HHS Announces 2017 Out-of-Pocket Maximums

Money and gavelThe Department of Health and Human Services (HHS) has announced the 2017 out-of-pocket maximums applicable to self-funded and fully insured employer health plans. The maximums for 2017 have been set as follows:

  • Individual coverage: $7,150
  • Family coverage: $14,300

All non-grandfathered health benefit plans in effect on or after January 1, 2014 are required to comply with the Affordable Care Act’s (ACA) mandate that employer health plans’ annual in-network out-of-pocket maximums not exceed HHS’ established limits. The 2017 limits represent an increase from the current 2016 maximums of $6,850 for individual coverage (an increase of $300), and $13,700 for family coverage (an increase of $600).

The out-of-pocket limits represent the maximum amount that an enrollee must pay for covered essential health benefits through cost-sharing. It typically includes the annual deductible as well as any cost-sharing obligations the enrollee must meet after the deductible has been satisfied. The out-of-pocket maximum does not include premiums, cost sharing associated with of out-of-network services, or the cost of nonessential health benefits.

According to a recent study by United Benefits Advisors (UBA), out-of-pocket costs have increased significantly over the past decade, although median plan limits have remained below HHS’ out-of-pocket maximums. According to UBA, both individual and family coverage plans saw significant increases in median in-network plan out-of-pocket maximums in 2015. It is expected that out-of-network expenses will continue to increase significantly as well, as employers continue to widen the cost-share gap between employer and employee responsibilities.

For solutions to help mitigate employee health benefit plan costs that don’t simply shift costs to valued employees, contact the benefits experts at POMCO today.

 

More Large Employers Self-funding Pharmacy Benefit Plans

self-funding prescription drug benefit plansAccording to a recent survey conducted by United Benefit Advisors (UBA), more large employers are selecting to self-fund their prescription drug benefit plans. According to the survey, an increasing number of employers are turning to the cost-containment benefits of self-funding to avoid the Affordable Care Act (ACA)’s impact on the cost of fully insured health coverage.

Based on data obtain from over 10,000 survey respondents, self-funded prescription drug benefit plans have increased by approximately one third from 2009 to 2014, while fully insured prescription drug benefit plans have decreased by approximately 3 percent. The data also showed that 66 percent of employers with at least 1,000 employees currently maintain a self-funded pharmacy benefit plan.

Employers across the nation are also more likely to implement a layer of stop loss protection for their prescription drug benefit plan. The increasing trend is the result of both the shift to self-funding, as well such ACA requirements as the removal of annual and lifetime limits on health benefits, which open plans up to greater high dollar claim risk and cost exposure. Another factor leading employers to elect stop loss coverage for their prescription drug benefit plans is the increased cost of expensive specialty medications used to treat complex disease states.

According to UBA’s survey, approximately 95 percent of self-funded pharmacy benefit plans now include specific stop loss coverage, an increase of almost 7 percent compared to the five preceding years. Approximately 77 percent of self-funded pharmacy plans incorporate a layer of aggregate stop loss protection. This trend has grown more rapidly over the same five year period, at a rate of just over 9 percent. In 2014, the average specific stop loss level was $140,235, representing an increase of approximately 14 percent from the four prior years.

For information on how to mitigate overall benefit costs with an integrated health and pharmacy benefit management solution, contact the experts at POMCO today.

 

Congress Delays Cadillac Tax Until 2020

BusinessmanPresident Obama has signed into law a two-year delay of the Cadillac Tax. The delay is part of Congress’s $1.8 trillion omnibus spending deal, the Consolidated Appropriations Act of 2016. In response to strong concerns expressed by employers and labor groups regarding the potential negative financial impact of the tax, Congress proposed the two-year delay.

