In recent years, many companies have been dealing with rising health care costs largely by transferring more of the expense and risk on to their employees.

But some employers have found smarter, more creative ways to limit health costs without further burdening valued employees. Here are some of the best solutions:Read More

Even though the Trump administration continues taking steps to try to dismantle the Affordable Care Act, the law applies to employers and the IRS is enforcing it by the book.

Businesses are increasingly receiving IRS Letter 226J, which states that they may be in violation of the employer mandate, typically by either not offering coverage when they are legally required to do so or not offering “affordable” coverage to their employees.Read More

As promised, the Trump administration has issued proposed rules that would allow individuals to skirt Affordable Care Act regulations and buy short-term, low-coverage health plans.

Under the proposal, individuals would be able to purchase short-term plans that last up to 12 months, compared to the three-month maximum under the ACA.Read More

In a move that could either reshape health care delivery in America or barely register as a blip, three corporate and financial giants have unveiled a new company that they hope will reduce health care costs.   Amazon, Berkshire Hathaway and JPMorgan Chase, which seem to have had enough with high health insurance costs for their employees, are instead taking the bull by the horns and say they will take a new approach to health care for their workers.  In announcing the venture, Berkshire Hathaway chairman and CEO Warren Buffett said that continuously climbing health care costs are “a hungry tapeworm on the American economy.”  The move was greeted with excitement, with hopes that the trio of big hitters could bring an innovative approach to cost-containment that could be replicated for other employers around the country.  Without providing much in terms of details, that said they would leverage their combined scale and expertise to develop technologies that would allow their employees and dependents to enjoy “simplified, high-quality and transparent healthcare at a reasonable cost.  Many observers are hoping that fresh sets of eyes will be able to take a creative approach to funding insurance coverage and delivering health care for less as cost inflation continues unabated.  The big question is how they will be able to influence pricing, particularly considering that there have been many different approaches to funding reimbursement to providers and none has yielded a method that seriously controls costs and cost inflation.

Tackling costs from the tech angle

The trio of companies, however, seems to be more interested in approaching the cost question from the technology angle. Amazon is already heavily involved in tech and e-commerce, and the banking industry (of which Chase is a member) is light years ahead of the health industry in terms of technology and user-friendly consumer interfaces.  Berkshire Hathaway brings capital to the equation.  Also, the companies have more than 1 million employees combined, which would allow them to wield significant clout in negotiating contracts with hospitals, pharmacies and doctor networks. They could use this to hold them accountable for billing as well as health outcomes.  The tie-up could also focus on runaway pharmaceutical costs. During much of 2017, it was rumored that Amazon was considering a move into the pharmacy business and it could be able to use its clout to possibly sway drug prices.  One analyst told the New York Times that we could see the new company introduce “an online healthcare dashboard that connects employees with the closest and the best doctor specializing in whatever ailment they select from a drop-down menu. Perhaps the companies would strike deals to offer employee discounts with service providers like medical testing facilities.”  The companies said the initiative would be “free from profit-making incentives and constraints.”If the three giants develop a healthcare organization without a profit motive and instead an aim to shave health care costs, it could bring about serious savings. There are many parts of the healthcare industry that are high-cost, high-margin sectors that thrive on significant markups.  Jamie Dimon, chief executive of JPMorgan Chase, said in a statement that the effort could eventually be expanded to benefit all Americans.  For now, it’s early days and as we learn more about this interesting new venture, we’ll keep you abreast of developments.

Under the Affordable Care Act, group health insurance costs have been rising at a much slower rate than they had during the decade preceding its passage.

In fact, the rate of annual premium growth in the group market has hovered around 5% – more than half of what it was between 2001 and 2010. Also, health care’s share of the national economy actually fell from 17.4% in 2010 to 17.2% by 2013. However, that trend hasn’t lasted and in 2016 the share was 17.9%.

There has been a lot of debate about why rates have been increasing and some pundits say that if it were not for spiraling pharmaceutical costs, the rate of health insurance inflation would be lower.

While the drug industry would deny pharmaceutical costs are what’s driving health care cost inflation, the numbers show otherwise, according to an analysis by Modern Healthcare, an industry trade publication.

Here are the figures that drive home the point. Between 2013 and 2016, personal health care consumption rose 16.7%, according to the Centers for Medicare & Medicaid Services (CMS). This is what was driving that inflation:

• Hospital spending: Up 15.5%
• Professional services (mostly physician office-based care): Up 16%
• Drug spending: Up 23.9%

Source: CMS

For 2018 group health plans, the inflation components of the three main areas could not be starker:

• Hospital costs: 6.1% (from 2017)
• Physician costs: 4.3%
• Pharmaceuticals: 10.9%

Source: Segal Company

The situation may actually be worse than the numbers hint at. Retail drug sales don’t include the most expensive medicines – those delivered in hospital outpatient and physician offices. The CMS doesn’t track that data separately, but one can get a glimpse of what’s happening by examining the latest financial reports from major hospital systems.

Controlling drug costs

Prescription drug costs now account for about 17% of total U.S. healthcare spending and were the fastest rising component of that spending over the past year.

Drug costs have been difficult for health care providers and the insurance industry to tackle.

The pharmaceutical industry has been able to fend off government efforts to counter price hikes. It successfully lobbied Congress in 2003 to bar Medicare from negotiating prices in the new Part D program.

The industry has been aided by opposition from physician and patient advocacy groups, who fear that cost-benefit calculations will be used to cut them off from high-priced but effective medicines.

Benefits consulting firm Segal Company asked managed care organizations, health insurers, pharmacy benefit managers and third-party administrators to rank the cost-management strategies implemented by group health plans in 2017. Here are the top five:

• • Using specialty pharmacy management– This focuses on controlling costs of specialty drugs, many of which cost more than an annual health premium for a year’s worth of dosing.
  • Intensifying pharmacy management programs– This includes negotiating better pricing for commonly used drugs.
  • Contracting with value-based providers.
  • Increasing financial incentives in wellness plans.
  • Adopting high-deductible health plans.

These strategies show plan sponsors are looking to drive utilization to high-quality, low-cost providers in lieu of simply passing the costs on to their employees.