Employer healthcare costs expected to rise in 2011
NEW YORK Against a backdrop of continued economic uncertainty, employer healthcare costs for active employees are projected to rise 8.2% after plan changes to an average annual cost of $10,730 in 2011, according to a recent survey of 466 large and midsize employers conducted by Towers Watson.
“Employees today are adjusting to historically lower-than-average merit pay increases, while at the same time facing higher healthcare contributions, co-pays and deductibles. Merit pay increases have gone up 16% while employee contributions have risen 49% over the last five years. This combination could adversely affect many employees and intensify the growing affordability crisis,” stated Ron Fontanetta, senior healthcare consultant with Towers Watson. “With employers also facing the challenge of steadily rising costs, plus the advent of healthcare reform, the need to rethink employer approaches to health care is greater than ever.”
According to survey respondents, 59% of employers planned to implement significant or moderate healthcare plan design changes in 2011, and two-thirds (67%) planned to do so in 2012.
“In light of the complexities around all of the regulatory guidelines and mandates, most employers are taking the time to understand the new legal environment before making too many long-term changes to their health benefit strategy,” said Randall Abbott, a senior healthcare consultant with Towers Watson. “Nonetheless, the earlier employers consider the strategic ramifications of the law and can act, the better they can assess their future role as healthcare benefit sponsors, and understand the implications on their business and employees.”
Many employers today, however, are not staying the course:
• By 2012, 64% of employers are projected to offer an account-based health plan — such as combining a high-deductible health plan with an employee-directed healthcare account, such as a health reimbursement arrangement health savings account — and 39% of employers are projected to have ABHP enrollment of more than 20%;
• As many as 62% of employers are projected to apply outcome-based incentives by 2012, shifting from incentives for employee participation in wellness programs to incentives for improvements in health metrics, for example. “Healthcare reform has reinforced employers’ commitment to wellness [health-management] programs,” Fontanetta said. “Employers today understand that one of the keys to controlling long-term healthcare costs is to provide employees with the tools to personalize and manage their health. They are also offering incentives to encourage employees to maintain their well-being and access to clinical support and advice”; and
• According to the survey, 86% of U.S. employers plan to increase efforts to encourage employees to engage in wellness/health promotion programs, with 65% already increasing or planning to increase incentives for these programs, and another 17% considering this action for 2012. Among specific health promotion programs, employers plan to increase efforts to encourage employees to engage in behavioral health programs (78%), biometric screenings (74%), health risk assessments (71%) and disease management programs (67%).
IRS’ updated FSA rules regarding OTC medicines draw response
WASHINGTON The Internal Revenue Service earlier this month issued guidance reflecting statutory changes regarding the use of certain tax-favored arrangements, such as flexible spending arrangements, to pay for over-the-counter medicines and drugs.
The Affordable Care Act, enacted in March, established a new uniform standard that, effective Jan. 1, 2011, applies to FSAs and health reimbursement arrangements. Under the new standard, the cost of an OTC medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or such other healthcare expenses as medical devices, eye glasses, contact lenses, co-pays and deductibles, the agency stated. 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 still can be reimbursed in 2011 if allowed by the employer’s plan.
WageWorks, a provider of consumer-directed benefits solutions, including FSAs, this past summer advocated an extension of that Jan. 1 deadline, arguing that all parties — consumers, retailers and third-party administrators — needed additional time to react to the changes. “This restriction will hurt millions of consumers who rely on their FSAs to manage their out-of-pocket healthcare costs and pay for necessary over-the-counter therapies,” stated Joe Jackson, CEO of WageWorks. “If Congress is intent on putting this provision into effect, they should at least push back the deadline so that consumers — and especially retailers — are ready for the transition.”
Jody Dietel, president and chair of the Special Interest Group for Inventory Information Approval System Standard said, “Without clarification on the type of permission needed for FSA reimbursement for OTC drugs, consumers, retailers and third-party administrators will be confused and unlikely to fully comply with the new regulations by the start of new year. Meanwhile, we’re likely to see doctor’s offices overwhelmed with patients seeking prescriptions to use their spending accounts for Claritin, Zyrtec and other OTC items,” she said. “A delay in implementation will provide time for all parties to be better educated on the issue and prepared to comply with the new rules.”
SGIS maintains an electronic list of FSA-eligible products used by most retailers in the country.
The new regulations, even the recent guidance issued by the IRS, leave many questions unanswered, according to a report on The Bulletin published last week. Will physician prescriptions be required to specify a number of pills with the prescription, or can consumers buy bulk-sized containers of pain relievers? And if pharmacies must process prescriptions for aspirin or cold medication, will they seek some dispensing fee for their time?
“We’re concerned that there will be a lot of confusion out there,” Jeff Beadle, CEO of SIGIS, told The Bulletin. “Someone is buying Tylenol in December, and they can’t now buy Tylenol in January unless they go to their doctor and get a prescription first.”
The report suggested retailers will face an additional challenge — when to update the list of eligible products under FSA plans because many FSA plans do not run on a calendar year.
RC2’s The First Years brand inks deal with Natus Medical
OAK BROOK, Ill. A brand made by RC2 has inked a product licensing agreement with a leading provider of healthcare products used for the screening, detection, treatment, monitoring and tracking of common medical ailments in newborn care.
As part of the deal, Natus Medical will manufacture and distribute a line of The First Years brand’s GumDrop pacifiers, accessories and other related items. The First Years’ GumDrop product line is slated to debut at retail in early 2011.
GumDrop pacifiers are available in two sizes, newborn (0 to 3 months) and infant, and come in playful green, blue, orange, pink and purple colors. In addition to pacifiers, The First Years’ GumDrop line will include pacifier clips and cases.