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.
In a handful of cases, health insurers reversed denials after physicians or patients posted complaints on social media
Prior authorization requirements by health insurers have long been a thorn in the side of medical laboratories, as well as physicians. But now, doctors and patients are employing a new tactic against the practice—turning to social media to shame payers into reversing denials, according to KFF Health News (formerly Kaiser Health News).
Genetic testing lab companies are quite familiar with prior authorization problems. They see a significant number of their genetic test requests fail to obtain a prior authorization. Thus, if the lab performs the test, the payer will likely not reimburse, leaving the lab to bill the patient for 100% of the test price, commonly $1,000 to $5,000. Then, an irate patient typically calls the doctor to complain about the huge out-of-pocket cost.
“There are times when you simply must call out wrongdoings,” she wrote in an Instagram post, according to the outlet. “This is one of those times.”
In response, an “escalation specialist” from BCBSIL contacted her but was unable to help. Then, after KFF Health News reached out, Nix discovered on her own that $36,000 in outstanding claims were marked “paid.”
“No one from the company had contacted her to explain why or what had changed,” KFF reported. “[Nix] also said she was informed by her hospital that the insurer will no longer require her to obtain prior authorization before her infusions, which she restarted in July.”
“I think we’re on the precipice of really improving the environment for prior authorization,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update. If this was to happen, it would be welcome news for clinical laboratories and anatomic pathology groups. (Photo copyright: Nashville Medical News.)
Physicians Also Take to Social Media to Complain about Denials
Some physicians have taken similar actions, KFF Health News reported. One was gastroenterologist Shehzad A. Saeed, MD, of Dayton Children’s Hospital in Ohio. Saeed posted a photo of a patient’s skin rash on Twitter in March after Anthem denied treatment for symptoms of Crohn’s disease. “Unacceptable and shameful!” he tweeted.
Two weeks later, he reported that the treatment was approved soon after the tweet. “When did Twitter become the preferred pathway for drug approval?” he wrote.
Eunice Stallman, MD, a psychiatrist from Boise, Idaho, complained on X (formerly Twitter) about Blue Cross of Idaho’s prior authorization denial of a brain cancer treatment for her nine-month-old daughter. “This is my daughter that you tried to deny care for,” she posted. “When a team of expert [doctors] recommend a treatment, your PharmD reviewers don’t get to deny her life-saving care for your profits.”
However, in this case, she posted her account after Blue Cross Idaho reversed the denial. She said she did this in part to prevent the payer from denying coverage for the drug in the future. “The power of the social media has been huge,” she told KFF Health News. The story noted that she joined X for the first time so she could share her story.
Affordable Care Act Loophole?
“We’re not going to get rid of prior authorization. Nobody is saying we should get rid of it entirely, but it needs to be right sized, it needs to be simplified, it needs to be less friction between the patient and accessing their benefits. And I think we’re on really good track to make some significant improvements in government programs, as well as in the private sector,” said Todd Askew, Senior Vice President, Advocacy, for the American Medical Association, in an AMA Advocacy Update.
However, KFF HealthNews reported that Kaye Pestaina, JD, a Kaiser Family Foundation VP and Co-Director of the group’s Program on Patient and Consumer Protections, noted that some “patient advocates and health policy experts” have questioned whether payers’ use of prior authorization denials may be a way to get around the Affordable Care Act’s prohibition against denial of coverage for preexisting conditions.
“They take in premiums and don’t pay claims,” family physician and healthcare consultant Linda Peeno, MD, told KFF Health News. “That’s how they make money. They just delay and delay and delay until you die. And you’re absolutely helpless as a patient.” Peeno was a medical reviewer for Humana in the 1980s and then became a whistleblower.
The issue became top-of-mind for genetic testing labs in 2017, when Anthem (now Elevance) and UnitedHealthcare established programs in which physicians needed prior authorization before the insurers would agree to pay for genetic tests.
Dark Daily’s sister publication The Dark Report covered this in “Two Largest Payers Start Lab Test Pre-Authorization.” We noted then that it was reasonable to assume that other health insurers would follow suit and institute their own programs to manage how physicians utilize genetic tests.
At least one large payer has made a move to reduce prior authorization in some cases. Effective Sept. 1, UnitedHealthcare began a phased approach to remove prior authorization requirements for hundreds of procedures, including more than 200 genetic tests under some commercial insurance plans.
However, a source close to the payer industry noted to Dark Daily that UnitedHealthcare has balked at paying hundreds of millions’ worth of genetic claims going back 24 months. The source indicated that genetic test labs are engaging attorneys to push their claims forward with the payer.
Is Complaining on Social Media an Effective Tactic?
