Judge decides injuries claimed by pathologists are not antitrust injuries and that plaintiffs have no standing to bring antitrust lawsuit
Four pathologists who filed an antitrust lawsuit alleging their former employer “engaged in a series of unfair and deceptive practices” in an effort to maintain a monopoly on clinical pathology services in central Iowa had their lawsuit dismissed by a federal judge. The plaintiffs appealed the decision. Two related state lawsuits are still pending, one in which the plaintiffs are the defendants.
It is common for pathologists in a community to leave one pathology practice and either establish a new practice or join a nearby practice. What is less common is litigation that involves the original group practice and the departed pathologists.
Thus, this example of lawsuits and counter lawsuits is interesting because it creates court rulings about the strengths and weaknesses of the arguments asserted by both plaintiffs and defendants in situations where pathologists leave their employer but continue to practice in the same community.
The court decisions in these cases demonstrate how judges are handling these issues involving antitrust allegations, market share, and non-compete agreements.
“As a result of Defendants’ alleged conduct, Goldfinch asserts its ability to compete has been severely undermined and ‘has the potential to harm patients,’” wrote federal judge Rebecca Goodgame Ebinger, JD (above), in her order granting defendants’ motion to dismiss. “These injuries are not antitrust injuries because they do not stem from conduct affecting competition in the pathology and dermatopathology markets generally.” Clinical laboratories and anatomic pathology practices can learn from the decisions handed down in this court case. (Photo copyright: Wikipedia.)
Pathologists Accuse Defendants of Suppressing Competition
In their original complaint, which was filed May 13, 2024, in the US District Court for the Southern District of Iowa, the plaintiffs said that, beginning in 2021, IPA “strongly pressured” them to sign an employment agreement that would have prevented them from launching a competing practice in the Des Moines area. They refused to comply, but “the administrator of these corporations told these pathologists that the Agreement was in effect even though they had not signed it,” the complaint states.
On October 2022, they informed IPA that they intended to leave to form their own pathology practice, according to the complaint.
The new practice, Goldfinch Laboratory in Urbandale, Iowa, began offering pathology services in February 2023.
“Prior to the formation of Goldfinch, IPA was the only independent pathology practice in central Iowa that was not exclusively tied to one source of referrals,” the complaint states. In addition, “it was the only independent pathology practice in central Iowa that offered dermatopathology services.”
After they notified IPA and RLC of their intention to leave, the plaintiffs alleged that the employer engaged in a series of efforts to “suppress competition” and monopolize the local market for pathology and dermatopathology services.
Plaintiffs Allege Defendants’ Behavior Could Have Harmed Patients
The pathologists were barred from entering IPA’s offices, leaving potential referring physicians with the impression that “these pathologists were no longer practicing,” the complaint states, and preventing them from “maintaining on-going relations with potential referral sources.”
IPA, the complaint alleges, “refused to share biopsy slides with Goldfinch pathologists when those slides were required for continuity of care of the patient—even though this practice was contrary to the standard of care and could well have caused harm to patients.” The complaint characterized this as “an effort to induce referral sources not to make referrals to Goldfinch.”
The plaintiffs also alleged that IPA and RLC made “false and deceptive statements to dissuade referral sources from making referrals to Goldfinch,” for example by claiming that legal problems would force the practice to close.
Given their “monopoly power” in the local market, the plaintiffs argued, IPA and RLC “were able to charge supracompetitive prices for their services.” A $1.4 million contract with one hospital corporation was “in the top 5% of Part A contracts in the United States,” the complaint alleges, and rural hospitals paid “at least 400% of the actual Medicare fee schedule amount for the technical component of pathology services for Medicare patients.”
Defendants’ Response to Allegations
In their motion to dismiss the suit, the defendants argued that Goldfinch was “a classic ‘disgruntled competitor’” that had not demonstrated an “antitrust injury” as defined by federal and state law.
“Goldfinch’s owners used to work for IPA and RLC, voluntarily left, and now seek to litigate their personal financial losses under the guise of federal and state antitrust claims,” the motion states.
The defendants also argued that Goldfinch lacked standing to file an antitrust claim.
Goldfinch “alleges the ‘antitrust practices’ of IPA and RLC are harmful to patients and other payers for pathology and dermatopathology services,” the motion states. “But patients and payers are quite capable of noticing and seeking redress for the alleged harms and Goldfinch need not do so on their behalf.”
