Cigna Express Scripts Merger APPROVED

The United States Department of Justice (DOJ) has given the necessary approval of Cigna's acquisition of pharmacy benefit manager (PBM) - Express Scripts.  The $52 billion deal will result in a consolidated healthcare behemoth that some say, is in reaction to recent healthcare sector entrant - Amazon.  Another large scale healthcare acquisition/merger - CVS/Caremark and Aetna - is currently under DOJ review, but is expected to be approved soon, in a $69 billion transaction.  The Cigna/Express Scripts transaction is scheduled to be completed by the end of 2018.

Previously (2007) CVS acquired PBM - Caremark - in a $21 billion deal; and in 2015, health insurance giant United Healthcare purchased PBM - CatamaranRx - at the time the 4th largest PBM in existence, and folded it into their OptumRx subsidiary.  Clearly, there's something to the consolidation of health insurers (or payers) and PBM's, which began prior to Amazon's foray into healthcare, and the more recent announcement of the establishment of the yet to be named "Amazon/Berkshire Hathaway/JP Morgan/Chase healthcare coalition".

If you're not familiar with what/who PBM's are, they are third party administrators of prescription drug programs for a variety of health insurance plan types including commercial plans, self-insured, Medicare Part D, state government plans, and the Federal Employees Health Benefits Program (FEHBP).  In effect, the PBM's process the transaction of prescription drug purchases that are initiated by a patient/consumer at a pharmacy (retail and/or mail order), according to the insurer/payors guidelines and protocols.  Importantly, PBM's also negotiate discounts and rebates from drug makers, and facilitate the so called formularies that determine patients drug costs, tiers, access, etc., for those with insurance through the aforementioned payor types.

While there are a number of relatively smaller/nimble PBM's in existence (e.g., Magellan Rx Management, WelldyneRx, CastiaRx), the largest in recent memory have been Caremark, CatamaranRx, OptumRx, and Express Scripts.  With Cigna's purchase of Express Scripts, and the pending approval of CVS/Caremarks' purchase of Aetna, the 4 largest PBM's will be integrated units of large health insurance companies.  It will be interesting to see how the 36 Blue Cross Blue Shield Association plans throughout the country adapt to being the only major health insurer that contracts out it's pharmacy benefit management.  I would also expect to see further acquisition and merger activity among the assortment of existing PBM's.

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Reference Based Pricing

Among the strategies being deployed by benefits brokers/consultants, on behalf of employers feeling squeezed by ever increasing health insurance costs is REFERENCE - BASED PRICING (RBP).  Variances in the price of healthcare can be as much (or even more) as 500% for the same services...with little to no difference in quality.  Don't believe me?  See for yourself using - Healthcare Bluebook!
Click - https://www.healthcarebluebook.com/ui/consumerfront?SearchTerms=mri

I used the tool to discover the variance in cost for an MRI in my adopted hometown of Omaha, NE, to be 10-fold!  On the low end - $501...on the high end...$5,048!  (Note: I know of a facility in town that will do an MRI for as low as $350).

Rather than rely on a Preferred Provider Organizations (PPO) or Health Maintenance Organizations (HMO) contracted rate of reimbursement (or fee schedule), some self funded employers are setting their fee schedules for certain care based on a much lower price point...and one that is defensible.  There are many upsides to RBP, including:

• freedom of provider choice for insured members
• transparency of true healthcare costs for insured members
• significantly lower claims costs for employers
• claim advocacy for members that are balance billed by their provider

RBP operates off the premise that healthcare providers shouldn't charge different patients (or customers) different prices for the exact same service or set of services, based solely on how the patient pays the bill (e.g., cash pay, private insurance, government coverage like Medicare, Medicaid, Tricare, etc.).  So an example of a typical RBP model might set reimbursement rates for care at some defined percentage of the Medicare reimbursement rate.  

One example I've seen uses 150% of Medicare reimbursement rates for physician care; and 175% for facility services.  Such a relatively lower, RBP reimbursement schedule, compared against a PPO or HMO negotiated rate could be 75% less, or more!  The savings could be considerable to an employer, and again, covered employees and their dependents would have complete freedom of choice of provider, without the limits of a network.  But there is a drawback, which can be dicey to say the least.  If a provider refuses to accept the RBP rate of reimbursement, and balance bills the patient, a dispute emerges.  Fortunately there are vendors that can mediate, negotiate, and ameliorate on behalf of the patient, to reach an agreed upon reimbursement amount.  If an agreement can not be reached, litigation can ensue.

