WSJ 10/31/2014
By Anna Wilde Mathews, Angus Loten and Christopher Weaver

Small companies are starting to turn away from offering health plans as they seek to reduce costs and increasingly view the health law’s marketplaces as an inviting and affordable option for workers.

In the latest sign of a possible shift, WellPoint Inc. said Wednesday its small-business-plan membership is shrinking faster than expected and it has lost about 300,000 people since the start of the year, leaving a total of 1.56 million in small-group coverage.

During a call with analysts to discuss third-quarter earnings, the No. 2 insurer said it had projected a five-year migration to “significantly reduce” small-employer membership, but it now thinks the dropoff will be compressed into two years.

Going forward, with the health law’s marketplaces running and functioning well, small employers will likely re-evaluate exchanges as an option for their employees, said Wayne DeVeydt, WellPoint’s chief financial officer. “We think [that] will become even probably a more prominent decision that they’ll make this quarter,” he said.

Some other insurers have flagged a similar trend. Aetna Inc. Chief Financial Officer Shawn M. Guertin said the company was seeing “some erosion at the bottom of the market” among employers with two to 10 workers. Kaiser Permanente is seeing “some contraction” in the small-group market, particularly in places where insurers are offering cheap individual plans, said Joe Smith, the nonprofit’s vice president for small business.

Laura Land, who co-owns cellphone-case-maker Empire Cell Phone Accessories in Riverside, Calif., which has 38 full-time employees, said the company plans to discontinue its health plan next year and instead direct workers to the state’s health-insurance exchange.

“It’s getting to be too much paperwork for us to administer the plan, especially if workers are going to decline anyway and go to the exchange,” said Ms. Land, adding that several new hires recently turned down the plan in favor of cheaper exchange options.

It’s not yet clear how widespread the shift will ultimately be. An April survey by the International Foundation of Employee Benefit Plans found that 22.5% of employers with 50 or fewer employees said they “definitely will” still be offering health benefits in five years, while an additional 42% said they “very likely” would. Among large employers with 500 or more employees, about three-quarters fell into those two categories.
The health law doesn’t penalize companies with fewer than 50 workers that don’t offer coverage, and those with fewer than 100 employees won’t face fines until 2016.

Some employers are facing premium increases to keep offering coverage as they shift to plans that meet the law’s requirements—though this impact has been delayed for many because the Obama administration has allowed states and insurers to keep older plans in effect.

Blake Meaux, owner of Mo’ Muscle Cars in Conroe, Texas, said his 13-employee company ended its health plan in July after being told its premiums could double or rise even higher.

“The company could not afford it, and the employees couldn’t afford it,” Mr. Meaux said. He talked over the issue with workers and brought in an agent to connect them with individual coverage. He is offering to pay about half the cost of workers’ individual premiums, the same share paid under the group plan.

The law has also eliminated several reasons small employers offered group plans to ensure employees could get coverage. Workers with pre-existing health conditions can now buy coverage on their own, and insurers can’t charge them more based on their health history, as they could before the law took effect.

The law includes subsidies for lower-income workers that can sometimes be as generous as the amounts small employers were paying toward health benefits. Indeed, insurers and brokers say small employers in lower-income industries are far more likely to switch.

“That’s often the main determining factor,” said Michael Z. Stahl, a senior vice president at HealthMarkets Inc., an agency that focuses on individual coverage and works with a growing number of small businesses.

King Par LLC, a golf retailer in Flushing, Mich., decided to end its plan in February as it was facing an expected rate increase. Ryan Coffell, the company’s chief financial officer, said those with relatively low wages, such as warehouse workers, are paying about the same amount toward their coverage as they did before because of the federal support.

For employees who made too much to qualify for subsidies, King Par in some cases offered a salary bump to make up for the lost health benefits.

“The few people who were affected the most, we made sure to make them whole,” said Mr. Coffell.

