Hospitals Work to Recoup ACA Costs
Although hospitals are subject to the same ACA requirements as other large employers, such as the employer shared responsibility and the Cadillac tax, they are afforded some unique options to help mitigate costs that other employers are not. While many employers reported changes in their policies to reduce worker hours, hospitals are able to offer benefits to offer their employees incentives to utilize care and benefits in their own facilities. In July of 2016, the Cammack Health Benefits Survey of Hospitals was released.
The 2016 Cammack Health Benefits Survey of Hospitals
For the past 11 years, The Cammack Health Benefits Survey of Hospitals (“Survey”) has offered analysis of emerging trends and the crucial benchmarking information that hospital executives need to make long-term strategic decisions regarding their employer-sponsored health plans. The Survey includes data from over 140 hospitals across 69 participating northeast healthcare systems in Connecticut, Delaware, New Jersey, New York, Pennsylvania, Massachusetts, and Rhode Island.
Some of the key findings reported in the Survey are outlined below:
- The median cost of health coverage for hospital employees rose by 4.3% in 2016;
- The most expensive plans do have low cost-sharing for employees, however, it was shown that cost-sharing it is not as predictive of total expense as one would imagine;
- A little less than half of the participating hospitals tier contributions by salary amount;
- The percent of hospitals that require a surcharge to cover a spouse more than doubled from 13% in 2015 to 27% in 2016;
- A rise in stop-loss deductible levels;
- An increase in the amount and severity of the highest claimants;
- The offering and utilization of wellness programs continues to rise; 86% of the participating hospitals offer wellness programs compared to 71% in 2015;
- A large in prescription drug costs, primarily for specialty medications; and
- Hospitals are trending towards either opening or exploring the use of internal pharmacies.
Hospital Incentives
By lowering the cost of the benefits, hospitals can offer to make changes to incentivize employees to seek care in their own healthcare system. Incentives may include lower co-pays and/or deductibles. Hospitals can also form a network and offer health plans with less doctor choices in exchange for lower fees.
In addition, hospitals can also provide hospital-run pharmacies to combat rising drug prices. Prescription costs continue to be dominated by specialty drug prices and controlled by ACA mandated out-of-pocket maximums. The Survey reports that strategies implemented by groups in the survey include clinical rules and exclusions, higher cost share on specialty tiers and exclusive dispensing channels. In addition, the Survey reported that expensive drugs used to treat chronic or complex conditions were at a median of 38% of prescription drug spending in 2015.
Hospitals have increased their emphasis on, have added or are considering adding a high-deductible health plan (“HDHP”) in order to lower costs. HDHPs have lower premiums than other health plans, which may help to contain the Cadillac tax (described below).
Wellness Program
One of the most popular healthcare savings initiatives in recent years has been workplace wellness programs. When employees adhere to programs that promote good health and disease prevention, they make themselves eligible for premium discounts and special rebates. Based on the Survey results 47% of hospitals offer some wellness activities, 39% offer a comprehensive wellness program, 8% plan to offer a wellness program within 12 months and 6% offer no wellness programs at all. Moreover, of those with wellness programs, 47% both track and use wellness data, 27% track wellness data but do not utilize it and 27% don’t track data at all.
Additionally, the Survey reports that the value of an incentive does not necessarily predict the level of engagement. Since 2013, while incentive size has not increased substantially, the number of respondent’s offering wellness incentives have increased each year.
Cadillac Tax
The Cadillac tax is still a pending concern. In December 2015, Congress delayed implementation of the Cadillac tax, a 40 percent excise tax on high-cost employer health benefit plans, to January 1, 2020. The Cadillac tax was enacted as part of the ACA, which set thresholds at $10,200 for single (or self-only) coverage and $27,500 for other than self-only coverage in 2018 dollars. Although the tax would only affect the highest-cost employer health plans at first, most projections of growth in health insurance premiums range between about 4 and 7 percent per year.
The delay provides an opportunity (1) to address the amount of the dollar thresholds and ensure that they make sense when the tax becomes effective in 2020, (2) for employers to plan for this tax, and (3) for the government to issue temporary and final regulations; something which was lacking at the time of the postponement. In the meantime, hospitals can consider planning opportunities to reduce exposure to the tax when it is planned to take effect in 2020.
Conclusion
The ACA has brought increased healthcare and other costs to many employers, however, the majority of organizations believe the largest cost increases are yet to come. Hospitals have been met with challenges of increasing costs but can strategize to lower these costs in various ways.
The Survey is “designed to measure and quantify information related to the employer-sponsored plans of hospitals in the Northeast.” The survey itself offers a comprehensive overview of plan design, contribution strategies, plan cost details, and utilization data.
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.
