Demand for Voluntary Group Benefits Grows During Pandemic

As the COVID-19 pandemic drags on and many Americans see unmet needs outside of their health insurance, more and more workers are increasingly signing up for the voluntary benefits their employers offer.

While many workers in the past had skipped on voluntary benefits, they have grown concerned that a good group health insurance plan may not be enough to provide all the coverage they need.

It’s important for employers to react to this trend as the pandemic has put many people on edge about how they can continue to pay the bills if they are laid up with COVID-19, and especially if they have long-haul symptoms that have plagued some people for months after first getting sick.

Employers who fail to upgrade offerings could see higher turnover and more difficulty in retaining and attracting talent.

More employers have added these insurance products to their voluntary benefit offerings. According to a recent Aflac survey, more than 80% of employers are looking at offering insurance plans that cover costs associated with coronavirus or a future pandemic.

Also, many insurers are actively developing new plans and enhancing existing plans that pay benefits for prevention, diagnosis and treatment of a variety of virus strains.

Extra peace of mind

Voluntary benefits offer both employers and employees added peace of mind in uncertain times. These plans serve a dual role: In addition to helping pay expenses health insurance doesn’t cover, they also serve as a financial safety net if covered illnesses arise as complications of the coronavirus.

There are a number of plans that can provide coverage that would be outside the scope of health insurance, including:

  • Hospital indemnity insurance – This is a supplemental plan designed to pay for the costs of a hospital admission that may not be covered by other insurance. It will cover out-of-pocket expenses like medical copays, deductibles and regular expenses, such as food, rent and utilities.
  • Critical illness insurance – These plans pay out in the event of covered critical illnesses. This insurance can help alleviate financial worries during a serious illness by providing a lump-sum cash payment to the insured person when they’re diagnosed with a specific critical illness. The benefit provides cash at a time when it may be needed most.
  • Life insurance – In case the unthinkable happens.
  • Disability insurance – These plans pay benefits when insureds are unable to work due to covered illnesses or injuries. If you have disability insurance and become injured or sick and lose your ability to work, you’ll get paid monthly disability insurance benefits to cover your lost income. Disability insurance can be bought individually, but many employers offer long-term and short-term disability insurance as part of an employee benefits package, like health insurance.

The pandemic has highlighted the need for these and other employee benefits that take care of the whole individual, rather than focusing on just health insurance.

Executives at insurers that offer these products say that as Americans struggle to balance their work and home lives, particularly if they work from home as a result of the pandemic, they are looking to their employers for more support to help cover holes in their benefits.

The key: Education

If employers have too many voluntary benefit offerings and don’t do a good job of explaining how they complement each other, it can only lead to confusion among their employees. And if they are confused, the chance that they will opt for any of the plans is greatly diminished.

That’s why education about the products, and how if set up properly they can provide a powerful level of protection for a variety of events, is crucial. If you’re interested in expanding the voluntary benefits you offer your employees, now is the time. We can help you get the ball rolling and help educate your staff on their choices and why they are important.

COVID-19 Relief Bill Extends Unemployment Benefits, PPP and More

The $900 billion COVID-19 relief bill, passed by Congress and signed into law on Dec. 27, includes a number of provisions that affect employers and their workers in terms of paid sick leave and Emergency Family and Medical Leave Act provisions.

The legislation also boosts unemployment benefits to out-of-work Americans, as well as reopening and expanding the Paycheck Protection Program that was introduced in March as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Paid sick leave and family medical leave

The new law has not extended the obligation for employers to provide emergency paid sick leave and expanded family and medical leave beyond Dec. 31, 2020, instead making it voluntary after that date.

From Jan. 1, employers can continue receiving tax credits if they provide emergency paid sick leave (EPSL) and emergency family medical leave (EFML) to employees for COVID-19-related purposes through March 31. Here are the caveats:

  • Tax credits will be available for leave granted to employees who did not already exhaust 80 hours of EPSL and 12 weeks of EFML. For example, if a worker who was entitled to 80 hours of EPSL last year used 50 of those hours, they’d have 30 hours left to use between Jan. 1 and March 31 this year.
  • Employers must protect the jobs of any employee that is granted EPSL and EFML.