A story in Harvard Business Review cited research suggesting that companies should avoid responding publicly to customer complaints on social media. Though public engagement may appear to be a good idea, “when companies responded publicly to negative tweets, researchers found that those companies experienced a drop in stock price and a reduction in brand image,” the authors wrote.
However, the 2023 “National Customer Rage Survey,” conducted by Customer Care Measurement and Consulting and Arizona State University, found that nearly two-thirds of people who complained on social media received a response. And “many patients and doctors believe venting online is an effective strategy, though it remains unclear how often this tactic works in reversing prior authorization denials,” KFF Health News reported.
Federal Government and States Step In
KFF Health News reported that the federal government is proposing reforms that would require some health plans “to provide more transparency about denials and to speed up their response times.” The changes, which would take effect in 2026, would apply to Medicaid, Medicare Advantage, and federal Health Insurance Marketplace plans, “but not employer-sponsored health plans.”
KFF also noted that some insurers are voluntarily revising prior authorization rules. And the American Medical Association reported in March that 30 states, including Arkansas, California, New Jersey, North Carolina, and Washington, are considering their own legislation to reform the practice. Some are modeled on legislation drafted by the AMA.
Though the states and the federal government are proposing regulations to address prior authorization complaints, reform will likely take time. Given Harvard Business Review’s suggestion to resist replying to negative customer complaints in social media, clinical labs—indeed, all healthcare providers—should carefully consider the full consequences of going to social media to describe issues they are having with health insurers.
PwC report indicates deal-making may generate long-term savings, but adds to higher medical costs as hospital systems dominate markets and drive up prices
Consolidation of big hospital health networks combined with a loss of independent doctor practices has changed the healthcare landscape in recent years, and clinical laboratories and anatomic pathology groups have been directly impacted. Now, those trends, along with increased access to care, are expected to push employer medical cost up by as much as 6% in 2019.
The continued deal-making is bad news for medical laboratories, since super-sized hospital systems typically trim the budgets of laboratory and other services to improve operating efficiencies.
At the same time, more doctors are practicing as employees of hospitals, health networks, and medical groups. This physician consolidation presents challenges for independent clinical laboratories, which often lose test orders to in-house hospital labs when physicians no longer practice independently.
Consumer Demand for Access to Healthcare Will Drive Costs Higher
Consolidation-related pressures are not the only forces pushing medical costs higher. HRI expects a third factor to inflate medical costs in 2019—consumer pressure for more ways to access care.
The growth of care options such as: retail clinics, telemedicine, urgent care, and on-site employer health clinics may bring prices down over time, however increased utilization often raises employers’ healthcare costs in the short-term as workers take advantage of easier ways to access care, the report states.
Less Flu and High-Performing Health Networks Expected to Lower Costs
Conversely, HRI believes a milder flu season in 2018-2019 may help keep spending increases in check. Additionally, the growing number of healthcare advocates in the workplace who educate employees on the use of their healthcare benefits, plus the creation of high-performing health networks—both of which emphasize high-quality care alongside cost savings—should serve to deflate healthcare spending.
In an interview with FierceHealthcare, Barbara Gniewek, a Health Services Principal at PwC, compared attempts to control healthcare spending to a balloon. “Every time you squeeze one area” another issue crops up, she said.
Employer healthcare costs have risen 5.5% to 7% annually for each of the past five years. HRI contends downward pressure on healthcare prices overall—not just drug prices—may be the only remaining way for employers and health plans to keep healthcare spending from outpacing inflation.
“Efforts by employers to cut utilization have mostly run their course,” the report states. “Employers and consumers are plagued by high prices that continue to grow because of new, expensive medical services and drugs, and other factors, such as consolidation.”
While the 2019 spending number pales in comparison to the annual double-digit growth in healthcare spending two decades ago, Gniewek told RevCycleIntelligence the inflation news should not be viewed as positive.
“While some people are relieved that it’s not the high rates of 15 or 20 years ago, costs going up at that rate still [are] unsustainable,” Barbara Gniewek, Health Services Principal at PwC, told RevCycleIntelligence. “We still haven’t figured out how to control healthcare costs and we still don’t have the type of healthcare that we need.” (Photo copyright: PricewaterhouseCoopers.)
Giant Wave of Consolidation
In theory, healthcare consolidation should create economies of scale that result in efficiencies that drive costs lower. However, reality can be much different, since short-term prices often rise when one health system suddenly dominates a market.
“We need to start getting to the point where we pull out the excess redundancies in the system and be able to monetize that in terms of savings,” Gniewek told RevCycleIntelligence. “We just haven’t seen that happen yet. It’s been more, ‘I own the market, so I can drive up the prices.’ As the government and employers demand better price control and want to do some direct contracting or high-performing networks, then eventually consolidations will be more efficient.”