IMPORTANT: The first known RBP lawsuit has emerged, and is currently pending in a Virginia circuit court, after having been remanded back down from the state's supreme court.  A decision  could define the future of RBP (see Glenn Dennis vs. Memorial Hospital of Martinsville & Henry County).  The crux of the dispute lies in the difference between what the hospital charged for services provided to Mr. Dennis - $111,115 - and the amount Mr. Dennis' employer's self funded plan allowed for said services - $27,254, a 300% difference!  

Stay tuned...or rather...we will...and will let our readers and clients know the outcome!

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HSA Updates for 2019

Last month (May, 2018) the IRS issued its anticipated 2019 calendar year, inflation adjusted figures affecting Health Savings Accounts (HSAs), and the associated/required qualified High Deductible Health Plans (HDHPs).  Changed figures for 2019 are indicated in red in the chart that follows; along with the current (2018) and prior (2017) year's limits.

	2017	2018	2019
HDHP MINIMUM DEDUCTIBLE
Individual	$1,300	$1,350	$1,350
Family	$2,600	$2,700	$2,700
HDHP OUT-OF-POCKET MAXIMUM
Individual	$6,550	$6,650	$6,750
Family	$13,100	$13,300	$13,500
HSA MAXIMUM CONTRIBUTION
Individual	$3,400	$3,450	$3,500
Family	$6,750	$6,900	$7,000
CATCH-UP CONTRIBUTIONS (age 55 and older)	$1,000	$1,000	$1,000

Readers interested in an overview of HSAs and HDHPs can click on the following link - 

http://sstevenshealthcare.blogspot.com/2013/10/health-savings-accounts-hsas.html

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Wellness Program Alert!

If your organization offers, or is in the process of considering a Wellness Program...HOLD THE PHONE!  There is pending litigation involving the American Association of Retired Persons (AARP) and the U.S. Equal Employment Opportunity Commission (EEOC) that could profoundly alter the regulatory and compliance requirements associated with certain Wellness Programs. Generally speaking, the rules and regulations affecting Wellness Programs, apply to those defined as "health contingent" and "outcome based".
See - http://sstevenshealthcare.blogspot.com/2013/06/wellness-programs-and-affordable-care.html

At present, there are a myriad of rules, agencies and regulations that regulate certain Wellness Programs, including:

• Health Insurance Portability and Accountability Act (HIPAA) - prohibits discrimination in premiums or plan eligibility based on health-related factors, but offers exceptions to certain wellness programs.
• Affordable Care Act (ACA) - expanded HIPAA exceptions to allow for up to a 30% incentive/penalty for wellness program participation; and 50% for tobacco use.
• Americans with Disabilities Act (ADA) - generally does not allow discrimination, within a wellness program, based on disability*.
• Genetic Information Nondiscrimination Act (GINA) - generally does not allow wellness programs to use genetic information to discriminate participants*.

* In July of 2016, the EEOC released regulations allowing for the use of both ADA and GINA protected information by wellness programs. The regulations, which took effect 1/1/2017, established that employers could request otherwise ADA/GINA protected data, provided there was no more than a 30% incentive/penalty; and the related disclosures by program participants was not involuntarily provided.

At the heart of the disagreement between AARP and the EEOC is whether a wellness program can be construed as voluntary (versus involuntary).  Despite the EEOC's efforts to clarify the impact of both the ADA and GINA's impact on wellness programs through issued regulations, AARP contended that "the EEOC failed to adequately establish that a 30% incentive does not render a wellness program involuntary".  The Washington, D.C. based District Court agreed with AARP, and granted a judgment ordering the EEOC to vacate their regulations and submit a notice of proposed rule making (by 8/31/2018), and file a status report by 3/30/18.  On 3/30/3018, the EEOC reported it had yet to promulgate new regulations, blaming a delay in Senate confirmation of its new Chair and Commissioner.  (Note: As of the date of this blog post, these confirmations were still pending.)

So, as of the writing of this blog post, the court order for the EEOC to vacate their wellness program related regulations, effective 1/1/2019, remains intact.  All of this leaves affected employers, offering or considering offering health contingent/outcome based wellness programs, with five (5) options:

1. If your Wellness Program involves answering health related questions (e.g. a health risk assessment) or medical testing (e.g., venipuncture/biometric screening), discontinue these practices.

2. Continue following the EEOC regulations (affecting incentive limits, providing separate wellness program notices, etc.), knowing these regulations have been ordered to be vacated effective 1/1/19.

