Impact of the recent J&J lawsuit. Does your business need to CYA?

Impact of the recent J & J lawsuit – Does your business need to CYA!

March 7, 2024

In early February 2024, pharmaceutical giant Johnson & Johnson (J&J) and its benefit plan committee were sued in a putative class action alleging the company breached its fiduciary duty in its selection of its pharmacy benefit manager (PBM), its reliance on a biased consultant in the selection process, as well as failure to negotiate more participant-friendly contract terms in implementing the services. To understand the basis of the lawsuit and more importantly how it potentially could impact your business, it’s important to recount some relevant developments over the last few years:

Decades of Retirement Plan Litigation

Beginning back in 2006, and then continuing to the present time, 401(k) and 403(b) plans have been the subject of assumed class action lawsuits alleging excessive fees. These lawsuits have focused on the employer/plan sponsor’s fiduciary responsibilities with respect to vendor selection, fees and investment performance. Several of these cases have even made it all the way to the US Supreme Court.

Consolidated Appropriations Act, 2021 (CAA) – the New Health & Welfare Plan Transparency Law

During the later part of 2020, Congress passed the CAA, which introduced a series of reporting and disclosure measures intended to bring greater increased transparency to the medical and prescription drug industry. The CAA specifically required health plans to:

a. post machine-readable files reporting the rates paid to network and non-network providers for a series of services
b. create price estimator tools that allow participants to determine in advance how much a healthcare supply or service will cost
c. document the processes used to create limits on access to mental health/substance use disorder services, and
d. solicit fee disclosures from healthcare brokers and consultants involved in the plan design upon entering into a contract as well as when renewing a contract.

The CAA also prohibited health plans from entering into contracts with network administrators that would restrict access to price or quality of care information. This is just an initial summary, as according to the Senate Historical Office, The CAA, 2021 (H.R. 133), at 5,593 pages, is one of the longest bills ever passed by Congress.

Why should you care and what does it have to do with your business? We will get to that but if you want to, skip ahead to page 1,576 of the bill where there are provisions in the CAA relating to healthcare, specifically in DIVISION BB-PRIVATE HEALTH INSURANCE AND PUBLIC HEALTH PROVISIONS that affect employers. Here it outlines the established protections for consumers related to surprise billing and transparency in health care and points now to the more visible & ever present obligations addressing employer’s fiduciary duties toward their employer-sponsored health plans.

But like a lot of employers, you may have, for the mere sake of sanity, chose to ignore the news over the last several years regarding this ruling and its subsequent updates. However, it may be time to heed the old adage, “pay now or pay later”, as it is starting to apply to compliance when your business is offering a group health plan.

Shifting Focus to Welfare Plan Fee Litigation

Recently, a number of welfare plans brought suits against their sponsoring employer, insurer, and/or third party administrators (TPAs). These suits alleged that the employer and/or TPAs refused to provide requested information relating to pricing, inflated costs and held conflicts of interest. At the same time, several well known ERISA plaintiffs’ attorneys have indicated they intend to potentially shift focus to health & welfare plan fee litigation. In addition, recently in the later part of 2023, a number of companies also began receiving ERISA document requests seeking six years’ worth of plan documents as well as a link to the plan’s healthcare price estimator tool.

As noted previously, J&J, its fiduciary committee, and individual committee members were sued for an alleged breach of fiduciary duty with respect to their ERISA-governed prescription drug benefit program. This lawsuit, along with other pending litigation, does provide insight into potential existing theories as to how other plans may be targeted in this new wave of fiduciary litigation involving health & welfare plans. Therefore, companies & their C-Suite executives should be checking at least a few boxes now to ensure that they are making a good faith effort as the fiduciary of their health plan to remain compliant.

Conclusion – Some Clarity

First, it is important to note that the J&J lawsuit contains a number of unsubstantiated allegations. Regardless, the mere introduction of these large scale allegations, combined with the CAA’s increased focus on the employer’s fiduciary duties towards their health plan & the continued delivery of unsustainable health premium increases year over year, are all now serving as important catalysts for many C-Suite executives.