Insurers, for their part, are moving to recapture the lost business by signing up employees to their individual plans—a possibility raised by WellPoint, which is a big player in the health-law consumer exchanges. Mr. DeVeydt, WellPoint’s finance chief, said the company aimed to “become indifferent on where that customer wanted to buy their product.”
Medical Mutual of Ohio, which said it is seeing the strongest shift away from offering health benefits among the smallest employers with just two to four workers, is working to ease the transition for companies that want to move from a group plan to individual coverage.

“That’s the best way to maintain the membership,” said Dan Polk, a vice president who oversees small-group business. He added that the insurer is retaining “a very high percentage” of those whose employers are dropping plans.

Source: New York Times

Health insurance companies are no longer allowed to turn away patients because of their pre-existing conditions or charge them more because of those conditions. But some health policy experts say insurers may be doing so in a more subtle way: by forcing people with a variety of illnesses — including Parkinson’s disease, diabetes and epilepsy — to pay more for their drugs.

Insurers have long tried to steer their members away from more expensive brand name drugs, labeling them as”non-preferred” and charging higher co-payments. But according to an editorial published Wednesday in the American Journal of Managed Care, several prominent health plans have taken it a step further, applying that same concept even to generic drugs.

The Affordable Care Act bans insurance companies from discriminating against patients with health problems, but that hasn’t stopped them from seeking new and creative ways to shift costs to consumers. In the process, the plans effectively may be rendering a variety of ailments “non-preferred,” according to the editorial.

“It is sometimes argued that patients should have ‘skin in the game’ to motivate them to become more prudent consumers,” the editorial said. “One must ask, however, what sort of consumer behavior is encouraged when all generic medicines for particular diseases are ‘non-preferred’ and subject to higher co-pays.”

I recently wrote about the confusion I faced with my infant son’s generic asthma and allergy medication, which switched tiers from one month to the next. Until then, I hadn’t known that my plan charged two different prices for generic drugs. If your health insurer does not use such a structure, odds are that it will before long.

The editorial comes several months after two advocacy groups filed a complaint with the Office of Civil Rights of the United States Department of Health and Human Services claiming that several Florida health plans sold in the Affordable Care Act marketplace discriminated against H.I.V. patients by charging them more for drugs.

Specifically, the complaint contended that the plans placed all of their H.I.V. medications, including generics, in their highest of five cost tiers, meaning that patients had to pay 40 percent of the cost after paying a deductible. The complaint is pending.

“It seems that the plans are trying to find this wiggle room to design their benefits to prevent people who have high health needs from enrolling,” said Wayne Turner, a staff lawyer at the National Health Law Program, which filed the complaint alongside the AIDS Institute of Tampa, Fla.

Mr. Turner said he feared a “race to the bottom,” in which plans don’t want to be seen as the most attractive for sick patients. “Plans do not want that reputation.”

In July, more than 300 patient groups, covering a range of diseases, wrote to Sylvia Mathews Burwell, the secretary of health and human services, saying they were worried that health plans were trying to skirt the spirit of the law, including how they handled co-pays for drugs.

Generics, which come to the market after a name-brand drug loses its patent protection, used to have one low price in many insurance plans, typically $5 or $10. But as their prices have increased, sometimes sharply, many insurers have split the drugs into two cost groupings as they have long done with name-brand drugs. “Non-preferred” generic drugs have higher co-pays, though they are still cheaper than brand-name drugs.

With brand names, there’s usually at least one preferred option in each disease category. Not so for generics, the authors of the editorial found.

One of the authors, Gerry Oster, a vice president at the consulting firm Policy Analysis, said he stumbled upon the issue much as I did. He went to his pharmacy to pick up a medication he had been taking for a couple of years. The prior month it cost him $5, but this time it was $20.

As he looked into it, he came to the conclusion that this phenomenon was unknown even to health policy experts. “It’s completely stealth,” he said.