3. Disregard the EEOC regulations and instead defer to the less restrictive HIPAA regulations and ACA amendments that followed.

4. If not currently offering a wellness program, postpone until the 2020 plan year; although there are  no assurances this matter will be resolved by then. 

5.  Establish a totally voluntary, non-outcome based wellness program that is not subject to the aforementioned regulations.

Affected organizations might consider consulting with their wellness program vendor, insurance carrier, third party administrator, benefits attorney, etc. for guidance, as situations, programs, rules, etc. vary significantly.

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IRS Reinstates 2018 Family Contribution Limit

As the old saying goes - "the more things change...the more they remain the same"!  A little more than a month ago, we shared the news that the IRS had reduced the previously announced, 2018 family Health Savings Account (HSA) contribution limit by $50 (from $6,900 to $6,850).
See - http://sstevenshealthcare.blogspot.com/2018/03/o-n-march-5-2018-irs-issued-bulletin.html

This "middle of the game" change was fraught with challenges and potential fines for unsuspecting HSA  taxpayers!  Apparently the hue and cry of the affected was great enough to cause the IRS to change course, and revert back to the previously announced HSA contribution limit, for those with family coverage, of $6,900.

The long and short of this guidance is that for 2018 - ANY POTENTIAL TAX PENALTIES FOR CONTRIBUTING MORE THAN $6,850, BUT LESS THAN $6,901 HAVE BEEN REMOVED FOR THOSE WITH QUALIFYING FAMILY COVERAGE.

Importantly, taxpayers that have made a correction to what was previously an excess contribution can:

• Do nothing and maintain their corrected, maximum contribution of $6,850; or
• Contribute the additional $50 that the IRS is now allowing.

To access the "revised revision" (IR-2018-107), click - https://www.irs.gov/newsroom/irs-grants-relief-for-taxpayers-affected-by-reduction-of-maximum-deductible-health-savings-account-contributions

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ACA Modifications for 2018 and 2019

Earlier this week (4/9/2018) the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) issued final regulations and guidance that profoundly alter the Affordable Care Act (ACA) both immediately, and in 2019 and beyond.  The objective of the new guidance is "...to increase coverage access in the ACA by offering plans that have lower premiums".  America's Health Insurance Plans (AHIP), a national advocacy and trade association, said that it "...supports the policies that encourage state flexiiblity, support innovation and promote affordability".

Most of these changes affect the Individual and Small Group (under 50 employees) market segments; but there is some impact to the large group market as well.  To access the HHS Notice of Benefit and Payment Parameters for 2019 Fact Sheet, click here -
https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-09.html

Following is a summary* of the more relevant aspects of the guidance and regulations impacting virtually everyone that has, or is considering purchasing health insurance:

• Relief from the Individual Mandate - Although the individual mandate and associated penalty has been eliminated starting in 2019, the guidance has broadened the so called "hardship exemptions" which allow affected individuals to avoid the individual mandate penalty THIS YEAR, in states that deferred to federally facilitated exchanges (39 states, including Nebraska).   Importantly, the guidance allows the exemption to be retroactive two (2) years, so even affected consumers facing a penalty from 2017 could conceivably avoid the fine.  The guidance stipulates the following broadened use of the hardship exemption:
• if one lives in a county, borough, or parish in which one or no ACA qualified plan is offered, and the consumer can show that the lack of choice resulted in their failure to purchase qualified coverage; or
• if one is opposed to abortion, and lives in a location where the only available plan covers abortion services.

NOTE: Federal officials and private researchers have indicated that about half of the U.S counties have one ACA insurer in 2018.

• Beginning in 2019:
• States will have the authority to cut back on the ACA's "10 essential health benefits (EHB)". While states will not be able to summarily eliminate any of the listed benefits; they can allow insurers to include limits on the number of physician office visits and cover fewer prescription drugs, for example. However, plans that cover EHB's must do so with no annual or lifetime dollar maximum.
• States will have more options and flexibility in establishing their EHB-benchmark plans.
• Insurers will no longer be required  to sell the metallic, standardized set of benefit plans (i.e., bronze, silver, gold, platinum).
• The responsibility for evaluating the adequateness of (PPO) network contracted healthcare providers will shift from the federal government to the states, in states that use healthcare.gov.
• Insurers will have more latitude in meeting the ACA's "minimum loss ratio" provision, which requires fully insured plans to rebate premium income amounts that exceed 80% (85% for groups with 100+ employees) of incurred claims.
• There will be new "income checks" to prevent people form claiming government subsides that wouldn't otherwise be eligible for such assistance.
• Federally facilitated exchanges will be required to discontinue tax credits for enrollees who fail to file taxes and reconcile past tax subsidies.
• Out of pocket maximum limits increase to $7,900 and $15,800 for individual and family coverage respectively.