These motivated C-Suite executives, who ruthlessly manage every other cost in their company, have become frustrated with not being able to reign in these healthcare costs now representing their number two or number three line item on their P&L. It is these same savvy C-Suite executives who have started to engage in a conversation where they are able to take back control of their healthcare budgets to reclaim trapped profits while actually creating healthier, happier employees that are more fulfilled and more productive.

For more understanding

We have the privilege of helping employers understand their employee benefits, and primarily their health plan, as a supply chain issue that can dramatically improve both the health of employees and the bottom line. This approach may not be new, but a reminder is needed that a viable, measurable and fiscally manageable health plan involves diligence in its healthcare supply chain management. This model allows companies to apply the same effective cost-control practices they leverage in other parts of their organization to their healthcare costs. The process eliminates wasted expenses, redirects dollars to produce measurable ROI, and optimizes the employee healthcare experience resulting in a more loyal, productive, and profitable workforce.

For a copy of an overview of important cost containment solutions you can start to positively leverage in this process, click here:

The CEO Survival Guide – How to Make Healthcare A Controllable Cost

If you have any questions on taking back control of your healthcare spend or other benefits-related challenges, please contact us at 714.716.4060 or mike@my-EBP.com, or provide info here .

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor if different, the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.

This publication is posted on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

Level-Funded Health Plans help contain costs for employers

4 ways level-funded health plans help contain costs for employers

May 20, 2022

Level-funded plans are designed to offer employers predictability with the potential of upfront savings and a surplus refund

Level-funded plans continue to become a more viable option for employers to contain costs in the health insurance marketplace. Forty-two percent of small firms in 2021 reported that they have a level-funded plan, compared to just 7% two years ago, according to the Kaiser Family Foundation Employer Health Benefits Survey (1).

What’s driven an increased adoption of these plans? As health costs have continued to rise, health insurers have designed level-funded plans to offer the potential savings of self-funded plans, but with reduced risk. They also offer the predictability of fully insured plans, but at a potentially lower cost due to an opportunity for lower premiums upfront and a surplus refund if medical claims are lower than expected.

Employers with a level-funded model are often paying less than they would have paid for a fully insured plan. Also, the prices of level-funded plans are based on risk profiles so that healthier groups do not pay as much as less healthier groups.

“Level-funded plans offer the consistency, flexibility and transparency that many fully insured, small group plans can’t provide. They’re designed to compete with fully insured plans.”

Understanding level-funded plans

While there’s been increased adoption, understanding the value of level-funded plans still requires some education in the healthcare marketplace. At their core, level-funded plans are generally self-funded plans that offer three distinct elements, with certain plan components varying among carriers:

stop-loss insurance to mitigate risk
opportunity for a surplus refund (2)
a third-party claims administration agreement

Level-funded plans also typically include monthly reports with data that employers can use to track health care usage and wellness programs that may increase member engagement and reduce costs. These monthly accessible reports provide valuable claims data and current participant plan engagement that allows level-funded plans to more agile and able to react quicker to changes and the needs of the healthcare marketplace. In addition, as a type of self-funded health plan, our plans are built to provide the pricing stability employers want and need, and provide them an opportunity to capture premium surplus at the end of the contract year.

To take a closer look at how level-funded health plans help contain costs here’s how they compare to self-funded and fully insured plans

1. Level-funded plans offer predictability and mitigate the risks of self-funded plans

Similar to a self-funded plan, level-funded allows employers to assume some of the financial risk of providing health services to employees by directly paying for employee medical claims.

How do these plans mitigate this risk? Employers with level-funded plans pay a fixed monthly fee, which covers the maximum claims liability, administrative fees and stop-loss insurance which protects against large claims and high member utilization.

In a self-funded model, the employer pays more if claims are higher than anticipated and gets money back if claims are lower at the end of th plan year. Level-funded plans, however, cover the cost of individual or aggregate claims that exceed the plan’s maximum, while offering the health plan and its sponsoring employer an opportunity to receive money back if lower-than-expected claims produce a surplus.