In addition, the defendants argued, Goldfinch failed to adequately define a “plausible” product market or geographic market that was subject to the alleged monopoly power.
“Goldfinch’s alleged geographic market is vaguely ill-defined as ‘central Iowa,’” the motion states. “But there is a difference between the service area and a geographic market.” The motion cited an earlier decision in which the US Court of Appeals for the Seventh Circuit “deemed a relevant market for a pathology practice to be nationwide.”
“As a result of Defendants’ alleged conduct, Goldfinch asserts its ability to compete has been severely undermined and ‘has the potential to harm patients,’” she wrote. “These injuries are not antitrust injuries because they do not stem from conduct affecting competition in the pathology and dermatopathology markets generally. These injuries, instead, are a result of Defendants’ alleged actions targeting Goldfinch and demonstrate an injury to Goldfinch as a competitor—the loss of some patients and referral sources.”
She also agreed with the defendants that Goldfinch lacked sufficient standing to bring an antitrust claim, and that the plaintiffs had failed “to adequately allege a relevant market for pathology and dermatopathology services.”
Goldfinch filed a Notice of Appeal on Jan. 10.
State Lawsuits Pending
Meanwhile, both parties are awaiting a decision in a state court lawsuit in which the Goldfinch partners are the defendants, according to the Iowa Capital Dispatch.
IPA filed the suit late in 2022, shortly after learning that the four pathologists planned to leave and start their own practice. It alleged “breach of contract, breach of the common law duty of loyalty, civil conspiracy and tortious interference,” Iowa Capital Dispatchreported at the time, claiming that the pathologists were improperly attempting to lure clients away.
In a related case, Goldfinch pathologists Milless and Halverson have filed a state discrimination lawsuit against their former employer, “alleging they were paid $200,000 to $350,000 annually, which they claim was far less than what some of the less qualified male doctors were paid,” Iowa Capital Dispatch reported. That case goes to trial in August.
This is a plethora of lawsuits involving pathologists and the pathology practices in the communities where they formally practiced. Pathologists and group pathology managers may find useful insights from a study of the legal arguments made by the two parties, as well as the decisions laid down by judges in these court cases.
Clinical laboratories are being squeezed on both sides as rising healthcare costs affect their patients while increasing health plan costs impact their employees’ health coverage
When UnitedHealthcare CEO Brian Thompson was murdered on Dec. 4, the nation’s attention focused on the negative impact ever-increasing costs of healthcare coverage is having on the average American. Clinical laboratories and anatomic pathology groups experience this trend firsthand as annual increases in the cost of health plans affect their employees.
To understand just how raw the public is feeling about health insurance, consider that in a recent Emerson College poll, 41% of respondents ages 18-29 stated that Thompson’s murder was “completely” or “somewhat” acceptable.
While the majority of the country believes that such violence is not an acceptable way to solve one’s problems, the message is clear that Americans’ waning trust in health insurance companies has reached unhealthy levels.
“Health insurance costs are far outpacing inflation, leaving more consumers on the hook each year for thousands of dollars in out-of-pocket expenses. At the same time, some insurers are rejecting nearly one in five claims. That double whammy is leaving Americans paying more for coverage yet sometimes feeling like they’re getting less in return,” CBS News reported.
Twenty-five years of increases from the insurance industry make it clear why the relationships between healthcare consumers and insurance companies has soured.
“Employers are shelling out the equivalent of buying an economy car for every worker every year to pay for family coverage,” said Kaiser Family Foundation President and CEO Drew Altman (above) in a news release. “In the tight labor market in recent years, they have not been able to continue offloading costs onto workers who are already struggling with healthcare bills.” Clinical laboratories and pathology groups are among those employers struggling to provide affordable health coverage for their employees. (Photo copyright. Kaiser Family Foundation.)
People Are Frustrated
The cost of living in America has risen dramatically in the past decade. So much so that people are increasingly becoming frustrated and lashing out against companies that appear to be making record profits while their customers struggle to pay for their products and services.
A recent Kaiser Family Foundation (KFF) Health Tracking Poll found that “About one in five adults (19%) say they have difficulty affording their bills each month and about four in 10 (37%) say they are just able to afford their bills each month, while a little over four in 10 (44%) say they are both able to pay their bills and have some money left over.”
