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Health and Benefits

Health Care Service Provider Audit

When switching to a new health insurance plan, how will I know if my employees can continue to use their preferred physicians, hospitals and facilities?

When an employer changes its health plan, it often means moving from one provider network to another.  An employer must consider the benefits of moving to the new network against the potential that some of its employees may need to find new doctors.

To assist employers with this analysis, RMC offers a healthcare provider audit. This audit compares the penetration of proposed service provider networks in the geographic regions that apply to eligible employees. The audit is based on a sample of primary care physicians, specialty care physicians, and facilities identified as providers of interest by the employer and its employees. Results are presented in an easy-to-understand format, which allows for easy comparison between the network alternatives.

Provider Networks

Health insurance arrangements utilize provider networks to offer members access to medical services at pre-negotiated discount rates. Provider networks are often assembled by health insurance companies. Healthcare providers who elect to participate in a network agree to provide their services to network members at pre-negotiated discount rates, rather than at their usual “off-the-rack” rates.  Healthcare providers benefit from this arrangement through the volume of plan participants steered to them by the network. Plan participants benefit by gaining access to the network’s discounted rates for medical care.

Provider networks range in size from regional to national, and in breadth of access from narrow managed care networks to broad open access networks. Customized local networks can be assembled with significant member volume (i.e., plans with thousands of insured members). The network options available vary by location and insurer. Multiple networks may be offered in situations where an employer requires broad regional or nationwide coverage, or where the array of choices available to plan members includes multiple insurance carriers.

Example

An employer is considering switching health insurance carriers at renewal. However, the employer is concerned that switching insurance carriers might mean that some of its employees will lose access to their existing doctors or clinics. To ensure a smooth transition to a new carrier, the employer requests RMC to conduct a healthcare provider audit. The employer will use the healthcare provider audit to determine how employees will be impacted by the decision to change insurance carriers.

The first step in the audit is for RMC to provide the employer’s employees with a temporary link to a portal where each employee can identify the doctors and/or facilities they would like to include in the audit. The employees also identify the importance of each doctor and/or facility on a scale of 1 to 10; 1 being of low importance and 10 being of high importance. Lastly, they identify if they would like to keep the name of the doctor or facility confidential.

The window for submissions is typically limited to five business days, which can be extended at the employer’s request. Employee submissions on the portal are sent directly to RMC. Once the portal closes, RMC prepares an audit of the networks to assess compatibility with the providers identified by the employees. The results of the audit are provided in a simple table format, as shown below.

Table 1 – Service Provider Audit Results Example #1

In this example, Network A provides the least access to the requested service providers – two doctors, one infusion facility, and one major hospital do not accept Network A.

Network C provides more access when compared to Network A, but one facility and provider – marked confidential by an employee – do not accept Network C.

Network B provides the most access, with only one facility that does not accept Network B.

The relative importance of each provider also factors into the decision-making process. For example, the below audit was prepared using two networks.

Table 2 – Service Provider Audit Results Example #2

Network A provides the least access to the requested service providers – three providers do not accept Network A.

Network B provides the most access so the requested service providers – one provider does not accept Network B.

One might assume that Network B is the obvious choice since more doctors on the list accept Network B. However, the one doctor that does not accept Network B was marked as a 10 out of 10, in terms of importance. The sum of the doctors and facilities that do not accept Network A only adds up to 6. Therefore, an argument could be made that Network A is a better option.

When faced with a decision like Example #2, the relative importance of each provider, volume of participants, provider specialty, and a host of other factors should be considered in the decision-making process.

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Press Release

Courtney Boles Appointed to Gilbert-Insured Trust Board

Courtney Boles, Captive Risk Consultant for RMC Group, was recently appointed to the Town of Gilbert Self-Insured Trust Board.

The Board is responsible for the operation of the Town of Gilbert’s self-funded medical and dental plans. The Trustees provide oversight of plan administration and financials and make recommendations to the Town Council regarding risk retention/reinsurance options and funding requirements.

Courtney Boles Headshot
Courtney Boles – Captive Risk Consultant

“I’m excited to serve on the Gilbert Self-Insured Trust Board and have an opportunity to help the Town of Gilbert provide the best Health, Dental, and Workers Compensation benefits for their employees in an efficient and cost-effective manner. The Town of Gilbert is focused on the future with a mission to Anticipate, Create, and Help People,” Courtney said. “It’s good to see the town’s approach to risk management reflects this commitment and I’m looking forward to using my experience in the self-insured space to support their goals and give back to a place I love.”

Courtney joined RMC Group’s Captive Insurance division in September 2020, and is responsible for building relationships and soliciting new business. Courtney concentrates on the Southwest United States.  However, she helps business owners with their risk throughout the entire country.

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Health and Benefits

Employer Challenges with Medicare-Eligible Employees

An increasing number of employers are facing Medicare-related health insurance issues, and these issues are expected to only become more prevalent in the coming years. Here is an overview of the issues from the underlying causes to how employers might navigate them.

Medicare-Related Health Insurance Challenges Are Increasing

Two trends are contributing to the overall increase in Medicare-related health insurance challenges for employers.

First, older Americans are simply working longer.  While this isn’t a new trend, the Bureau of Labor Statistics projects that this trend will continue, with about one-third of seniors age 65 to 74 expected to be working in 2029. Even among seniors age 75 and older, the BLS expects more than 10 percent of the demographic to be working at the end of the decade.

