The Bright Side
2022 was a doozy for employers.
The overturning of Roe v. Wade; the implementation of new surprise billing provisions and transparency in coverage rules to promote the sharing of healthcare pricing data; navigating a multitude of compliance requirements on everything from mental health parity to employer reporting; keeping up with a flurry of state activity on issues like paid leave, cyber security and unemployment taxes. The list goes on.
In 2023, employers will likely face similar business and compliance challenges as healthcare costs continue to rise and state and federal regulations for employer-provided health plans continue to shift. The bright side is that there may be an opportunity to make legislative headway on a few health and benefits issues depending on how Congress works together in certain policy areas. Even if there is gridlock, there’s also an opportunity for regulatory agencies like Health & Human Services and the Department of Labor to establish their own agendas. Here’s where The Council is focused.
Prescription Drug Pricing & PBM Transparency
Pharmacy benefit managers (PBMs) are facing pressure from many different stakeholders, including members of Congress, drug manufacturers, patients and employers. Mark Cuban even invested in a drug manufacturing company and online pharmacy that now shares his name and is dedicated to cutting out the middleman.
Lowering prescription drug costs is a bipartisan issue, and PBM oversight is one step toward achieving that objective. Whether it’s about PBMs’ lack of transparency, business practices or market influence, lawmakers are gunning for these companies. As The Council’s senior vice president of government affairs, Joel Kopperud, has noted about our 2023 Congressional priorities: our top issue this year is PBM transparency.
I have to admit, though, that I’m getting tired of the word “transparency.” It has become all-encompassing of much larger healthcare reform efforts and synonymous with lowering costs. Because of that, it means everything and nothing. While transparency is a critical step toward understanding the complexities of how healthcare prices are negotiated and why treatments, services and medications cost what they do, it’s only the first step of many when it comes to addressing healthcare affordability and access issues.
To be sure, the pharmacy supply chain is much too opaque. The largest PBMs make up over 90% of market share. While there is a new breed of PBMs emerging that share revenue sources and prescription utilization information with their partners, pass rebates through to plan sponsors, and allow for plan auditing, they make up about 3% of market share combined.
Without a clear understanding of how pharmacy benefits programs are managed, brokers and consultants struggle to deliver cost-effective solutions to their clients, and employers struggle to provide pharmacy benefits tailored to the needs of their employees. Understanding PBMs’ business practices, which connect health plans, patients and employers to the pharmacy supply chain, may be the most critical factor that will support the ongoing viability of the commercial health insurance marketplace.
Clarity, comprehensibility, accessibility of information, however you describe the concept of transparency, there’s an exchange of information that is not happening. Different stakeholders are looking for different information, but pricing and compensation data are two key elements. This is how we think we could get there:
- Require PBMs to provide specific information to group health plan sponsors including costs, aggregate rebates, fees, use of prescription drugs, and cost sharing by enrollees.
- Require PBMs to pass 100% of any manufacturer revenue or discounts on to the plan sponsor. This would include payments to subsidiaries such as group purchasing organizations (GPOs) or rebate aggregators and funds “clawed back” by a PBM from a pharmacy.
- Prohibit spread pricing, where a plan or patient is charged more for a drug than the PBM paid to the pharmacy for that drug.
- Ensure that PBMs are subject to transparency requirements under the Consolidated Appropriations Act of 2021, specifically Section 202 and Section 204. This would require PBMs to disclose to plan sponsors any bona fide fee arrangements, including services provided to pharmaceutical manufacturers.
The 2022 end-of-the-year legislative spending package included a provision extending telehealth relief from the 2020 CARES Act, allowing HSA-qualifying high-deductible health plans to cover telehealth and other remote-care services on a pre-deductible basis. The Council’s government affairs team will be working to make this provision permanent.
Telehealth also plays a key role in expanding access to mental health services, which is another major priority of the Biden administration. According to a national poll by Morning Consult, 21% of insured adults reported having personally had a telehealth appointment for their mental health in the past year. And nearly two thirds (64%) of insured adults are willing to receive mental healthcare virtually through a telehealth system, according to the Kaiser Family Foundation.
Public Option Insurance Plans
Although federal efforts to establish a public option or single-payer healthcare system have been stymied, a few states continue to carry the torch.
