Wednesday, November 7, 2012
Monday, September 10, 2012
Form W-2 Guidance
The Affordable Care Act (ACA) requires employers report the aggregate cost of employer-sponsored health coverage on employees’ Form W-2s. The reporting is for informational purposes to show employees the value of their health care benefits.
The IRS website provides specific guidance and a chart depicting the who, what, when, where and how of reporting health care benefit value. For instance, the reporting requirement is optional for employers filing fewer than 250 Form W-2s, until further IRS guidance is issued. Health Alliance recommends employers consult with a trusted tax professional regarding this and any other tax matter.
Thursday, August 23, 2012
Business Travel Insurance
Unfortunately,
employers are sometimes innocently unaware that their domestic group
health and workers compensation plan's, don't adequately cover their employees
when they travel abroad on business. Benefits such as Accidental Death &
Dismemberment (AD&D), Emergency Medical Air Evacuation & Repatriation,
Political Evacuation, and 24 Hour Assistance Services are rarely included in
traditional group health plan's. These benefits are critical to anyone
traveling abroad and should always be included in any risk management or
employee benefit plan. Our products
include:
Business Travel
Accident: This fully customizable insurance provides World - Class protection
and is an inexpensive but extremely valuable coverage that supplements any
employee benefit program. Benefit Options: Accidental Death &
Dismemberment, International Medical, Emergency Medical Evacuation and
Repatriation, Political / Natural Disaster Evacuation, War Risk, and 24-Hour
Multilingual Global Assistance Services.
Blanket
International Group Medical (Groups of 5 or more): Customized blanket coverage
for any business, corporation, church, school, and non-profit organization that
has employees or group members traveling outside their home country, for short
or long periods of time. This comprehensive but inexpensive insurance solution,
fills the gaps in traditional U.S. state-side group health or nationalized
health plans that limit or exclude, when an employee or group member travels
abroad
A Nation at Risk
Americans
remain dramatically uninsured–and underinsured–for life insurance. In fact,
life insurance ownership is at an all-time low. A startling 41 percent of U.S.
adults have no life insurance at all, according to recent LIMRA data, and 43
percent of those who have coverage admit it’s not enough. Both men and women
are less likely to own life insurance today than they were in 2004.
The
odds of not having life insurance have increased dramatically for every age
group since that time, and only one in 10 insured adults owns both permanent
and term life insurance—half as many as in 2004.
This
creates a nation of families who could be on the brink of financial ruin if a
primary wage-earner dies. For example, of the households that own life insurance,
seven in 10 have only enough to replace their household income for 3.5 years.
The
general rule of thumb is to carry enough life insurance to replace income for
seven to 10 years. For those fortunate enough to have employer-provided life
insurance, many assume the relatively small amount of coverage it offers will
be adequate for their needs, when in reality it often will pay for little more
than final expenses.
Tally
up the ongoing costs of mortgage payments, utilities, food, transportation,
health care, clothing and all the daily necessities of life—not to mention
longer-term expenses such as children’s college education—and you’ll quickly
see the gap in coverage.
Those without life protection are obviously
at even greater risk, especially since 61 percent of American workers live
paycheck to paycheck, and 34 percent of households admit they would immediately
have trouble meeting everyday living expenses if a primary wage earner died
today.
Wednesday, June 6, 2012
FSA Limit & Plan Year Clarification
The IRS has just released Notice 2012-40 for
Health Care Flexible Spending Accounts (FSAs) regarding the $2500 contribution
limit that goes into effect for 2013 and deadlines for compliance. This
guidance provides transition relief for FSA plans that run on a non-calendar
year basis.
FSA Plan Year Clarified
- The $2,500 limit will not affect any plans beginning prior to January 1, 2013.
- Fiscal plan years will not be impacted until the first plan year beginning on or after January 1, 2013.
- Non-calendar plan years will have until the end of the 2014 calendar year to amend their plans to comply within the limit.
- Short plan years must prorate the $2,500 limit based on the number of months in the short plan year.
$2,500 Contribution Limit Items of
Note
- Applies to salary reductions (including cashable credits).
- Applies separately for each unrelated employer that an individual may be working for during the year.
