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Health Plan Rebates in 2021 to Be Second Highest on Record

Group health plan insurers are expected to pay out $618 million in rebates to plan sponsors for the 2020 policy year after seeing use of health care services plummet during the COVID-19 pandemic.

That’s according to a Kaiser Family Foundation estimate in April, which also projects that insurers will pay out $1.5 billion in rebates to enrollees in the individual market.

The total $2.1 billion estimated payout this year is second only to the $2.5 billion insurers paid out in 2020 since the Affordable Care Act took effect and started requiring these rebates. Small and large group health plans received $689 million in rebates in 2020.

The ACA requires insurance companies that cover individuals and small businesses to spend at least 80% of their premium income on health care claims and quality improvement, leaving the remaining 20% for administration, marketing and profit. If they spend less than 80%, the shortfall has to be returned to policyholders in the form of a rebate.

The threshold for large group health plans is 85%. This threshold is called the medical loss ratio (MLR).

The rebates that will be paid in 2021 are based on a three-year MLR average loss ratio (2020, 2019 and 2018). Rebates this year will be paid to sponsors who had group health policies in effect in 2020, and only to those who were in plans that failed to spend enough on medical services. Many plans spend more than the MLR cap on medical services and do not have to pay.

There are two main drivers of larger rebates this year:

There was a significant drop in health care utilization in 2020 — The pandemic depressed the use of medical services as many people who would normally have gone to the doctor for ailments chose to stay home to avoid the risk of contracting COVID-19.

Also, hospitals cancelled elective care early in the pandemic and when COVID-19 cases were cresting, so that they could free up resources for coronavirus patients and reduce the virus’s likelihood of transmission. In fact, an analysis by the Peterson-KFF Health System Tracker found that health care spending fell slightly in 2020, making it the first year on record to see spending decline.

Insurers in the individual market had record profits in 2018 and 2019 — The Kaiser Family Foundation earlier reported that individual market insurers were very profitable in 2018 and 2019, even though the individual mandate penalty was eliminated in 2018 and insurers had been reducing their rates the previous few years.

How to handle rebates

Health insurers may pay MLR rebates either in the form of a premium credit (for employers that are still using the insurer) or as a lump-sum payment. More than 90% of group plan rebates come as a lump sum.

Once an employer receives this money, it is their responsibility to distribute the rebate to plan beneficiaries appropriately within 90 days, or risk triggering ERISA trust issues.

How the employer distributes the check will depend on how much their employees contribute to the plan, if at all. Here are the basic rules for employers handling their MLR rebate checks:

If you paid 100% of the premiums, the rebate is not a plan asset and you can retain the entire rebate amount and use it as you wish.
If the premiums were paid partly by you and partly by the participants, the percentage of the rebate equal to the percentage of the cost paid by participants must be distributed to the employees.

If you have to distribute funds to the plan participants, the Department of Labor provides a few options (if the plan document or policy does not already prescribe how they should be distributed):

The funds can be used to reduce your portion of the annual premium for the subsequent policy year for all staff who were covered by all of your group health plans.
The funds can be used to reduce your portion of the annual premium for the subsequent policy year for only those workers covered by the group health policy on which the rebate was based.
You can provide a cash refund to subscribers who were covered by the group health policy on which the rebate is based.

How to Create a Flextime Policy

With so many people having been relegated to remote work during the COVID-19 pandemic, many employers are now wrestling with how to proceed as it starts to wane. Many companies are considering implementing hybrid, flextime work schedules after seeing success with remote work.

Flextime is the use of flexible schedules in which employees spend a portion of their workday on the worksite, and the rest from home or another location. For example, a flextime schedule might require an employee to work on-site from 8 am to 2 pm, and complete the rest of the workday from another location.

Unfortunately, there is little legal guidance on the use of flextime schedules. Even the federal Fair Labor Standards Act, which governs minimum wage and overtime pay for most employees, does not address flexible work schedules.

Alternative work arrangements are a matter of agreement between the employer and the employee.

Flextime considerations

If you decide that you want to extend flextime to one or more of your employees, you should start by drafting an official company policy on exactly how it works. It’s always good to get it down on paper.

Take your time to make sure you have all angles covered, including ensuring that you don’t run afoul of wage and hour laws in the process.

Among other considerations, you should address the following three issues when crafting your flextime policy:

Which employees are eligible for flextime (management, sales or others);
What hours employees are required to work on-site; and
Whether prior approval is required from management or human resources.

Once you’ve written out your policy, it may be a good idea to pass it by your legal counsel to ensure you comply with all relevant wage and hour laws. When approved, include the new flextime policy in your company’s employee handbook, so that it is received by all employees who are or may become eligible for the alternative work schedule.