Washington had a rocky rollout of its public option plan, Cascade Select, which prompted the state to make several changes to the program. It was launched on Jan. 1, 2021, and capped plans’ statewide aggregate provider reimbursement rate at 160% of Medicare. Several carriers opted to participate, but many hospitals refused to join a public option network. Because carriers were unable to form adequate networks without these hospitals, about half of the state’s counties did not have a public option plan in 2021.
Additionally, during the 2021 plan year, public-option premiums were on average 11% higher than other plans. In 10 of the counties where it was available, the public option was not even the lowest-premium plan. Fewer than 1% of individual healthcare shoppers chose to enroll.
In response, Washington passed legislation to ensure statewide availability of public option plans, requiring certain hospitals to contract with a public option plan in 2023. They will be funded via a $50 million appropriation in the state’s biennial budget as well as a Section 1332 innovation waiver from the federal government.
Colorado launched public option plans for 2023. Carriers must offer Colorado Option plans in each county where they operate and meet premium-reduction targets between 2023 and 2025. If carriers can’t meet these targets or network adequacy requirements for Colorado Option plans, the state insurance commissioner can order healthcare providers to join the plan networks at set reimbursement rates (within statutory limits that ensure these rates are adequate) following a public hearing.
To implement the new premium-reduction targets, Colorado asked for the federal government to approve an expansion of its Section 1332 innovation waiver. It was approved in July 2022 and was the first waiver ever to be approved for a public option. This could be significant if other states follow suit.
Early results indicate a lukewarm uptake of the new public option plans, which enrolled 25,000, or about 13% of those who shopped on the state’s exchange, even though the plans had top billing on the online marketplace. Colorado’s governor and advocacy groups said signups surpassed their original goal, even though the state never published an enrollment projection.
Nevada held a series of stakeholder meetings to address populations to target, ensure plans and providers agree to reasonable rates, and determine whether the public option should be open to small employers in future years. After considering the public’s input, Nevada is preparing a Section 1332 waiver application.
Healthcare Data & Price Sharing
In the latest phase of the federal Transparency in Coverage rules, beginning Jan. 1, 2023, health plans are required to share with members a price comparison tool for a list of 500 items and services. The first phase of the rule went into effect in July 2022 and requires health insurers and self-insured employers to post negotiated rates online.
A quick aside: I decided to look for this tool through my insurer and was told by a customer service agent that it contained a very broad range of pricing information that did not consider my specific plan.
Arming consumers with pricing information so that they can make more informed decisions about their healthcare may not yield lower costs immediately in the short term, but it’s necessary to help promote choice and competition in the commercial insurance market.
It’s significant that healthcare price variations exist in the marketplace. Consumers would be less incentivized to shop for care if the cost were low, but in the U.S. healthcare system, they are disadvantaged if they do not shop. A Marist poll done for PatientRightsAdvocate.org found that 87% of consumers would shop for the best quality healthcare at the lowest price if actual prices were readily available to them.
A 2019 report by the RAND Corporation analyzed price variation in hospital services using employer-sponsored private health plan claims data and compared it to Medicare plan pricing. Hospital prices varied significantly by state, ranging from 150% to 300% of Medicare. Outpatient services varied more dramatically, with the highest at 600% of Medicare.
The RAND study estimated that shifting hospital prices from the 75th percentile to the 25th percentile (relative to Medicare) would reduce costs for employers by 40%, or $1.4 billion.
Interestingly, a September 2022 Congressional Budget Office report on strategies to reverse commercial health insurance costs concluded that transparency would lead to very small price reductions, equating to about 1% over the next decade.
Even still, there have been a litany of transparency-focused regulations passed over the last few years. These rules have propelled the industry toward a price-transparency inflection point and created the environment to embrace some form of data standards.
For example, a January 2021 Centers for Medicare and Medicaid Services Hospital Price Transparency rule requires hospitals to post their prices online, but a recent report from Turquoise Health shows that only about two thirds of U.S. hospitals posted negotiated rates on their websites.
While recent price transparency regulations require both hospitals and payers to publish negotiated rates, there is a gap in the usability of this information in that consumers cannot easily compare price and quality information across different organizations.
There are several policy recommendations that address insurer and hospital participation and reporting implementation issues, including creating feedback loops to address missing or incorrect data files, standardizing data reporting requirements, and promoting common definitions of episodes of care.