- Does not apply to non-elective contributions that cannot be cashed out or received in the form of taxable benefits.
- Unused amounts carried over during a grace period are not counted toward the $2,500 limit.
Dental Health
Dental health planning is a valuable part of staying healthy, but it’s also a financial investment that helps employers and individuals save money.
Four out of ten Americans lack any kind of dental benefits. Without convenient access to affordable care, people often delay seeking treatment. Some end up seeking costly hospital care for preventable dental conditions, like a toothache progressing to a severe abscess. In Florida alone, the cost of dental-related ER visits was more than $88 million in 2010, according to the Pew Center.
“Anyone concerned about financial health should be ensuring employees have incentive for oral care because prevention and early detection makes a major difference in financial and clinical outcomes,” said Nicholas Kavouklis DMD.
A 2007 study published in the Journal of Periodontology showed that patients with severe periodontal disease had 21 percent higher healthcare costs than patients with healthy gums. The disease produces bacteria that enters the bloodstream and can exacerbate other conditions, including expensive lung and cardiovascular problems.
“Many diseases, including diabetes and cancers, will manifest symptoms in the mouth before they are evident elsewhere,” said Dr. Kavouklis. “A dentist can identify warning signs, uncover risks, and help employers and employees avoid high-dollar claims.”
Thursday, May 17, 2012
EAP Services Available to Health Alliance Group Members!
Did you know Health Alliance plans, upon renewal in 2012, include free services (for fully insured group members) from Resolutions Employee Assistance Program (EAP)? As a part of Carle, Resolutions provides telephonic counseling services by licensed professional counselors for employee plan members and their dependent members over age 18. Active employee members, retiree members and COBRA members can take advantage of six telephonic sessions per plan year—free of charge.
Members simply call (toll-free) 1-855-232-4267, for professional help with issues that may be affecting on-the-job performance. Emotional stress, workplace problems, legal consultation, budget counseling and more can be discussed. Unless mandated by law, all information is kept strictly confidential.
For more specifics on getting EAP services implemented and promoted, log in at HealthAlliance.org and view our Resolutions EAP flier.
Friday, May 4, 2012
Be Prepared for the 2013 HSA Changes!
HSA contribution limits
$3,250 for self-only coverage (up $150 from 2012)
$6,450 for family coverage (up $200 from 2012)
HSA catch-up contributions (age 55 or older)
$1,000 (no change)
HDHP minimum required deductibles:
$1,250 for self-only coverage (up $50 from 2012)
$2,500 for family coverage (up $100 from 2012)
Out-of-pocket maximum:
$6,250 for self-only coverage (up $200 from 2012)
$12,500 for family coverage (up $400 from 2012)
$3,250 for self-only coverage (up $150 from 2012)
$6,450 for family coverage (up $200 from 2012)
HSA catch-up contributions (age 55 or older)
$1,000 (no change)
HDHP minimum required deductibles:
$1,250 for self-only coverage (up $50 from 2012)
$2,500 for family coverage (up $100 from 2012)
Out-of-pocket maximum:
$6,250 for self-only coverage (up $200 from 2012)
$12,500 for family coverage (up $400 from 2012)
Friday, April 13, 2012
Employee Advisory Committees Promote Benefits Buy-In
When it comes to designing and communicating employee benefit programs, employee input and involvement can be a boon. After all, one of the best ways to gain buy-in for and to communicate employee benefit programs is to use peer-to-peer interaction. If a group of employees supports these programs and makes it a point to tell other employees, organizations can build buy-in for programs and make changes more readily.
How organizations structure this employee involvement varies. Some opt for the simplest type of employee input in the form of employee focus groups and surveys. Others establish a task force to promote a specific benefit offering, such as health promotion programs. Still others create broad-based employee advisory committees that assess an organization's total benefits mix.
Employee advisory committees, as the name suggests, are groups of employees who meet regularly or as needed to provide input on benefit programs and other issues affecting employees and the employment relationship. Some of these committees are highly formal, with set terms for members and with regularly scheduled meetings, with minutes taken and later shared. Many unions, colleges and universities, and public-sector employers maintain employee advisory committees. However, these committees can play a positive role in almost any organization.
