This is even worse that I had believed true. Rand Corporation conducted a nationwide study of hospital claims from 2015 - 2017 to understand the disparity in pricing of private health insurance verses Medicare reimbursement rates. The results are astounding. In middle Tennessee the average reimbursement by our hospital systems are: Williamson Medical Center 160%, Vanderbilt Hospital 208%, St. Thomas Health Systems 192% and HCA Tri-Star 303%.
What that means is, if Medicare charged $1,000 for a procedure Vanderbilt has been paid $2,008 for that same procedure from our commercial insurance carriers. That is the type of insurance most of us have individually or through our employers. We wonder why health insurance costs so much, it's because we subsidize the government policies to keep our healthcare providers afloat.
Think about that, HCA Hospitals are charging on average 300% more than the amount the government is paying for the same services. What can be done? That's the $100 billion dollar question that needs to be answered to get healthcare costs and medical premiums under control. I don't have the answers, just want to give you some information to think about.
Want to read the study, click here
The payment amounts above are referenced in the national map, zoom into Tennessee and you can view the hospitals individually for their specific payment amounts. It's very interesting and very disappointing.
Good news, the annual HSA contribution limits continue to increase (a little bit). For 2020 a person with employee only coverage will be able to contribute $3,350, up from $3,500 in 2019. If you cover dependents on your medical plan you can put $7,100 away on a pre-tax, tax free basis. This is a $100 increase from 2019.
One of the challenges I have with HSA rules is why a person has to have a $2,800 deductible to be eligible to contribute. I understand if you have a "shared" deductible it's only $1,400 but those are the exception to the rule. I am a huge HSA fan and encourage everyone who is eligible to try it because there is nothing to lose.
Many financial experts are saying an HSA even without a match is a better long-term retirement strategy than your 401-k (traditional or Roth). The reason is that you can put in tax deductible dollars on the frontend, your money grows tax-free and if taken out for qualified expenses comes out tax-free. That is a fantastic program, get on board, set up your account and fund it as heavily as possible.
Have an excellent day, we appreciate your business. Have questions or need group insurance help in Tennessee, call me. David Moore 615-724-1701
Good news for those getting their individual policies through Healthcare.gov. BCBST will be offering individual plans in Nashville and Memphis in 2020. Additionally, Cigna and Oscar Health will be reducing rates for their individual policies. Although the proposals are not final, it appears Tennesseans will have more options at hopefully lower costs next year.
There are five insurance companies currently offering individual health insurance in TN. Here are the proposed increases/decreases for 2020.
BCBST will expand into Nashville and Memphis and is asking for an average increase of 1.4%.
Bright Health offers coverage in Knoxville, Nashville and Memphis and is asking for an average 2.9% increase.
Celtic is expanding into Nashville and Knoxville and proposes to reduce rates by an average of 1.6%.
Cigna is expanding into Chattanooga, Jackson is proposing a 5.7% decrease in premiums.
Oscar Health will continue to offer coverage in Nashville and Memphis and proposes an 8.3% decrease in premiums.
This information is from Kevin Walters, a spokesman for the Tennessee Department of Commerce and Insurance.
Unfortunately the insurance carriers no longer allow agents and brokers to help individual customers with these policies. You will have to do all the research and customer service on your own.
In the summer of 2018 Amazon purchased PillPack a mail order prescription company that packages all your prescriptions in individual daily packets. PillPack had an amazing concept and Amazon wants to scale it worldwide. The nearly $1,000,000,000,000 ($1 Trillion) pharmaceutical industry has long been controlled by Pharmacy Benefit Managers. These are the middle men between those who manufacture the medicines and the individuals, insurance companies or Medicare who pay for them.
PBMs create very confidential and secretive pricing practices where no one really knows the actual cost of a medicine especially the end user. What happens many times is a prescription has a retail price the customer pays but behind the scenes the insurance company receives a cash rebate or credit for that prescription reducing their actual cost. How much is the rebate you ask? Only the PBM and insurance company know and they claim it is used to keep health care prices lower for everyone.
Congress is working hard to create more transparency in drug pricing and do away with behind the scenes rebates and discounts. There is of course a lot of pushback from the pharmacy lobby in Washington so time will tell if this does in fact lower pharmacy costs.
Amazon on the other hand could do to prescriptions what they have done to buying pretty much anything else. It seems they are already talking with insurance companies about working directly with them and cutting out the PBMs or middle men. This is not welcome news to the decades old pharmaceutical industry and they are pushing back. While it may take years it seems, we may soon be getting lower cost medications delivered to our doors with just the push of a button.