Benefits of flexible hours

Through the availability of smartphones and wireless internet, the amount of work employees can complete off-site has grown significantly. Utilizing available technology for this purpose can increase productivity, and even expand the geographic area in which a business operates.

Employees working remotely can also better attend to family and personal matters, improving their work-life balance and in some cases reducing the need for a leave of absence. They also don’t have to waste time commuting, which for some can be more than two hours or more on the road every day.

Creating a virtual workplace that allows a company to offer a flextime schedule can result in a number of significant benefits, including:

Saving money on work space;
Retaining valuable employees;
Bringing on outside project teams;
Expanding visibility; and
Increasing efficiency and productivity.

Vision Coverage Can Reduce Overall Health Care Costs

Research has found that employers who offered their workers stand-alone vision benefits experienced $5.8 billion in cost savings in the aggregate over four years due to reduced health care costs, avoided productivity losses, and lower turnover rates.

That’s because individuals who receive an annual comprehensive eye exam are more likely to enter the health care system earlier for treatment of serious health conditions, thereby significantly reducing their long-term cost of care.

Additionally, people are more likely to get an annual comprehensive eye test than a routine physical, according to the study by HCMS Group, a human capital risk management firm that analyzes data to help employers reduce waste in health benefits.

While not mandatory under the Affordable Care Act for adults, you may consider vision coverage for your employees as it may help decrease your overall health insurance outlays in the future.

The ACA requires that pediatric vision care coverage be embedded in medical benefits for children up to age 19 in group health plans purchased by employers with 100 or fewer employees.

The ACA’s vision care requirement for kids has exposed a gap in coverage for adults that is prompting an uptick in interest in voluntary vision benefits.

According to the “2020-2021 WorkForces Report” by the life insurer Aflac, 67% of U.S. employers surveyed offered voluntary vision benefits in 2020.

And nearly eight out of 10 employees said they would enroll in vision benefits if they were offered by their employer.

Early detection

The main reason vision benefits can help with early detection of illnesses is that comprehensive eye exams provide the only possible non-invasive view of blood vessels and the optic nerve.

As a result, eye doctors can detect early signs of chronic diseases before any other health care provider.

Eye doctors were the first to identify in patients signs of:

Diabetes (34% of the time) — The HCMS study estimates savings of $3,120 per employee due to early identification of diabetes.
High blood pressure (39% of the time) — The study estimates savings of $2,223 per employee due to early identification of high blood pressure.
High cholesterol (62% of the time) — The study estimates savings of $1,360 per employee due to early identification of high cholesterol.

The case for vision insurance

Vision insurance policies typically cover routine eye tests and other procedures, and provide specified dollar amounts or discounts for the purchase of eyeglasses and contact lenses. Some vision insurance policies also offer discounts on refractive surgery, such as LASIK and PRK.

Vision insurance only supplements regular health insurance. Regular health insurance plans pay for eye injuries or ocular disease.

Vision insurance, on the other hand, is a wellness benefit designed to reduce your costs for routine, preventative eye care such as eye exams, eyewear and other services.

With the prospect of reduced health care costs among your employees, which in turn would reflect well in your health insurance premiums, if you have not considered vision benefits before, it may be time to take a second look.

Health Plans Dropping Out-of-Pocket Cost Waivers for COVID-19 Treatment

As the light at the end of the pandemic tunnel gets brighter, more health insurers are ceasing to offer cost-sharing waivers for COVID-19 treatment.

After legislation was enacted in 2020 that required health insurance companies to cover COVID-19 tests and vaccines, many insurers voluntarily waived all deductibles, copayments and other costs for insured patients who fell ill with COVID-19 and needed hospital care, doctor visits, medications or other treatment.

Not all health insurers extended these waivers to their enrollees, but many did.

Insurers are still required to provide free COVID-19 testing and vaccinations to their enrollees. That’s because federal guidance requires them to waive such costs.

Also, guidance issued in February after President Joe Biden assumed office, reinforced the Trump administration rule about waiving cost-sharing for testing. Biden’s guidance took an extra step, saying that it applies even in situations in which an asymptomatic person wants a test before traveling or seeing a relative.

Almost 90% of individual and group health plans enrollees were in plans that waived cost-sharing for COVID-19 treatment, according to the Peterson-KFF Health System Tracker.

What insurers are now doing

However, starting in late 2020, more and more insurers have quietly been dropping those waivers. For example:

UnitedHealthcare started curtailing its waivers in November.
Anthem stopped its cost-sharing waivers on Jan. 31.
Cigna stopped offering cost-sharing waivers for COVID-19 treatment on Feb. 15.
Aetna ceased offering deductible-free inpatient COVID-19 treatment waivers on Feb. 28.