Getting the Most Out of a Committee
A well-run employee advisory committee with engaged and knowledgeable members can be a good sounding board for organizations that are contemplating benefit changes or need to communicate new programs. “We find focus groups and surveys to be more common than advisory committees,” said Anita Doncaster, a partner with consulting firm Aon Hewitt in Charlotte, N.C. “However, when used strategically, employee advisory committees can have demonstrable, positive impact by providing the employee point of view on benefits.”
If an organization is going to use an employee advisory committee, it needs to be prepared to take the group’s feedback and concerns seriously. Not all employers are willing to do that. “The deterrent is that many employers may not always be in a position to take the advice of employees serving on an advisory committee so they are hesitant to seek their opinions,” said Doncaster.
This is certainly a risk, but an employee advisory committee can yield important insights into what employees want and value in a benefits program. “Employers do not want to be spending money on a program that few employees use or care about, and it can be a mistake to change or cut programs that are considered sacred cows by employees,” said Kelly Jones, senior vice president with Sibson Consulting in Cleveland. “If the committee tells you what programs fall into either of those categories, you can more confidently eliminate or cut back on less-valued programs and use that money to invest in something that is more important to employees.”
Picking the Right People
One of the most important decisions to make when establishing an employee advisory committee is deciding who will serve on it. The employees serving on the committee do not always have a strong grounding in employee benefits programs, how they work, and the issues and decisions involved in designing and administering these programs. This can make it difficult to communicate to the committee the employer’s rationale and decision-making around certain issues, such as plan design and cost sharing.
“Employers should consider choosing people who are natural leaders—not necessarily named leaders in the organization but people who have influence in the organization,” said Doncaster. “I would also choose people who are not natural leaders but who are thoughtful and who are considered high-potential employees.” The rationale is that keeping high-potential employees happy is a crucial role for employee benefits. By having these employees on the committee, the employer gains insight into what a high-potential employee wants from the benefits program.
Perspective is also important. In some cases, members of an employee advisory committee might come in assuming that the employer does not have employees’ best interests at heart. To overcome this, HR and benefit professionals need to be transparent and explain the issues. This requires time and effort that can pay off if it ends with the employee advisory committee’s support for planned changes and the programs the organization wants to communicate.
Committee members become de facto ambassadors who can help HR to communicate benefits issues to the rest of the employee population. Moreover, the messages these ambassadors send are likely to be well received. As employees themselves, committee members have had the same questions as their peers and will seek to answer those questions in a way that makes sense to peers. By working with committee members, HR can guide what content committee members emphasize when talking with their peers.
Taking It Seriously
Employee advisory committees can fulfill a number of roles for an employer. However, for the committee to thrive and its members to contribute wholeheartedly, the employer should be as transparent as possible in its dealings with the committee and should be ready to act on the committee’s findings and recommendations or to explain why the employer cannot or will not do so. “This needs to be a transparent process for there to be any credibility,” said Jones. “Make sure that it is open and honest.”
At the same time, employers need to be clear upfront about the committee’s purpose and mandate and how the company is going to use the committee’s input. This includes the rules for the committee: how frequently it will meet, where, and so on. “It is the employer’s job to help the committee understand what is happening in the organization and how the committee’s input will help resolve those issues,” said Doncaster. “Don't try to manipulate their data or input, and don't try to spin any negative messages that need to be delivered. If an employer does anything like this, the advisory committee members are likely to be less inclined to be open and honest.”
Joanne Sammer is a New Jersey-based business and financial writer.
How organizations structure this employee involvement varies. Some opt for the simplest type of employee input in the form of employee focus groups and surveys. Others establish a task force to promote a specific benefit offering, such as health promotion programs. Still others create broad-based employee advisory committees that assess an organization's total benefits mix.
Employee advisory committees, as the name suggests, are groups of employees who meet regularly or as needed to provide input on benefit programs and other issues affecting employees and the employment relationship. Some of these committees are highly formal, with set terms for members and with regularly scheduled meetings, with minutes taken and later shared. Many unions, colleges and universities, and public-sector employers maintain employee advisory committees. However, these committees can play a positive role in almost any organization.
