Healthcare reform has been on the national radar for over 70 years. During that time the debate has ranged from whether good health is a right, how healthcare can be expanded to whether a national healthcare system is a form of socialism.
While the United States has been struggling to find a workable system, every other wealthy country in the world has adopted universal healthcare. Meanwhile, our spending on healthcare is the highest.
As a result of increasing consolidation and skyrocketing payments for insurance premiums and care, the healthcare debate is turning more and more to combating costs. As a result, push back is coming from sources including employees challenging company plans to companies challenging insurance providers and consultants.
Out-of-Pocket Healthcare Costs
Individuals and families rank healthcare out of pocket costs as their top financial priority, according to a recent KFF survey. About three quarters of survey respondents said they are worried about paying unexpected medical expenses or the cost of medical services.
Other research mirrors KFF’s findings.
About half of working adults report difficulty in affording health coverage. The Commonwealth Fund 2023 Health Care Affordability Survey found that 57 percent of those with marketplace plans or individual coverage had trouble paying for their coverage. At the same time, 45 percent of those with employer coverage find it hard to cover premiums.
With the cost of coverage being a problem, many people struggle to pay out of pocket expenses. As a result, the Commonwealth report found that over one-third or more people with health insurance are delaying getting care or filling prescriptions.
Meanwhile, of those delaying care, 54 percent with employer coverage and 61 percent with marketplace or individual plans reported getting sicker. Of those who got care, 30 percent who are on an employer plan are paying on medical debt. Of marketplace and individual plan enrollees, 39 percent are paying medical debt.
Employers Hit With Rate Hikes
At a time when many employees are struggling with the cost of company health plans and medical debt, employers report rates for company plans increasing.
Rates for employer plans regularly increase. However, according to Mercer’s National Survey of Employer-Sponsored Health Plans, rates have jumped. In addition, that trend is expected to continue.
Coverage rates have increased over the last decade by three to four percent, according to the Mercer report. However, last year they increased by five percent.
New more expensive drugs are the fastest growing component of costs, according to Mercer. Last year pharmacy benefit costs rose 8.4 percent.
Healthcare Cost Volatility
Another Mercer survey of CFOs conducted in February and March found that healthcare costs are the most unpredictable element of their business.
Of the 80 respondents, 72 percent said healthcare expenses are the most volatile expense for their companies. Those costs are so iffy that 65 percent of CFOs say they have to recalculate their forecast two to four or more times a year.
One prediction almost all of the CFOs surveyed agreed on was that a spike in healthcare costs would put the health of their companies in jeopardy.
A rise in healthcare costs of two percent above the Consumer Price Index (CPI) over the next three to five years would spell trouble for 94 percent of the companies surveyed.
Of the 80 companies surveyed, 74 percent have self-funded health insurance plans. Those programs pay claims themselves instead of using an insurance company. Around 40 percent of self funded plans in the survey build a margin in their healthcare budget of one to five percent. The hope is that the extra padding will cover unforeseen claim volume and cost hikes.
Battles Over Costs Going to Court
Workers are beginning to take their frustration over company healthcare plans to court.
In a first-of-its-kind action, an employee of Johnson & Johnson filed a class action suit against the company alleging it mismanaged employee drug benefits. As a result of that alleged mismanagement, the suit contends, employees vastly overpaid for prescription drugs.
Losses to employees amount to millions of dollars, according to the suit. Those losses come in the form of “higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays, and lower wages or limited wage growth.”
Part of Johnson & Johnson’s mismanagement is evident in the elevated prices it agreed to pay its pharmacy benefits manager, the plaintiff alleges.
One of the examples cited in the New Jersey case involves the generic drug teriflunomide used to treat multiple sclerosis. Local pharmacies charge between $40.55 to 77.41 for a 90-day supply of the drug, according to the suit. However, the Johnson & Johnson plan required covered employees to pay $10,239.69.
“No fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” states the suit.
Last month a Mayo Clinic employee filed suit against the healthcare firm and Medica, its insurance provider. That class action alleges that employee’s medical bills were “systematically underpaid’.
The Johnson & Johnson and Mayo Clinic cases are just two legal actions attacking how employer health plans are managed. However, they are not likely to be the last. At least two law firms are gearing up to take on other companies.
Companies Challenging Benefits Managers
Workers are not the only ones taking action on employee health insurance plans.
In December, Kraft Heins settled a lawsuit against Aetna Insurance. In that suit, Kraft Heinz alleged that Aetna enriched itself to the tune of millions of dollars as the third-party administrator of the company’s health insurance plan.
Earlier this year, Tyson Foods switched from benefits manager Caremark, which is part of CVS, to Rightway. The move was made to save costs in the company’s health plan.
Rightway works on a fee basis and claims it can save employers 15 percent.
In addition to promising savings, Rightway offers something most companies find hard or impossible to get from the big PBM companies – transparency.
Rightway’s business model passes drug discounts to employers and their covered employees in addition to helping employees find less expensive generic drugs.
Last year, Blue Shield of California dropped CVS’s Caremark in favor of a partnership with Mark Cuban’s Cost Plus Drug Company and Amazon Pharmacy. Blue Shield said the move was to save on drug costs for its nearly 5 million members.
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