The cost of specialty drugs, injectable or tablet form used to treat complex medical conditions, is growing at an annual rate of over 20 percent. At current utilization rates, the cost of new and existing specialty drugs is predicted to total 40 percent of the cost of providing pharmacy benefits to employees and their dependents by 2016. These statistics are a composite of data from ESI, Caremark, Optum, and Medco reports.
In addition to market factors driving overall cost increases, the absence of generic substitutes and brand-name competition gives drug manufacturers near-monopoly pricing power and makes conventional benefit design and utilization management less effective than when applied to traditional brands and generics.
As plan sponsors explore options to better manage the cost of specialty drugs as part of employee health benefits, beware of nuances that only health care professionals are apt to understand.
There is no reason, whatsoever, to not repeal COBRA, effective January 1, 2014. The Consolidated Omnibus Budget Reconciliation Act of 1985, more commonly known as COBRA, is a federal law that provides workers and their families the right to remain on a former employer’s health plan should they lose their job for any reason, experience a transition period between changing jobs, have their working hours reduced to part-time or experience other specified life events. Individuals exercising this right must pay up to 102 percent of the cost of the health plan and can remain on the plan for 18 months. The purpose of this law was to prevent individuals from having a coverage gap of 63 days. This is important, because before the passage of The Affordable Care Act (ACA) health insurers could only deny coverage for a pre-existing condition if the individual experienced a gap in health insurance coverage.
For plan years beginning on or after January 1, 2014, the ACA mandates that no individual can be denied health care coverage due to a pre-existing condition. Elimination of the pre-existing condition exclusion for children took effect September 1, 2010.
COBRA applies to any employer with 20 or more workers. Human resources directors and administrators at employers subject to COBRA will often complain about the costs and complexity of administering COBRA benefits. In fact, many hire outside firms that specialize as COBRA administrators because managing this requirement with internal resources is often impossible.
Now that the Supreme Court has affirmed the constitutionality of the ACA (with one exception related to Medicaid) and President Obama has retained the White House, Congress should enact legislation to repeal COBRA effective January 1, 2014.
Mark Whitcher at firstname.lastname@example.org or (401) 490-9351
Barry Eyre at email@example.com or (401) 490-9365
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Health Reimbursement Arrangements (HRAs) have become more popular with employers in recent years. HRAs are Internal Revenue Service-sanctioned employer-funded and tax- advantaged accounts, established by employers, to pay the health insurance premiums or out-of-pocket medical expenses of employees. The accounts enable employers to cap their expenses and liabilities with a defined contribution approach to health benefits.
On January 24, 2013, the federal government released guidance on whether or not employers would be allowed to offer HRAs, tied to individual health insurance policies, to avoid penalties imposed by the Affordable Care Act (ACA) for not offering qualified, affordable health coverage. Under the ACA, employers who do not meet the requirements of the law face a penalty of up to $3,000 per employee per year.
The Departments of Labor, Health and Human Services, and the Treasury collectively issued a set of FAQs that clearly outlines the rules regarding HRAs. Section 2711 of the Public Health Service Act (PHS Act), as added by the Affordable Care Act, distinguishes between HRAs that are “integrated” with a group health plan from those that are not integrated, so-called “stand-alone” HRAs. Employers cannot replace group plans with HRAs, tied to individual plans, without facing stiff penalties for violating the ACA.