Second, the Social Security full retirement age can be higher than the eligibility age for Medicare.  While a person can retire and begin receiving reduced Social Security benefits at age 62, the earliest full retirement age is 66 and for people born after 1960, it is 67.  In addition, benefits increase if an employee works beyond their full retirement age, maxing out at age 70.  This means that there could be a two-year gap, where an employee becomes eligible for Medicare at age 65, but will not be fully eligible for Social Security until age 67. Many people may choose to work beyond their Medicare eligibility birthdate as a result.

The result is that Medicare-related health insurance challenges are not something that employers can afford to ignore. Many employers are already facing with these issues, and those that aren’t will probably face them soon.

Medicare is a Four-Part Health Insurance Plan for Seniors

Medicare is, of course, the nationally subsidized health insurance plan that is available to those 65 and older.  The program consists of four main parts:

  • Part A: Generally, covers stays in hospitals, skilled nursing facilities and certain at-home care. Most enrollees aren’t charged a premium.
  • Part B: This usually covers doctor’s visits, outpatient exams, and tests. Premiums are usually charged.
  • Part C: Medicare Advantage plans are offered as alternatives to “standard” Medicare plans, and they may have different rules and out-of-pocket expenses. These plans are offered by approved private insurers, which charge premiums.
  • Part D: This part covers prescription drugs. These plans are offered by private insurers, which charge premiums.

Because Medicare Part A is premium-free, many employees who have access to employer-sponsored plans may choose to enroll in this part of Medicare alone.  Instead, they may rely on their employer-sponsored plan to cover office visits, outpatient services, and diagnostic testing.

Medicare Eligibility Begins at Age 65

A person becomes eligible for Medicare at age 65 and can enroll during the three months before the month in which they turn 65, the month in which they turn 65 or the three months after they turn 65.  When a person enrolls after their 65th birthday, coverage may apply retroactively for up to six months.

A person who does not enroll (or prove equivalent coverage) when first eligible for Medicare may have to pay a penalty if they enroll later.

Working May Impact an Employee’s Decision to Enroll in Medicare

Working part- or full-time does not affect Medicare eligibility, but it may impact an employee’s decision whether to enroll in Medicare.  The decision to enroll depends on an employer’s size and an employee’s coverage needs.

An eligible person working for an employer with fewer than 20 employees is required to enroll in Medicare coverage or face higher premiums later. An eligible person working for an employer with 20 or more employees can forgo Medicare coverage, as long as they have equivalent or better coverage through their employer or through their spouse’s employer.

Whether an eligible employee chooses to enroll in Medicare is a personal decision that depends on personal health, family coverage needs, employer-sponsored plan features, income level, and other factors. Many employees may elect to, at least, enroll in the free Medicare Part A coverage.  However, some will delay Medicare enrollment altogether.

Medicare Can Overlap with Employer-Provided Health Insurance

When an employee is both enrolled in Medicare and covered by their employer’s plan, one will provide primary coverage and the other will be secondary. Whether Medicare is primary or secondary depends upon the size of the employer.

When an employer has fewer than 20 employees, Medicare pays first and the employer’s plan pays second.  When an employer has 20 or more employees, the employer’s plan pays first and Medicare pays second.

Medicare Isn’t Compatible with Health Savings Accounts

Employees who are covered by a high-deductible health plan (HDHP) can contribute to a health savings account (HSA).  However, an employee may not contribute to an HSA, if they are enrolled in Medicare.  As a result, an employee’s decision whether to enroll in Medicare may depend upon the value they attach to the ability to make future contributions to an HSA.

Navigating Medicare Issues and Self-Funded Plans

Whether a Medicare-eligible employee enrolls in Medicare or stays in their employer’s health plan is a difficult decision for an employee.  However, it is also a challenge for employers that want to mitigate increasing healthcare costs by adopting a self-funded health plan.  Whether a self-funded health plan option is viable for a particular employer may depend upon the mix of an employer’s employees.  There is not a one-size-fits-all solution. Instead, each situation must be taken on a case-by-case basis and should be navigated with expert guidance.

RMC can provide the expert guidance that an employer needs with a consultative risk management approach.  RMC’s Medicare consulting services provides businesses with a clear path to a successful self-funded health plan transition.

To speak with a knowledgeable consultant at RMC, contact us today. One of our representatives will be happy to assist you and your business.

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Compliance Update Health and Benefits

The United States Supreme Court Decides the Rutledge Case

In a previous article, we told you about a case that was argued in the United States Supreme Court on October 6, 2020.  That case, Rutledge, Attorney General of Arkansas v. Pharmaceutical Care Management Association, was decided by the Court in a unanimous opinion issued on December 10, 2020.

What Was The Case About?

To refresh your recollection, the State of Arkansas had passed a law, known as Act 900, regulating the price at which pharmacy benefit managers (PBMs) are required to reimburse pharmacies for prescription drugs.  While invisible to most plan participants, PBMs are an important part of most employer healthcare plans.

A PBM is an intermediary between a healthcare plan and a pharmacy.  When a plan participant goes to a pharmacy to fill a prescription, the participant may or may not have a co-pay.  Whether the participant has a co-pay or not, the participant expects that the cost of the prescription will be mostly paid by the plan.  Ultimately, the participant is right.  However, it is not the plan that makes a payment to the pharmacy.  The plan’s PBM pays the pharmacy, and the plan reimburses the PBM.