The Cadillac Tax was added to the Internal Revenue Code by the Affordable Care Act (ACA) and was originally slotted for 2018. It is a 40 percent excise tax on the health plan value  that exceeds $10,200 for individual coverage and $27,500 for family coverage. The tax would be imposed on applicable employers, health insurers and “persons who administer plan benefits.” The Consolidated Appropriations Act also makes the Cadillac excise tax deductible for those entities required to pay it. The tax was originally enacted as non-deductible, so the change in tax status will potentially ease the burden to some applicable employers.

The Consolidated Appropriations Act also authorizes the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses appropriate benchmarks to determine whether the tax should be adjusted to reflect age and gender factors when setting excise tax thresholds.

Over the past several years employers have started making strategic benefit plan decisions to avoid the pending tax, such as shifting costs to members, reducing benefits, or transitioning to high deductible health plans. Even though the tax has been delayed, employers are still encouraged to work with their benefits administration partners and brokers to assess whether their health benefit plan is at risk of being subject to the tax so that adjustments can be made prior to its eventual enforcement.

It is anticipated that the two-year implementation delay will provide time for further examination of the proposed Cadillac Tax law to allow Congress and the new Administration to further examine and consider how best to execute the proposed tax. Some are still hopeful that the tax will be repealed before January 1, 2020.

 

Deadline for ACA Reporting Extended

Quantifying the Population Health Management Investment

The Internal Revenue Service (IRS) has extended the deadline for applicable employers and other health coverage providers to furnish 1094 and 1095-B and C series forms required by the Affordable Care Act (ACA). The deadline for furnishing individuals with 2015 Form 1095-B and 2015 Form 1095-C has been extended from February 1, 2016, to March 31, 2016. The IRS’s recent notice also extends the due date for employers and other health coverage providers to file with the IRS 2015 Form 1094-B and 2015 Form 1094-C from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016, if filing electronically. Any employer filing 250 or more forms is still required to file electronically.

The extension provides employers with more time to gather the necessary data to generate and submit the required forms. Some of the ACA’s reporting requirements apply only to large employers (those with 50 or more full-time employees or full-time equivalents) and are meant to demonstrate compliance with the employer shared-responsibility mandate (“Pay or Play”) and eligibility for premium tax credits. Other reporting requirements apply to all employers, insurers, or other coverage providers that provide employees with minimum essential coverage to enable the IRS to enforce the individual mandate.

The extension provides a small measure of relief to many employers or their vendors, if applicable, who were in need of additional time to aggregate and calculate the data necessary for reporting purposes. The IRS forms require employers and other coverage providers to gather detailed information such as an employer’s monthly offer of health coverage to full-time employees, the employee’s share of premium, monthly enrollment information for covered individuals, their spouses and dependents, and identifying information such as tax identification numbers, and addresses, for example.  As this is the first year employers were required to document such data, many are still formulating processes to accumulate the information needed.

The IRS will still accept filings of the information returns on Forms 1094-B, 1095-B, 1094-C, and 1095-C beginning in January 2016 from any entity prepared to submit in January. The IRS intends to take a good-faith enforcement approach to this first year of reporting, however it is important to note that employers that do not meet the extended deadlines will still be subject to ACA penalties for failure to timely furnish and file the required forms. Employers utilizing software or payroll vendors to assist with their IRS filings should confirm with their vendors any applicable deadlines for data submission.

 

A CFO’s Guide to Making Benefit Plan Determinations

What Questions Should You be Asking?

Simplifying AdministrationEmployee benefits are one of the most significant bottom line costs for any organization. Chief financial officers play an essential role in determining what benefit plan solutions not only fit into the organization’s budget, but have the potential for the greatest cost savings. As you plan for the coming year’s expenses and work with your human resources director and benefits consultant to determine the right employee benefit solutions for your employees, ask the following questions:

Is our current health benefit plan at risk for the Affordable Care Act’s (ACA) Cadillac Tax?

The Cadillac Tax is a 40 percent excise tax on employer-sponsored health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The mandate is set to go into effect in 2018¹, leaving employers only two full calendar years to make plan changes in order to avoid the tax. For organizations that are collectively bargained in particular, it may be necessary to begin negotiations and planning now, in order to avoid the tax in 2018. To mitigate the risk of the tax, some employers are choosing to restructure benefits, move to narrow networks, or offer a high-deductible health plan (HDHP) in order to reduce overall plan costs and health plan value.