Other provisions

The legislation extends some CARES Act unemployment programs:

Unemployment benefits ― The new law extends the Federal Pandemic Unemployment Compensation (FPUC) program supplement from December 26, 2020 to March 14. However, instead of receiving $600 a week under the original program, benefits will be $300 per week.

Gig worker unemployment benefits ― The law also extends the Pandemic Unemployment Assistance (PUA) program, which covers independent contractors and gig workers who would usually not be eligible for unemployment insurance payments.

This program (originally created by the CARES Act) is also extended to March 14, and then a three-week phase-out period begins and will run until April 5. The law increases the number of weeks independent contractors are eligible for these benefits to 50 from the original 39. 

Extra weeks for those whose benefits ran out ― The Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of unemployment insurance benefits to individuals who use up all of their state unemployment benefits, will be extended until March 14.

The law also increases the number of benefit weeks to 24, from 13 under the original version of the program. After March 14, this program will be phased out over three weeks until April 5.

More money ― Taxpayers with annual incomes below $75,000 will receive a $600 check, plus another $600 per dependent child. Payments are phased out for people with incomes in excess of $75,000.

Paycheck Protection Program (PPP) part II ― The law also sets aside $284 billion for forgivable loans to struggling businesses as part of a second PPP. Companies that receive funds will have to use the money on payroll and other specific expenses if they want the loan to be forgiven.

Depending on the loan, employers will have either eight or 24 weeks after receiving the loan to spend it on approved expenses.

But PPP part 2 does have some additional prerequisites that differ from the original. It lowers the employee threshold for businesses to 300 employees or fewer (down from 500). Additionally, the maximum loan is now $2 million, compared to $10 million under the original PPP.

Qualifying expenses are also different in this version, which means any business thinking about applying needs to read all the fine print.

New Law Bans Surprise Billing

Part of the COVID-19 relief package that Congress passed in late December includes a notable provision that bans surprise medical bills when out-of-network doctors work on insureds at in-network hospitals.

This so-called “balance billing” occurs when an out-of-network provider is involved in a patient’s care at a hospital that accepts their insurance, often without the patient knowing about it. Patients can end up facing unexpected bills in the tens of thousands of dollars.

Specifically, the law bars out-of-network providers and air ambulance firms from billing patients for more than they would be charged by in-network providers (ground ambulance services are not covered under the law).

Additionally, health plans are barred from requiring patients to pay more for care they unknowingly receive from out-of-network providers at in-network facilities.

According to the Kaiser Foundation, 18% of emergency visits lead to at least one out-of-network charge for people covered by large group plans, as do 16% of in-network inpatient admissions.

Here are the main points of the legislation:

  • The law requires that patients be billed on their plan’s in-network rate for emergency medical care at an out-of-network facility, or if they are treated by an out-of-network clinician at an in-network hospital.
  • It protects patients admitted to an in-network hospital for a planned procedure when an out-of-network doctor works on the patient. Most often this happens when a doctor is called to provide assistance in the operating room, or if the anesthesiologist on duty is out of network.
  • Doctors and health plans are allowed to bill for out-of-network treatment in the above situations if the patient is informed of the estimated costs at least 72 before they receive care.
  • Whatever the patient pays for the above out-of-network services must be counted toward their in-network annual deductibles.

Billing disputes

For the health insurers and providers to agree on the cost of care, the new law sets up an arbitration process to settle payment disputes for out-of-network claims. The plan sponsor and the covered employee are not part of this dispute resolution process.

The law gives the insurer and provider 30 days to settle a dispute and if they can’t come to an agreement during that time, they can go to a binding arbitration process that the law creates. This “Independent Dispute Resolution” (IDR) will be administered by independent entities.

During IDR, both the insurance company and the provider submit what they want to pay to the dispute resolution arbiter, who will decide a fair amount based on what other providers charge for similar services.

The arbiter will not be allowed to consider rates paid by Medicare and Medicaid, which tend to be lower than what commercial insurers pay for services and what hospitals normally charge. 

The decisions are binding. after which the insurer has 90 days to pay the bill.

The new law takes effect in January 2021.

One more thing…

Besides banning surprise billing, the law also bars gag clauses. Many contracts between health insurers and providers include provisions that bar enrollees, plan sponsors or referring providers from seeing cost and quality data on providers. These provisions will now be prohibited.

