Willis Towers Watson, November 16, 2020

Individual coverage health reimbursement arrangements (ICHRAs), a new employer-sponsored health care benefit program for active employees that became available this year, are drawing the attention of U.S. employers, particularly wholesale and retail employers and those in education and the public sector. This is according to new research by Willis Towers Watson (NASDAQ: WLTW), a leading global advisory, broking and solutions company.

An IRS rule issued in 2019 opened the door for employers to begin offering ICHRAs this year. With an ICHRA, employees choose where their medical benefit dollars are spent by purchasing individual insurance coverage and then receiving a reimbursement through an employer-sponsored health reimbursement arrangement. The survey found growing interest in this new benefit as a way for employers to keep their costs fixed by giving employees the opportunity to manage their own health care benefit choices and spend.

According to the Willis Towers Watson 2020 Health Care Delivery Survey, about one in six employers (15%) is planning to offer or considering offering ICHRAs to at least some portion of its employees in 2022 or later. The survey results showed similar levels of interest regardless of employer size, with 20% of large employers planning to offer or considering offering ICHRAs to at least some portion of their active employees. In a further sign of support for ICHRAs, a forthcoming Willis Towers Watson survey of chief financial officers found one-third are considering ICHRAs for some portion of their active employees.

“Not surprisingly, relatively few employers adopted ICHRAs this year, as the pandemic diverted much of their attention to other critical benefit matters,” said John Barkett, senior director of policy affairs, Benefits Delivery and Administration, Willis Towers Watson. “However, we expect to see interest grow as companies learn more about ICHRAs and the market for individual health plans continues to grow more robust each year. ICHRAs may be a preferred option for companies considering offering health care benefits through a defined contribution approach personalized to each employee.”

The survey found nearly one in three (29%) public sector and education employers and almost a quarter (22%) of wholesale and retail employers are planning to offer or considering offering ICHRAs in 2022 or later. These sectors may be among the early adopters of this new benefit option, which affords employers greater ability to control costs and provides employees with more health benefit options than their employers offer today.

“ICHRAs may align well with employers rethinking their overall approach to benefits, especially in certain industries that have struggled with the challenge of providing competitive benefits that meet the diverse needs of their workforces under ever-increasing budget pressures. And as more employers adopt the ICHRA approach, employees could find relief from the burden of having to change plans whenever they change jobs,” said Barkett.

https://www.willistowerswatson.com…

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The Demise of the Defined-Benefit Plan

Investopedia, November 16, 2020

Key Takeaways

• Once common, defined-benefit plans in the private sector are rare and have been replaced by defined-contribution plans, such as a 401(k).
• Companies choose defined-contribution plans instead because they are less expensive and complex to manage than pension plans.
• The shift to defined-contribution plans has placed the burden of saving and investing for retirement on employees.

https://www.investopedia.com…

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Comment:

By Don McCanne, M.D.

That swooshing sound is that of our income and wealth rapidly shifting up to the top of the wealth ladder. It takes many forms, but one that has snuck in there is the demise of the defined benefit retirement plan – those plans that guaranteed a reasonable income throughout the retirement years. They have been replaced by defined contribution plans such as 401(k) plans, IRAs, or no plans at all. These plans shift much of the responsibility for funding retirement to the individual employees. Most of these plans do not have enough funds for a secure retirement, and if they are converted to an annuity to cover the full years of retirement, the amounts are almost never enough to live on, even with a Social Security check.

Switching from defined benefit to defined contribution has greatly reduced the employers’ costs of pension plans, but at a significant cost to their employees. The employers’ contributions are fixed whereas the employees must find ways to cover the higher balances of their retirement costs, including costs they may face merely because they live to their full life expectancy or beyond.

The defined contribution approach has worked so well for employers that they are now planning to expand that concept to individual coverage health reimbursement arrangements (ICHRAs). Under this scheme, courtesy of the Trump administration, the employers no longer contribute their full share of the costs of the employees’ health benefits (defined benefit), but, instead, they contribute a fixed defined contribution to the health reimbursement arrangement which is then used by the employee to purchase a plan from the private health insurance market. As if the employees’ current contributions weren’t already a financial burden, the amounts they would have to contribute for full service health plans would be much greater and would increase more rapidly since health care inflation would be passed on to the employees. They could purchase less expensive plans with spartan benefits, but then they would face financial hardship in the event of medical need, defeating the purpose of insurance.