The problem that Act 900 sought to address is that the amount paid to the pharmacy by the PBM may bear no relation to either the amount paid by the pharmacy to acquire the prescription drug or the amount paid by the plan to the PBM.  The PBM enters into a contract with the pharmacy pursuant to which the PBM agrees to reimburse the pharmacy according to rates set by the PBM and known as the maximum allowable cost (MAC).  The PBM also enters into a contract with the plan pursuant to which the plan agrees to reimburse the PBM at a certain amount.  The difference between the MAC for a particular drug and the amount paid by the plan represents profit for the PBM.  However, in certain cases, it may only be the PBM that is making a profit.  That is because the MAC may be less than the pharmacy’s acquisition cost.  And, if that happens too often, a pharmacy may be forced out of business.

Act 900 attempted to resolve this problem by requiring PBMs to periodically update their MACs to ensure that the MAC for a particular prescription drug equaled the pharmacy’s acquisition cost.  In addition, Act 900 provided an appeal procedure whereby a pharmacy could challenge a PBM’s MAC when it was below the pharmacy’s acquisition cost.  Finally, Act 900 provided that a pharmacy could refuse to deliver a prescription drug to a plan participant if the PBM’s reimbursement rate was less than the pharmacy’s acquisition cost.

This case began when the Pharmaceutical Care Management Association (Association), a trade association of the some of the largest PBMs, sued the State of Arkansas in federal district court.  The Association claimed that Act 900 was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and, as a result, unenforceable.  The Association won in the District Court, and the District Court’s judgment was affirmed by the United States Court of Appeals for the Eighth Circuit.  The State filed a Petition for a Writ of Certiorari, which the Supreme Court granted.

The Supreme Court Finds No ERISA Preemption

In an opinion written by Justice Sotomayor, the Court reviewed the law of ERISA preemption.  It said that ERISA preempts any state law that relates to an employee benefit plan.  Further, a state law relates to an employee benefit plan if it has a connection with or reference to such plan.

The Court found that the purpose of ERISA was “to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures”.  It accomplished this by ensuring that an employer would not be subject to the differing rules and regulations of the various states.  “ERISA is therefore primarily concerned with preempting laws that require providers to structure benefit plans in particular ways, such as by requiring payment of specific benefits.”

Not every state law that affects an ERISA plan is preempted.  “This is especially so if a law merely affects costs.”  The Court discussed its earlier decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Company, in which the Court held that a New York law that imposed a surcharge on hospital billing rates for plans other than Blue Cross Blue Shield plans was not preempted by ERISA.  In discussing the Travelers case, Justice Sotomayor wrote that:

Plans that bought insurance from the Blues therefore paid less for New York hospital services than plans that did not.  This Court presumed that the surcharges would be passed on to insurance buyers, including ERISA plans, which in turn would incentivize ERISA plans to choose the Blues over other alternatives in New York.  Nevertheless, the Court held that such an “indirect economic influence” did not create an impermissible connection between the New York law and ERISA plans because it did not “bind plan administrators to any particular choice.”

In Rutledge, the Court said that it is required to follow the holding of Travelers.

Act 900 is merely a form of cost regulation.  It requires PBMs to reimburse pharmacies for prescription drugs at a rate equal to or higher than the pharmacy’s acquisition cost.  PBMs may well pass those increased costs on to plans, meaning that ERISA plans may pay more for prescription-drug benefits in Arkansas than in, say, Arizona.  But “cost uniformity was almost certainly not an object of pre-emption.”

The Court also found that Act 900 does not refer to ERISA plans.  The reason that Act 900 does not refer to ERISA plans is that it is equally applicable to non-ERISA plans.  Since Act 900 does not have an impermissible connection to ERISA plans and does not refer to ERISA plans, it is not related to ERISA plans and is not preempted.

What Will Be The Impact of Rutledge?

This depends on whom you ask.  The State of Arkansas, as well as the over 30 other states with similar laws, will be pleased.  The states can now regulate the reimbursement rates that pharmacies are paid for prescription drugs to ensure that no pharmacy is forced to close because the MAC is less than the pharmacy’s acquisition cost.  The pharmacies are happy because, in states with such laws, they will no longer be forced to sell prescription drugs for less than cost.

On the other hand, the PBMs are not pleased.  Obviously, this could reduce their profit margins if they are required to increase their MACs.  The impact on prescription drug plans is less clear.  One of the arguments made by the Association before the Supreme Court is that PBMs will be forced to pass on increased costs to healthcare plans.  This will increase the cost of prescription drugs to the plans.  This may force plans to increase co-pays or eliminate certain coverages.  However, the Court’s role in this case was not to judge the wisdom of Act 900.  It was simply to determine whether it was preempted by ERISA.  And, since cost regulation does not relate to an ERISA plan, it found that Act 900 is not preempted by ERISA.

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Health and Benefits

The Real Cost of a Premium Holiday

As group health insurance premiums rise each year, employers look for solutions to mitigate their increased costs. An emerging trend this year is “premium holiday”, which insurers are offering to make it seem like employers can save on coverage.

In reality however, this price adjustment trend rarely results in long-term savings and can easily result in employers paying more.

Premium Holidays Rarely Offer Sustained Savings

A “premium holiday” usually provides a break on premiums for one month, thereby seeming to reduce an employers’ health insurance costs for the year. Most of these programs skip an entire month’s premium for the first year that coverage is in place, although a few may offer a one-month discount instead.

However, these price adjustments rarely deliver on their promise of reducing overall costs.