How COVID-19 Will Change Employee Benefits

The COVID-19 pandemic has impacted businesses and other organizations in multiple ways. Lost revenue and the overnight change to remote workforces, among other things, have caused significant changes to operations and finances. A new report shows that there will be long-term effects on employee benefit programs as well.

Health insurers are forecasting continued cost increases that dwarf general inflation rates, according to the report by Mercer Marsh Benefits. Most expect 2021 medical cost inflation to come in at 4.3%, slightly higher than in 2020. They anticipate the trend of escalating costs to continue next year and going forward.

The culprits? The high costs of diagnosing, caring for and treating COVID-19 patients. A survey of studies released in September showed that half of all COVID-19 patients who were admitted to an intensive care unit were there more than seven days. ICU patients who need ventilators also cost more to treat – 59% more per day, according to one report.

A new landscape for plan outlays

Like this year, 2021 will be a very different one for group health plan outlays, as a number of novel factors take center stage, including:

A rebound in elective diagnostics and treatments – Mercer Marsh predicts a rebound in some elective treatments when it is safe to resume these procedures in 2021. On the other hand, some elective procedures that were postponed will never be rescheduled as people end up taking a different non-surgical course and ideally recover from their ailment or use lower cost-of-care virtual services.

Delays leading to greater need for care – Delays in treatment for serious conditions, such as cancer, and exacerbation of other chronic conditions, like diabetes, may require more invasive and expensive care. Many people have postponed these treatments during the pandemic and doing so may end up increasing the cost of the treatments if their conditions have deteriorated.

New claims linked to remote working – The report predicts a higher incidence of conditions relating to remote working and sedentary lifestyle, including musculoskeletal and mental health issues. According to the journal The Lancet Psychiatry, “A major adverse consequence of the COVID-19 pandemic is likely to be increased social isolation and loneliness … which are strongly associated with anxiety, depression, self-harm, and suicide attempts across the lifespan.”

COVID-19-specific claims – Sixty-eight percent of insurers expect to see higher outlays  due to the cost of COVID-19-related diagnostics, care and treatment. There is also the issue of paying for a vaccine once one becomes available. These costs cannot be predicted at this point.

Ongoing COVID-19 concerns – The long-term physical and mental health effects on survivors of COVID-19 are largely unknown. Some coronavirus “long-haulers,” who have lingering symptoms and effects that can last for months, may require additional treatment and doctors’ visits as they try to cope.

Increases to unit prices – Prices for a wide range of services are increasing as demand rises and/or to offset revenue lost due to COVID-19. Mercer Marsh found that 68% of insurers expect costs will rise in 2021 because of health providers charging more to offset revenue lost due to the cornavirus.

New PPE costs – The unit cost of care is also being driven up by the cost of personal protective equipment, which is being added to many treatment bills.

The takeaway

In the years ahead, employee benefits will change in terms of the services they provide, the treatments they cover, and the way they will be delivered.

More doctors’ visits will be done via tablet computers. Coverage for preventive medicine will increase to drive better and less expensive health outcomes. But even with that, a vicious pandemic coupled with uninvited changes in lifestyles will likely drive up the cost of those benefits for years to come.

The Big Question: Can Employers Require Workers to Vaccinate?

As the COVID-19 pandemic rages on and more employers bring staff back to the workplace, many businesses are considering implementing mandatory vaccination policies for seasonal flus as well as the coronavirus.

A safe and widely accessible vaccine would allow businesses to open their workplaces again and start returning to a semblance of normalcy. But employers are caught in the difficult position of having to protect their workers and customers from infection in their facilities as well as respecting the wishes of individual employees who may object to being required to be vaccinated.

The issue spans Equal Opportunity Employment Commission regulations and guidance, as well as OSHA workplace safety rules and guidance. With that in mind, employers mulling mandatory vaccination policies need to consider:

  • How to decide if such a policy right for the company,
  • How they will enforce the policy,
  • The legal risks of enforcing the policy, and
  • Employer responsibilities in administering the policy.

Proceed with caution

A number of law firms have written blogs and alerts on the subject of mandatory vaccinations, and the overriding consensus recommendation is to proceed with caution. 