Here is a very interesting article and videos that better explain how this disruption could take place. These are of course my thoughts and opinions but I have worked in the health insurance industry for 25 years.
Before the ACA, small employers had the option to "reimburse" employees with tax-free dollars for their individual health insurance policies. The Affordable Care Act wanted all policies to go through the healthcare.gov exchanges and businesses to offer ACA compliant plans to their employees so Health Reimbursement Arrangement's for individual policies were eliminated.
As President Trump and his administration look for ways to create affordable health insurance options they are re-allowing employers to reimburse employees who have individual policies. This is great news except there are no longer any affordable individual policies available. Without qualifying for a subsidy, small group policies are less expensive and offer the same qualified benefits. Some are saying short-term policies could work in this situation but too are costly and the benefits are quite limited.
So what's the point? I believe it is about talking points and "trying" to find solutions. If the carriers are unable to offer policies that can have "pre-existing" conditions and medical underwriting we will not see low cost medical plans again and HRA's won't make much sense.
Here is a very good article from Forbes about this issue.
I am reading a summary of the American Medical Associations recommendations to improve healthcare in America. Some democrats are pushing Medicare for All, the AMA is more concerned about those who are unable to afford basic health insurance rather than the millions who have access through their employers. This study says 82% of the uninsured fall below the 400% of the Federal Poverty Level “FPL” with 20% of those falling below the poverty line. More than three-quarters have at least one full-time worker in their family.
The crux of the affordability issue stems from the high cost of healthcare in the US. In 2017 we spent $3.5 trillion on healthcare, an average of $10,739 per person. This was up 3.9% from 2016 and makes up 17.9% of the gross domestic product.
Who doesn’t have insurance? A lot of eligible people. Here in Tennessee because we did not expand Medicaid or Tenncare there are the working poor who earn less than 133% of the FPL so they don’t qualify for a premium subsidy through Healthcare.gov Across the county there are 8.2 million individuals who are eligible for premium tax credits but still have not signed up for coverage. Another serious problem is those who have a working spouse who has access to affordable, credible coverage through work but the dependent premiums are not affordable. Because coverage is available at work, they are not eligible for a subsidy for their dependents leaving many uninsured. Then of course there are those who are “bullet proof” and because the individual mandate penalty is no longer effect have decided not to pay for insurance regardless of the cost.
What can be done to fix some of these issues? There are many suggestions in the report, many of which make total sense but unfortunately, we need our politicians to cross the isle and agree to make or change the laws. There are also many industries who will lose business and revenue if some of the changes were to happen and they have very strong political ties and contributions to try and prevent change from happening or water down the things that have the greatest impact to reduce costs.
Because Medicaid and Medicare reimbursements to doctors and hospitals are so low, commercial insurance reimbursements are exceedingly high to make up for the losses. If everyone were moved to Medicare level reimbursements the healthcare system would collapse financially. Just one more reason it’s so difficult to make serious changes and improvements to our healthcare system.
This is a fascinating report you can read it here
With the ever-increasing cost of health insurance, carriers are offering new products to help lower the cost of healthcare for qualifying businesses. Most companies today use a fully insured medical plan with limited plan design choices. What that means is you pay a set premium each month and the insurance company takes the risk in high claims years or realizes the reward when claims are much less than the premiums paid. Because you have very limited access to actual claims data you never know if they are making or losing money on your group, you just know it’s expensive.
Carriers have offered “self-funded” insurance plans for larger companies for many years. With the ACA and all the rules and regulations that came with it the carriers realized that by using a self-insured plan they had plan design flexibility and a lower tax burden. The next step was to see if there was a way to make these plans work for smaller employers, especially those with healthy employees. The good news is, there is a way and today many carriers are offering limited funded medical plans to companies with as few as 10 enrolled employees.
These new plans offer a high level of protection from large claims and the employer is never asked to pay more than their regular premiums each month. In the event they have a bad claims year with one or more very large claims, the maximum risk the employer faces is the amount of their agreed upon premiums. The flip side of that is if claims come in less than expected the group can get part of that savings back. The other advantage for smaller companies (under 50 employees) is the plan design flexibility “limited funding” provides.
