Regulators are in the early stages of creating rules that make it easier for health plans that were grandfathered in before the Affordable Care Act took effect to continue providing coverage.
The number of workers enrolled in plans that were in effect before the ACA was enacted in 2010 has been shrinking, and as of 2018, some 16% of American workers who were enrolled in group health plans were in grandfathered plans.
Under the ACA, those plans do not have to abide by the same regulations as plans that took effect after the law’s implementation.
In February 2019, the Internal Revenue Service, the Employee Benefits Security Administration and the Health and Human Services Department issued a request for information from grandfathered plans. The goal is to determine whether there are opportunities for the regulators to assist plans to preserve their grandfathered status in ways that would benefit employers, employees, and their families.
While the effort will only affect a small amount of employer-sponsored plans, the move is significant as it looks like the ultimate goal is to further loosen rules for grandfathered plans.
A plan is considered grandfathered under the ACA if it has continuously provided coverage for someone (not necessarily the same person, but at all times at least one person) since March 23, 2010 and if it has not ceased to be a grandfathered plan during that time.
Grandfathered plans have certain privileges that other group health plans that were created after that date do not have, as the latter are all required to comply with all of the rules under the ACA.
Under the ACA, grandfathered plans do not have to comply with certain provisions of the law.
These provisions include coverage of preventive health services and patient protections (for example, guaranteed access to OB-GYNs and pediatricians).
Other ACA provisions apply to grandfathered plans, such as the ACA’s waiting period limit.
Grandfathered health plans may make routine changes to their coverage and maintain their status.
However, plans lose their grandfathered status if they choose to make significant changes that reduce benefits or increase costs for participants.
Some of the questions that the three departments are asking plan administrators are:
- What actions could the departments take to assist group health plan sponsors and group health insurance issuers to preserve the grandfathered status of a group health plan or coverage?
- What challenges do health plans and sponsors face regarding retaining the grandfathered status of a plan or coverage?
- What are your primary reasons for retaining grandfathered status?
- What are the reasons for participants and beneficiaries remaining enrolled in grandfathered group health plans if alternatives are available?
- What are the costs, benefits and other factors when considering whether to retain grandfathered status?
- Is preserving grandfathered status important to group health plan participants and beneficiaries? If so, why?
Responses to the request for information are due by March 27.
What started out as a way to help many pharmacy benefit managers (PBMs) to control costs has turned into a major sticking point in the health care system: pharmaceutical rebates.
Attention is growing regarding the role that rebates play in actually increasing the price of brand-name drugs, which is adding a heavier burden on health plan enrollees. Calls are growing to jettison rebates altogether. The problem is that insurers often get to keep the rebates and not pass them on to their enrollees.
A study by Benfield, a division of benefit consulting firm Gallagher Benefits, found that 69% of employers surveyed would welcome an alternative to rebates, such as discounts or point-of-sale rebates, in which patient payments reflect a post-rebate price.
Employers acknowledged focusing on rebates as a revenue stream rather than focusing their attention on other important factors such as reducing employee coinsurance or deductible payments, or providing access to the most effective medicines.
The issue of rebates even has the attention of the Trump administration.
When Department of Health and Human Services Secretary Alex Azar testified before the Senate Health Education Labor & Pensions Committee in 2018, he said: “We may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from these artificial list prices, would likely serve patients far better, as would a system where PBMs receive no compensation from the very pharma companies they’re supposed to be negotiating against.”
How rebates work
Drug rebates are redeemed after the transaction has taken place, but it’s not the end user (the plan enrollee) who is receiving the rebates. Instead, the PBM, the insurer or sometimes the employer receives the rebate.
The big debate is that these rebates do nothing to help the enrollee, who is often having to pay a higher cost-sharing burden for medications.
Under the current system, drug makers set a list price for their products, then negotiate with some PBMs over how much of a discount they will provide off that list price.
The size of the rebate depends on a number of factors, like how many drugs are used by the health plan enrollees, and how much of the medicine cost is covered under the drug formulary.
Companies that offer bigger rebates are often rewarded with better access, like smaller copayments.
What happens if rebates are jettisoned?
Nobody can accurately predict what would happen if rebates were eliminated.
Their elimination could potentially increase expenditures for brand drugs if payers do not find an alternative tool that reduces drug costs (for example, negotiating lower prices to begin with).
A report by Altarum, a not-for-profit health care research and consulting organization, estimated that $89 billion in rebates went to payers in 2016. Altarum found that state Medicaid plans received $32 billion of the total, followed by Medicare Part D plans ($31 billion), commercial health plans ($23 billion), and other payers ($3 billion).
Eliminating rebates will have the most significant effect on patients. Medicare and commercial insurance rebates totaled $54 billion in 2016, according to the Altarum report. The big unknown is exactly how much of that total directly benefited patients and how much flowed to the insurers and the Centers for Medicare & Medicaid Services.
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