Getting the Most Out of a Committee
A well-run employee advisory committee with engaged and knowledgeable members can be a good sounding board for organizations that are contemplating benefit changes or need to communicate new programs. “We find focus groups and surveys to be more common than advisory committees,” said Anita Doncaster, a partner with consulting firm Aon Hewitt in Charlotte, N.C. “However, when used strategically, employee advisory committees can have demonstrable, positive impact by providing the employee point of view on benefits.”
If an organization is going to use an employee advisory committee, it needs to be prepared to take the group’s feedback and concerns seriously. Not all employers are willing to do that. “The deterrent is that many employers may not always be in a position to take the advice of employees serving on an advisory committee so they are hesitant to seek their opinions,” said Doncaster.
This is certainly a risk, but an employee advisory committee can yield important insights into what employees want and value in a benefits program. “Employers do not want to be spending money on a program that few employees use or care about, and it can be a mistake to change or cut programs that are considered sacred cows by employees,” said Kelly Jones, senior vice president with Sibson Consulting in Cleveland. “If the committee tells you what programs fall into either of those categories, you can more confidently eliminate or cut back on less-valued programs and use that money to invest in something that is more important to employees.”
Picking the Right People
One of the most important decisions to make when establishing an employee advisory committee is deciding who will serve on it. The employees serving on the committee do not always have a strong grounding in employee benefits programs, how they work, and the issues and decisions involved in designing and administering these programs. This can make it difficult to communicate to the committee the employer’s rationale and decision-making around certain issues, such as plan design and cost sharing.
“Employers should consider choosing people who are natural leaders—not necessarily named leaders in the organization but people who have influence in the organization,” said Doncaster. “I would also choose people who are not natural leaders but who are thoughtful and who are considered high-potential employees.” The rationale is that keeping high-potential employees happy is a crucial role for employee benefits. By having these employees on the committee, the employer gains insight into what a high-potential employee wants from the benefits program.
Perspective is also important. In some cases, members of an employee advisory committee might come in assuming that the employer does not have employees’ best interests at heart. To overcome this, HR and benefit professionals need to be transparent and explain the issues. This requires time and effort that can pay off if it ends with the employee advisory committee’s support for planned changes and the programs the organization wants to communicate.
Committee members become de facto ambassadors who can help HR to communicate benefits issues to the rest of the employee population. Moreover, the messages these ambassadors send are likely to be well received. As employees themselves, committee members have had the same questions as their peers and will seek to answer those questions in a way that makes sense to peers. By working with committee members, HR can guide what content committee members emphasize when talking with their peers.
Taking It Seriously
Employee advisory committees can fulfill a number of roles for an employer. However, for the committee to thrive and its members to contribute wholeheartedly, the employer should be as transparent as possible in its dealings with the committee and should be ready to act on the committee’s findings and recommendations or to explain why the employer cannot or will not do so. “This needs to be a transparent process for there to be any credibility,” said Jones. “Make sure that it is open and honest.”
At the same time, employers need to be clear upfront about the committee’s purpose and mandate and how the company is going to use the committee’s input. This includes the rules for the committee: how frequently it will meet, where, and so on. “It is the employer’s job to help the committee understand what is happening in the organization and how the committee’s input will help resolve those issues,” said Doncaster. “Don't try to manipulate their data or input, and don't try to spin any negative messages that need to be delivered. If an employer does anything like this, the advisory committee members are likely to be less inclined to be open and honest.”
Joanne Sammer is a New Jersey-based business and financial writer.
Tuesday, April 3, 2012
Key Tax Provisions in the Affordable Care Act
Affordable Care Act Tax Provisions
The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that became effective in 2010 or 2011, and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.
Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.
Changes to Flexible Spending Arrangements
Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers.
FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.
Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On Aug.12, 2011, the IRS issued proposed regulations that describe who will be eligible to receive the premium tax credit and how to compute the credit. The proposed regulations also describe how to reconcile any advance credit payments for health benefits purchased through an Exchange with the final credit amount. The proposed regulations provide numerous examples, solicit written comments and provide a notice of public hearing. Comments must be submitted by Oct. 31, 2011.
The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.
Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov.
Health Coverage for Older Children
Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.