(Incidentally, economists contend that the employers’ portion of the payment for health benefits is actually paid by the employees in the form of forgone wage increases. This reduction to a smaller defined contribution would give the employers the opportunity to prove this by providing the balance to employees in the form of wage increases. Don’t hold your breath waiting for it.)

This Willis Towers Watson report indicates that ICHRAs will be here in 2022. One-fifth of large employers intend to introduce them, and one-third of chief financial officers are considering them. Just as we saw the demise of employer-sponsored defined benefit retirement plans, we will soon see the demise of generous, defined benefit, employer-sponsored health plans, perhaps except for a modest 401(k)-type token defined contribution to the plans.

One of the strategies of the Affordable Care Act was to protect and perpetuate employer-sponsored health plans, but they are now on their way out. Do we really have to wait until tens of millions more face financial ruin because of the ever-increasing personal responsibility for health care costs? Is that swooshing sound going to be enough to placate us? Likely the bankruptcy attorneys may find it soothing.

By refusing to enact and implement single payer Medicare for All, who are we protecting? Those guys at the top who would have to pay more taxes, even though not enough to be able to feel the difference? It seems we should be protecting those who would be exposed to financial hardship should they need health care. Potentially, that’s most of us. The system is working for some, but it needs to work for all of us. We need to tell those at the top to take their defined contributions and shove them. Congress, working with the IRS, can let them and the rest of us know how much we really need.

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Healio, November 10, 2020

POINT by Benjamin Sommers, M.D., Ph.D.

Yes.

A public option can improve health care affordability with continued private insurance and better access to quality providers, but only if the design is set up in a way that provides more financial protection upfront. You could also push private insurers to do this, but a public option is a better vehicle to make sure the cost-sharing terms are affordable for patients.

Many individuals who are currently insured in the marketplace have high deductibles — up to several thousand dollars in some cases. This leaves many people paying out of pocket for their care unless they get critically sick.

If the public option aggressively negotiates payment rates to providers, it will bring down the overall costs, as is the case with Medicare and Medicaid. There is a trade-off because it could possibly limit the number of providers but, on the other hand, it would save the whole system money.

There are a lot of varieties of public options. The one from the Biden campaign is for patients not in Medicaid expansion states. This would help patients who are too rich for Medicaid but too poor for the marketplace. Those people — and there are a lot of them — have fallen through the cracks.

This could also help patients in places where there is limited competition, which leads to higher premiums. Creating more competition brings down the costs.

However, there isn’t a magic number when, once hit, suddenly everyone is able to afford care and be covered. Every step taken squeezes people out. The only way to get everyone insured is through a single-payer system but, even then, it has to be more generous than the current Medicare plan. That being said, there doesn’t seem to be the political will or leverage to implement that.

The Medicare component of the public option is popular, but it also has substantial cost-sharing; about 20% in most cases. That’s why there are supplemental plans.

The U.S. Congress — Democrats and Republicans alike — gives away benefits with a value that substantially exceeds what the users pay. Each beneficiary on average receives $310,000 more in benefits than they pay. The unpaid bills — $37 trillion at last count — have been kicked down the road to future generations in the form of bigger federal deficits. The Galen Institute reports that Medicare’s annual deficits are responsible for one-third of U.S. federal debt.

Yet, Medicare’s enormous scale confers genuine administrative and purchasing efficiencies. Medicare spends up to seven times less than private insurers on administrative costs. It also pays hospitals 40% less and providers 2 to 3.5 times less than private insurers pay for the same services. Some contend that providers merely shift Medicare and Medicaid’s unpaid charges to private insurers, but that charge has been refuted. Rather, it is plausible that these payments appropriately help to squeeze out the one-third of health care expenditures that many experts view as sheer waste.

Americans generally like both private insurance and Medicare but universally hate their costs. “Medicare for All” eliminates private insurers and increases taxpayers’ burden. The public option keeps private insurers and controls health care costs.