Not all insurers are doing this though. Blue Cross and Blue Shield of Minnesota extended eligibility for telehealth benefits and COVID-19 treatment waivers through the end of 2021. Humana, meanwhile, has left the cost-sharing waiver in place for Medicare Advantage members, but dropped it on Jan. 1 for those in job-based group plans.

A study by the Peterson Center on Healthcare and the Kaiser Family Foundation released in November 2020, found that 88% of Americans who have health coverage — including employer-sponsored health plans and individual plans purchased on exchanges — had policies that waived cost-sharing for COVID-19 treatment.

Despite the fact that vaccines are rolling out quickly across the country and in light of a significant percentage of people who are hesitant to get vaccinated for COVID-19, the coronavirus is expected to be a presence in society for some time to come. And that means people will contract it and get sick.

There are also concerns about mutant strains that have developed in South Africa and Brazil, and possibly in India during the massive outbreak in April.

The takeaway

You may want to check with your group health plans to see if they have waived any cost-sharing for COVID treatment, and have since dropped or are planning to drop it.

You should meet with your employees or send them a memo explaining any impending changes for them if they have a health plan that is ending or has ended waivers.

Put Money into an HSA instead of a 401(k) After Employer Matching: Report

One of the main recommendations for employees with 401(k) plans is that they should contribute at least enough to their plan every paycheck to ensure they receive the maximum they can in their employer’s matching contributions.

But a new study by Willis Towers Watson recommends that younger, healthier workers should divert savings to their health savings account from their 401(k) after capping out employer matching instead of continuing to put money into their retirement plan.

The report reasons that if they do this, they can get more bang for their buck when they use their HSAs to pay for future medical expenses.

That’s because HSAs can be kept for life and the money they’ve accumulated in them can be used to pay for medical expenses whenever they need them, including in retirement. And the moneys used in HSAs to pay for those expenses are not taxed when they are withdrawn, unlike 401(k)s, the funds of which are subject to federal income tax when withdrawn

The benefits of HSAs

With HSAs:

Pretax contributions, gains from investment, and withdrawals used for qualified medical expenses are exempt from federal and most state taxes.
Any unused balance is carried over to the next year.
Funds never expire.
Unused funds can be passed on to a beneficiary after death.
After turning 65, account holders can withdraw money for any purpose. However, if those funds are not use for a bona fide medical expense, they are taxed as income.

No other retirement savings vehicle has the same tax advantages as an HSA, so a dollar saved in an HSA can be worth significantly more than an unmatched dollar saved in a 401(k), according to Willis Towers Watson. Some employers will match a portion of workers’ HSA contributions or seed their accounts with money to encourage participation.

That said, HSAs won’t outperform funds that are matched partly or fully by an employer, according to the report.

Willis Towers Watson said that those tax-free dollars and withdrawals can help pay for health care when we are likely to use it most: in retirement.

Men who retire at 65 with an average life expectancy of 85 would spend about $140,000 out of pocket for medical costs, and woman who retires at the same age and lives to 87 would spend an average of $159,000, according to the research.

The HSA pitch

HSAs can only be used in conjunction with a high-deductible health plan. When HSAs were first introduced, they did not have investment options for the money in the accounts, but as they have grown in popularity over the years, many HSAs now have evolved to essentially have the same investment choices as a 401(k).

HSAs have rules about how much of the balance can be invested. They will typically require that the first $1,000 in the account to be held in cash, and anything above that can be invested to help the funds grow over time.

In 2021, workers can contribute a maximum of $3,600 to their individual HSA account and $7,200 to a family coverage account.

If you are offering your workers high-deductible health plans with matching HSAs, and if you also provide a 401(k) and match part of the contributions, you may want to consider sharing this information with them to help them make informed choices on where to park their money for future use.

Addressing Pandemic Fatigue Among Your Staff

As the country and our businesses continue trudging along and hope that vaccines will pave the way out of the COVID-19 crisis, employers are increasingly seeing the effects of pandemic fatigue among their workers.

The same issues people are grappling with in their personal lives — exhaustion with social distancing and masking, a sense of loss of community and camaraderie, sadness over lost loved ones — are also spilling over into workplaces and affecting job performance.

Pandemic fatigue can manifest itself in noticeable changes in employees’ mood or demeanor and result in an inability to concentrate due to anxiety and sleeplessness.

