Don't HR Alone #50 - Hospital Medical Costs Rise, New Alternative ACA Plan, New Prevailing Wage Rule

August 2, 2017

 

Hospitals exploring stricter rules around health benefits as key elements of health strategies — SURVEY RESULTS

A growing number of hospitals are enforcing stricter rules around their health benefits as they cope with increasing health care costs and an evolving health care landscape, according to a new survey by Cammack Health, a business of Aon. The annual Benefits Survey of more than 196 hospitals across 86 participating health systems in the Eastern region of the U.S., found that the average annual health care expense per employee was $15,541, compared to $11,102 in 2010.
 

As costs continue to increase, so are hospitals’ appetites for requiring more from their employees in managing their own health care and plan choices:

  • 45 percent of hospitals surveyed either levy a surcharge or do not cover spouses who have access to coverage by their own employer.

  • More than three-quarters of plans (79 percent) maintain a higher cost sharing requirement for using urgent care facilities. While still priced to steer employees away from the emergency room, these copays are beginning to outpace primary care copays to help influence choice for place of service to encourage physician/member relationships.

  • 40 percent maintain separate cost sharing for specialty drug tiers, and 12 percent set coinsurance for non-formulary medications at 100 percent of the discounted price.

  • 48 percent price incentives to encourage employees to use their internal pharmacies.

“Hospitals want to continue to offer a comprehensive benefits package, but face financial pressure to achieve a meaningfully different cost outcome. As a result, their health strategies have evolved to introduce more cost-sharing to employees,” said Mary Clark, a senior vice president in Aon’s Health business. “However, they also recognize that focusing only on cost-sharing is not a sustainable long-term strategy. To remain competitive, they are adopting more innovative strategies that encourage accountability and deliver high-quality health outcomes.”

 

Adopting new strategies to mitigate cost. According to Cammack Health’s survey, more than two-thirds (67 percent) participate in a value-based contract with a payer. More than half (53 percent) have at least discussed the concept of partnering to manage health plan members at non-hospital employers. Such partnerships include accountable care organizations (41 percent), clinically integrated networks (32 percent), and physician hospital organizations (27 percent).

Eighty-three percent use a domestic tier to steer employees towards services within their health system. To encourage employees to use these services, hospitals use the following strategies:

  • No coinsurance (54 percent) or deductible (56 percent);

  • Free inpatient care (41 percent) and outpatient care (37 percent); and

  • No copay for primary care physician (24 percent).

“These trends align with the overall business objectives of the health care delivery system as health care transforms from volume to value,” added Clark. “Self-insured, employer-sponsored health plans are key risk populations for systems because they have more control over the data, design and incentives. By retaining care within their own networks and facilities, they have increased their ability to facilitate utilization, cost and quality outcomes.”

 

Source: Aon

 

New prevailing health and welfare fringe benefits rate announced — FEDERAL NEWS

Effective August 1, 2017, the prevailing health and welfare fringe benefits rate issued under the McNamara-O’Hara Service Contract Act will increase to $4.41 per hour. The increase comes via Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. The Labor Department’s Wage and Hour Division made the announcement in a July 25 memorandum.

 

The SCA requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to pay service employees in various classes no less than the wage rates and fringe benefits found prevailing in the locality, or the rates (including prospective increases) contained in a predecessor contractor's collective bargaining agreement. The DOL issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies.

 

These determinations are incorporated into the contract.The Executive Order requires certain employers that contract with the federal government to provide their employees with up to 56 hours (seven days) of paid sick leave annually, including for family care and absences resulting from domestic violence, sexual assault, and stalking.

 

The EO applies to new contracts with the federal government that result from solicitations issued on or after January 1, 2017 (or that are awarded outside the solicitation process on or after January 1, 2017).

 

To comply with EO 13706, an alternate health and welfare rate has been established that excludes the sick leave portion of the calculated health and welfare rate. The SCA health and welfare fringe benefits level for employees performing on contracts covered by EO 13706 will be $4.13 per hour.

 

Additional information about EO 13706 is available on a dedicated WHD webpage..

 

House lawmakers introduce bipartisan ACA-related “compromise plan” — PROPOSED LEGISLATION

The Problem Solvers Caucus, a bipartisan group of 40 House lawmakers, introduced a "compromise plan" on July 31 to address problems in the Patient Protection and Affordable Care Act (ACA). The proposal comes just days after Senate Republicans failed to move forward ACA repeal and replace legislation on the Senate floor.

 

In a July 31 press release, Rep. Daniel Lipinski, D-Ill., said that, for past the seven years, he has advocated that the two parties come together to address problems in the ACA . "On the heels of the failure of the Republican effort to repeal the ACA, the Problem Solvers Caucus is taking the lead in doing just that," Lipinski said. "The commonsense, bipartisan plan we are putting forward will take the steps that everyone agrees are needed to stabilize the individual health insurance market and reduce premiums," he added.

 

The plan focuses on five provisions. The proposed changes to the ACA would be paid for by offsets within the health care system, according to Lipinski.

 

Among these changes, the plan proposes appropriating funds so that cost-sharing reduction payments continue to be made. Although the current method of funding these payments has been ruled unconstitutional by the federal district court of Washington, D.C., the proposal would ensure the payments continue.

 

Additionally, the plan would create a dedicated stability fund for states’ reinsurance programs for paying for high-cost enrollees, which is estimated would result in a 5-to-10 percent reduction in premiums. The plan also proposes keeping in place the employer mandate but would raise the threshold to businesses of 500 or more employees, and would repeal the medical device tax of 2.3 percent.

 

White House. Although many lawmakers are deeming the GOP efforts at repealing and replacing the ACA a failure, President Trump is urging Republicans not to "give up." In a June 30 tweet, Trump said," Don’t give up Republican senators, the world is watching. Repeal and replace…."

 

Similarly, the day before, Trump said that Republicans should demand another vote before voting on any other bills. "Unless the Republican senators are total quitters, repeal and replace is not dead," he said.

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