Employer-Provided Health Coverage — Not Taxable; Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012
Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To give employers more time to update their payroll systems, Notice 2010-69, issued fall 2010, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued. Notice 2012-9, issued Jan. 3, 2012, restates and clarifies the guidance provided in Notice 2011-28, including the information on how to report, what coverage to include and how to determine the cost of the coverage.
The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that became effective in 2010 or 2011, and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.
Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.
Changes to Flexible Spending Arrangements
Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.
For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers.
FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.
Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On Aug.12, 2011, the IRS issued proposed regulations that describe who will be eligible to receive the premium tax credit and how to compute the credit. The proposed regulations also describe how to reconcile any advance credit payments for health benefits purchased through an Exchange with the final credit amount. The proposed regulations provide numerous examples, solicit written comments and provide a notice of public hearing. Comments must be submitted by Oct. 31, 2011.
The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.
Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov.
Health Coverage for Older Children
Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.
Employer-Provided Health Coverage — Not Taxable; Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012
Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To give employers more time to update their payroll systems, Notice 2010-69, issued fall 2010, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued. Notice 2012-9, issued Jan. 3, 2012, restates and clarifies the guidance provided in Notice 2011-28, including the information on how to report, what coverage to include and how to determine the cost of the coverage.
Express Scripts wins Antitrust Clearance
Mon, Apr 2 2012 (Reuters) — Express Scripts won U.S. antitrust clearance on Monday for its purchase of rival Medco Health Solutions following a contentious eight-month review, creating the clear leader in managing prescriptions for Americans.
The U.S. Federal Trade Commission announced it had closed its investigation into the roughly $29 billion deal, first announced in July, that combines two of the three largest U.S. pharmacy benefit companies, or PBMs. Separately, the companies announced they completed the deal.
Express Scripts shares rose 3.1% in Monday trading on Nasdaq. Before Monday's trading session, Medco shares were converted into Express Scripts shares and cash, based on terms of the deal.
Acquiring Medco more than doubles Express Scripts revenue base, and makes it significantly bigger than its closest rival CVS Caremark in terms of processing prescriptions.
PBMs like Express and Medco are supposed to cut the cost of medicines for their employers and health plan clients, in large part by encouraging more use of generic drugs.
But with generics already comprising about 75% of prescriptions, the combined company is going to need to show other ways they can give value to customers, says Jefferies & Co analyst Arthur Henderson.
"It is a space that is radically changing, and it is going to continue to radically change," says Henderson. The merger, he adds, "will give them more tools to work with to figure out how to continue to deliver lower costs to their customers."
The U.S. Federal Trade Commission announced it had closed its investigation into the roughly $29 billion deal, first announced in July, that combines two of the three largest U.S. pharmacy benefit companies, or PBMs. Separately, the companies announced they completed the deal.
Express Scripts shares rose 3.1% in Monday trading on Nasdaq. Before Monday's trading session, Medco shares were converted into Express Scripts shares and cash, based on terms of the deal.
Acquiring Medco more than doubles Express Scripts revenue base, and makes it significantly bigger than its closest rival CVS Caremark in terms of processing prescriptions.
PBMs like Express and Medco are supposed to cut the cost of medicines for their employers and health plan clients, in large part by encouraging more use of generic drugs.
But with generics already comprising about 75% of prescriptions, the combined company is going to need to show other ways they can give value to customers, says Jefferies & Co analyst Arthur Henderson.
"It is a space that is radically changing, and it is going to continue to radically change," says Henderson. The merger, he adds, "will give them more tools to work with to figure out how to continue to deliver lower costs to their customers."
Sunday, March 25, 2012
Health Care Cost Increases
Although the rate of health care cost increases is expected to remain stable in 2012, employers are taking more aggressive steps to manage their rising costs and improve employee health, according to findings from the 2012 Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care. The survey was completed by 512 employers who work at companies with at least 1,000 employees and collectively employ 9.1 million full-time employees, and represent more than $87 billion in annual health care spending.
The survey found that total health care costs per employee are expected to rise 5.9% to $11,664 in 2012, compared to 5.4% ($10,982) in 2011. Employees’ share of costs increased 9.3% during this period to $2,764. This amount represents a 40% increase in costs from just five years ago, compared to a 34% increase for employers over the same time period. Retirees not yet eligible for Medicare can expect to pay an average of $4,226 per year for single only coverage and $10,500 for family coverage.
