By: Kevin Brady, Esq.
On November 15, 2019, the Department of Health and Human Services, along with the Department of the Treasury, and the Department of Labor, issued proposed rules related to "Transparency in Coverage." These proposed rules come fresh off the heels of the executive order issued by President Trump in June of this year calling for increased transparency in the cost of health care, and the cost of coverage.
As made clear by the title of the proposed rules, the goal of the executive order, and the resulting proposed rules, is to make the cost of health care transparent for patients. Generally speaking, the proposed rules will require group health plans to make certain disclosures to plan members about the possible cost-sharing liability for the member, accumulated amounts (amounts paid by the member toward deductibles and out of pocket max), negotiated rates (payments by the plan to in-network providers for certain services) among other required disclosures.
The proposed rules impose disclosure requirements on group health plans and hopefully, these disclosures will help to avail the potential costs of coverage to its plan members. In practice, these required disclosures should empower self-funded group health plans. Self-funded plans are organized to pay for the health care expenses of their employees; they’re not organized to profit off of the employee premiums and therefore should benefit from increased transparency when it comes to pricing. While the long-term impact of the proposed rules cannot yet be determined, it is possible that network discounts may become more meaningful and group health plans may have more flexibility in terms of steering their plan members to more cost-effective providers. Regardless of the direct impact on group health plans, plan members will be empowered as a result of the rules.
Transparency in health care pricing is long overdue. Imagine going to a new restaurant and ordering an apple pie (an apple pie a day keeps the doctor away… do I have that right?), you don’t see the price on the menu but hey, how expensive can it be right? So you get the pie, you eat the whole thing and the next thing you know, the bill comes. You’re shocked to see that its $100.00. Would you have ordered the pie if you knew the cost? Or would you have gone to the diner across the street that sells an apple pie – that may taste even better - for a fraction of the cost? Without transparency in health care pricing, patients incur claims (eat pies) without regard to the overall (billed charges) or individual (cost of the service after cost-sharing) costs of that service. This is untenable.
In almost every other area of our lives as consumers, we are provided with the cost of a product or service before we purchase or use it; we then have the ability to utilize widely available, and easily accessible, data (thanks google) to compare those prices with other potential vendors or business and eventually ensure that the cost is reasonable, and in-line with our expectations before we make the purchase. This same access to information should be available to consumers of healthcare as well.
It is our hope that the proposed rules for transparency will not only avail the cost of health care to patients, but that a shift in the mindset of those patients to be more responsible consumers will result as well. This shift should not only benefit the patients themselves, but ultimately should help to curb the costs for their health plans as well. Eventually, as the cost of health care becomes more widely available (and just as importantly, digestible) for patients, the days of uninformed and frankly uninterested plan participants may be coming to an end. A great example of the power of information, and specifically, looking at health care through the lens of a consumer can be found right here at Phia.
Here, plan participants are encouraged to be informed consumers when it comes to health care. Transparency (between the Plan and its members) about the costs of coverage, and how active participation by members will ultimately benefit each covered individual, has helped the Phia Group avoid some of the major financial setbacks that commonly befall group health plans who do not otherwise encourage informed decision-making when it comes to health care.
Year after year, our personal costs (premiums and cost-sharing) remain incredibly low, while our benefit offerings continue to improve. This would not be possible if we (the members) did not approach health care as consumers. By encouraging participants to be informed- when it comes to the treatment options, proactive- when considering providers and their associated costs, diligent- when reviewing personal medical bills for errors and erroneous charges, and engaged- when it comes to our overall health, Phia has been able to effectively contain health care costs despite the lack of total transparency.
While the long-term impact of the proposed rules is yet to be seen, any change to the current system that increases transparency and encourages individuals to be responsible consumers of health care should help curb the rising costs in our health care system and the way in which we all participate in it.
By: Philip Qualo, J.D.
For employers who sponsor calendar year self-funded group health plans, the Fall season can be a very hectic time of year. This is usually the time of year that many employer plan sponsors begin reviewing their benefits in the context of the evolving needs of their workforce, and of course, plan costs. Based on my own experience in preparing The Phia Group health plan for the 2020 plan year, I have compiled several helpful tips for employer plan sponsors to keep in mind as they review their group health plans for the new plan year.
Know Your Workforce
Although U.S. job growth has been consistently strong in recent years, a low unemployment rate indicates there are more jobs than there are job seekers. Because of the limited pool of job seekers, and increasingly high quit rates, employers are reviewing their compensation packages, and more importantly, their benefit offerings, to assess what advantage they may have or need to attract and retain top talent. As such, employer plan sponsors should take the time to survey their workforce demographics and consider whether current benefit options are consistent with the needs of their current employees as well as future ones they seek to attract. For example, an aging or younger workforce may mean certain benefits are more or less important today than then they were a few years ago.
Employer plan sponsors should take the time to identify and analyze claim expenditures and benefit utilization for the current, and even prior, plan years. This allows employer plan sponsors to assess the financial health of their group health plans and identify benefits that are particularly costly or heavily utilized. By being proactive and identifying costly patterns, employer plan sponsors are empowered with the tools necessary to explore permissible cost-effective plan design options and cost-containment incentives to address high cost plan expenditures in the upcoming plan year.
Federal rules applicable to group health plans are constantly changing, whether it is due to new legislation or Court decisions establishing new precedent. Thus, employer plan sponsors should take the time to review their benefit offerings, Plan Documents, and/or Summary Plan Descriptions to ensure their group health plans are still compliant with the most current regulatory landscape. Failure to maintain or update benefits, Plan Documents and/or Summary Plan Descriptions in compliance with federal laws may result in costly penalties.
Internal Revenue Code (IRC) Section 105(h) prohibits self-funded group health plans from discriminating in favor of “highly compensated individuals” (HCIs) and against non-HCIs as to eligibility to participate and benefits available under the plan. If an employer’s group health plan treats all of its employees the same for purposes of health plan coverage (i.e., eligibility, contributions, and benefits are the same for all employees), the risk of violating Section 105(h) nondiscrimination rules is low.
For employer sponsored group health plans that vary eligibility and benefits among distinct classes of employees, Section 105(h) nondiscrimination testing should be conducted at least annually, preferably before the start of each plan year. A self-funded health plan cannot correct a failed discrimination test by making corrective distributions after the end of a plan year. If a self-funded health plan fails nondiscrimination testing, HCIs will be taxed on any excess reimbursements from the plan. Thus, depending on the plan’s design, an employer may wish to monitor group health plan compliance with Section 105(h) rules throughout the plan year to avoid adverse tax consequences for HCIs.
Employer plan sponsors that decide to make changes to their group health plan for a new plan year should make sure any relevant changes to the Plan Document are clearly communicated to the applicable stop-loss carrier. It is also advisable for all plan sponsors to review the content of their Plan Documents against the applicable stop-loss policy to identify and resolve potential gaps in coverage. Failure to communicate relevant health plan changes to the carrier or identify potential gaps between the Plan Document and the stop-loss policy may result in significant issues with stop-loss reimbursement in the new plan year.