Simultaneously, according to KFF, “Employees’ share of their [health insurance] premiums are also on the rise, with a worker with family coverage typically paying premiums of $5,700 per year in 2017, the most recent year for that data, up from about $1,600 in 2000. … The average family deductible—the amount paid out-of-pocket before insurance kicks in—has increased from $2,500 in 2013 to $3,700 in 2023.”
This double-whammy in costs has a growing number of American’s worrying about unexpected healthcare bills and the overall cost of keeping their families adequately covered for the future.
“We’ve gotten to a point where healthcare is so inaccessible and unaffordable, people are justified in their frustrations,” said Céline Gounder, MD, a CBS News medical contributor and editor-at-large for public health at KFF Health News.
The chart above taken from a KFF Health Tracking Poll (Jan. 30-Feb. 7, 2024) shows participants’ answers when asked, “How worried, if at all, are you about being able to afford each of the following for you and your family?” Results indicate, according to KFF, that three in four people polled are worried about paying future healthcare bills and covering increasing insurance costs. (Graphic copyright: KFF.)
AI and Coverage Denials
Coverage denials is another sore spot for many people, impacting nearly one in five claims in nongroup qualified health plans in 2021, KFF found. This ranged from 2% to 49% depending on the company.
“When you are paying for something, they don’t give it to you, and they keep raising prices … you will be frustrated by that,” Holden Karau, a software engineer and creator of Fight Health Insurance, a free online service that helps people appeal their denials, told CBS News. Karau’s company uses artificial intelligence (AI) to help customers create appeal letters.
But the use of AI in healthcare coverage has also drawn criticism. Insurance companies are increasingly using AI to review claims and issue denials, and the lack of transparency has led to lawsuits. Last year, CBS News covered lawsuits brought by the families of two deceased individuals who accused UnitedHealthcare of “knowingly” using a “faulty” AI algorithm to deny the patients medically necessary treatments.
Karau noted, “With AI tools on the insurance side, they have very little negative consequences for denying procedures,” CBS News reported. “We are seeing really high denial rates triggered by AI. And on the patient and provider side, they don’t have the tools to fight back,” she added.
“Unhappiness with insurers stems from two things: ‘I’m sick and I’m getting hassled,’ and the second is very much cost—‘I’m paying more than I used to, and I’m paying more than my wages went up,’” Rob Andrews, CEO of Health Transformation Alliance, a company that helps healthcare providers and other self-insured companies improve coverage for their employees, told CBS News. “A lot of people think they are getting less,” he added.
Effects on Clinical Laboratories
Even as individuals and families pay more money each year in healthcare premiums, deductibles, and out-of-pocket expenses, clinical laboratories have seen payers cut reimbursement for many lab tests. Thus, labs are dealing with a double-squeeze on their finances. On the income side, reimbursement for tests is under pressure, while on the cost side, the cost of health benefits for employees climbs annually.
Clinical lab and pathology managers will want to stay aware of these trends and take advantage of any opportunity to lower costs and pass on those savings to their patients.
Nearly 100,000 patients submitted saliva samples to a genetic testing laboratory, providing insights into their disease risk
Researchers at Mayo Clinic have employed next-generation sequencing technology to produce a massive collection of exome data from more than 100,000 patients, offering a detailed look at genetic variants that predispose people to certain diseases. The study, known as Tapestry, was administered by doctors and scientists from the clinic’s Center for Individualized Medicine and produced the “largest-ever collection of exome data, which include genes that code for proteins—key to understanding health and disease,” according to a Mayo Clinic news release.
For our clinical laboratory professionals, this shows the keen interest that a substantial portion of the population has in using their personal genetic data to help physicians identify their risk for many diseases and types of cancer. This support by healthcare consumers is a sign that labs should be devoting attention and resources to providing these types of gene sequencing services.
As Mayo explained in the news release, the exome includes nearly 20,000 genes that code for proteins. The researchers used the dataset to analyze genes associated with higher risk of heart disease and stroke along with several types of cancer. They noted that the data, which is now available to other researchers, will likely provide insights into other diseases as well, the news release notes.
“What we’ve accomplished with the Tapestry study is a blueprint for future endeavors in medical science,” said gastroenterologist and lead researcher Konstantinos Lazaridis, MD (above), in the news story. “It demonstrates that through innovation, determination and collaboration, we can deeply advance our understanding of DNA function and eventually other bio-molecules like RNA, proteins and metabolites, turning them into novel diagnostic tools to improve health, prevent illness, and even treat disease.” Some of these newly identified genetic markers may be incorporated into new clinical laboratory assays. (Photo copyright: Mayo Clinic.)