“It’s both ‘horizontal’ and ‘vertical,’ meaning hospitals aren’t just buying other hospitals, they’re picking up physician practices, rehabilitation facilities, and other ancillary healthcare providers,” a Knowledge@Whartonarticle on hospital consolidation stated.
Of the 115 health-system and hospital mergers announced in 2017, 10 were mega-deals involving sellers with net annual revenues of at least $1 billion, PwC noted in its annual report. The largest is a $28.4 billion merger between San Francisco-based Dignity Health and Catholic Health Initiatives of Englewood, Colo., which is expected to close in the coming year, according to a press release.
And a July 2018 report from the National Council on Compensation Insurance (NCCI) notes that though hospital mergers can lead to operating cost reductions for acquired hospitals of 15% to 30%, those reductions usually do not translate into price decreases.
“Research to date shows that hospital mergers increase the average price of hospital services by 6% to 18%. For Medicare, hospital concentration increases costs by increasing the quantity of care, rather than the price of care,” NCCI stated.
Clinical Laboratories May Be Part of Cost Reductions
If the factors fueling today’s increases in healthcare spending—consolidation and convenience—continue pushing costs higher, clinical laboratories and anatomic pathology groups will most likely be impacted as employers, insurers, and consumers look for ways to cut medical costs.
In this environment, medical laboratories must continually work to deliver more value to providers, patients, and healthcare networks.
Shift from fee-for-service to value-based reimbursement is fueling increase in joint ventures and co-branded insurance products, creating opportunities for nimble clinical laboratories and anatomic pathology groups
As healthcare moves from fee-for-service to value-based reimbursement, health insurers and providers are joining forces at a steadily increasing rate, with nearly three-quarters of partnered products in early 2018 being joint ventures or fully co-branded insurance products. This trend presents an opportunity for clinical laboratories to help providers become more effective in their use of laboratory tests as they aim for better patient outcomes and lower treatment costs.
While health systems integrating with insurance services is not new, the roll out of the Affordable Care Act (ACA) in 2014 and its emphasis on value-based reimbursement helped create renewed interest in vertical integration, notes Becker’s Hospital Review.
According to consulting firm Oliver Wyman, the number of payer-provider partnerships has grown rapidly over the past six years, with 73% of the 22 insurance products launched in the first quarter of 2018 being joint ventures of co-branded offerings.
In comparison:
22% of partnerships were joint ventures or co-branded in 2014:
33% in 2015;
57% in 2016; and,
71% last year.
Of the 22 new payer-provider partnerships announced this year, 20 product announcements explicitly emphasized value-based compensation, while compensation was implied but not mentioned in the final two product-based partnerships.
“Payers and providers continue to be interested in forming product-based partnerships,” Oliver Wyman stated when releasing the new data. “Our analysis … continues to show a steady increase of trend toward deeper partnership, with more co-branding, greater levels of value-based financial alignment, and other forms of closer collaboration and joint ventures.”
Oliver Wyman cited several “notable” new entrants:
In addition, Oliver Wyman noted that national payers Aetna and Cigna added to their growing rosters of joint ventures in 2018.
Speaking with Healthcare Dive, Tom Robinson, Partner, Health and Life Sciences at Oliver Wyman, described this year’s new ventures as varying in type, size, location, and model. He noted that 50/50 joint ventures with co-branding have gained in popularity, however, accountable care organizations (ACOs), pay-for-performance, and bundled-payment models also are being formed. Robinson believes these vertical integrations offer opportunities for innovation.
“The point of these partnerships is to create something new, rather than just building the same old offerings with a narrow network,” Robinson said. “Successful partnerships will take the opportunity to innovate around the product and experience now that the incentives, insight, investment and integration are all for it.”
In the video above, Oliver Wyman Health and Life Sciences Partner Tom Robinson discusses the emerging trend of payer-provider partnerships, and he highlights unique challenges and opportunities of these joint ventures. Click here to watch the video. (Photo and caption copyright: Oliver Wyman.)
Lower Costs, Improved Access, Through Payer-Provider Partnerships
In announcing Blue Cross Blue Shield of Rhode Island (BCBSRI), and Lifespan’s launch of coordinated healthcare plan BlueCHiP Direct Advance, BCBSRI President and Chief Executive Kim Keck pointed to the plan’s ability to drive down healthcare costs.
“We hear a consistent theme from our members—they want more affordable health plan options—and through our collaboration with Lifespan we are doing that,” Keck stated in a news release. “BlueCHiP Direct Advance is an innovative product that features Lifespan’s vast network of providers who are positioned to more effectively manage and coordinate a patient’s care. And, our partnership allows us to offer this new product at a cost that is 10% lower than our comparable plans.”