In some cases, the difference in price between a preferred and non-preferred generic drug is a few dollars per prescription. In others, the difference in co-pay is $10, $15 or more.

Source: Washington Post

Large businesses expect to pay between 4 and 5 percent more for health-care benefits for their employees in 2015 after making adjustments to their plans, according to employer surveys conducted this summer.

Few employers plan to stop providing benefits with the advent of federal health insurance mandates, as some once feared, but a third say they are considering cutting or reducing subsidies for employee family members, and the data suggest that employees are paying more each year in out-of-pocket health care expenses.

The figures come from separate electronic surveys given to thousands of mid- to large-size firms across the country by Towers Watson, the National Business Group on Health and PriceWaterhouseCoopers, consulting groups that engage with businesses on health insurance issues.

Bracing themselves for an excise tax on high-cost plans coming in 2018 under the Affordable Care Act, 81 percent of employers surveyed by Towers Watson said they plan to moderately or significantly alter health-care benefits to reduce their costs.

The excise tax will be levied on companies offering annual benefits that exceed $10,200 for individuals or $27,500 for families. For any costs above those amounts, businesses would be taxed 40 percent on the difference. Nearly three quarters of the businesses interviewed by Towers Watson said they are concerned they will be subject to the excise tax.

To lower their tax bill, many companies are looking to cut their premiums by raising deductibles. Many also are making greater use of health-care savings accounts.

“My takeaway from the employer surveys is that this trend is accelerating,” said Paul Fronstin of the nonprofit Employee Benefits Research Institute.

The National Business Group on Health finds 81 percent of employers offering insurance plans that include higher deductibles and an annual health savings account. The savings account allows employees to deposit money tax-free, and employers often deposit a set amount of money into these accounts at the beginning of the year.

“These plans have been around for more than a decade, but there is no doubt that the excise tax is out there, and employers want to do something now. Which is why we’re seeing greater interest in these types of plans,” Fronstin said.

Others see these changes as less of a result of the Affordable Care Act and more a response to the steadily increasing costs of health care. The expected increase of 4 to 5 percent from 2014 to 2015 is no greater than in previous years, but the continued pressure on businesses has forced a wave of cost-sharing innovation, giving employees what the industry calls more “consumer-directed” choices to make between the quality of care and the cost.

“I think this in many ways has very little to do with the Affordable Care Act,” said Gail Wilensky, a senior fellow at Project Hope, a health-care advocacy and services group. “It started 10 to 12 years ago, and is being used by employers to try to get their employees to react in what they see as a more responsible way.”

Experts say there is no evidence that consumer-directed plans necessarily increase what employees pay out of pocket, emphasizing that such costs depend on a range of details specific to the insurance plan.

“The question is whether it will get people to get better care, or whether they will put off care and end up having to get more expensive care,” Wilenski said.

Surveys by Towers Watson and the National Business Group on Health suggest out-of-pocket costs paid by employees are increasing. According to their data, average annual out-of-pocket costs have jumped more than 40 percent just in the past three years, from $1,890 per employee in 2011 to $2,649 in 2014. Over the same period, employees’ share of total expenses, which includes both monthly premiums and out-of-pocket expenses, has increased from 34.3 percent to just over 37 percent.

And experts point out that even costs absorbed by employers are felt by employees in other ways.

“Even if the increase is only a few percentage points, the health-care costs are crowding out other portions of the pie. It puts a squeeze on pay increases, it puts a squeeze on retirement contributions,” said Steve Nyce, a researcher in charge of surveys at Towers Watson.

“The challenge is not only premium increases, but also out-of-pocket expenses, where increasingly people have to pay more at the point of care.”

Even those shying away from high-deductible plans are finding other ways to give employees incentive to purchase cheaper care. Almost three quarters of employers interviewed by Towers Watson said they are adding some form of consumer initiative, such as pricing transparency tools, second-opinion services or claims assistance programs.