Plans that offer a so-called “premium holiday” frequently come with increased costs both in the upcoming plan year and in any years thereafter.

For the upcoming year, a premium holiday can be used to make a policy’s annual premium appear artificially low. Offering a one-month discount on a policy that’s seeing a major rate increase can mask the increase to a significant degree.

In reality, the increase is usually still quite substantial even after the one-month premium discount is taken into account.

In future years, a policy’s premium can increase dramatically when a one-month premium holiday isn’t included in the renewal. When employers are no longer given a discount, their next policy premium not only increases by the annual rate increase, but they also have to take into consideration that they are paying for twelve months rather than eleven.

The result is that premium holidays often result in employers spending more on health insurance than they intend to or realize.

The Increased Costs That Premium Holidays Mask Are Significant

While the exact amount that employers end up paying for health insurance is specific to each employer and its policy, the increased costs that premium holidays mask can be substantial. To see just how much this scheme can actually cost an employer, consider the following example of an employer who pays $120,000 in annual health insurance premiums.

The employer is facing a rate increase of 24 percent for 2021, which equates to a $28,800 increase for the year based on its 2020 premium of $120,000. As an incentive to renew, the employer is offered a one-time premium holiday that saves it $12,400 in 2021.

Although this looks attractive at first glance, the total premiums for the year come to $136,400 – an increase of 14 percent!

Moreover, the employer’s premium increase for 2022 will be based on a premium of $148,800, even though the employer only paid $136,400 in 2021.  Even if the insurer does not raise rates in 2022, but only eliminates the premium holiday, the employer will pay $148,800 in 2020, an increase of almost 10% percent.

There Are Other Ways to Mitigate Rising Health Insurance Costs

For an employer faced with rising health insurance costs, there are other ways to mitigate this expense. One way is through a self-funded health plan. A self-funded health plan can reduce an employer’s cost of providing health insurance to its employees, while still providing high quality coverage.

Contact us to learn more about how self-funded health plans can help mitigate these rising insurance costs. One of our team members would be happy to discuss the benefits of a self-funded health plan for your business.

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Health and Benefits

A Supreme Court Case That May Impact Prescription Drug

On Tuesday morning, October 6, 2020, the United States Supreme Court heard oral arguments in the case Rutledge v. Pharmaceutical Care Management Association.

What is This Case About?

The case involves a challenge to an Arkansas law known as Act 900.  The law was enacted by the State of Arkansas in 2015 to regulate the amounts that a Pharmacy Benefit Manager (PBM) must pay to a pharmacy when an individual covered under a health plan purchases prescription drugs.  The law was challenged by a trade association of PBMs as a violation of the Employee Retirement Income Security Act of 1974 (ERISA).  While the ERISA issues may be of great academic interest to ERISA lawyers, the case may have a more practical effect on individual consumers.

What is a Pharmacy Benefit Manager?

A PBM is a third-party intermediary between employers that sponsor group health plans that include a prescription drug benefit and retail pharmacies that sell prescription drugs to plan participants.  They are usually engaged by an insurance company to administer a plan’s drug benefits, and their goal is to reduce the cost of prescription drugs to the insurance company.  When a plan participant goes to a pharmacy, it is the PBM that determines how much the pharmacy will be paid for the medication.  That amount is known as the Maximum Allowable Cost (MAC).

In addition, it is often the PBM that reimburses the pharmacy for the difference between the MAC and the co-pay paid by the plan participant.  The PBM is then reimbursed by the insurance company for the amounts that it paid the pharmacy.  A PBM may also be paid an administrative fee or a portion of the difference between the MAC and the amount that the insurance company is willing to pay for the medication.

What Was Act 900 Intended to Accomplish?

A pharmacy does not purchase prescription drugs from a PBM.  It purchases medication from a wholesaler.  The problem that the legislation was intended to address is that, sometimes, the MAC is less than the amount that the pharmacy has to pay its wholesaler for a particular prescription drug.

As a result, Arkansas, like many other states, enacted legislation regulating the MAC that a PBM must pay to a pharmacy; requiring that a PBM set its MAC in an amount that is at least equal to the pharmacy’s purchase price.  The proponents of the legislation argue that many small, independent pharmacies have been forced out of business because their acquisition costs for prescription drugs often exceeded the MAC paid by the PBM.

How Did the Lawsuit Get Started?

The lawsuit was filed by the Pharmaceutical Care Management Association (PCMA), a trade association of PBMs.  The PCMA alleged that the Arkansas statute violates ERISA.  ERISA is a federal law that regulates employee benefit plans and seeks to protect employees.  ERISA contains a preemption provision that precludes states from enacting laws that also seek to regulate employee benefit plans.  Of course, the PCMA was not motivated solely by loyalty to federal law.  It claimed that the law eliminates an incentive used by PBMs to reduce the cost of prescription drugs.

It also likely reduces the profits earned by PBMs and increases the regulatory burden.  The state, of course, argued the opposite.  It claimed the law would protect consumers by preserving smaller, independent pharmacies and providing greater access to less profitable drugs.  The PCMA won in the district court as well as in the U.S. Circuit Court of Appeals for the Eighth Circuit.

How Will the Supreme Court Rule?

It is, of course, impossible to predict what will happen in the Supreme Court.  As of October 6, 2020, when the case was argued, the Court had only eight members.  This means that, if the Justices split, 4–4, the decision of the Appeals Court will be upheld, and Act 900 will be overturned.