In 2009 pandemic guidance issued during the H1N1 influenza outbreak, the EEOC stated that both the Americans with Disabilities Act and Title VII bar an employer from compelling its workers to be vaccinated for influenza regardless of their medical condition or religious beliefs – even during a pandemic.

The guidance stated that under the ADA, an employee with underlying medical conditions should be entitled to an exemption from mandatory vaccination (if one was requested) for medical reasons. And Title VII would protect an employee who objects due to religious beliefs against undergoing vaccination.

In these cases, the employer could be required to provide accommodation for these individuals (such as working from home).

Additionally, the employer would have to enter into an interactive process with the worker to determine whether a reasonable accommodation would enable them to perform essential job functions without compromising workplace safety. This could include:

  • The use of personal protective equipment,
  • Moving their workstation to a more secluded area,
  • Temporary reassignment,
  • Working from home, or
  • Taking a leave of absence.

One issue that employment law attorneys say may not have any legal standing is if an employee objects to inoculation based on being an “anti-vaxxer,” or someone who objects to vaccines believing that they are dangerous. In this case, depending on which state your business is located, you may or may not be able to compel an anti-vaxxer to get a vaccine shot.

Protecting your firm

To mount a successful defense of a vaccination policy if sued, you would need to be able to show that the policy is job-related and consistent with business necessity. And that the rationale is based on facts, tied to each employee’s job description and that you enforce the policy consistently without prejudice or favoritism. 

Also, you must ensure that any employee who requests accommodation due to their health status or religious beliefs does not suffer any adverse consequences. In other words, you cannot punish someone that is covered by the ADA or Title VII for refusing a vaccine.

Also, you will need to project and safeguard your employees’ medical information, under the law.

The takeaway

A number of employment law experts say that once a vaccine is widely available, most employers will likely have the right to require that workers get it, as long as they heed the advice above about the ADA and Title VII. Until then, you may want to consider following the 2009 guidance.

If you do implement a policy requiring vaccination, consider:

  • Fully covering vaccine costs if they are not fully covered by your employees’ health insurance.
  • Allowing employees to opt out entirely if they have medical or religious objections.
  • In the event of a medical or religious objection, you must engage in an interactive process to determine whether the individual’s objections can be accommodated.
  • Including safeguards for keeping your employees’ medical information confidential.
  • Not abandoning your other efforts to keep your workplace safe, such as the use of social distancing, regular cleaning and disinfecting, and the use of personal protective equipment.

Uncertainty Weighs on Group Plan Cost Expectations

U.S. employers are expecting their group health insurance costs to climb 4.4% in 2021, despite the ravages of pandemic and a likely uptick in health care usage next year, according to a new survey.

The expected rate increases are on par with much of the last few years when insurance premium inflation has hovered between 3% and 4%. Despite the expected increase, employers do not plan to cut back on benefits for their employees, according to the Mercer “National Survey of Employer-Sponsored Health Plans 2020.”

The COVID-19 pandemic has injected a large dose of uncertainty into the marketplace. Overall, health care expenditures have plummeted since the pandemic started, which at first seems counterintuitive. But many hospitals postponed elective and non-emergency surgeries and procedures, while fewer individuals were seeking care either out of fear of going in for it or because they could not get appointments.

For example, the first three months after the pandemic had gotten a foothold in the U.S., according to the Willis Towers Watson “2020 Health Care Financial Benchmarks Survey,” monthly paid claims per employee dropped as follows:

  • April: 21%
  • May: 29%
  • June: 14%

“So far, the additional medical costs associated with the testing and treatment of COVID-19 have been more than offset by significant reductions in utilization across many service categories,” the insurance industry research firm recently wrote in its report.

Additionally, the Mercer report predicts that a significant portion of the deferred care will never be realized. And, for those people who have deferred care, when they eventually decide to come for the care will also depend on the course of the pandemic, hospital capacity and whether people feel safe to go in for the treatment.

“Different assumptions about cost for COVID-related care, including a possible vaccine, and whether people will continue to avoid care or catch up on delayed care, are driving wide variations in cost projections for next year,” Tracy Watts, a senior consultant with Mercer, said.

Employer reactions

Despite the expected cost increases, Mercer found that few employers plan to make any changes to their benefits this year, as they seek to keep things stable for their staff. The survey found that:

  • 57% will make no changes at all to reduce cost in their 2021 medical plans (up from 47% in the prior year’s survey).
  • 18% will take cost-saving measures that shift more health care expenses to their employees, including raising deductibles and copays.