What is the cost of our spousal coverage?

According to BenefitsPro, the average cost of providing health care for a family was $16,351 in 2013, a 4 percent increase from the year prior, and employees paid, on average, only $4,565 of that total. As part of a trend to not only reduce overall health care costs, but also as a strategy to further avoid Cadillac Tax implications, a growing number of employers are restricting spousal benefit coverage by implementing a working spouse rule. The rule stipulates that if the spouse of an employee has access to primary health care through his/her own employer, and the employer pays for a designated portion of the single coverage cost, the spouse is not eligible for coverage under your plan. As an alternative, some employers are allowing spouses to remain covered, but are adding a surcharge to the cost for the employee. CFOs should weigh the cost benefits of a working spouse rule against how such a significant change may be viewed by employees. Though bottom line costs are a priority, recruitment and retention of talent must be considered with every benefit decision.

Are we conducting eligibility audits?

One of the largest causes of benefit leakage is outdated or inaccurate coordination of benefits. Employees may inadvertently fail to notify their employer of a change in their dependent’s status, but regardless of the reason, employers have an obligation to protect their health plan by ensuring that claims are not paid to anyone who is not truly eligible for coverage. Eligibility audits are a helpful tool for identifying such scenarios as dependents that have exceeded the plan’s age limit, a change in marital status such as a divorce, or cases when a child is not a legal dependent per the terms of the plan, such as a nephew or grandchild. According to Employee Benefit Advisor, a dependent eligibility audit can provide a typical ROI of nearly 15 percent and millions of dollars in cost savings. Organizations should conduct an eligibility audit at least every four years in order to identify enrollees who, per the plan guidelines, should no longer be eligible for coverage

Have we considered self-funding?

According to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded. CFOs should consider the advantages of self-funding, which include a greater flexibility in plan design and benefit options, access to actionable claims data, and lower administrative costs. Self-funding also provides enhanced cash flow options. Unlike fully insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.

For a health benefit plan assessment and customized cost-avoidance solution for your health benefit plan, contact the benefit experts at POMCO today.

 

¹ After this article was published in December 2015 Congress delayed the Cadillac tax until 2020. Read more here.

 

 

Does Your Consumer-Driven Health Plan Put You At Risk for the Cadillac Tax?

Affordable Care Act (ACA), Out-of-Pocket-MaximumsThere are significant questions regarding 2018’s potential Cadillac Tax in the minds of employers across the nation. The Affordable Care Act’s (ACA) proposed 40 percent excise tax on high cost plans has the potential to either significantly add costs to employers’ health plans, or require a shift of costs to members in an effort to avoid the tax – something many employers are hesitant to concede. Aside from the potential impact to health benefit plans, new insight indicates that the Cadillac tax may impact employers’ abilities to offer consumer-driven health plans (CDHP) such as flexible spending accounts (FSA) and health savings accounts (HSA). Read on to prepare your benefit strategy prior to 2018.

Potential Impact to FSAs

The Cadillac tax intends to levy a 40 percent penalty on health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The tax applies only to the portion of the plan cost that falls above those thresholds. Since the maximum FSA contribution limits, which are estimated to be $2,700 by 2018, are typically additive to other benefit costs for employees that elect contributions, the cumulative cost of coverage between health and FSA plans could easily trigger the penalty fee for generous health plans. For this reason, some employers are considering terminating their FSA benefit, but maintaining their health benefit plan structure.

According to BenefitsPro.com, a recent survey of hospital management personnel identified that many hospitals intend to remove their FSA plans from their benefit plan offering if the ACA’s Cadillac Tax goes into effect in 2018. This potential trend is because FSA benefits may have an impact on triggering the Cadillac Tax penalty. According to the Kaiser Family Foundation, an estimated 26 percent of employers anticipate that their FSA offering may, in part, trigger the excise tax.