Many employers plan to make substantial changes to their health care benefits offerings because of these rising costs. Four in 10 employers say that developing a workforce culture where employees are accountable for their own health is a top health care strategy focus in 2013. One in four employers say the same about reviewing their overall mix of benefits. Many employers are also keeping their eye on staying up to date and complying with the Patient Protection and Affordable Care Act (34%).
“As employers try to maintain the balance between containing costs and offering competitive total rewards packages, they are realizing that their future health care benefits choices are not quite as simple as ‘paying or playing,’” says Ron Fontanetta, senior health care consulting leader at Towers Watson. “In fact, there is a wide spectrum of design choices that will allow employers to develop a health care strategy that matches their unique objectives and workforce demographics.”
The options, which range from continuing to discontinuing health plan sponsorship, include offering an employer-sponsored plan to only a portion of the population and providing employees with a defined contribution for use in health insurance exchanges. According to the survey, only 3% of employers are very to somewhat likely that they will discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. By the same measure, 45% of employers are very to somewhat likely that they will offer coverage to only a portion of their workforce and direct the others to exchanges.
While most employers will remain focused on sponsoring the design and delivery of their health care programs through 2015 (77%), they are much less confident that health care benefits will be offered at their organization over the longer term. Less than one in four (23%) companies are very confident that they will continue to offer health care benefits 10 years from now, down from a peak of 73% in 2007.
Companies today are continuing to expand their use of financial rewards to engage employees and their spouses to better manage their health. In fact, more than two-thirds of respondents offer incentives today. Respondents also indicated that they have become more willing to add penalties to their arsenal (used by 20% today), and some (10%) have even adopted achievement standards, which will likely continue to grow in use as companies increasingly hold employees accountable for unhealthy life choices, losing weight and lowering blood pressure.
The survey found that total health care costs per employee are expected to rise 5.9% to $11,664 in 2012, compared to 5.4% ($10,982) in 2011. Employees’ share of costs increased 9.3% during this period to $2,764. This amount represents a 40% increase in costs from just five years ago, compared to a 34% increase for employers over the same time period. Retirees not yet eligible for Medicare can expect to pay an average of $4,226 per year for single only coverage and $10,500 for family coverage.
Many employers plan to make substantial changes to their health care benefits offerings because of these rising costs. Four in 10 employers say that developing a workforce culture where employees are accountable for their own health is a top health care strategy focus in 2013. One in four employers say the same about reviewing their overall mix of benefits. Many employers are also keeping their eye on staying up to date and complying with the Patient Protection and Affordable Care Act (34%).
“As employers try to maintain the balance between containing costs and offering competitive total rewards packages, they are realizing that their future health care benefits choices are not quite as simple as ‘paying or playing,’” says Ron Fontanetta, senior health care consulting leader at Towers Watson. “In fact, there is a wide spectrum of design choices that will allow employers to develop a health care strategy that matches their unique objectives and workforce demographics.”
The options, which range from continuing to discontinuing health plan sponsorship, include offering an employer-sponsored plan to only a portion of the population and providing employees with a defined contribution for use in health insurance exchanges. According to the survey, only 3% of employers are very to somewhat likely that they will discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. By the same measure, 45% of employers are very to somewhat likely that they will offer coverage to only a portion of their workforce and direct the others to exchanges.
While most employers will remain focused on sponsoring the design and delivery of their health care programs through 2015 (77%), they are much less confident that health care benefits will be offered at their organization over the longer term. Less than one in four (23%) companies are very confident that they will continue to offer health care benefits 10 years from now, down from a peak of 73% in 2007.
Companies today are continuing to expand their use of financial rewards to engage employees and their spouses to better manage their health. In fact, more than two-thirds of respondents offer incentives today. Respondents also indicated that they have become more willing to add penalties to their arsenal (used by 20% today), and some (10%) have even adopted achievement standards, which will likely continue to grow in use as companies increasingly hold employees accountable for unhealthy life choices, losing weight and lowering blood pressure.
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