And now that vaccines are being administered at a quickening pace and word is that we may be able to soon resume normal activities, people have a sense of unbridled excitement. It’s like how kids feel when they’ve had a year of school and summer vacation is right around the corner.

It’s important for all employers to stay the course on their safety protocols, while at the same time acknowledging what their employees are going through. Keep requiring mask-wearing and social distancing.

The effects

Pandemic fatigue is real and can result in:

Employee disengagement — This can lead to poor productivity and mistakes in their work.

Employee conflicts — Many people are stressed and exhausted, which can lead to arguments and irritation with co-workers. It can also happen if one employee doesn’t take COVID-19 precautions seriously, wearing a mask below their nose or chin (or not at all) and angering a co-worker who is serious about safety.

Failing to observe social distancing rules of being 6 feet apart can also result in arguments between co-workers.

Lost concentration — Pandemic fatigue can also lead to employees not focusing well on their jobs and safety regimens. This can result in workplace accidents.

What you can do

There are steps you can take to combat pandemic fatigue in the workplace, but the first and foremost thing you should do is consistently enforce safety rules and make sure that COVID-19 protocols should be part and parcel of the rest of your safety procedures.

You should do this by incentivizing good safety behavior, and rewarding that good behavior.

But you must also be cognizant of the emotional toll the pandemic has had on your workers. You can do this by boosting morale through:

Giving compliments — Provide positive feedback when merited, even for smaller achievements. Compliments go a long way these days due to the stress people have been through.

Showing compassion — Be consistent in your treatment of staff and consider checking in with employees to ensure that they are doing well. Ask how they’ve been faring and show empathy and sympathy for the issues they may be wrestling with.

Remember, some of your employees may have family that has succumbed to the virus or may be currently battling it.

Being calm and patient — It’s important that management shows calm and measured leadership, which can reassure the ranks that things aren’t so bad. Also, if management and supervisors can be patient when workers are dealing with stress, it can in turn tamp down any stress building among staff.

Exuding confidence — Part of being a steady and calming force includes expressing confidence that better times are ahead. This too can help your employees feel more relaxed about the future. Supervisors and managers should also express confidence in and appreciation for the employee’s individual commitment to stay the course.

The final word

These are tough times for most everyone, and for many people their work and personal lives have been upended and replaced with little to no social activity and feelings of isolation and frustration.

By providing steady leadership, continuing to enforce safety protocols and paying attention to the struggles your staff are facing, you can help any workers dealing with pandemic fatigue to better weather the storm that we may soon be exiting.

HDHPs Do Not Slow Down Health Care Spending: Study

A new study has found that high-deductible health plans have only a limited effect on the growth of health care spending for people who sign on for these plans.

The National Bureau of Economic Research researched HDHPs over a period of four years and found they failed to control health spending any more than traditional preferred provider organization plans (PPOs) and health maintenance organizations (HMOs). The only statistically significant impact on lower growth by HDHPs was on more expensive pharmaceuticals.

The news comes as HDHPs continue growing in use and popularity among employers and some of their workers. They are often paired with a health savings account that allows participants to set aside a portion of their wages before taxes in special accounts used to pay for health-related expenses, including deductibles.

When HDHPs first came on the scene they were touted as a potential cost-saver. The logic went that when the worker has more skin in the game and has to pay more for their medical care and medications, they will shop around for the lowest-cost service or drug.

Here are the main findings of the report:

Covered workers who switched from low-deductible plans to high-deductible plans saw lower growth rates of spending, but for no more than a year.
HDHPs seem to discourage the use of less cost-effective drugs. The report surmised that’s because people with these plans will be more motivated to shop around for better prices, like from an online pharmacy.

Considerations

PPOs continue to be the most popular choice among employees and HDHPs continue growing as employers look to cut their and their employees’ premium expenditures, according to a recent report by Benefitfocus, a benefits technology company. HDHPs currently account for about 30% of group health plans in play.

Also, some employees prefer having an HDHP as they can save money up front on the premium.

Over the past few years, employers have noticed that younger and healthier workers will gravitate towards HDHPs when offered them, as they will usually not need much health care and they are willing to trade a lower up-front premium for the small likelihood that they will need a significant amount of medical care, which they would have to pay for out of pocket.

However, workers in their 40s and older are more apt to stick to their PPO or HMO plans, which have higher premiums but lower out-of-pocket maximums.

But the authors of the National Bureau of Economic Research report said that for some people with health problems, HDHPs “may have high adverse health consequences when patients delay, reduce, or forgo care to curb costs, even when costs are moderate compared to health benefits.”

The takeaway

There is no doubt that HDHPs will continue growing in use, but they are not for everyone. Employers that give their workers an option of choosing an HDHP or a traditional PPO plan will be able to better cater to the different needs of their workers.