In addition, similar laws of many other states would suffer the same consequence.  While each side may have presented its case as important for consumers, the issue is much more esoteric.  The issue is ERISA preemption, which has a long and confusing history.  Justices may react differently to that issue than they would if the case were simply presented as pro- or anti-consumer.

For further information or for assistance with your health and prescription drug benefit plans, contact RMC Group.

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Health and Benefits

Reducing Costs with Narrow Network Health Insurance: What Employers Need to Know

Rising health insurance costs continue to burden businesses with increasing overhead expenses. The trend is likely to accelerate as a result of the Covid-19 pandemic.

Premiums for employer-sponsored health plans have steadily increased from 1999 to 2018, more than doubling their costs in the 20-year span. Large employers expected to see a 5- or 6-percent increase in 2020 before Covid-19 struck.

Now, Covered California is projecting premium increases of 4 to 40 percent for employer-sponsored plans nationwide this year — and filings with the District of Columbia support those numbers. Aetna and United Health have asked regulators to approve increases of 7.4, 11.4, 17.4 and 38.0 percent for various plans in the District.

In light of this trend, more and more businesses are turning to narrow network health insurance plans as one way to mitigate rising premium expenses. These plans were fairly uncommon when premiums were much lower. But 18 percent of large companies (i.e., 5,000-plus employees) offered a narrow network plan in 2018. While fewer smaller companies offered these plans, many smaller companies are following the lead of larger employers and are beginning to turn to these plans as a cost-mitigation strategy.

If your business is looking to mitigate the rising costs of health insurance, a narrow network health insurance plan can be the solution. When used appropriately, a narrow network health insurance plan can effectively address rising health insurance costs for both employers and employees. The following are some of the most common questions businesses have about these plans.

What Are Narrow Network Health Insurance Plans?

Narrow network health insurance plans limit provider choice. They are defined by a narrow network of healthcare providers. A narrow network may include physicians, specialists, hospitals, urgent care clinics and other medical providers; it just doesn’t have as many options as a broad network plan. While there isn’t a universal mark for exactly what constitutes a narrow network, all of these plans are more restrictive than their broad network plan counterparts.

In restricting the provider networks, narrow network health insurance plans are similar to health maintenance organizations (HMOs). HMOs commonly also have more restrictive lists of in-network providers.

Are Narrow Network Health Insurance Plans Compliant with the Affordable Care Act?

Not only are narrow network plans generally compliant with the Affordable Care Act (ACA), but they have long been a primary component of the ACA’s cost-controlling strategy.

When the ACA adopted marketplace exchanges back in 2014, approximately 70 percent of the health insurance plans made available through the exchanges were either narrow network or ultra- narrow network plans. These types of plans continue to dominate the individual marketplace today, accounting for 72 percent of marketplace plans in 2019. (For the 2014 survey, a narrow network health insurance plan was defined as a plan where 30 percent of a region’s 20 largest hospitals did not participate in the plan.)

Just as the ACA marketplace exchanges can offer narrow network health insurance plans, an employer can generally offer these plans without worrying about non-compliance penalties. Many narrow network health insurance plans meet all of the ACA requirements. A health insurance professional who has experience with these types of plans can make sure that your business chooses an ACA compliant plan.

How Do Narrow Network Health Insurance Plans Help Control Employers’ Health Plan Costs?

Narrow network health insurance plans help mitigate costs by prioritizing cost, while also ensuring that plan participants have adequate access to healthcare.

First and foremost, narrow network health insurance plans limit the providers that the plan works with. This is often done by lowering reimbursement rates for providers. This results in limiting in-network providers to those providers willing to accept the plan’s rates. In most cases, much more affordable coverage is secured.

Second, these plans usually provide very limited or no coverage for out-of-network claims, which are generally more expensive. By limiting out-of-network coverage, a narrow network health insurance plan can hold costly out-of-network claims in check. In comparison, a plan that offers more out-of-network coverage would have to pay more for these often-expensive claims.

Third, these plans tend to not require primary care referrals for specialist visits. This is a point of distinction between narrow network plans and HMOs, which usually do require referrals. The savings is not insignificant. Even though a single referral visit might not result in a huge claim, the cumulative savings across all participants is substantial when these claims are eliminated.

Results of These Reasons

For these reasons, a narrow network health insurance plans reduces the cost of healthcare. As a result, an insurance company that offers narrow network health insurance plans is generally able to charge lower premiums.

An alternative for cost mitigation is to require its employees to pay a larger share of premiums. However, this is no way to engender employee satisfaction and usually is not the best option. Thus, a narrow network plan is seen by many business leaders as a better cost-mitigation tool.

Narrow network health insurance plans available through marketplace exchanges can save individuals and families about 16 percent on their premiums. Detailed data on employer savings isn’t as readily available because businesses have adopted these plans at a slower pace than individuals. But businesses can normally expect to see their costs drop when adopting a narrow network health insurance plan.

The best way to determine the savings that your business can realize by implementing a narrow network health insurance plan is to engage an insurance professional to conduct an analysis based on your specific situation and plan details. An insurance professional familiar with narrow network and broad network health insurance plans can assist with completing an analysis.

How Do Narrow Network Health Insurance Plans Help Control Employees’ Health Plan Costs?

Employees likewise benefit from the lower premiums that narrow network health insurance plans offer. Unless an employer keeps the savings to itself, employees can expect to pay less for a narrow network health insurance plan than they would for a broad network health insurance plan.