Employers are also adding benefits, some of them prompted by the pandemic and shifts in how health care is accessed. For example:

  • 27% are adding or improving their telemedicine services (telemedicine for episodic care, artificial-intelligence-based symptoms triage, ‘text a doctor’ apps, and virtual office visits with a patient’s own primary care doctor).
  • 22% are adding or improving their voluntary benefits (critical illness insurance or a hospital indemnity plan).20% are boosting their mental health services coverage.
  • 12% are offering targeted health services, like for diabetes and other chronic conditions.
  • 9% are offering more support for complex cases.
  • 4% are offering services to limit surprise billing.

The takeaway

Mercer noted the following trends going into 2021:

Keeping the status quo – A majority of employers surveyed are avoiding making any changes to their health plans, including increasing employee cost-sharing, even if premiums increase. Instead, they are focused on providing a stable source of health insurance for their staff and supporting their workers as they deal with stress and effects of the pandemic.

Digital migration – More employers are offering digital health resources like telemedicine, telehealth apps, and virtual office visits, for their convenience, safety, efficiency, and cost-effectiveness.

Costs uncertain – Due to the effects of the COVID-19 pandemic, cost projections are uncertain at best. The avoidance of medical care could translate into a higher utilization in 2021 and hospitals may start charging more to recoup lost revenues from 2020. Or people may have forgone a lot of that care forever. It’s too early to tell.

How to Distribute Group Health Plan Rebates to Your Staff

Group health plan insurers are paying out $689 million in rebates to plan sponsors this year, as required by the Affordable Care Act’s “medical loss ratio” provision.

The provision 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.

The MLR threshold is higher for large group insured plans, which must spend at least 85% of premium dollars on health care and quality improvement.

Employers who sponsor health small and large group health plans around the country in the last few months have received notices of rebates from their insurers. For those who have received one for the first time, there’s always a question of what they should do with the surprise funds. 

MLR rebates are based on a three-year average, meaning that 2020 rebates are calculated using insurers’ financial data in 2017, 2018 and 2019.

You received a rebate…now what?

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 payment.

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 it works (example)

  • Total premiums paid to an insurance company for a plan with 100 covered employees during 2019 = $2,000,000.
  • Total participant contributions during 2019 = $500,000 (25% of total plan premiums for the year).
  • The employer receives a $30,000 rebate from the carrier in 2020.
  • A total of $7,500 is considered plan assets and must be distributed to the employees (25% of the $30,000).

Tax treatment of cash refunds

If your employees paid for their share of the health premium with pre-tax earnings, the refund would also have to be taxed. But if they paid for their premiums post-tax, they would not be required to pay taxes on the refund (unless they deducted the premiums on their income tax returns). 

You must distribute rebates to your staff within 90 days of receiving them.

Helping Your Older Workers Transition to Medicare

As health insurance costs rise and our workforce ages, fewer employers are providing retiree health insurance benefits to their older workers, and are instead asking them to sign up for Medicare.

It’s a delicate situation as some older workers may resent being pushed to Medicare, especially if they’ve worked for their employer a long time. But employers obviously want to keep their staff happy and not risk losing them just because they are asking them to move to Medicare.

The share of people aged 65 to 74 in the workforce has been steadily rising for years. It’s projected to reach 30% in 2026, up from 27% in 2016 and 17% in 1996, according to the Bureau of Labor Statistics. And among those 75 and older, the share projected to be working in 2026 is 10.8%, up from 8.4% in 2016 and 4.6% in 1996.

While some employers opt to keep their Medicare-eligible workers on their group health plans, the majority do not. With the Kaiser Family Foundation estimating that only 29% of employers are keeping their Medicare-eligible employees on their company health plans, how can they support transitioning from their employer health plans to Medicare plus supplemental coverage?

If you have employees who will soon be eligible for Medicare and you want to transition them, you can help them and be there for them as a trusted source of information. Here’s what you can do to help workers who are nearing retirement to enroll:

Consider group Medicare Advantage coverage – There are a number of Medicare Advantage insurers that offer group Medicare coverage, which will help provide a transition from regular group health insurance. The nice thing about Medicare Advantage group health coverage is that often the premiums are quite low compared to regular health plans.

