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Employer Sponsored Healthcare Market Overview: September 2018

Tuesday, September 4, 2018

 Authored by: Mike Wojcik, Senior Vice President

In our new era of Human Capital Management – health plans and other employee benefits have risen in status and play a strategic role in attracting and retaining quality employees, especially during our Country’s current low unemployment and as the ‘War for Talent’ increases.

Affecting this need, health plans are now increasingly challenged by a healthcare system that remains in flux due to the new Administration’s policies and regulation’s, along with a reshaping of the market with new technology and trends. In addition, large-scale mergers between unrelated industry giants are now taking place, challenging the status-quo. Most recent proposed mergers include CVS buying Aetna, Cigna buying Express Scripts, Walmart acquiring Humana, and United Healthcare, a health insurer, becoming the largest employer of physician practices, thus over-taking Kaiser Permanente, an actual healthcare system!

On another front, Amazon, Berkshire Hathaway and JP Morgan Chase recently joined forces to research and develop an independent health plan for their collective of over one million employees. It is not yet clear if a plan will be developed, or offered beyond their collective and into the commercial market, but their efforts will be welcomed as a cost-cutting disrupter to the traditional healthcare system.

Adding to the unease, other market disrupters entering different facets of healthcare include Amazon entering mail-order pharmacy with their recent acquisition of online pharmacy PillPack; Apple entering healthcare through telehealth and electronic medical records; Amazon and Apple each testing onsite health clinics to maintain healthy, more productive employees. And to complete the loop, for now, Google has heavily invested in a healthcare start-up called Oscar Health, while Best Buy purchased a provider of health devices for the aging.

Separately, Association Health Plans (AHP’s) are gaining interest because of the Department of Labor’s recently revised plan definition, however, participation is limited to the self-employed and small employers with less than 50 lives.

The Affordable Care Act (ACA) remains in discussion, especially with the upcoming mid-term elections where the ACA is again a pawn in the game of politics. Recent changes have postponed the Cadillac Tax until 2022 and for fully insured plans, the HIT tax is delayed for 2019. Still untouched is an employee’s ability to use pre-tax dollars to pay for their share of an employer-sponsored health plan through a cafeteria plan. With all the recently proposed bi-partisan bills in Washington, we highly anticipate several enhancements to High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) within the next year, making them the plan of choice in most businesses.

As of now, our core challenge remains high Medical and Pharmacy trend averaging 6%, with plan changes, according to Pricewaterhouse Cooper’s 2019 study. Pharmacy continues to be the most challenged with an endless pipeline of new Specialty (biogenetic) drugs that cost an average of $5,000 per script per month.

The President’s new pharmacy proposal ‘American Patient’s First’ carves a quick path for savings in the Medicare and Medicaid markets improving Government spending. We expect to see spill-over of these tactics to commercial markets. They will include added transparency, faster to market biosimilar drugs (specialty alternatives) and generics, added control or the elimination of drug rebates, select importation of drugs creating more competition, and cost-sharing of R&D with other countries.  

Market innovations and disrupters are all pointing towards gaining more value for the dollars spent! They focus on: elimination of waste and fraud, creating greater efficiencies and convenience for member use, promoting prevention and early detection and promoting greater consumer engagement through plan design and easy-to-use price transparency.

The last change in the process is for Physicians and Hospitals to shift from “Pay for Volume” to “Pay for Value” contracts. The industry has named these models Accountable Care Organizations, or ACO’s for short (another acronym to remember). These models encourage and engage a medical team approach to follow and monitor care in a very proactive way to ensure best outcomes at lower cost, and if certain metrics are met, providers could receive bonuses. Within the next year, we expect to see multi-tiered networks designed to encourage members to use these innovative, lower-cost, but high-quality ACO providers.

Meaningful change for sustainability of Healthcare is rapidly developing. This will reshape Health Insurance as we know it. As a result, we expect multi-generational and multi-cultural needs will cause a greater need for supplemental benefits to complete a member’s personal benefit portfolio.

The Horton Group is deeply engaged in all facets of healthcare. We look forward to keeping our clients informed of new opportunities as they develop. 

Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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