Additionally, as discussed above, an employee does not need a primary care physician referral in order to see a specialist. An employee’s copay may be only $30 or $50 for a single referral. If the employee needs multiple referrals to specialists in a year, though, the savings can add up to hundreds of dollars. This can be an especially valuable to patients that have complicated health issues and families that have multiple people who need to see specialists.

Do Narrow Network Plans Provide Sufficient Access to Coverage?

While narrow network health insurance plans generally meet ACA requirements and usually provide adequate coverage for most employees, they do have limited networks of providers. An employer might find that it has some employees whose coverage needs are not sufficiently met by a limited healthcare network.

For example, some narrow network health insurance plans may not have certain specialists in-network within a given region. This can create an issue for employees who need to see out-of-network specialists and pay for the specialized care out of pocket as a result.

How Do Narrow Network Health Insurance Plans Fit Into Tiered Plan Structures?

To address the risk of insufficient network coverage, some businesses turn to a tiered plan structure. Tiered plans consist of two or more different health insurance plans. One of these plans is a narrow network health insurance plan, and another is a broad network health insurance plan.

With a tiered plan, employees can select and pay for whichever level of coverage best suits their situation. Those who don’t need extensive coverage can save on premiums by selecting the narrow network option. Those who need more extensive coverage can procure it through the higher-priced broad network health insurance plan.

A tiered plan might not save businesses as much as a strict narrow network health insurance plan could since some employees will likely opt for the more expensive broad network health insurance plan. Nonetheless, this structure is an effective way to reduce health plan premiums while still meeting employees’ needs.

In addition, a tiered network plan can reduce the risk of over-insuring some employees, since employees can tailor their plan selection to their individual needs.

What Other Challenges Come with Implementing Narrow Network Health Insurance Plans?

The limited healthcare provider networks of narrow network plans might create a few challenges during implementation of a plan. However, each of these can be addressed with a well thought-out implementation.

First, employees may not even know the providers who are in their current healthcare network or realize how the list of in-network providers will change. A 2015 study found that 44 percent of people who purchased health insurance for the first time weren’t aware of the providers who were in their network. Often, some people never bother to find out.

To address this concern, human resources representatives can educate employees on the providers in a narrow network (or even a broad network) during open enrollment. This is a best practice regardless of whether a business offers a narrow network health insurance plan or a different type of plan.

Second, some employees might discover that their current providers are not in their employer’s new narrow network health insurance plan. This is a challenge that may be managed by helping employees find new providers who are in-network. It’s generally not an issue after implementation, once employees have made any necessary provider changes. Also, employees who are unwilling to change providers can stay with their current providers by paying the out-of-network costs.

Third, some plans may lack providers in certain specialties. This should be kept in mind as businesses evaluate plan options, and it’s a good reason to consider a tiered plan structure (see Tiered Plan Structures).

Fourth, some employees who need specialized medical care may have to drive long distances for appointments and procedures. Businesses can accommodate employees who are in this situation by offering more paid sick leave. HR representatives can remind employees that a mileage deduction for medical-related driving is available if employees meet certain requirements. The medical mileage deduction for 2020 is 17 cents per mile.

Can Narrow Network Health Insurance Plans Be Paired with Health Savings Accounts?

Health savings accounts (HSAs) are tax-advantaged savings accounts that can be used for medical expenses. These accounts can only be set up in conjunction with high deductible health plans (HDHPs), which meet specific deductible and limit requirements as defined by the IRS.

For 2020, HDHPs must have deductibles of at least $1,400 for individuals or $2,800 for families. Their maximum out-of-pocket limits cannot exceed $6,900 for individuals or $13,800 for families.

HDHPs and narrow networks technically refer to different aspects of health insurance plans. However, the two features are frequently used in conjunction to mitigate costs. Thus, many narrow network plans are HDHPs and can have HSAs associated with them.

Having an HSA option can be helpful when introducing narrow network health insurance plans to employees. Businesses that haven’t yet switched to an HDHP can highlight the HSA as a beneficial feature that can help with both in-network and out-of-network costs. Businesses that already have an HDHP option can remind employees of the HSA feature, potentially using it to quell concerns about increased out-of-network costs.

Do Narrow Network Health Insurance Plans Have Broad or Narrow Pharmacy Plans?

Narrow network health insurance plans can be paired with either broad or narrow pharmacy plans. Choosing these two elements separately gives employers greater ability to adjust their health and pharmacy plan offerings to their budgets and their employees’ expectations.

How Can Employers Find a Narrow Network Health Insurance Plan?

For help exploring narrow network health insurance plan options, contact RMC Group. As experienced professionals in the industry, our team can perform a provider audit to compare your current plan’s in-network providers to those who participate in a narrow network. We’ve assisted multiple businesses throughout the country with narrow network health insurance plans, and we’re ready to help yours too.

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Health and Benefits

How Do You Get More of Your Employees to Use Telehealth?

Healthcare has evolved dramatically in recent years, making it easier than ever for people to receive the care they need — without even leaving the house.

Telehealth is a modern service that offers access to doctors, specialists, and therapists at any time through phone calls or video chats. It’s an increasingly common addition to healthcare plans offered by employers.

From an employer perspective, partnering with a telehealth provider is worth considering for many reasons:

  • Telemedicine helps reduce employer costs, especially for self-funded plans.
  • Access to quality care is quick and easy, especially in areas without other adequate medical care options.
  • Telehealth helps reduce employee absenteeism.
  • Additional health benefits can help you attract and retain talent.