How Mayo Conducted the Tapestry Study
One notable aspect of the study was its methodology. The study launched in July 2020 during the COVID-19 pandemic. Since many patients were quarantined, researchers conducted the study remotely, without the need for the patients to visit a Mayo facility. It ran for five years through May 31, 2024. The news release notes that it’s the largest decentralized clinical trial ever conducted by the Mayo Clinic.
The researchers identified 1.3 million patients from the main Mayo Clinic campuses in Minnesota, Arizona, and Florida who met the following eligibility criteria:
Participants had to be 18 or older,
they had to have internet and email access, and
be sufficiently proficient in speaking and reading English.
More than 114,000 patients consented to participate, but some later withdrew, resulting in a final sample of 98,222 individuals. Approximately two-thirds were women. Mean age was 57 (61.9 for men and 54.3 for women).
“It was a tremendous effort,” said Mayo Clinic gastroenterologist and lead researcher Konstantinos Lazaridis, MD, in the news release. “The engagement of such a number of participants in a relatively short time and during a pandemic showcased the trust and the dedication not only of our team but also of our patients.”
He added that the researchers “learned valuable lessons about some patients’ decisions not to participate in Tapestry, which will be the focus of future publications.”
Three Specific Genes
Enrolled patients were invited to visit a website, where they could view a video and submit an eligibility form. Once approved, they completed a digital consent agreement and received a saliva collection kit. Participants were also invited to provide information about their family history.
Helix, a clinical laboratory company headquartered in San Mateo, Calif., performed the exome sequencing.
Though Helix performed whole exome sequencing, the researchers were most interested in three specific sets of genes:
Patients received clinical results directly from Helix along with information about their ancestry. Clinical results were also transmitted to Mayo Clinic for inclusion in patients’ electronic health records (EHRs).
Among the participants, approximately 1,800 (1.9%) had what the researchers described as “actionable pathogenic or likely pathogenic variants.” About half of these were BRCA1/2.
These patients were invited to speak with a genetic counselor and encouraged to undergo additional testing to confirm the variants.
Tapestry Genomic Registry
In addition to the impact on the participants, Mayo Clinic’s now has an enormous amount of raw sequencing data stored in the Tapestry Genomic Registry, where it will be available for future research.
The database “has become a valuable resource for Mayo’s scientific community, with 118 research requests submitted,” the researchers wrote in the news release. Mayo has distribution more than a million exome datasets to other genetic researchers.
“What we’ve accomplished with the Tapestry study is a blueprint for future endeavors in medical science,” Lazaridis noted. “It demonstrates that through innovation, determination, and collaboration, we can deeply advance our understanding of DNA function and eventually other bio-molecules like RNA, proteins and metabolites, turning them into novel diagnostic tools to improve health, prevent illness, and even treat disease.”
Everything about this project is consistent with precision medicine, and the number of individuals discovered to have risk of cancers is relevant. Clinical laboratory professionals understand these ratios and the importance of early detection and early intervention.
Though the No Surprises Act was enacted to prevent such surprise billing, key aspects of the legislation are apparently not being enforced
Dani Yuengling thought she had properly prepared herself for the financial impact of a breast biopsy. After all, it’s a simple procedure, especially if done by fine needle aspiration (FNA). Then, the 35-year-old received a bill for $18,000! And that was after insurance and though she had received a much lower advanced quote, according to an NPR/Kaiser Health News (NPR/KHN) bill-of-the-month investigation.
So, what happened? And what can anatomic pathology groups and clinical laboratories do to ensure their patients don’t receive similar surprise bills?
Yuengling had lost her mother to breast cancer in 2017. Then, she found a lump in her own breast. Following a mammogram she decided to move forward with the biopsy. Her doctor referred her to Grand Strand Medical Center in Myrtle Beach, S.C.
But she needed to know how much the procedure would cost. Her health plan had a $6,000 deductible. She worried she might have to pay for the entire amount of a very expensive procedure.
However, the hospital’s online “Patient Payment Estimator” informed her that an uninsured patient typically pays about $1,400 for the procedure. Yuengling was relieved. She assumed that with insurance the amount would be even less, and thankfully, clinical laboratory test results of the biopsy found that she did not have breast cancer.