We can help you get set up with a Medicare Advantage group carrier that can take the administrative burden off you. We can send plan materials and other resources directly to your Medicare group members.

You can also choose to have Medicare group members billed directly for their premiums, or you as their employer can be billed.

Some carriers will let you customize your group Medicare Advantage plan with different deductibles, coinsurance and copayment amounts.

Help with the ‘donut hole’ – All Medicare plans have a coverage gap (known as the “donut hole”) for medicines. The coverage gap begins after an enrollee and their drug plan (or Medicare Advantage plan) have spent a certain amount for covered drugs. While they are in the coverage gap, which starts after they and their plan have spent $4,130 on pharmaceuticals in a given year, they will pay 25% of the cost of most drugs.

Seniors can’t get a plan on their own that offers help through the coverage gap. Retirees can only skip the coverage gap through an employer-sponsored plan. That’s where you come in.

By offering your retirees a prescription drug plan with coverage through the gap, you’ll help ease the financial burden that the coverage gap can present.

Make it user-friendly -For years your employees have been used to the top-shelf open enrollment system you have had in place for your workforce, with support like a hotline and access to plan information, such as lists of provider networks and formularies, as well as many different mediums for accessing enrollment information (like e-mail and mobile phone apps).

A recent study found that nearly 70% of workers who are 60 years or older find plan comparison tools and plan guidance tools valuable as they make health care decisions. Since this is what they are used to, you can provide the integrated, consumer-oriented experiences to help facilitate their enrollment in a Medicare Advantage plan.

Educate them about supplemental coverage – Medicare enrollees have access to an average of 28 Medicare Advantage plans, which means they will have a wider array of plans to choose from than they may be used to under their employer’s group plan.

They will also likely be bombarded with offers from various plans by mail and e-mail. It’s often confusing for many people to sift through the plans and find the one that’s best for their life and health circumstances. Many Medicare beneficiaries will seek out an advisor to help them choose the right plan.

In this case, a thoughtful employer would contract with an advisor to help their senior employees choose the best plan for them.

Final Rule Paves Way for Drug Imports to Reduce Patient Costs

The Department of Health and Human Services and the Food and Drug Administration have issued a final rule and guidance that paves the way for states to allow pharmacists and wholesalers to import prescription drugs in order to reduce costs for patients. 

The final rule implements a provision of federal law that allows FDA-authorized programs to import prescription drugs from Canada under specific conditions, according to a report by Kaiser Health News. Prices are cheaper in Canada because the government there caps how much drug makers can charge for medicines, while the free market reigns supreme in the United States.

Even though insulin is not included among the drugs covered by the rule, the Trump administration also issued a request for proposals seeking plans from private companies on how insulin could be safely brought in from other countries and made available to consumers at a lower cost than products sold in the U.S.

Why now?

Congress has allowed drug importation since 2003, but only if the secretary of the Department of Health and Human Services certified it is safe. That had never happened until this year, when Secretary Alex Azar approved an application by Florida, according to a letter he wrote to congressional leaders. 

For decades, Americans have been buying drugs from Canada for personal use – either by driving over the border, ordering medication online or using storefronts that connect them to foreign pharmacies, according to Kaiser Health News. Though the practice is illegal, the FDA has generally permitted purchases for individual use.

About 4 million Americans import medicines for personal use each year, and about 20 million say they or someone in their household has done so because prices are much lower in other countries, according to surveys.

How it would work

The administration envisions a system in which a Canadian-licensed wholesaler buys from a manufacturer of drugs approved for sale in Canada and exports them to a U.S. pharmacy, wholesaler or importer that has contracted with the state in which they operate.

To be eligible for importation, a drug would need to be approved by Canada’s Health Canada’s Health Products and Food Branch and needs to meet the conditions in an FDA-approved new drug application.

Essentially, eligible prescription drugs are those that could be sold legally on either the Canadian market or the American market with appropriate labeling. 

Under the final HHS and FDA rule, state importation programs will have the flexibility to decide which drugs to import and in what quantities. 

The rule also requires drug manufacturers to provide importers with documentation guaranteeing the medications are the same drugs as those already sold in the U.S. 

Parts of this report were reprinted from Kaiser Health News.

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