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Why the Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

Why The Latest Healthcare Reform Defeat Shouldn’t Be a Distraction from Your Health Benefits Strategy

10/09/2017

by Chris Byrd

 

Now that the Graham-Cassidy healthcare bill has failed, Congress will move on. We can expect it to concentrate instead on some pressing items on the calendar—things like agreeing on a continuing resolution to keep the government operating, raising the debt ceiling and reauthorizing programs like the Children’s Health Insurance Program. And of course, as we all know, congressional leadership is poised to take on the very complex issue of tax reform. In other words, after a six-month-long healthcare debate during which politicians expended a considerable amount of political and emotional energy, healthcare is largely off the table for now, barring the (unlikely) inclusion of healthcare in a tax reform package.

 

This means the Affordable Care Act remains the law of the land. While it is far from a perfect framework (and both sides of the aisle agree on that), the employer market has adjusted to it. The repeal and replace efforts of the past six months led some employers to place their benefit strategies on hold pending an understanding of what a new world order might look like. My advice: Don’t put off making decisions about your benefits strategy any longer. The deliberation and debate over a wholesale overhaul of the present system is finished. There will be some targeted efforts, most notably to stabilize the individual market, but the employer market framework is known—more of the same.

 

If there is disappointment among supporters of consumer-directed healthcare approaches, it is over the missed opportunity to pass reforms that would have expanded HSAs, restored the OTC tax benefit, eliminated the cap on FSA contributions and further delayed the implementation of the Cadillac Tax. In the absence of a broad reform bill, these supporters will continue to advocate for these provisions in separate pieces of legislation. But much of that effort may have to wait until after the end of the year, given that the attention of the tax-writing committees is fully focused on tax reform. The industry’s biggest priority continues to be to repeal, reform or delay the Cadillac Tax.

 

The market forces that are causing employers to continue to move toward consumer-directed, higher-deductible healthcare plans haven’t changed, and the trend of consumers having more skin in the game is inexorable because it works. Even without the legislative changes that would have been favorable to consumers with tax-advantaged accounts had the broad healthcare reform bills passed, these accounts will remain a very effective and attractive tool for both employers and consumers. Consumers should be making use of them, as they provide a significant benefit by helping them save money and become wise stewards of their healthcare dollars. Consumer-directed health approaches—and the tools and products that have sprung up around them—continue to be an effective part of the answer to the challenges presented by healthcare’s ever-increasing costs. As Congress gathers its energy for another round of discussion and debate—this time around tax reform—employers and consumers should not be distracted by what’s happening in Washington as it relates to their health benefits strategy.

 


Chris Byrd

Executive Vice President, WEX Health Operations & Corporate Development Officer

Chris Byrd brings more than 25 years of experience in employee benefits and banking to his role at WEX Health. A founder of Evolution Benefits in 2000, Chris played a key role in designing the proprietary architecture for the company’s prepaid benefits card.

Chris oversees the daily execution of WEX Health’s business and leads the company’s operations and service delivery, corporate development, merger and acquisition activity, and legal, industry, and government relations efforts.

He began his career in commercial banking, and prior to 2000, he focused on finance, strategy, and business development for Value Health and two start-up healthcare companies. He joined WEX Health in July 2014.

Chris, who serves on numerous industry boards, is a frequent speaker on emerging trends in financial services and benefits and is active in industry and government relations. He earned a degree in economics from Brown University.  


What’s Driving Medical Cost Trend Upward in 2018?

Medical cost trend is projected to have a slight uptick next year compared to the last three years, according to PwCs Health Research Institute (HRI) Medical Cost Trend: behind the numbers 2018 report.

Medical cost trend is the projected percentage increase in the cost to treat patients, assuming benefits stay the same. Insurers use the projection to calculate health plan premiums for the following year.