These plans don’t work for all companies, in fact we are only seeing success in about 20% of the groups we are quoting. Only those companies with lower medical risk are a good fit for these plans. There is an underwriting process to determine the health and possible future risk of each group. This can be as simple as using Milliman to get pharmacy data and then making a determination from that. The other way is getting each employee to complete a health statement listing their medical conditions and any prescriptions they are taking. This is of course much more accurate but also much more difficult for the employer and HR department.
An example of the savings looks like this. We have a medical practice with 31 employees who had a small group EHB plan with BlueCross BlueShield of TN. The employee rate for their lowest cost plan was $402 using the S Network, the P network cost $461. We went shopping carriers and looking at all the different options. The group moved to Humana with a “limited funding” plan that includes all the hospitals in network just like the P Network for a $307 employee premium. We also offer two other buy-up options each of which were much less expensive. This of course saved the company a lot of money, we were also able to decrease employee costs and were able to give them a wider variety of plan design options.
Will this work for your company? Good question, the only way to find out is to go shopping. You don’t need to wait for the renewal, especially if it’s January 1st. If you find a better program you can change at any time, the carriers lock your rates in for 12 months but you can leave sooner if that is best for your situation. You can reach us at 615-724-1701 or email@example.com
The Trump Administration has been proposing new ways to reduce group medical insurance and healthcare costs and the resistance continues to mount. Two of his lower cost models are short-term medical policies and Association Health Plans. Both are coming under much scrutiny and on March 28, 2019 a federal judge ruled that parts of the 2018 final rules on association health plans (AHP's) are invalid.
The court struck down two parts of the rule:
- The provision defining "employer" to include associations of disparate employers; and
- The provision expanding membership in these associations to include working owners without employees.
The fact that AHP's were intended to allow small businesses and individuals to avoid the requirements of ACA and allowing an individual to be considered an "employer" and an "employee" at the same time is just not viable. The court ruled that bona fie association and working owner provisions of the final rule were unreasonable interpretations of ERISA and must be vacated.
In Tennessee there are several groups working hard to design and implement AHP's. I expect we will see changes in the structure of Association Health Plans to exclude one person groups and require common industries to band together. We are far from done with the tinkering to healthcare while costs continue to rise.
Have you considered Local Funding for your group insurance plan? We have helped many TN companies reduce their costs by using non-traditional techniques and getting outside to box to build better plans for lower costs.
Great news for the nearly 167,000 Tennesseans who don't have access to health insurance. Tennessee Republican lawmakers advanced a plan on February 27th that would overall how TN provides health insurance to our low income and disabled residents.
Being in the health insurance industry I have long struggled with the ACA providing subsidies and low deductible health plans to many of our lower income residents but not those who are truly poor. You see, if you earn more than 138% of the Federal Poverty Level you do not qualify for any subsidies through the Affordable Care Act and are left on the sidelines because we do not have offer robust Medicaid coverage. For a single person this is $13,724 and $27,945 for a family of four.
Mark and I attended a meeting today from a healthcare leader who is trying to build an Association Health Plan (AHP) for Tennessee small businesses. It became clear very quickly this is not going to be an easy endeavor but it could be a game changer moving forward.
President Trump signed an executive order in 2018 allowing associations to offer heath insurance to its members. Associations cannot be formed just to provide health insurance but this will be a huge benefit if affordable coverage becomes available by grouping many small businesses together. The current rules would allow a sole proprietor to buy group insurance with what we hope will be large group pricing.
While it is a federal law that allows the formation of an Association Health Plan, TN will have its own laws that are overseen by the Tennessee State insurance commissioner. It is not likely we will see insurance sold across state lines because of this. The rules today allow Associations based on companies in related industries or in a common geographical region to offer health insurance on a group basis.
The health plans would not be able to discriminate based on individual health conditions or high claims. This is a really big deal but also makes implementing a plan very difficult because you won't know the risk of the enrollee's until claims start coming in. Health insurance works by the law of large numbers and for an association plan to be successful, they will need strong adoption from the first day.
While association plans are probably still a year or two away, companies with healthy employees are benefiting today with "level funded" health insurance plans. These plans avoid many of the ACA rules and community rates by using a "self insured" platform which allows them to ask health questions and rate groups based on their actual risk. This has saved several of our clients tens of thousands of dollars and given them much more flexibility in designing the health plan that works best for their employees. We would be happy to get pricing for your company if you think your employees are healthier than most.
The good news in all this is carriers, entrepreneurs and some government officials are looking for ways to lower healthcare costs. We will surely see successes and failures but at the end of the day choice and competition will keep rates as low as possible.