When Allina Health System of Minnesota and Aetna last year announced their partnership plans, Allina Chief Executive Penny Wheeler, MD, praised the ability of “payer-provider” partnerships to improve care coordination and increase access to preventive care.
Jim Schowalter, MPP, President and Chief of Executive of the Minnesota Council of Health Plans, told the Star Tribune the joint venture between the for-profit insurer and local health system would accelerate the shift within the state to value-based care.
“This is another effort in our state that moves us away from old fee-for-service systems,” Schowalter stated. “Working together, doctors and insurers can deliver better personal care and hold down medical expenses.”
While the future of the ACA and other healthcare reforms is uncertain, clinical laboratories and anatomic pathology groups should expect healthcare networks and insurers to continue to find ways of partnering. That means pathologists can expect to have an expanded role in helping providers improve patient outcomes and reduce healthcare spending.
Clinical laboratories will want to develop value-based lab testing services as the nation’s largest health insurers prepare to engage with Medicare Advantage patients in record numbers
UnitedHealth Group (UNH), the nation’s largest health insurer, forecasts wildly impressive growth of Medicare Advantage plans and value-based care. If this happens, it would further shrink the proportion of fee-for-service payments to providers, including medical laboratories.
Switching to a value-based care reimbursement system, administered through Medicare Quality Payment Programs (QPPs), is one of the more disruptive changes to hit physicians, including pathologists. And, given UnitedHealthcare’s predictions, healthcare system adoption of QPPs will likely accelerate and continue to impact clinical laboratory revenue.
“Within 10 years, we expect half of all Americans will be receiving their healthcare from physicians operating in highly evolved and coordinated value-based care designs,” stated David Wichmann, CEO, UnitedHealth Group (NYSE:UNH), during the company’s second-quarter earnings call in April. (Photo copyright: Minneapolis/St. Paul Business Journal.)
50% of All Americans in Value-based Care Systems by 2028
UnitedHealth Group also envisions more than 50% of seniors enrolled in Medicare Advantage plans within five to 10 years, up by 33% over current enrollments, Healthcare Finance reported.
“Where it can go, hard to tell, but I don’t think it’s unreasonable to think about something north of 40% and approaching 50%. It doesn’t seem like an unreasonable idea,” said Steve Nelson, CEO, UnitedHealthcare, a division of UnitedHealth Group, during the earnings call.
In light of UNH’s widely-publicized comments, clinical labs should consider:
Preparing strategies to reduce dependence on fee-for-service payments;
Developing diagnostic services that add value in value-based reimbursement arrangements.
For labs, more seniors in Medicare Advantage plans means fewer patients with Medicare Part B benefits, which cover tests in a fee-for-service style. In contrast, Medicare Advantage plans are marketed to seniors by companies that contract with Medicare. These insurance companies typically restrict their provider network to favor clinical laboratories that offer them the best value.
Why Insurers Like Medicare Advantage Plans
UnitedHealth Group is not the only insurer anticipating big changes in the Medicare Advantage market. Humana (NYSE:HUM) of Louisville, Ky., is reallocating some services from Affordable Care Act health insurance exchange plans to the Medicare Advantage side of the business, Healthcare Dive reported.
According to a Kaiser Family Foundation (KFF) report, these insurers are ranked by number of enrollees in Medicare Advantage plans:
UnitedHealthcare—24%;
Humana—17%;
Blue Cross Blue Shield affiliates—13%.
Healthcare Dive noted that, in a volatile healthcare industry, payers seem to prefer the stability and following benefits of Medicare Advantage plans:
Market potential, as evidenced by growing elderly population;
Good retention rate of Medicare Advantage customers; and
Favorable payments by the Centers for Medicare and Medicaid Services (CMS) to the insurers.
Cleveland Clinic Makes Deals with Humana, Blue Cross Blue Shield
Last year, Cleveland Clinic and Humana announced creation of two Medicare Advantage health plans with no monthly premiums or charges for patients to see primary care doctors, and no need for referrals to in-network specialists, according to a joint Humana-Cleveland Clinic news release.
And, along with Anthem Blue Cross and Blue Shield in Ohio, Cleveland Clinic also launched Anthem MediBlue Prime Select, a Medicare Advantage HMO plan with no monthly premium, a news release announced. For most of their care needs, members access Cleveland Clinic hospitals and physicians.
Control Costsas Medicare Advantage Plans Grows
These examples highlight the necessity for clinical laboratories to prepare as the Medicare Advantage program expands and accompanying networks narrow.
“Medicare Advantage plans will result in more pressure on providers [such as clinical laboratories] and hospitals to focus on the cost of care,” said Michael Abrams, Managing Partner at Numerof and Associates, told Healthcare Dive.
With an exploding elderly population, medical laboratories should analyze what the shift to value-based care and Medicare Advantage plans may mean for their revenues.