As an alternative solution to canceling an FSA plan entirely, other employers are considering re-structuring their FSA to only allow employer contributions, or to limit the employee’s contribution below the maximum IRS thresholds, thus diminishing the risk that an employee’s additional contribution may push the employee’s total cost of overage over the Cadillac Tax’s acceptable limit

Aside from FSA plan reductions, employers may also want to consider reducing such pre-tax ancillary health benefit options as critical disease or hospital indemnity plans.

Potential Impact to HSAs

As the proposed ACA mandate currently stands, employer and employee contributions to HSAs are also subject to the Cadillac Tax’s threshold limit. While the popularity of HSAs coupled with high deductible health plans (HDHP) have been on the rise as employers look for solutions to mitigate their overall benefit plan costs, HSAs, when coupled with employer pre-tax contributions, may now increase an employer’s risk of being subject to the 40 percent excise tax.

Similar to the decisions facing employers offering FSAs, employers are considering reducing or eliminating their pre-tax contributions to their employees’ HSA accounts in order to avoid reaching the Cadillac Tax’s threshold. Such a trend could reduce the effectiveness of HSAs as a successful strategy for employees to reduce their out-of-pocket health care costs. It may also limit opportunities for employers to incentivize population health management program initiatives in the form of HSA contributions – an employee engagement strategy that has been extremely successful in increasing wellness program participation.

Potential Changes in the Future

As a result of concerns expressed by organizations that the Cadillac Tax may impact their ability to help employees pay for quality health care expenses, many benefits professionals are advocating for benefit accounts to be excluded from the threshold limits before the Cadillac Tax goes into effect in 2018.  In addition, there is still hope that the United States Treasury Department and the Internal Revenue Service (IRS) will delay enforcement of the tax through extended transition relief.

 

Projecting the Impact of the Proposed Cadillac Tax on Employer Sponsored Health Coverage

Quantifying the Population Health Management InvestmentOne aspect of the Affordable Care Act (ACA) that has been looming large in the now foreseeable future is the “Cadillac Tax,” a 40 percent excise tax on employer-sponsored health plans with annual premiums in excess of $10,200 for individual coverage, and $27,500 for family coverage. The tax applies only to the portion of the plan cost that falls above those thresholds, and was proposed in the initial ACA regulations passed back in 2010. For years, employers have been warily waiting for final regulations to be issued regarding the Cadillac Tax, and some have even hoped that the regulations may be changed significantly to reduce or remove the tax. As we enter 2016, however, the Cadillac Tax is still anticipated to become a mandated requirement in 2018. Employers are working with their brokers and benefits administration partners to project how the Cadillac Tax could impact their health plan, and are making changes to mitigate the potential cost impact.

The purpose of the Cadillac Tax is to reduce overall health care costs and reduce the tendency of companies to provide rich health care benefits to employees as a form of compensation that is not taxed at the same level as ordinary income. Utilization trend data indicates that overly generous health plans lead to over-utilization of health care services, which in turn, increase overall health care spend nationwide. By encouraging employers to move away from overly-rich benefits, the Cadillac Tax hopes to encourage individual plan members to become more responsible, cost-conscientious consumers of health care services.

While this is a goal that has the theoretical potential to financially benefit employers and their health plans, many organizations are casting a worried eye toward the impact reducing their benefits will have on their valued employees. The Cadillac Tax’s requirements are particularly concerning for collectively bargained plans with long-standing negotiated benefit plans. If employers at risk of being subject to the excise tax do not make benefit changes, however, they stand to incur significant costs in the form of penalty tax dollars.

The Congressional Budget Office estimates that the total liability for companies subject to the tax could reach $79 billion from 2018 and 2023, and according to Forbes, 40 percent of employers expect the Cadillac Tax to affect at least one of their current health plans come 2018, while 14 percent expect it to immediately impact the majority of their current health benefit plans. Further, according to Mercer, approximately one third of employers are at risk of paying the Cadillac Tax in 2018 if they do not make adjustments to their health benefit plan costs, and that percentage may increase to as much at 50 percent by 2018.