It also appears that employers are moving away from providing family coverage. A third of employers interviewed by Towers Watson have already cut subsidies for spouses, are planning to do so in 2015, or are considering such changes. Subsidy reductions are becoming even more common when spouses have insurance available through their own employer: 26 percent said they are considering surcharging or fully excluding spouses if coverage is available elsewhere, and another 37 percent already have this policy in place or plan to implement it in 2015.

The survey by Towers Watson found that nearly one in four employers considers private exchanges to be a viable alternative for 2016. Private exchanges are online platforms, typically operated by brokers or insurers, that allow employees to shop for plans directly and customize more expensive add-ons, such as dental or hospitalization benefits, presumably giving the employee some control over the real cost of an insurance plan. (Towers Watson operates its own private exchange).

By contrast, employers had very little confidence in public exchanges in their first year in operation; 77 percent said they are “not at all confident public exchanges will provide a viable alternative” for their employees. While it is clear that employers want to reduce or restructure benefits packages, most, 99.5 percent, said they have no plans to direct employees to public exchanges.

Businesses are also planning a range of changes to the ways employees can access health care. One third of employers interviewed by Towers Watson plan to expand telemedicine provisions, in which patients conduct routine health check-ups over the phone. A quarter of employers consulted by NBGH currently include so-called “narrow networks,” in which employer insurance plans will only support treatment at facilities that have been determined “high-value” by independent monitors who have measured the cost of care against the quality provided.

“This goes back to the idea of getting better value for the dollar spent,” said Randy Abbott, a senior consultant at Towers Watson. “At present, there is no correlation between cost and quality for doctors. The narrower networks are designed to evaluate providers based on quality of care and quality of outcomes, all compared to a competitive price.”

The Towers Watson survey, which came out on Aug. 20, projects that costs will increase 4 percent in 2015, factoring in likely employer adjustments. Surveys conducted by the National Business Group on Health and PriceWaterhouseCoopers placed the number slightly higher, reporting 5 percent and 4.8 percent, respectively

New York Times by Andrew Pollack –

August 14, 2014:

It may be the biggest thing in diaper rash treatment, a custom-made product to soothe a baby’s bottom at the eye-popping price of $1,600.

This is no Desitin or Balmex, or any other brand found in stores. This cream is blended to order in a pharmacist’s lab.

Does it work better than the common treatments? There is little evidence either way. But the sky-high prices commanded by such compounded medicines are drawing the ire of health insurance companies that must pick up the bill. They say the industry is profiteering at their expense.

Compounded medicines are the Savile Row suits of the pharmacy, made to order when common treatments will not suffice. Pharmacists say it is the doctors who decide what to prescribe. But many pharmacies have standard formulations and some promise six-figure incomes to sales representatives who call on doctors.

Besides the $1,600 ointment to treat diaper rash, there was the $8,500 cream to reduce scarring and the $2,300 salve to relieve pain recently billed to Catamaran, a pharmacy benefits manager. Alarmed that its spending on compounded drugs has quintupled in just two years, Catamaran has begun to review such claims more carefully.

Pharmacy benefit managers owned by UnitedHealth and Blue Cross and Blue Shield plans are also reining in spending on compounded drugs, as are insurers like Harvard Pilgrim and various state workers’ compensation plans.

Express Scripts, the largest pharmacy benefits manager, has said it will stop paying for more than 1,000 ingredients used in compounding, cutting spending by its health plan clients on such medicines by 95 percent. It said such spending had grown to $171 million in the first quarter of this year from $28 million in the first quarter of 2012.

“There are absolutely situations where compounded medicines are appropriate,” but other cases in which the products are “unsafe and overly expensive,” said Dr. Sumit Dutta, chief medical officer at Catamaran, which is based in Schaumburg, Ill. “If you remove the profit motive, what is the base-line appropriate use of these products?”

