Insurance carriers and drug makers are often demonized as unjust profiteers of the US healthcare system. In practice, 20 out of 23 Obamacare Co-ops have failed. This is due to a variety of factors, but certainly provides evidence that the free market operates somewhat efficiently. Recently, California SB SB852 provides a path to get the State of California into the generic drug manufacturing business. It will be interesting to see if the state is successful in taking over the means of production for generic drugs.
Due to Covid, many remote employees are choosing to relocate their home address to a different geographic area. In some instances, this will impact their access to healthcare. Here's a summary of important considerations:
1. PPO members can usually find an in-network provider at their new geographic location.
2. HMO members often have emergency-only coverage outside of their local HMO network. If the change is more than a few weeks, members should consider switching to a local HMO medical group at their new locale(if possible) or switching to a PPO plan.
3. Most insurance carriers have expanded Telehealth options, providing access to care for HMO members outside of their geographic area.
4. Employees who "permanently" change their home address to another state(even if they are not planning on being there forever) will likely have income and payroll tax implications. It's a great idea to consult your payroll vendor and CPA if this comes up at your business.
As expected due to Covid-related shutdowns and delay of standard care, Covered California insurance rates for 2021 will increase only an average of 0.6%. This is a solid early indicator for employers can expect in the broader group marketplace in California for 2021.
Four executive orders were signed today to combat high Rx prices:
1. Directs federally qualified health centers to pass along massive discounts on insulin and epinephrine received from drug companies to certain low-income Americans.
2. Will allow State plans for safe importation of certain drugs, authorize the re-importation of insulin products made in the United States, and create a pathway for widespread use of personal importation waivers at authorized pharmacies in the United States.
3. Will prohibit secret deals between drug manufacturers and pharmacy benefit manager middlemen, ensuring patients directly benefit from available discounts at the pharmacy counter.
4. Ensures that the United States pays the lowest price available in economically comparable countries for Medicare Part B drugs.
Improving the US Healthcare System: 6 GREAT IDEAS AND 5 NON-SOLUTIONS
US healthcare system provides the highest quality of care on the planet. Our system has fully harnessed the power of free market economics for innovation and efficiency, but is still subject to systemic barriers. San Diego in particularly has amazing systems including Scripps, UCSD, Sharp, and others. Access to care and cost are a separate issue. In my career working as an insurance broker since 2005, I am often asked what actions could be taken to improve access to care and cost.
Here are some good ideas and non-solutions, in my opinion.
6 GOOD IDEAS
1. Improve population health:
1. State-by-state limiting Rx copays:
The CA Department of Fair Employment and Housing has released a free training tool to help companies comply with SB1343. For companies with 5 or more employees, the training is due by January 1, 2021.
Most healthcare providers accept both Medicare and private insurance, and some also accept Medicaid/Medi-Cal. Private insurance provides the most lucrative reimbursements to doctors, hospitals, and Rx providers thus keeping the system afloat(profitable) and driving innovation. Here's a breakdown of the rates different insurance providers pay from one TX study:
For Every $1 Paid by Medicare:
Private Insurance: pays 115%-200% of the Medicare rate.
Medicaid: pays 61%-81% of Medicare rate.
Ever wonder where your insurance premiums go? Health insurer profit account for just 3.4% of your premium. Insurance companies have extremely high levels of transparency and regulation. Information can be found via
publicly available small group rates, 5500 filings for large groups, State Department of Insurance Filings, and ACA MLR reporting.
Conversely, the 88% of premium spent on medical cost has very limited transparency and regulation: Rx costs, pharmacy benefit manager rebates, hospital costs, etc.
CA health insurance carriers have done their part in the Covid-19 crisis by waiving testing costs, advancing claims payments, enhancing telehealth, and relaxing Rx/pre-authorization protocols.
Follow up to my post from 3 weeks ago regarding the direction of health insurance rates. Suspension of elective care procedures will outweigh COVID-related care and will drive low increases or even rate reductions in the near term in most areas:
"Earlier this month, UnitedHealth Group CEO David Wichmann told analysts that cost reductions so far are outstripping expenses for COVID-19 and that revenue is up compared with the previous year"
Mammoth/ThinkHR has made their COVID-19 Crisis Response Center available:
The CDC just released tips to help Americans decrease the spread of the coronavirus:
Government-mandated benefits expand what health plans cover and also drive up premiums for consumers. For example: the ACA requires health plans to cover pediatric dental and preventative health services. Here's a good rundown of proposed mandates and their estimated costs to Californians:
A leading trend in employee benefits over the past decade has been to offer employees multiple plan choices to increase efficiency and eliminate over insurance. Each employee can select a plan that best fits their needs.
At the 33:00 mark, author Neil Howe talks about the paradox of choice and how millennials may be more likely to view a plethora of choices as a bad thing. Very interesting contrarian perspective:
Two important tax updates:
1. The long delayed Cadillac Tax is now officially repealed.
2. PCORI Fees, originally set to expire in 2019, have been extended.
AB 5 was signed into law to force gig economy workers at companies like Uber and DoorDash from 1099 into W-2 status. The effect on the entire economy has been widespread. Here's a good article on industries exempted, assuming they meet other 1099 eligibility criteria. There's a strong likelihood that this measure may be challenged by a ballot initiative in November 2020.
For new hires, USCIS has released a new I-9 form that employers must start using by April 30, 2020:
Were you enrolled in an HSA-eligible high deductible plan in 2019? Reminder: you have until tax day April 15th to max out your pre-tax HSA contribution for the 2019 tax year:
All San Diego hospitals do a great job discounting rates for low income patients. Some have a standard policy based on FPL, some do it on a case-by-case basis.
AB 731 will require large group health insurance(100+ employee) renewals to be released 120 days prior to renewal date, up from the current 60 days requirement.
Certainly good from a strategic planning standpoint. Opponents argue that the rate review procedures included will increase costs for the entire market by adding a layer of bureaucracy to achieve a result best served by a competitive marketplace, while proponents say the added layer of regulatory scrutiny will reduce costs for Californians.
Official ruling released yesterday from the CA Department of Managed Health Care: Association Health Plans(trust plans) to be completely phased out by July 1, 2021.
Official release here:
Recommended Rx dosages are often the same for a 110lb woman and a 250lb man. As medical professionals work to improve and customize recommended Rx dosages, this is a good fact for consumers to be aware of:
Seismic mandate upgrades will cost California hospitals between $34 billion and $143 billion by 2030 when the next round of requirements go into effect. This is both an important infrastructure investment and a key driver of healthcare cost increases.