Then came the sticker shock! The bill broke down like this:
$17,979 was the total for her biopsy and everything that came with it.
Her insurer, Cigna, brought the cost down to the in-network negotiated rate of $8,424.14.
Her insurance then paid $3,254.47.
Yuengling was responsible for $5,169.67 which was the balance of her deductible.
So, why was the amount Yuengling owed higher than the bill would have been if she had been uninsured and paid cash for the procedure?
According to the NPR/KHN investigation, this is not an uncommon occurrence. The investigators reported that nearly 30% of American workers have high deductible health plans (HDHPs) and may face larger expenses than what a hospital’s cash price would have been for uninsured individuals.
Dani Yuengling (above) knew she had to take the lump in her breast seriously. Her mother had died of breast cancer. “It was the hardest experience, seeing her suffer,” Yuengling told NPR/KHN. Fortunately, following a biopsy procedure, clinical laboratory testing showed she was cancer free. But the bill for the procedure was shockingly higher than she’d expected based on the hospital’s patient payment estimator. (Photo copyright: Kaiser Health News.)
Take the Cash Price
In 2021, Bai was part of a John’s Hopkins research team that analyzed US hospital cash prices compared with commercial negotiated rates for specific healthcare services.
“The 70 CMS-specified hospital services represent 74 unique Current Procedural Terminology (CPT) diagnosis related group codes (four services were represented by two codes),” the authors wrote. “Cash prices and payer-specific negotiated prices for the 70 services were obtained from Turquoise Health, a data service company that specializes in collecting pricing information from hospitals.”
They continued, “Cash prices can affect the cost exposure of 26 million uninsured individuals and concern nearly one-third of US workers enrolled in high-deductible health plans, who are often responsible to pay for medical bills without a third-party contribution and thus are interested in having access to low cash prices. In contrast with the commercial price negotiated bilaterally between hospitals and insurers providing insurance plans, the cash price is determined unilaterally by the hospital and might be expected to be higher than negotiated prices.”
However, the team’s research found otherwise. “Across the 70 CMS-specified services … some hospitals set their cash price comparable to or lower than their commercial negotiated price,” they concluded.
Bai advises patients to ask healthcare providers about the cash price before undergoing any procedure no matter what their insurance status is. “It should be a norm,” she told NPR/KHN.
Federal No Surprises Act is not Foolproof
Yuengling was charged an extraordinarily high amount for her procedure compared to other hospitals in her area. Fair Health Consumer estimates the cost of the procedure Yuengling received cost an average of $3,500 at other local hospitals. Uninsured patients likely pay even less.
A spokesperson for Grand Street Medical Center blamed the inaccurate estimate on “a glitch” in the payment estimator system. The hospital has since removed some procedures from the tool until it can be corrected. Yuengling initially disputed the charge with the hospital but in the end decided to pay the full amount she owed.
NPR/KHN recommends that insured patients consult with their health insurance company to get an estimate before any procedure. That is the purpose of the No Surprises Act which was enacted as part of the Consolidated Appropriations Act, 2021 (CAA).
The law requires health insurance companies to provide their members with an estimate of medical costs upon their request. The Act also empowers patients to file federal complaints about their medical bills.
Patients who find themselves in a similar situation to Yuengling may want to consider paying the cash price for the procedure. Although this may not be common practice, Jacqueline Fox, JD, a healthcare attorney and professor of law at the University of South Carolina’s Joseph F. Rice School of Law, told NPR/KHN that there is not a law she is aware of that would prohibit patients from doing so.
Anatomic pathology groups and clinical laboratories should check that their online prices and estimation tools comply with the No Surprises Act to ensure that what happened to Yuengling does not happen with their patients. They also could inform patients on how to pay cash for procedures if insurance rates are too high. Medical professionals and patients can work together to achieve transparency in healthcare pricing.
Compilation shows US Veterans Administration spent the most at $16B
Clinical laboratory leaders and pathologists will be interested in which hospital systems are making the largest investments in electronic health record (EHR) technologies. Especially considering laboratory information systems (LIS) must interface with these platforms and require extensive reworking when hospitals change their EHRs. For example, hospitals moving to the Epic Systems EHR often require their laboratories to implement the Epic Beaker LIS as well.