Level-funded plans are designed to mitigate risk associated with the self-funded plan model by providing no risk of additional liability outside of the level premiums established at the beginning of the plan year and paid monthly.

2. The health plan may receive a surplus refund with level-funded plans

For a fully insured plan, the insurance company assumes the financial risk for providing health services to the employer group. For a fixed monthly premium paid by the employer, the insurer pays health care claims and covers administrative costs, sales commissions and taxes. At the end of the plan year, if the actual health care claims are higher than expected, the insurer pays them and if they’re lower, the insurer keeps the difference.

In contrast, an employer with a level-funded plan is insured against higher-than-expected claims while potentially receiving a surplus refund resulting from lower-than-expected claims.

For employers, there’s an incentive to help keep their employee populations healthier to drive for a greater surplus refund. With wellness programs and virtual care included with many level-funded plans, employees are encouraged to develop healthier habits to make this happen.

3. Level-funded plans offer greater insights to help contain costs

Unlike with most fully insured plans, employers with level-funded can receive detailed monthly data reports to help them better understand employee utilization of health services and manage their benefits.

The amount of reporting is determined by the employer, whether it’s receiving only high-level reports or taking more detailed looks at segments of the employee population. Employers don’t have to wait until the next renewal period at the end of the plan year before they can understand how member behavior may be potentially driving up healthcare costs.

These insights may enable employers to alert their employees that:

Low-cost generic drugs can often be substituted for brand name drugs and result in lower out-of-pocket costs for the member while providing the same level of healthcare needed-it’s important to note that a licensed healthcare provider should be consulted before changing any medications.
Going to urgent care may be more appropriate, less time-consuming and less costly than going to the emergency room.
Seeing their primary care provider or general family doctor virtually rather than in-person can again save both time and money.

The detailed data reports provided by level-funded plans provide a huge advantage, especially for small employers, by giving them insights into their virtual care usage, ER use, pharmacy utilization and network strategy. Being enabled to make informed decisions about healthcare as needed by tracking these things over time helps drive an improved and better quality member experience.

4. Member experience is key within the level-funded model

Many carriers level-funded models include wellness programs and 24/7 virtual care options, which help employees and their families play a more active role in their health care and save on out-of-pocket costs.

Employees are often offered the chance to participate in fitness tracking and health programs designed to reward the members with credits for dollars for completing certain daily fitness goals and/or complete milestone health check-ups. In some programs, these credits/dollars can be used directly to pay out-of-pocket expenses or health savings account (HSA) dollars. Activities that qualify usually include walking, swimming, cycling elliptical. To offer employees more convenience,24/7 virtual care is often available for a variety of conditions, including general medical care, back and neck care, and behavioral health counseling.

The member experience including virtual, health engagement and plan design options is what distinguishes most level-funded plans. They help to increase employee satisfaction and engagement and for employers, its the opportunity for lower costs and the chance to achieve sharing in the potential surplus refund.

For more clarity and assistance in exploring the advantages of moving your healthcare plan to a level-funded model, contact Mike Young at 714.716.4060, mike@my-EBP.com or provide info here .

(1) 2021 Employer Health Benefits Survey, Kaiser Family Foundation, 2021.

(2) Please consult a licensed tax and/or legal advisor to determine if by receiving this surplus refund, there are any restrictions or obligations. Surplus refund available only where allowed by state law.

4 Strategies for Reducing Health Benefit Costs in 2022

January 20, 2022

Health care costs continue to rise each year, and 2022 will likely be no exception. In the new year, experts predict a 6.5% increase in medical expenses alone, according to PricewaterhouseCoopers. In terms of health plan premiums, employers anticipate they may rise more than 5% in 2022, a Willis Towers Watson survey reports.

With these increases in mind, employers will want to strategize methods to rein in benefits spending. This article offers four ways to help.

1. Alternative Plan Modeling

One common method for reducing benefits costs is to increase employees’ share of expenses. This could be done directly through premium increases, but that might generate more problems for an employer; after all, many employees are still struggling financially and are ready to leave their jobs for better benefits options thanks to the COVID-19 pandemic.