Exhibit No. 1 for those who contend that profiteering is at least part of the reason for the proliferation of compound medicines is the indictment in June in Southern California of 15 doctors, chiropractors, pharmacists and financial brokers, including a major donor to President Obama. They are charged with engaging in a kickback scheme that billed workers’ compensation for millions of dollars in such medicines and led to the death of a baby exposed to a compounded pain cream his mother was using.

But the compounding industry is fighting back.

“Millions of people benefit from compounding,” said Jay McEniry, executive director of a coalition formed hastily in June to fight the cuts by Express Scripts and others. “For the most part, people who take compounded medications have no alternatives.”

The coalition is called Patients and Physicians for Rx Access, though it was started mainly by compounding pharmacists.

Compounding, which dates from the ancient days of medicine, involves a pharmacist making medicines for a patient who cannot be helped by mass-manufactured drugs. For instance, patients might need a special formulation because they are allergic to an ingredient in a commercial product, or a liquid formulation if they cannot swallow pills.

But compounding has grown well beyond that, and has gotten black eyes in the process. Two years ago, about 750 people were sickened and 64 of them died from injections of a fungus-tainted steroid made by the New England Compounding Center, a company that was essentially mass manufacturing.

Congress last year passed legislation to improve federal oversight of compounding, particularly such large operations.

The new controversy centers on medicines that are not injected, mainly topical creams to treat pain and scarring. People in the compounding business say that spending on such drugs is growing because doctors are turning away from the maligned painkillers known as oral opioids out of concern about abuse. A cream delivers relief more directly to painful joints or muscles, with less entering the bloodstream to cause side effects.

They also say the cost of ingredients has risen because of increased regulatory scrutiny of overseas chemical manufacturers. Even so, they say, compounded drugs account for less than 1 percent of pharmaceutical spending. Another factor appears to be a change in an industry standard for how such medicines are billed, which took effect in 2012.

Before that, pharmacists submitted claims listing just the main ingredient, usually with some markup. Under the new system, each ingredient is listed, with its cost.

This is something pharmacy benefit managers wanted. But they now say that compounders, knowing they can bill for each ingredient, have begun adding more of them.

While creams typically contain about four ingredients, the $8,500 scar cream contained 13 ingredients, and the $2,300 pain cream had 18 ingredients, according to Catamaran. The $1,600 diaper rash ointment had only two ingredients, one an organic floral extract.

Pharmacy benefit managers say there is scant evidence that these combinations of ingredients are safe or any more effective than conventional drugs approved by the Food and Drug Administration, like Voltaren Gel, a topical pain treatment with only one active ingredient that costs about $50 a tube. Compounded drugs do not require F.D.A. approval.

Some states are acting to control spending on compounded drugs in workers’ compensation, said Brian Allen, vice president for government affairs at Progressive Medical/PMSI, a workers’ comp pharmacy benefit manager. California passed a law in 2011 and Ohio has set a limit of $600 per prescription. Georgia is looking at a limit of three ingredients per prescription.

But some say abuses continue and point to the indictments issued in June by a grand jury in Orange County, Calif. They center on Kareem Ahmed, a million-dollar donor to President Obama’s re-election campaign.

According to a 2012 profile of Mr. Ahmed in Talking Points Memo, his company, Landmark Medical Management in Ontario, Calif., buys accounts receivable from doctors and other health care providers treating workers’ compensation cases. The doctors and pharmacists get less than the face value of the claims, but do not have to wait months for processing. Landmark profits when the claim is eventually paid.

But the indictments said the purchase of accounts receivable was really a disguised kickback to doctors and chiropractors to induce them to prescribe compounded creams that Mr. Ahmed had formulated “based on the profitability of the ingredients.”

The indictments also named 10 doctors or chiropractors, two pharmacists and two Landmark employees.

Priscilla Lujan of Los Angeles applied one of those creams to her knee for a workplace injury and then prepared a bottle for her 5-month-old son, according to her lawyer, Shawn J. McCann. She allowed the baby to bounce on her knees and suck her fingers.