According to information sourced by Becker’s Hospital Review, the top 16 hospital systems each spent $500 million or more on EHRs, adding, however, that the information is “not an exhaustive list.”
Number three on the list is Kaiser Permanente which operates multiple hospitals within its nine healthcare networks across the United States serving 12.5 million members. For that reason, its total investment in EHR technology represents a much larger number of hospitals than the other health systems on the list.
Of the 16 providers on the list, 12 installed EHRs provided by Epic Systems of Verona, Wis. Four of the providers implemented EHRs from Oracle Health (formerly Cerner), North Kansas City, Mo., and Meditech of Westwood, Mass.
“Looking forward, there are many advantages in terms of investing in the future and how we will be aligned with technologies including digital and AI applications,” said pathologist Angelique W. Levi, MD (above), vice chair and director of pathology reference services at Yale School of Medicine, in a news release following a site visit to Geisinger Diagnostic Medicine Institute in Danville, Pa., to see Epic Beaker in operation at Geisinger’s clinical laboratory. “But what we gain immediately—having all the patient information accessible in one place in a linked and integrated fashion—is very important.” (Photo copyright: Yale School of Medicine.)
Provider, EHR, Investment
Becker’s list below shows the total amount invested by the 16 healthcare systems was approximately $38.32 billion. The average EHR implementation cost is $2.39 billion for a large healthcare provider.
Becker’s stated they assembled this list from public sources and that there may be other EHR/hospital contracts with a total cost that also would make the list. It is not common to see a list of what hospitals actually spend to acquire and deploy a new EHR.
Epic added 153 hospitals to its client base in 2023. Epic’s EHR competitors—Oracle and Meditech—both experienced declines in client retention rate, Healthcare IT News reported based on the KLAS data.
“Both current and prospective large organization customers are drawn to Epic because they see the vendor as a consistently high performer that provides strong healthcare IT [information technology], quality relationships, and the opportunity to streamline workflows and improve clinicians’ satisfaction,” Healthcare IT News said of the KLAS report’s findings.
In a blog post, authors of the KLAS report explained that in 2023 Oracle added specialty hospital clients and Meditech “saw several new sales” which included healthcare systems and independent providers.
In the next few years, the industry is “ripe for disruption. Another vendor could come in and turn everything on its head,” the KLAS blog article concluded. “Even those who choose Epic want to have more competitive options to choose from.”
Preparing for an LIS Change
Clinical laboratory leaders who may be transitioning their LIS during a new EHR installation may learn from colleagues who completed such an implementation.
Angelique Levi, MD, vice chair and director of pathology reference services at Yale School of Medicine, who was part of the pathology team, noted that one challenge for labs is addressing “information that’s from many different places when we’re talking about cancer care, prognostic testing, and diagnostics.
“It’s become much more complicated to manage all those data points,” she continued. “Without being on an integrated and aligned system, you’re getting pieces of information from different places, but not the ability to have linked and integrated reports in one spot.”
EHR implementations are among the most labor-intensive, expensive projects undertaken by hospitals. Therefore, it is crucial that clinical laboratory and pathology leaders research and learn why an EHR (and possibly LIS) change is needed, what is expected, and when results will be received.
ICHRAs allow companies to compensate employees for insurance purchased in individual markets and may help clinical laboratories reduce patient bad debt
Both employees and their employers are frustrated with current options for health coverage. Now, a recent report from the HRA Council suggests that more employers are turning to Health Reimbursement Arrangements (HRA) as an alternative to traditional group insurance coverage to cope with the increasing cost of employee health benefits. This will be of interest to clinical laboratories that must collect copays/deductibles from patients. Health insurance arrangements that make it easier for patients to pay help labs reduce patient bad debt.
According to its website, HRA Council is “dedicated to improving and expanding health coverage options for millions of workers by giving employers better ways to offer workers health insurance.”
The non-partisan advocacy organization, which consists of insurers, brokers, employers, and other stakeholders, estimates that only 500,000 workers are currently covered by these plans nationwide. That number of workers represents a 29% increase since 2023, with most of the growth coming from large employers.
Under HRA arrangements, employers provide non-taxed financial assistance to workers who then obtain coverage for themselves and/or their families in the insurance marketplace.