The CMS guidance also extended the transitional policy allowing for the continuation/renewal of so called "grandmothered plans" for an additional year.  Previously, such plans were set to expire at the end of 2018.

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Between 2013 and 2017 the average health insurance premium costs more than doubled in states using the federally facilitated exchanges (39).  Also, at present (2018) half of all U.S. counties have only one insurance company offering health insurance coverage to individuals.  For these and other reasons, HHS and CMS are looking for ways to lure health insurers back to the marketplace; and allow for lower premiums.


*The above list is merely a summary of the final regulations and guidance released by HHS/CMS, and represents some of the more pertinent and relevant provisions.  Again, to access a fact sheet summarizing all of the provisions, click - 

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-items/2018-04-09.html

To access the 523 page final regulations, click - https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-07355.pdf

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Medical Expense Tax Deduction UPDATE!

The Tax Cuts and Jobs Act, signed into law in late December, 2017, contained some great news for folks that incur significant medical expenses AND itemize deductions on their tax return.  Historically, the threshold used to determine the amount of eligible/deductible expenses has been 7.5% of adjusted gross income (AGI), until an increase to 10% in 2013.  In other words, eligible expenses exceeding 10% of AGI are deductible expenses, and can be considerable given the rather generous list of allowable expenses.
(See - https://www.irs.gov/pub/irs-pdf/p502.pdf )

In 2013, this threshold was increased to 10% of AGI (per the Affordable Care Act (ACA)), which made it a bit more challenging to arrive at a reasonable figure for tax deduction purposes.  Seniors were given a pass on the increase until 2017.  Enter the Tax Cuts and Jobs Act, which, and this is extremely important - for 2017 and 2018, took the threshold back down to 7.5%!  Unless Congress acts, the threshold will return to the ACA increased level of 10% in 2019.

Example: For 2017 and 2018, a couple filing jointly with annual adjusted gross income of $50,000 could deduct qualified medical expenses that in total, exceeded $3,750 ($50,000 x 7.5%).

Importantly, the tax reform law also significantly increased the standard deduction amounts for singles and married couples filing jointly for 2018, to $12,000 (from $6,350) and $24,000 (from $12,700) respectively.  So careful attention must be paid in evaluating whether it makes sense to itemize, and thus take advantage of the lower medical expense threshold; or simply take the standard deduction. Regrettably, you can't do both.

This temporary (but hopefully made permanent) reduction of the medical expense deduction threshold could be particularly welcoming news to seniors who have, on average, higher medical expenses, including Medicare premiums.  But seniors aren't the only benefactors of the threshold reduction, since there are so many expenses that can be included in the calculation.  Here's a partial list of items that can be included in the list of allowable/deductible expenses:

• Medicare premiums - Parts B, C, D, and Medigap plans. (Hint: in many cases, seniors can find their part B and D premium amounts on social security payment statements.)
• (Qualified) Long Term Care insurance premiums and services
• Fees/Deductibles/Copays/Coinsurance related to services provided by doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, therapists, and nontraditional medical practitioners.
• Payments for prescription drugs (including insulin) that require a prescription (Note: over the counter drugs are not eligible).
• Eyeglasses and contacts, including solutions/cleaners
• Smoking cessation programs
• Weight loss program costs

Again, the link to access IRS publication 502 which includes all eligible expenses is -
https://www.irs.gov/pub/irs-pdf/p502.pdf

Individuals who obtain health insurance through their employer are cautioned that premiums paid by employers, and employee paid premiums that do not appear on form W-2 are NOT allowed for consideration in the deduction.  Most employees pay their share of premiums on a pre-tax basis through IRS section 125, which would render such premiums disqualified in the threshold calculation.  Also, otherwise eligible expenses that are reimbursed through a Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), or Flexible Spending Account (FSA) are NOT eligible for inclusion in the determination of deductible expenses.

Because the threshold reduction may potentially return to 10% in 2019, filers would be wise to take advantage of the reduction in preparing their 2017 tax return, and/or aggregate qualified expenses this year (2018) in order to, as my dad used to say - "make hay while the sun shines"!

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