In addition to the financial impact of the excise tax itself, the Cadillac Tax will further financially impact employers in the form of administrative costs. According to new guidance issued by the Internal Revenue Service (IRS), it is considering two approaches to determine which entity must actually remit payment for the tax — the “insurer,” or for self-funded plans, the employer. Under the other approach being considered, the employer would calculate the tax and direct any applicable plan administrators to pay the portion associated with the plan they administer. Regardless of the final regulatory outcome, the administrative requirements associated with calculating and reporting potential tax implications may significantly impose administrative and financial burdens on many employers.

Given the potential for both tax and administrative cost requirements, many employers may decide they need to lower their health care costs by reducing their health benefit cost share in order to ensure overall affordability of their plan. According to Bloomberg Business, after several years of shifting health care costs to employees, organizations are slowing their adoption of high-deductible health plans (HDHP) in part because they are waiting to see if lawmakers repeal, or revise, the terms of the Cadillac Tax. If the Tax is not repealed, it is anticipated that the increasing trend of offering HDHPs as options or even full replacements to traditional PPO plans is likely to continue in 2018 and beyond.

Other strategies that some employers are implementing to mitigate health plan costs include implementing a working spouse rule, in which employees pay a higher premium to enroll a spouse who has coverage available from his/her own employer – or not allowing the spouse to enroll as primary, or even as secondary, at all. In addition, employers are adding population health management programs to encourage healthy behavior in an effort to reduce risk factors that could lead to high utilization patterns or catastrophic claims.

As 2018 approaches, many employers will be faced with a difficult decision: reduce employee benefits, or face significant tax penalties. For strategic recommendations for mitigating health plan costs without compromising on the quality of your health benefit plan offering, contact the benefits experts at POMCO.

 

2016 Open Enrollment Reminders for Employers

2016 open enrollment checklistOpen enrollment season is already upon us. This year, make sure your health benefit plan is fully-compliant with 2016 regulations, and form a plan to effectively communicate plan changes and open enrollment requirements to your employees.

2016 Benefit Plan Compliance Requirements

As we approach 2016, employers should work with their brokers and benefit plan administrators to ensure their benefit plans are in compliance with the following 2016 regulations:

  • Prepare for 2016 Affordable Care Act (ACA) reporting requirements. The ACA’s Employer Mandate states that applicable large employers (ALEs) that do not offer affordable, minimum value health coverage to the majority of their full-time employees (FT) and their dependent children will be subject to a penalty if any FTs purchase health coverage through the Health Insurance Exchange Marketplace and receive a premium subsidy credit to help pay for coverage. This mandate became effective January 1, 2015. Employers must be prepared to report to the Internal Revenue Service (IRS) whether or not they offered affordable, minimum value health coverage to employees and their dependent children in compliance with ACA regulations. Review the calculation methods available and determine if your plan meets affordability and minimum value requirements. Click here for more information of employer reporting requirements under the ACA.
  • Verify your grandfathered plan status. A grandfathered plan is defined as a plan that was in existence when the ACA was established in 2010. Certain plan changes will result in a loss of grandfathered status which requires compliance with other ACA mandates, such as $0 member cost share for preventive and routine services. Work with your broker or benefits administrator to verify your grandfather status for 2016. Click here for more information on grandfathered and non-grandfathered plan requirements.
  • Verify your out-of-pocket maximum. Effective January 1, 2016 all non-grandfathered health plans’ out-of-pocket maximums for essential health benefits may not exceed $6,850 for individual coverage and $13,700 for family coverage. Check the maximums on your benefits to ensure your plan is compliant.
  • Embed individual out-of-pocket maximums. Effective January 1, 2016 the ACA also requires that for non-grandfathered health plans the out-of-pocket maximum apply to all individuals regardless of whether they are enrolled under a family or individual health plan option. This means that individual out-of-pocket maximums must be embedded in the plan’s family coverage when the family out-of-pocket maximum exceeds the ACA’s out-of-pocket maximum for individual coverage. Speak with your benefits administrator to ensure its claims processing system will accommodate the embedded out-of-pocket requirements. Click here for more information on embedding out-of-pocket maximums.
  • Review your high deductible health plan (HDHP) and health savings account (HSA) limits. For HDHP-compatible HSAs, a plan’s out-of-pocket maximum must be lower than the ACA’s limits of $6,550 for individual coverage and $13,100 for family coverage. Verify that your plans’ limits are in compliance. In addition, verify that your HDHP’s deductible and out-of-pocket maximums comply with the 2016 limits. Click here for more information on 2016 HSA limits.

