State Lawsuit Update: We’re All Tied Up 2-2 as We Head Into the Fourth Inning

breaking health care reform newsThis morning, a Florida judge has ruled that the PPACA, or health care reform law, is unconstitutional.  The judge ruled that because the individual mandate is unconstitutional and that the law does not have a severability clause that the entire law must be struck down.   This brings the count of lawsuits found in favor of opponents to the law up to 2, with 2 earlier suits finding in favor of the law.

So what does this mean?  This means that we’re going to see a trip to the bullpen as the federal government takes the Florida and Virginia rulings to the appellate court.  Of course, that won’t be the end of the game.  Eventually, we will see the closers come to the mound.  Meaning this whole mess will end up in the Supreme Court.  Unfortunately, this game may go into extra innings as the Supreme Court ruling may not come until 2012 or 2013.  In the meantime, the government is expected to ask the appellate court to keep the law in place until it issues its ruling.  So sit back, relax and find that hot dog vendor!  We’re in for a pitcher’s duel.


Should Your Company Stop Buying Health Insurance?

The Patient Protection and Affordable Care Act is making some employers take a look at self-funding their medical plans since some of the costs to comply for fully insured plans add 2-4% to the premium on top of the double-digit increases they would be getting anyway. Self-insurance can help reduce overall costs if your employees are relatively healthy and your medical loss ratios has consistently been low (typically less than 80%).  Stop-loss insurers of late have been willing to consider smaller companies (some will insure under 100 employees). For employers who choose to self-insure, they must evaluate which network to use and who will process the claims (a third party administrator (TPA) or an insurer who will ‘rent a network’).  Additionally, you will need to evaluate who will provide stop-loss reinsurance protection.

For those of you unfamiliar with self-funding or stop-loss insurance concepts, here’s how it works.  The TPA will process claims as they come in.  The employer pays the claims through the TPA (to comply with HIPAA).  Typically, you are able to save money just on the difference in administration costs between the TPA and your insurance company.  For added protection, you should purchase stop-loss insurance.  Stop-loss insurance does what it says.  It stops the loss (of dollars) when there is a big claim.  This is especially important if cash flow can be an issue for your company.  There are two types of stop-loss coverage and I recommend having both.  The first is Specific Stop-Loss, sometime referred to as “Spec”.  If a single large claim comes in, say a heart bypass surgery for $250,000, the spec coverage will limit the employer’s portion of the claim.  The employer can choose the level that they will be able to fund ($50k, $100k, etc.) and the stop-loss insurer will pick up the rest.  Obviously, the higher level the employer chooses to be responsible for, the lower the cost of the insurance.  The second type of stop-loss coverage is Aggregate Stop-Loss, or “Agg”.  This protects the employer from paying out claims for the plan year once a certain total claims level is reached.  This is usually expressed as a certain percentage over your expected claims volume, also referred to as a “corridor”. 

Unfortunately, too many employers (and their advisors) view stop-loss protection simply as a commodity and that all policies are the same. Buying based on the lowest price without getting all the of the policy details can be costly. I will share with you some cases that illustrate my point: A company I’ve been speaking with selected a stop-loss program that paid claims up to three months after the plan year, this is referred to as a 12/15 contract, which means that the insurance will cover all claims incurred in a twelve month period AND that are received in the 15 months from the start date. When a large hospital claim occurred in late December, a carrier audit process was triggered which resulted in the claim of $280,000 not being paid until early April, four months after the plan year-end and one month after the stop-loss contract provision. The company incurred the entire liability on that claim because although it was incurred during the plan year, it was not paid until after the 15 month period of the contract had expired.  Had the company chosen a longer term contract (with a slightly higher premium) they would have been able to limit their payout to the “spec” limit, which in their case was $50,000. 

Here’s another. A self-funded company was preparing for the renewal process, having recently learned of a large, ongoing $1 million a year claimant. The carrier providing the stop-loss on the program decided to exercise their right to “laser” (Dr. Evil finger quotes) the claimant, meaning that it would not provide stop-loss coverage for that employee. Given that there was a large ongoing claim, no other carrier would touch this company. Giving the carriers a lasering clause will reduce the premium, but it is a dangerous proposition when a large claim actually hits.

Here’s a quick list of questions to ask when considering self-funding:

  • What specific stop-loss level would you be comfortable with? Do you have the cash flow to pay a big claim?
  • What aggregate stop-loss level are you comfortable with? Is your expected claims projection realistic?
  • How long should incurred and paid periods be?  Choosing a short paid period could be costly.
  • Lasering – some policies state no lasers on renewal, but not all. Are you willing to pay for that protection?
  • Does the policy cover prescription drugs? Not all do.
  • How does the policy tie into your health plan’s summary plan description?

State Health Care Reform Lawsuit Updates

Uninsured Adults by StateWe are starting to see movement at the state level in several directions.  First, the number of states filing lawsuits against the federal government and the health care law continues to grow.  Six additional states are joining the Florida lawsuit and a seventh, Oklahoma, announced its intention to file a lawsuit on its own.  This brings the number of states attempting to turn over the law to 28.  Here is the list:

Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, Wisconsin and Wyoming.