While telehealth is not appropriate for all medical needs, it can be a valuable tool for employers and employees alike to control the cost of maintaining good health.

Common Uses for Telehealth Services

When an employer adds or transitions to telehealth coverage, the employer must communicate its benefits to employees through printed brochures and online benefits explanations. The material should list the ways in which telemedicine can be an effective alternative to a traditional doctor visit.

Limited Primary Care

While telehealth cannot replace a primary care physician, it can be helpful when an employee is unable to schedule an appointment for themselves or their family.  In many cases, the employee will be able to discuss symptoms with a telehealth provider and get an initial diagnosis.

Follow-Up Care

In addition, prescriptions can often be refilled through telehealth.  Doctors frequently require follow-up visits after surgeries or other treatments. If a patient has no complications, telehealth is much more convenient than an office visit.

Physical and Behavioral Health

Medical care, such as physical therapy or mental health therapy, can easily be accomplished through telehealth.  Patients can follow guided prompts or discussions with medical professionals without having to be in an office in person.

Transportation Limitations

A common obstacle in addressing health issues is inadequate transportation. An employee may not be able to get to a doctor’s office.  Telehealth appointments are available anywhere they have access to a computer and/or telephone.

Set Goals to Increase Usage

Managers can and should track the usage of telehealth by their employees and set goals for future use. The metrics used can include:

  • Total amount of money saved by the company
  • Total number of telehealth consultations by employees each month
  • Utilization rate, which is the number of consultations divided by the total number of primary care physician consultations plus the number of telehealth consultations

To meet your company’s goals for telehealth use, you must design a telehealth plan that will interest employees. Consider plans that require no out-of-pocket payments or consultation fees.

Then, implement a communication strategy so employees are fully aware of their benefits. This outreach campaign can include:

  • Emails scheduled regularly to remind employees of the value of telehealth services
  • Links to the telehealth provider’s website as well as appropriate contact phone numbers
  • Flyers posted in employee break rooms and bathrooms
  • Messaging that is appropriate for common seasonal issues, such as allergies or the flu
  • Testimonials from a “telehealth champion,” or someone in the company that appreciates telehealth

It’s important to note that telehealth may not be suitable for an emergency.  In all communication with employees, you should make it clear that, if an employee or family member needs immediate care, they should go to an emergency room.

Finally, offer assistance with enrollment. Employees will appreciate information outlining the steps necessary to take part in the program. Make internet access available to help employees complete any applications — and participate in telehealth appointments.

Criteria for Selecting Providers

For employees to feel comfortable with a transition to digital healthcare, you must select a telehealth provider that has a user-friendly platform and a proven record of success. If the process is frustrating, employees will prefer more costly in-person options.

An ideal provider should offer participants a fast, easy, and seamless experience. There should be numerous ways for employees to schedule telehealth appointments. Younger employees are often more comfortable with virtual channels, while older employees may feel more comfortable speaking directly to a person.

Employees should be able to connect with a telehealth service provider via:

  • Mobile app
  • Website
  • Online chat
  • Phone

Providers should be able to demonstrate a focus on patient satisfaction through metrics as well. When comparing services, HR managers can request information on the expected ROI of the telehealth service. Ensure that the provider has a utilization rate of at least 25%. If the utilization rate is lower, it may indicate concerns with the platform.

Sometimes, providers will increase costs when utilization rises.  If this is the case, make sure that the ROI increases as well. Otherwise, you may not realize the cost savings expected from adding telehealth.

Consider using a provider with a fee structure that is more attractive to employees. For instance, look for plans that charge employees on a monthly basis for unlimited use. If there is a charge every time a patient seeks a consultation, utilization rates may remain low.

Modernize with Telehealth

The transition from a traditional healthcare plan to telehealth for employees can be smooth and effective. Managers should work with service providers that are able to demonstrate a proven track record for ROI and utilization rates through a user-friendly platform.

Do not presume that employees will naturally adopt telehealth practices without a targeted outreach campaign to educate them on the appropriate uses and benefits. Keep the tone of all communications — whether through email, flyers, or in-person meetings — positive and supportive.

Remind employees that telehealth is a powerful and affordable tool for managing their health in a way that benefits everyone — but only when they enroll and use it.

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Health and Benefits

Employee Advocacy Case Study – Carrier Confusion

Employee Advocacy

Employer-sponsored health insurance and group benefits can be confusing. It is important to have trusted advisors available to assist plan participants in understanding their coverage and navigating the claims process. RMC’s employee advocacy team is a live resource available to assist plan participants with any questions or issues they may experience while using their coverage.

Below is a recent example of RMC’s employee advocacy team stepping in to quickly resolve an issue that a plan participant experienced while filing a claim.

The Accident

An employee fell at home and suffered a serious bone fracture. The employee received immediate medical attention, and their employer-sponsored health insurance covered the initial setting of the bone and all necessary rehabilitation. Due to the severity of the break, the employee was directed by their doctor not to return to work for approximately 90 days to avoid aggravating the injury. Luckily, the employee’s employer also provided Short-Term Disability and Accident Insurance to replace some of the income lost during the rehabilitation period.

Trouble Filing the Claim

Unfortunately, filing the Short-Term Disability and Accident claim was not as straight forward as the employee had hoped. First, the employee attempted to contact the insurance company to start the paperwork for the Short-Term Disability and Accident Insurance claim. After two weeks without success the employee contacted their Human Resources Manager for assistance. Over the next week the HR Manager was also unsuccessful in initiating the claim. Finally, the HR Manager contacted RMC to ask for assistance.