Considering this, a more careful approach to lowering expenses may be through alternative plan modeling. Instead of a traditional health plan, employers can think about other plan designs that can still benefit employees without excessive costs. Plan modeling alternatives include:

• Consumer driven health plan models—High deductible health plans with savings options attached.
• Self-funding models—Health plans funded and managed by an employer rather than a carrier.
• Reference-based pricing models—Self-funded health plans with set spending limits on shoppable services.
• Level-funding models—Self-funded health plans where an employer pays a set amount to a carrier for claims, the remainder of which is refunded at the end of the year if there is any leftover.

Each of these plan modeling alternatives has advantages and disadvantages, depending on an organization’s unique circumstances. Employers should reach out to Mike Young at MY-Employee Benefits Plus to learn more about the potential of these and other plan models.

2. Health Care Literacy

Improving health care literacy for employees has seen a significant push in recent years. The idea is that if employees better understand their health care options, they can save money and improve their overall well-being.

Even limited health literacy can go a long way toward keeping health costs down in 2022. Arming employees with questions such as “How much will this cost?” and “Can I be treated in an equally effective but less costly way?” can help them take better control over their health choices and make wiser decisions. Further, employees should also be taught basic concepts such as when to visit an emergency room versus an urgent care, the difference between coinsurance and deductibles, and how to price shop for services.

Ultimately, the more educated employees are about health care topics, the more money they can potentially save. In other words, the education employers invest in now will pay for itself later through healthier employees and reduced health expenses.

3. Telemedicine Solutions

Telemedicine allows consumers to visit their doctor over the internet. Unsurprisingly, that made it extremely popular during the height of the COVID-19 pandemic.

And that popularity isn’t likely to go away in 2022. Rather, more businesses are likely to shift toward offering more telemedicine options. According to McKinsey and Company, only 11% of U.S. consumers utilized telemedicine in 2019, pre-pandemic. As of mid-2021, 46% of consumers were using telemedicine to replace the in-person health visits they had originally planned. Additionally, 76% of consumers said they were interested in using telemedicine going forward, according to a separate McKinsey and Company survey.

Employers who want to test out telemedicine capabilities can think about offering it in a limited capacity. For instance, an employee might see a doctor in person for an annual checkup, then follow up later with a virtual visit. If employees find this useful, employers can consider expanding their telemedicine offerings.

4. Prescription Drug Policy Revisions

Prescription drug offerings are great additions to health plans, but they can sometimes increase costs if not used properly. Specifically, employees will need to be educated about their drug plan, or they might spend money needlessly.

For instance, without adequate knowledge, an employee might opt for name-brand prescriptions each time they need one. The employee might not even know to ask their doctor about generic alternatives, which are equally effective and significantly more affordable. This can raise prices for everyone—individuals and their employers.

Beyond education, employers can help control needless drug spending by revising their policies. This may include requiring employees to request generic medications first before covering more costly alternatives.

Summary

There are many approaches for controlling benefits spending, but not all will work for each organization. That’s why it’s important for employers to closely analyze their health plan data and assess where they spend the most. This will help inform strategy and allow employers to maximize their efforts.

And for a copy of this news brief, click here: 4 Strategies for Reducing Health Benefits Costs in 2022

Reach out to Mike Young at MY-Employee Benefits Plus to discuss cost-saving strategies that will fit your unique workforce.
Contact Mike at 714.716.4060 or mike@my-EBP.com .

5 Strategies for Reducing Health Benefit Costs in 2022

August 27, 2021

For the past two decades, health costs have increased each year. This happens for a variety of reasons, such as inflation or, say, a global pandemic. With that in mind, employers can bank on prices going up in 2022.

According to a PricewaterhouseCoopers (PwC) report, medical costs are projected to increase 6.5% in 2022. This is about average for the past decade; although, it is slightly lower than the 7% increase projected this year (as more spending goes toward the COVID-19 pandemic).

Yet, 6.5% is still a considerable increase, especially when so many budgets have been reallocated or slashed due to the pandemic. That’s why employers must think both strategically and creatively about how they can lower their health benefits expenses in 2022.