Employee Communications

Once you have verified that your health plans are compliant for 2016, follow these tips to effectively communicate required information to your employees and eligible plan members:

  • Distribute summary of benefits and coverage documents (SBC). Per ACA regulations, health plans must provide an SBC to applicants and enrollees to help them understand the benefit options available to them and decide in which plan to enroll. Be sure your SBCs are updated to reflect any changes for 2016 and distributed to all eligible employees and their beneficiaries during open enrollment. Click here for more information on SBC regulations.
  • Distribute annual notices. Work with your benefits plan administrator and broker to ensure you distribute all required annual notice to employees, which may include the following:
    • Notice of Patient Protections
    • Notice of Health Insurance Portability and Accountability Act (HIPAA) Special Enrollment Rights
    • Consolidated Omnibus Budget Reconciliation Act (COBRA) Notice
    • Grandfathered Plan Notice
    • Annual Children’s Health Insurance Program Reauthorization Act (CHIPRA) Notice
    • Women’s Health and Cancer Rights Act (WHCRA) Notice
    • Medicare Part D Notices
    • Michelle’s Law Notice
 

Six Advantages of Self-funding Your Employee Benefit Plan

Professional Man Celebrating Fists in the airAccording to the Kaiser Family Foundation’s 2014 Employer Health Benefits Survey, more employers are self-funding their employee benefits, and that number has been on the rise. According to Kaiser, 15 percent of covered employees at small companies with 3-199 employees, and 81 percent of covered employees at larger firms, are enrolled in plans which are either partially or completely self-funded.  The percent of covered employees enrolled in self-funded plans has increased for large firms since 2004. Both mid- and large-sized employers are learning the advantages inherent in self-funding employee benefits.

As you plan for the coming benefit year, consider the following advantages of self-funding, and whether or not it may be a financial strategy that can help your organization meet its corporate goals:

  1. Cost-Containment. Third party administrators (TPA) that manage self-funded plans have the capability to go beyond strict network discount arrangements on every claim payment to find additional cost savings. With internal claim reviews, fraud and abuse protections, custom claim negotiations, and case management solutions, each claim can be reduced before it is paid to ensure the employer is paying the least amount required.
  1. Greater flexibility. While insurance carriers sell pre-designed, fully insured health and dental plans with restricted benefits and strict plan limitations, under a self-funded arrangement, a TPA can customize a plan design to the exact specifications of the employer at the benefit/cost-share level. This opportunity poses a significant advantage to collectively bargained plans and allows employers to strategically manage the cost of their plan.
  1. Actionable data. Fully insured plans receive minimal experience data from their carriers, which limits an employer’s ability to understand what factors are impacting costs. Strategic TPAs can offer their self-funded plans fully-customized data, data analytic tools, and predictive modeling solutions, that can be used to help guide plan design strategy in an effort to mitigate cost-drivers.
  1. Lower Administrative costs. With a self-funded plan, employers avoid the costs of claim reserves, steep insurance carrier profit margins, risk charges, premium taxes, and contingency margins. They also avoid the Affordable Care Act’s Health Insurance Tax, which is expected to incur $145 billion in revenue.
  1. Enhanced cash flow. Unlike fully-insured plans that require advanced premium payment, under a self-funded plan, claims can be funded as they are due, which allows employers to keep more money in a bank account where it can earn interest.
  1. Strategic Service. TPA client service staff members are highly trained in the intricacies of self-funding. They are benefits experts who work to collaborate with employers and their brokers or consultants to properly manage the plan to optimal efficiency. This engagement and service involvement provides self-funded employers with a trusted partner to assist with escalated member inquiries, plan experience review discussions, compliance resources, and strategic expertise.