This is important as the U.S. workforce becomes more diversified, and for employers with multi-generational employee pools.

Conversations Around Rx for Advisors with Nicole Elover

ScriptSourcing’s very own National Sales Executive, Nicole Elover, sits down with Lester Morales of THB to get in-depth about just how easy it is to cut Rx spend over 70%.

For more info or to book a consultation, you can reach out to Nicole directly at Nicole@ScriptSourcing.com

100% COBRA Subsidy in Effect Through Sept. 30

The recently enacted American Rescue Plan Act of 2021 includes a 100% COBRA subsidy for up to six months for employees laid off during the COVID-19 pandemic. The subsidy is in effect through September 30.

Due to the short ramping up period, it’s imperative that employers who have laid off workers, or who plan to do so, start preparing to notify them.

The Consolidated Omnibus Budget Reconciliation Act requires group health plans sponsored by employers with 20 or more employees to offer staff and their families the opportunity for a temporary extension of health coverage (called continuation coverage) after they have quit or been laid off for 18 months. The employees will usually be responsible for the entire premium.

Who is eligible?

Eligible individuals include:

Workers who were previously laid off or lost their benefits and became eligible for COBRA continuation coverage but chose not to purchase it, as long as they would still be eligible now. Example: A worker who was laid off in November 2020 but rejected the offer of COBRA coverage then.
Individuals who previously elected COBRA continuation coverage, but later dropped it, as long as they would still be eligible now. Example: A worker was laid off in August 2020, elected and purchased COBRA coverage, but dropped the coverage in January.
Individuals who were involuntarily terminated or experienced a reduction in hours, and who timely elect COBRA continuation coverage after April 1.

Individuals are not eligible for a subsidy:

If they voluntarily resigned from their job.
They become eligible for other employer coverage or Medicare.
They are beyond their maximum COBRA coverage period (which under federal law is 18 months, and under California law may be up to 36 months).

What’s covered

The subsidy applies to all health coverage that COBRA usually covers: health insurance, and dental and vision coverage too. Generally, the coverage that employers offer Assistance Eligible Individuals (AEIs) should be the same coverage in effect prior to their COBRA-qualifying events.

Individuals who qualify for the COBRA subsidy are not required to pay a premium.

The group health plan will cover the cost of the coverage, which will be reimbursed (including any administrative fee) by the U.S. government via a payroll tax credit.

Notice requirements

When notifying newly eligible individuals, the information can be included with the COBRA election notice or a separate notice that would come along with the election packet.

The notices must include:

Notification of the availability of subsidies.
A prominently displayed description of the AEI’s right to the subsidy and conditions.
The forms necessary to establish eligibility.
A description of the special election period.
A description of the qualified beneficiary’s obligation to notify the plan when they are no longer eligible for coverage.
Contact information of the plan administrator and any other person maintaining relevant information in connection with the subsidy.

Important: The Department of Labor is expected to provide model language for these notices by April 10.

What you should do

There are a number of steps employers need to take as the ramping up period is quite short:

Coordinate with your COBRA administrator to ensure that you agree about who should identify eligible individuals and who will be sending out notifications.
If that is you, identify those individuals who may be eligible for the COBRA subsidy and who may be eligible to make a new election.
Prepare notification documents.
Notify all eligible individuals.

Group Health Plans Must Cover COVID-19 Testing for Asymptomatic People

The Centers for Medicare and Medicaid Services announced in late February that private group health plans cannot deny coverage or impose cost-sharing for COVID-19 diagnostic testing, regardless of whether or not the patient is experiencing symptoms or has been exposed to someone with the disease.

The CMS said it had issued the new guidance to make it easier for people to get tested with no out-of-pocket costs if they are planning to visit family members or take a flight, for example. Up until now, some health plans have not covered testing if a person is not experiencing symptoms or has not come into contact with someone who is later confirmed as being infected with COVID-19.

The guidance covers the part of the Families First Coronavirus Response Act of 2020 that required that plans and issuers must cover COVID-19 diagnostic testing without any cost-sharing requirements, prior authorization or other medical management requirements. Still, many people were denied getting tests because they had no symptoms or hadn’t been exposed to someone infected with the virus.

According to the guidance:

“Plans and issuers must provide coverage without imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements for COVID-19 diagnostic testing of asymptomatic individuals when the purpose of the testing is for individualized diagnosis or treatment of COVID-19.

“However, plans and issuers are not required to provide coverage of testing such as for public health surveillance or employment purposes. But there is also no prohibition or limitation on plans and issuers providing coverage for such tests.”

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