The main point of dispute for the states is the individual mandate that starts in 2014 which will require individuals to carry health insurance.  According to a 2009 Gallup poll, the number of uninsured adults increased to 16.2% from 14.8% in 2008.  15 states had over 20% of the adults in their state uninsured, with Texas leading the way at 26.9%.  One interesting point to note from the survey is that of the 15 states with the highest number of uninsureds, 11 of them are suing to overturn the individual mandate.  Conversely, of the 15 states with the lowest number of uninsureds (all of them are under 13%), only four are involved in the lawsuits.  By the way, the state with the lowest percentage of uninsured adults, at 5.5%?  Massachusetts.  The state with a health insurance mandate.

Pssssst. Your Drug Pusher Wants to See You.

Psst Go 90Actually, this post has nothing to do with illegal drugs.  Walgreens is introducing a new program called “Go 90” which will allow customers to get 90 days worth of a prescription at Walgreens pharmacies rather than having to get the 90 day prescription filled through a mail-order pharmacy. 

From the press release:

“One way to improve medication adherence and compliance is by allowing patients to receive 90-day supplies of chronic medications at their community pharmacy,” said Walgreens President and CEO Greg Wasson. “Today, some patients still are only able to receive a 90-day supply through a mail-order option designed by their prescription plan administrator. We are out to change that with our ‘Go 90’ program, which will inform eligible patients that they can receive a 90-day medication supply from their trusted community pharmacist. We also will be encouraging all prescription plan administrators to adopt this design to help both their clients and individuals save money, while improving patient health through proper medication adherence and compliance.”

The 90 day drug supply is a great way to keep people with chronic conditions (asthma, high blood pressure, diabetes, etc.) on their med regimen.  This should prevent these patients from having a lapse in their drug supply which could lead to a serious incident, such as a trip to the emergency room.  Many insurance companies provide discounted pricing for a mail-order 90 day supply.  The press release didn’t indicate if Walgreens would be able to honor the discounted pricing that some insurers provide for the 90 day supply, so make sure you check with the pharmacist before you get your prescription filled.

(This post was not sponsored or endorsed by Walgreens.  However, if they would like to sponsor or endorse this blog, please have them give me a call.)

More Health Care Reform Clarifications: Non-Discrimination and Preventative Services

As we enter 2011, I continue to examine the PPACA, or health care reform law, to gain a better understanding of its provisions so that I can continue to communicate them accurately to clients and readers of this blog alike.  So here are a couple of things I’d like to point out.

First, the IRS, Department of Labor and Department of Health and Human Services have issued a notice delaying the enforcement of group health plan non-discrimination rules, which were to go into effect on January 1, 2011.  So what does this mean?  Under the law, certain current or former executives/owners that aren’t offered to non-executives would be prohibited.  Some of these benefits might include:

  •  A company gives a manager a severance agreement that will pay for all or a portion of his COBRA premiums for a full 12 months if his employment is involuntarily terminated — and all other former workers are required to pay the full COBRA premiums themselves
  • New salaried employees are eligible for healthcare benefits immediately, but hourly workers are not eligible until 90 days after their start date
  • A company offers a low deductible plan option to officers, but only offers rank and file employees a high-deductible plan

The agencies are now saying that companies will not have to comply with the non-discrimination rules until the agenices have issued further guidance regarding this portion of the law.  They did not indicate when that might be, however the agencies did indicate that when guidance is issued the effective date for compliance will be delayed to give plan sponsors time to implement the changes that will be required. 

Perhaps of more importance to the public in general is a clarification on the preventative services portion of the law.  The law states that non-grandfathered plans will have to cover certain preventative services without any cost-sharing for the patient.  This means that physicals, well-baby exams and most immunizations will be covered without the patient having to pay a deductible, co-payment or co-insurance of any kind.  There is also a list of recommended preventative services that will be covered at 100% as well.  One of the new services covered at 100% will be colonoscopies.  HOWEVER, the recommendation is that screening should be done in adults age 50 through age 75.  So if you are under the age of 50, you’re health insurance may still require cost sharing on this procedure.  And let me tell you, the procedure is not inexpensive.  So be sure you check with your health care provider and your insurance company so that you fully understand what preventative services will be covered at 100%.

Vote to Repeal Health Care Reform Scheduled

According to the Wall Street Journal, Republicans in the House plan to hold a vote on repealing the recently enacted PPACA (health care reform) law on January 12th.  It is expected to pass overwhelmingly in the House (where the GOP has the majority), but to fail in the Senate.  Even if it somehow finds its way through the Senate, President Obama would veto any repeal.

I bring this to your attention only because I believe that there will be some confusion caused by the reporting of this vote and that people may believe that the law has actually been repealed.  Rest assured, it will not be.  However, the GOP will have control of appropriations in the House in 2011 and may find a way to choke off some aspects of the law, such as Medicaid funding to the states or some of the grants for medical research that are built into the law.  As always, please check back regularly for updates and be well!

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