The Resolution

Within ten minutes RMC’s employee advocacy team determined that the employee and HR Manager had been contacting the wrong insurance company. Instead of the contacting their current carrier, they were attempting to file a claim with a carrier they used several years ago. RMC contacted the current carrier and received confirmation of benefits and the forms required to file a claim right away.

RMC’s employee advocacy team assisted the employee in completing the forms and submitting the claim. The team was also able to streamline the claims submittal process, eliminating several unnecessary and redundant steps that resulted from poor communication between the carrier and employee. On the day following the claim submittal, the carrier informed RMC’s team that the Accident funds would be sent to the employee the next day and the Short-Term Disability funds would follow within a week.

The employee was extremely thankful to have this claim resolved. Now that the burden of financial uncertainty had been removed, their attention could be focused on what matters most: recovery. RMC’s “human touch” approach made all the difference!

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Health and Benefits

Pharmacy Benefit Management and Prescription Formulary

Selection of a pharmacy benefit manager (PBM) and management of the prescription formulary are important elements of the cost containment strategy in a self-insured health plan.

Cost of Prescription Medications

Prescription medications represent a large percentage of the total cost of employer-sponsored health insurance.  In self-insured plans, prescriptions are often responsible for 30% or more of total claims costs.  However, there are strategies available to minimize these expenses without sacrificing the level of care expected by the plan sponsor and plan participants.

Prescription medications generally fall into three classifications:

1. Brand Name

Brand name medications are expensive because the original manufacturers desire to recoup the cost of research and development, as well as the cost of marketing efforts.  They are often prescribed due to name recognition, even when more cost-effective generic equivalents are available.  Original manufacturers are often granted exclusive production and marketing rights for a certain period of time in order to recoup the expenses of bringing the medication to market.  This exclusivity eliminates competition which would otherwise reduce the cost to consumers.

2. Generics

Generic medications are lower-cost alternatives that are functionally equivalent to brand name medications.  Generics are less expensive because they are produced by manufacturers who did not participate in the original research, development and marketing efforts, and therefore do not carry the associated cost burden.  Generics can often be substituted for brand name medications at the counter when requested by the insured.  Generics may not be available for newer medications, or when the prescribing physician includes “dispense as prescribed”, or equivalent language, in the prescription.

3. Specialty

The term “specialty” refers to a range of medications that may have any of the following characteristics: derived from living cells, treat potentially debilitating or fatal conditions, treat rare diseases, injectable or infusible, have unique storage and/or shipment requirements, not commonly stocked in pharmacies.  Specialty medications may be either brand name or generic and are often very expensive.

While profit is the primary motivator for progress and innovation in the pharmaceutical field, it can lead to situations where the cost of medication becomes misaligned with its clinical value.  Many medications are available at a range of prices and there may be no clinical difference between the most expensive version and another that is available at a fraction of the cost.

Where no clinical difference between two medications exists, any extra money spent on a more expensive version is money that is wasted by the plan sponsor and plan participant.  Careful review of the medications being utilized by plan participants can reveal opportunities for cost containment through provision of more economical substitutes.

Pharmacy Benefit Manager

The pharmacy benefit manager (PBM) performs the administrative functions that a commercial insurer would perform in a fully-insured health plan with respect to prescription medication access.  These functions include drafting the prescription formulary document, negotiating medication costs with manufacturers, confirming coverage, and processing claims.

PBMs generate revenue through spread pricing, manufacturer rebates and administrative fees.  Spread pricing means that the PBM charges the plan sponsor a markup over the price it pays the manufacturer.  This generally leads to the utilization of higher cost medications.  Low administrative fees may signal that the PBM generates its revenue by retaining more of the rebates it receives from manufacturers.  Though it may be possible for the PBM to pass all rebates back to the plan sponsor by charging higher administration fees, this is not necessarily in the plan sponsor’s interest.  When the PBM shares in rebate revenue, they are incentivized to consistently negotiate the best rebate terms with manufacturers.

Where the PBM relies on static administrative fee income regardless of performance, the PBM may not work as diligently to negotiate rebate terms on the plan sponsor’s behalf.  Incentives can also become misaligned where the PBM focuses primarily on potential rebate revenue without regard for ultimate cost of medication to the plan sponsor or plan participant.  These factors should all be considered when evaluating PBM vendors.

Prescription Formulary

The prescription formulary is the plan specific document that lists the medications that are covered under the health insurance plan and the pricing structure that applies to them.  The formulary is a function of the PBM that is chosen to administer pharmacy benefits.  The formulary generally classifies medications into four tiers.  The pricing structure and cost-sharing between the plan sponsor and plan participant depends upon the tier to which the subject medication belongs.

  • Tier 1 – Generics: Generally, the most cost-effective option, where available.
  • Tier 2 – Preferred Brands: Brand name medications available at favorable pricing.
  • Tier 3 – Non-Preferred Brands: Brand name medications available at less favorable pricing.
  • Tier 4 – Specialty: Generally, the most expensive category of medications.

Plan sponsors often choose a broad default formulary offered by the PBM in hopes that the majority of medications desired by plan participants will be covered.  While this may appear to be the safest route to provide a smooth experience for plan participants, it often leads to wasteful spending by both plan sponsors and plan participants.  By working actively with PBM’s to remove high cost medications from the formulary and providing avenues for plan participants to access more economical equivalents, wasteful spending can be drastically reduced.