Benjamin Sommers, MD, PhD, is the Huntley Quelch professor of health care economics at Harvard University T.H. Chan School of Public Health.

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COUNTER by David Himmelstein, M.D.

No.

A public option insurer that doesn’t try to dodge unprofitable enrollees like traditional Medicare does would be saddled with more than its share of sick, expensive patients and would become a de facto high-cost, high-risk pool. Although a public option really can’t achieve universal coverage, a single-payer system, usually referred to as Medicare for All, can.

CMS’s decades-long efforts to level the playing field have not worked against private insurers, which breaks their promises of fair competition. Insurance companies have also used their political muscle to sustain and increase their competitive advantage over traditional Medicare. The result is that a public plan and the taxpayers absorb the losses while private insurers skim off profits. This imbalance is so big that private plans can outcompete a public plan despite squandering vast sums on overhead costs, CEO salaries and shareholder profits.

The bottom line is that a public option is a more expensive way to do this than a single-payer system.

Private insurers currently take in $252 billion more than they pay out per year, which is equivalent to 12% of their premiums. A single-payer system with overhead costs comparable to Medicare’s could save about $220 billion of that money. A public option would save far less, or possibly nothing, if much of the new public coverage is channeled through Medicare Advantage plans, whose overhead, at 13.7%, is even higher than the average commercial insurer.

A single-payer system would put private insurance companies out of business. Drug companies and medical suppliers would also stand to lose billions because they would face a buyer that could actually drive down costs.

The excess overhead inherent to multipayer systems imposes a hidden surcharge on the fees that doctors and hospitals must charge all patients — not just those covered by private insurance. All told, a public option reform would sacrifice about $350 billion annually of single payer’s potential savings on providers’ overhead costs, over and above the $220 billion in savings it could sacrifice annually on insurers’ overhead.

Finally, a public option would undermine the rational health planning that is key to the long-term savings under single payer. Each dollar that a hospital invests in new buildings or equipment increases its operating costs by 20 to 25 cents in every subsequent year. At present, hospitals that garner profits have the capital to expand money-making services and buy high-tech gadgets, whether they’re needed or not, while neglecting vital but unprofitable services.

I’m not sure what innovation people think is going to be stifled with a single-payer system. In fact, Medicare has been much more innovative than private insurers. Most scientific innovation has come from the NIH and other countries. The CT scan, for example, came from Great Britain. Most of the money drug companies and insurance make goes to their shareholders; an astonishingly low amount goes to innovation. We’d be much better taking the money from those profits and amping up funding to the NIH.

Because a public option would leave the current dysfunctional payment approach in place, it would sacrifice most of the savings available via single-payer reform. I’m not opposed to having a public option because it would give more people insurance, but I just think it’s a bad way to provide insurance in this country. The bottom line is that a public option would either cost much more or deliver much less than single payer.

David U. Himmelstein, MD, is a professor of health policy at City University of New York School of Public Health at Hunter College.

https://www.healio.com…

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Comment:

By Don McCanne, M.D.

This is one of those situations where it is better to answer the question they should have asked rather than the one that they actually asked.

A Medicare-like public option that benefits from government-administered pricing and that is subsidized by the government obviously would bring down costs for patients who are enrolled in the program when compared to private commercial plans that are not government subsidized. But what about all of the other patients who are not enrolled in the public option? Some have suggested that competition from a public option might cause private plans to reduce their premiums, but they would do so by reducing their own costs through benefit reductions, increases in patient cost-sharing, and perhaps moving to more restrictive provider panels, shifting more costs to the patients, so any net cost reduction would be negligible.

Compare adding a public option to our current expensive, administratively complex, highly dysfunctional health care financing system to replacing the system with a well designed single payer system – an improved Medicare for All. Not only would everyone be covered with a high-performance system, the average costs for patients, except for the very wealthy, would be less than the average costs we are paying now simply because the entire system would be funded through equitable, progressive taxes – that’s on top of the sharp reductions in profound administrative waste and the efficiency of public purchasing.

As David Himmelstein explains, the bottom line is that we would have a superior system that would be affordable for each of us if we enacted and implemented a single payer system. Even Benjamin Sommers says, “The only way to get everyone insured is through a single-payer system,” and “Medicare’s enormous scale confers genuine administrative and purchasing efficiencies.” It’s nice to see that these experts appear to agree even if the question superficially seemed to bring them to opposite yes or no conclusions.