The next day, the boy, Andrew Gallegos, was dead, from what the coroner’s office called “multiple drug intoxication” with “extremely high and lethal” levels of some of the pain cream ingredients in his blood.

Benjamin N. Gluck, a lawyer for Mr. Ahmed, said, “Mr. Ahmed and Landmark complied with all applicable laws at all times and we expect to be fully vindicated.”

He said the prosecution’s legal theory was “defective and has never been accepted by any court.” He added that selling accounts receivable, a practice known as factoring, was “a common and completely legitimate business practice” that was “especially necessary in the medical field because insurance companies make it so difficult, time-consuming and expensive for providers to collect on their bills.”

Los Angeles Times by Soumya Karlamangla –

July 29, 2014:

Nearly 60% of Californians without health insurance before Obamacare sign-ups began last year now have a medical plan, but the remaining uninsured will present a challenge in the second round of enrollments beginning this fall, according to a new study.

A Kaiser Family Foundation survey examining the state’s progress under the federal medical care overhaul said more than 80% of those still uninsured hadn’t had coverage in two or more years, including 37% who reported never having coverage before.

Foundation Chief Executive and President Drew Altman said though large numbers of Californians gained insurance during the first open enrollment period, “expanding coverage gets harder from here.”

The biggest reported barrier to signing up was cost, even though nearly two-thirds of those who remained without coverage were eligible for either Medi-Cal or subsidies through the state-sponsored marketplace, the survey found.

Mollyann Brodie, the foundation’s senior vice president, said researchers are observing a disconnect between what people expect insurance will cost and the price of plans actually available.

She said that in the next enrollment period, which begins Nov. 15, outreach needs to be “even more targeted and more intense to convince this group of Californians that they can actually get health insurance.”

The federal Affordable Care Act required nearly everyone to have health insurance starting in 2014. In California, people with qualifying incomes can receive subsidies to get discounted plan rates through the state’s health insurance exchange, Covered California. The state’s low-income health plan, MediCal, has also been expanded to include more people.

Erika Malady, 33, looked into signing up for health insurance last year but decided against it.

A single mother living in Santa Fe Springs, Malady said that when she browsed through the available plans offered through Covered California, the monthly premiums were about $120 a month. She said she couldn’t afford that on her annual salary of about $35,000 a year.

“It’s too expensive,” she said.

The study found that 42% of those who were uninsured before Obamacare sign-ups remained without insurance after. Twenty-four percent of those were eligible for subsidies through the exchange, and 39% were eligible for Medi-Cal, the survey found.

More than 70% of those who remained uninsured said health coverage was something they felt they needed.

Malady said she wants health insurance and now worries about having to pay a penalty and not having a safety net if she becomes ill. She says she’ll try to find an affordable plan when open enrollment opens again later this year.

“I’m not going to hold my breath,” she said.

Many survey respondents who signed up for insurance said it made them feel more financially secure. But 46% of the newly insured also said paying their monthly bill was at least somewhat difficult.

Total enrollment in Covered California private health plans is approximately 1.2 million. The exchange estimates that number will reach 1.7 million by the end of the next enrollment period.

A large share of those still uninsured — approximately 30% — are undocumented immigrants, who aren’t eligible to sign up for insurance through the state exchange or Medi-Cal, the survey found.

Nearly 20% of the remaining uninsured said they didn’t sign up because they’ve either been too busy or don’t know how. Brodie said that points to a continuing need for trained people who can help explain the process.

“It’s hard, it’s complicated, it’s serious, it’s scary,” she said. “This is not the same as just going to buy your groceries.”

Brodie said despite the attention given to the state exchange websites, many enrollees needed more personalized assistance.

Though open enrollment for Covered California won’t begin again until November, qualifying patients with special circumstances, such as losing employer-provided insurance or moving, can apply now for coverage. Signups for Medi-Cal coverage for lower-income residents continues year-round.