Annual Medical Cost Trend Expected to Be 6.5%

The anticipated growth rate for 2018 is 6.5 percent, half a percentage point higher than this year. Benefit design changes such as higher copays and narrower provider networks typically help hold down spending growth and is expected to do so next year by a percentage point, putting the net growth rate at 5.5 percent.

There are several factors affecting both sides of medical trend. While single digit increases have become the new normal for projections, the report notes that health organizations and businesses will have to tackle the price of services and the rate of utilization in the future to keep healthcare affordable.

Upward Pressure

For 2018, these three factors are expected to put upward pressure on medical cost trend:

Rising Inflation

The US economy is heating up and impacting all prices, healthcare costs included. With employers hiring and businesses and consumers spending, general inflation is rising and will likely put pressure on wages, medical prices and cost trend.

Movement to High Deductible Health Plans Slow

Less employers (28%) are considering only high deductible health plan offerings over the next three years, compared to (44%) in 2014, according to the 2017 PwC Touchstone Survey. A slowdown in the shift to HDHPs means employers may see an increase in utilization and will therefore have to look on the service-side of things such as narrower provider network and centers of excellence to bring down price instead of utilization.

Less Branded Drugs are Going Off Patent Protection

Fewer branded drugs have been coming off patent since 2016, meaning savings cannot be realized by generics coming onto the market in 2018. Generic prices are typically 80 – 85% less than branded originals within a few years of a patent expiring and create significant cost savings. Employers often use formularies with generics and encourage their use to help decrease medical costs.

Downward Pressure

There are also two emerging forces that may put downward pressure on health spending increases:

Public and Political Pressure to Keep Drug Prices in Check

Negative pressure is causing pharmaceutical companies to address pricing and value. Heightened political and public attention has the ability to cause drug-makers to hold price hikes in check, while for some drugs in the past year have had triple and quadruple digit percentage increases.

Employers Target New Treatments and Technologies to Reduce Waste

Employers looking to maintain access to care and minimize waste are turning to where treatments are administered, coordinating care, artificial intelligence, new technologies and traditional strategies to effectively keep employees covered and maintain costs.

Source:  PwC Health Research Institute. Medical cost trend: Behind the numbers 2018.

National Health Trends Show Mixed Progress 

As if there aren’t enough reasons to live in Hawaii, it just ranked first in the nation for the fifth year in a row for having the healthiest residents, according to the 2016 America’s Health Rankings Annual Report from the United Health Foundation.

The annual health rankings report has been tracking trends in health behaviors, policies, care and outcomes since 1990. It offers a comprehensive look at the nation’s health as a whole in addition to the health of people in individual states. Hawaii had the lowest rates of preventable hospitalizations and low rates of uninsurance along with the second-highest public health funding rate in the country. It also ranked second for low rates of obesity and cancer death. Massachusetts, Connecticut, Minnesota, and Vermont received the next highest rankings.

Positive National Trends

As reported in The Nation’s Health Feb/March issue, some positive national trends identified a decrease in unhealthy health activities. For example, smoking rates dropped by 41 percent since 1990. The uninsured rate has decreased by 35 percent from 16.2 percent in 2011 and preventable hospitalization for those on Medicare decreased by 35 percent over the past 10 years.

Individual Behaviors Need Improvement

Other trends need to address individual behaviors to make the U.S. healthier. The obesity rate increased to 29.8 percent, which is up from 11.6 recorded in the first report. Also for the first time since 1990, cardiovascular death rates increased to 251.7 from 250.8 deaths per 100,000 people. Additionally, drug deaths rose 4 percent from 2015 to 2016.

Efforts at the community or workplace level can be impactful in helping alleviate unhealthy habits/lifestyles such as physical inactivity and obesity by encouraging participation in wellness initiatives and providing access to healthy food options. Improving individual outcomes will positively influence state and national trends as well. Opportunities for progress need to continue for more promising results to be yielded next year.

Source:  The Nation’s Health. Rankings find improvements in health, but concerns linger. February/March. PP 1.