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By Jacqueline Ellison, Paul Shafer, and Megan B. Cole
Health Affairs, November 2020

Abstract

With the rise in the share of privately insured patients covered by high-deductible health plans (HDHPs), understanding sociodemographic trends in the uptake of health savings accounts (HSAs) is increasingly important, as HSAs may help offset the higher up-front costs of care in HDHPs. We used nationally representative data from the National Health Interview Survey from the period 2007–18 to examine trends in HDHP enrollment and HSA participation among privately insured adults by income level and race/ethnicity. Our findings show a substantial increase in HDHP enrollment across all racial/ethnic and income groups from 2007 to 2018. However, Black, Hispanic, and low-income HDHP enrollees were significantly less likely than their White and higher-income counterparts to participate in HSAs, and these gaps increased over time. This means that the HDHP enrollees most likely to benefit from the potential financial protection of HSAs were the least likely to have them. If these trends persist, racial/ethnic and income-based disparities in cost-related barriers to care may widen.

From the Discussion

Increased HDHP enrollment across all income levels and racial/ethnic groups reflects the larger trend in employers’ HDHP plan offerings during the past decade, as employers have often shifted costs to workers and attempted to minimize premium growth by using high deductibles and offering less generous benefits. Although other studies have documented increasing rates of HDHP enrollment in aggregate, our findings show that these increases have occurred across all income and racial/ethnic groups over time. As these trends persist, low-income, Black, and Hispanic populations, who already experience financial and structural barriers to care, may disproportionately experience negative consequences of high cost sharing.

Lower HSA participation among low-income individuals and families may be a result of this population being less likely to have an employer that contributes funds annually to the HSA or because lower-income people have fewer resources to set aside for future health care expenses. Research has demonstrated that lower savings levels among Black and Hispanic workers are primarily a consequence of inequities in intergenerational wealth, education, and employment. Thus, our finding of lower HSA participation among Black and Hispanic HDHP enrollees is likely a result of the disproportionate structural burdens borne by these communities. Fewer opportunities and lower incomes, compounded by labor-market discrimination, contribute to the racial/ethnic wealth gap and subsequent ability to save, as well as to the likelihood of being in a job that contributes to an HSA. Thus, institutionalized racism, as opposed to individual choices or agency, is the likely driver of observed racial/ethnic disparities in HSA participation.

Lower HSA uptake among people earning below 200 percent of the federal poverty level ultimately means that the people most likely to benefit from HSAs are those least likely to have them. Research consistently demonstrates that even minor cost sharing can result in the delay or avoidance of essential care, adverse events, and emergency department visits among low-income and chronically ill patients.

https://www.healthaffairs.org…

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Comment:

By Don McCanne, M.D.

High-deductible health plans (HDHPs) are promoted as a means to make patients more prudent shoppers of health care by making them responsible for upfront costs. But it has been well documented that these out-of-pocket costs have caused patients to forgo beneficial health care that they should have. To counter this adverse consequence, health savings accounts (HSAs) have been promoted to cover the upfront expenses. The problem here is that too many people do not have HSAs, and, if they do, the accounts frequently remain unfunded.

This study confirms that increases in HDHP enrollment have occurred in all income and racial/ethnic groups, whereas “Black, Hispanic, and low-income HDHP enrollees were significantly less likely than their White and higher-income counterparts to participate in HSAs.”

The consequences are obvious. Since those who have the greatest need for HSAs are less likely to have them, it is more likely that they will be unable to afford essential upfront health care services and then suffer the adverse health and financial consequences as a result.

Thus this study confirms that HDHPs and HSAs are yet one more example of institutional racism since they have a disproportionate negative impact on Black, Hispanic, and low-income individuals.

We could make progress in countering institutional racism by enacting and implementing a well designed, single payer, improved Medicare for All. Maybe we don’t have to call active opponents of Medicare for All racists, but we could let them know that their position does support institutional racism. Hopefully enough of them would be sensitive enough to that issue that they might take a more serious look at Medicare for All.

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