This article includes five ways to help reduce spending without compromising benefits quality.

1. Control Drug Spending

Drug prices are rising faster than any other medical service or commodity. Prices are now 33% higher than they were in 2014, according to GoodRx. This is a significant problem during inpatient procedures, where individuals aren’t usually given an option to select a generic medication—patients rarely know what drugs they’re given until after the fact. Even in routine prescription scenarios, employees may be prescribed name-brand medications simply due to physician preference.

Employers can educate employees on the price differences between name-brand and generic medications. Doing so can help employees understand that they can save money while still receiving the same quality treatment. Additionally, employers may consider introducing varying levels of prescription drug coverage. For instance, fully covering generic prescriptions or drugs used for chronic conditions. For higher levels (e.g., specialty drugs), employers may cover less of the costs. Ultimately, employers will need to determine the appropriate coverage levels for their unique workplaces

2. Encourage Active Benefits Participation

Beyond drug spending, employers can help limit overall health costs by making employees active participants in their health care. This means encouraging employees to improve their health literacy, research treatments and price shop.

Price shopping, in particular, should be easier in 2022, given the new hospital price transparency rule that took effect Jan. 1, 2021. Employees will now be able to see specific prices for procedures and other services. This incentivizes employees to educate themselves before making costly health decisions.

3. Offer Savings Accounts with Carryovers

Health plans with savings components are becoming more popular each year. That’s because these tax-advantaged savings accounts empower employees to control their own spending and improve their health literacy. The accounts include health savings accounts (HSAs), flexible spending accounts (FSAs) and others.

Many accounts allow for fund carryover from year to year, or allow employers to add that option onto their plan designs. Allowing carryover encourages employees to contribute more funds, since they’re no longer “use it or lose it.” Since many employers match contributions up to a limit, more money added to these accounts means greater tax savings for everyone.

4. Embrace Virtual Health Options

One major takeaway from the COVID-19 pandemic has been that virtual solutions can offer high-quality outcomes. This is so true that many companies are allowing employees to work remotely permanently. Virtual health options are no exception to this trend.

There are countless telehealth services available these days. Individuals can connect with health professionals in just a few clicks—no waiting times or driving to a clinic. Additionally, individuals will not need to take large chunks of time off work, allowing for greater productivity. As such, telehealth solutions are often much less expensive than a typical in-person doctor visit. Even the Centers for Medicare and Medicaid Services (CMS) acknowledges the usefulness of telehealth services, seeking to expand access.

Employers can consider adding telehealth services into their plan designs. In some cases, it may be cost-efficient for employees to schedule a virtual health visit before an in-person appointment, under certain circumstances. In any case, having a telehealth option expands access to care and lowers expenses for everyone.

5. Consider more Optimal Benefit Plan Funding Alternatives

A more drastic option for reducing health costs is restructuring how plans are funded. For instance, a self-funded plan may be more cost-effective than paying a monthly premium for a fully insured plan. Other options include level-funding or reference-based pricing models, each of which carries its own set of administrative rules and legal constraints.

Funding decisions should not be taken lightly and should be based on several factors, such as the size of an organization, risk tolerance, and financial stability. Employee financial stability should also be considered, especially while the effects of the COVID-19 pandemic can still be felt. Employees may not be able to burden large premium increases, constraining some plan funding flexibility options.

Historically, employers have shifted costs onto their employees (usually through higher premiums) as a way to reduce spending. However, that trend is not expected to be widespread in 2022. Considering the tight labor market and how many individuals are struggling financially due to the pandemic, employers will likely be hesitant to shift too much of the burden. Doing so may cause employees to seek other jobs or simply forego preventive care, which can lead to chronic conditions and higher future health care costs.

Conclusion

Employers have a variety of ways in which they can help contain health care expenses. Choosing the right method will depend on unique employee populations and budgets. For a copy of this news brief, click here: 5 Strategies for Reducing Health Benefit Costs in 2021 .

Reach out to Mike Young today for help strategizing your best options at 714.716.4060 or mike@my-EBP.com .