For more information on why so many employers are transitioning to self-funding, review the infographic below.

 

shift to self-funding
 

More Employers Adopt On-Site Health Clinics as a Cost-Control Measure

On-site clinicsAccording to a recent article by Forbes, nearly 33 percent of large employers have opened onsite clinics within their corporate offices in order to increase employee access to routine and preventive care, and to reduce overall health plan costs. This trend comes despite the looming Affordable Care Act’s (ACA) Cadillac Tax which, starting in 2018; looks to impose a 40 percent excise tax on the most costly employer benefit plans.

Many employers that fear they may be subject to the Cadillac Tax are making proactive changes to their health plans to avoid the tax in the form of increased copayments and deductibles, and benefit reductions including the narrowing of networks. For employers looking to remain competitive in the marketplace relative to employee benefits, such changes can come at the price of employee acceptance and satisfaction. In addition, when plans shift costs to employees, some members become more inclined to skip routine, preventive, or event chronic medical care in order to mitigate their out-of-pocket costs. Such measures can ultimately lead to exacerbated health plan costs in the end, when a decrease in preventive or chronic care management results in a costly catastrophic event.

Some industry experts anticipated that employers might be less interested in establishing onsite clinics after the Internal Revenue Service (IRS) issued guidance clarifying that the cost of worksite clinics would be factored in to the total Cadillac tax threshold. Contrarily, many employers have been embracing the on-site clinic model as a means of offering an affordable way to bring convenient, routine, preventive, and urgent care services to their employees.

A recent study by Mercer, found that 29 percent of employers with 5,000 or more employees have successfully established on-site clinics. An earlier Mercer study indicated that the industries that are most commonly adopting the practice include health care facilities, municipalities, and manufacturing organizations.

Services offered at on-site clinics may include:

  • The management of preventive health and wellness programs to help manage health risks and maximize member benefits
  • The treatment of primary and urgent care needs
  • Dispensement of commonly prescribed prescription drugs to improve generic use and formulary compliance
  • Initial on-site mental health triage, counseling, and integration with employee assistance program (EAP) services
  • Traditional occupational health services, including those associated with work-site injuries, illnesses and exposure
  • Health coaching and care management services
  • Referrals to high quality community physicians and specialists when outside care is required
  • The administration of travel medicine
  • Vaccinations

The on-site clinic model is effective from a cost-containment perspective because not only are employees more likely to see a physician or nurse located right in their own office; they avoid scheduled time off and the need for unplanned sick days.

Additional benefits to employers of establishing on-site clinics include:

  • Improved overall population health
  • The ability to enhance a corporate wellness benefit offering
  • An increase in employee retention, recruitment, and morale
  • Enhanced management of employee health risk and chronic conditions

According to Mercer, the cost of offering an on-site clinic is usually in the low single digits as a percentage of the overall health care spend for an employer. According to a survey it recently conducted among employers that have implemented an on-site clinic, 49 percent of respondents indicated that their spend on the worksite clinic was only 5 percent or less of its annual spending on all active employee health plans and worksite clinics. From a cost-savings perspective, cost reductions come in layers. First, costs are reduced through the increased efficiency of an on-site health center as opposed to exclusive employee use of the retail health system, and then from a reduction in catastrophic claims due in large part to the wellness, disease management, and chronic care programs offered as a part of the on-site clinic model.

For more information on on-site/near-site clinics as part of an effective population health management solution, contact the benefit experts at POMCO today.