One type of plan, known as the Qualified Small Employer HRA (QSEHRA), was established as part of the 21st Century Cures Act, which Congress passed in 2016. QSEHRAs, however, are available only to businesses with 50 or fewer full-time (or equivalent) employees. Most of the recent growth has come from Individual Coverage HRAs (ICHRA), established under regulations issued by the Trump Administration in 2019.
In contrast to QSEHRAs, ICHRA plans are available to companies of any size, HRA Council notes.
“It’s a way to offer coverage to more diverse employee groups than ever before and set a budget that controls costs for the companies,” HRA Council Executive Director Robin Paoli told KFF Health News.
“ICHRAs are bringing a fresh new approach for employers who need a new or different solution to enable providing health benefits to their employees,” said Andrew Reeves (above), senior vice president and general manager, Gravie ICHRA, in the HRA Council report. Gravie is one of the health benefits companies allied with HRA Council. “Through the defined contribution approach that ICHRA brings, employers are now able to set their budget and enable employees to make their own individual decisions on the coverage they need for themselves and their families. ICHRAs are delivering an approach to employee benefits that is both stable yet at the same time flexible for the individual,” he added. These types of alternatives to traditional employer-sponsored health plans may also help clinical laboratories and anatomic pathology groups reduce patient bad debt. (Photo copyright: LinkedIn.)
How ICHRA Plans Work
As explained by HRA Council, “an ICHRA allows the employer to allocate to each employee a specific amount of money to spend on ACA [Affordable Care Act]-compliant individual health insurance plans. Employees then purchase their own plans, and the employer reimburses them up to the allocated amount.”
The rule allows employers to define up to 11 classes of workers and offer different benefit packages to each. These benefits can be based on characteristics such as:
geography,
whether the worker is employed full-time, part-time, or seasonally,
whether the worker is paid a salary or hourly wage, and
Employers can choose to offer ICHRAs to some classes and traditional group plans to others. Within each class of employee, employers also can vary compensation based on age—up to a 3-to-1 ratio—since older workers will generally pay higher premiums than younger ones.
For example, the HRA Council explains, “if an employer offers its 26-year-old employee $300 per month, it could only offer the oldest employee up to $900 per month.”
However, some consumer advocates have pointed to potential downsides of these plans, KFF Health News reported.
The rule, they concede, provides guardrails to prevent companies from moving only their sicker employees—the ones most costly to cover—to the individual market. For example, employers must offer the HRAs to entire classes of workers, and the rule prevents them from defining classes that contain only a small number of employees.
However, the authors contend that employers can still target HRAs to classes more likely to be sick while offering group coverage to other classes. In general, they argue, employers with sicker workforces will be most attracted to HRAs. As these workers enter individual insurance markets premiums could rise, particularly “in states that today have individual markets with a relatively low-cost mix of enrollees,” the authors wrote.
Although the rule allows companies to vary compensation based on age, older workers will still pay more for insurance unless the contribution covers the entire cost of the premium. This would likely make the HRAs “less attractive to employers by making it harder for employers to avoid leaving some workers worse off,” the authors noted.
The Brookings authors also observed that workers who accept the contributions are ineligible for premium tax credits enabled by the Affordable Care Act.
KFF Health News noted other potential downsides as well. “Plans sold on the individual market often have smaller provider networks and higher deductibles than employer-sponsored coverage. Premiums are often higher than for comparable group coverage.”
In addition, ICHRAs can create administrative headaches that have prompted some employers to return to group plans. “Instead of a company paying one group health plan premium, dozens of individual health insurers may need to be paid,” KFF Health News reported. “And employees who’ve never shopped for a plan before need help figuring out what coverage works for them and signing up.”
One Employer’s Example
KFF Health News highlighted one organization that appears to be happy with its newly adopted ICHRA: Lycoming College in Williamsport, Penn. The school, which provides health benefits for 400 faculty, staff, and family members, saved $1.4 million in healthcare costs in the first year after implementing the plan. “Employees saved an average of $1,200 each in premiums,” KFF noted.
Prior to the transition, one employee with a family of five paid $411 per month for a plan that had a $5,600 annual deductible. Under the ICHRA, he pays $790 per month with no deductible.
“It’s nice to have the choice to balance the high deductible versus the higher premium,” he told KFF Health News. Before, “it was tough to budget for that deductible.”
Which is where the benefit to clinical laboratories comes back in. Making it easier and affordable for patients to pay their co-pays and deductibles also means more patients showing up at labs for doctor ordered tests and blood draws.