Walgreens and CVS Draw Line in the Sand

On June 7th, benefit plan professionals received notice that the "Hatfield and McCoy's" in the  pharmacy benefit manager (PBM) world  will not longer be playing nice with each other. You may have seen yesterday's announcement that Walgreens will not participate in future CVS Caremark pharmacy network plans.   According to the announcement, plans that are currently out to bid or that are renewing for the next plan year will not have access to Walgreens pharmacies if the business commences after June 7 to CVS Caremark.

The Walgreens announcement states that a letter was sent to CVS Caremark informing the company of its decision. Walgreens' reasons focus on CVS Caremark's programs that limit patients to using a CVS pharmacy or Caremark mail service pharmacy, a lack of knowledge when plans adopt this type of program, and unpredictability in reimbursement rates to Walgreens.  Walgreens executive vice president of pharmacy, Kermit R. Crawford, stated, "In the three years since the CVS-Caremark merger, it has become increasingly clear to us that Caremark's approach to Walgreens as a community pharmacy within CVS Caremark's retail network has fundamentally changed, and we are no longer viewed as a valued community pharmacy within its PBM network."

This announcement could cause potential disruption in the marketplace, particularly for plans considering CVS Caremark.   With 7,500 pharmacies nationwide, Walgreens operates pharmacies within five miles of nearly eight in 10 Americans and it currently maintains about a  20% market share.   It remains to be seen how and when the relationship between both organizations will be resolved.    Medco's retail pharmacy networks are unaffected by Walgreens' letter to CVS Caremark.

We have obtained a copy of the  Walgreens announcement, with a link to a brief FAQ and a replay of a webcast held June 7 by Walgreens.     We anticipate this will spark some bidding of drug plans this year for employer's valuing access of network pharmacies who view  ownership of retail pharacies and a PBM as a conflict of interest.

Cash up for Grabs — Early Retiree Medical Reimbursement

A Messsage from Lockton's Health Reform Advisory Group Attorneys: A draft application and set of instructions for the Early Retiree Reinsurance Program (ERRP) has been posted to the website of the Office of Management and Budget (OMB)

http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201005-0938-012

The U.S. Department of Health and Human Services (HHS) recently issued interim final regulations implementing the program.   Our Alert of 5/5/10 discusses those regulations.

Please note that the application and instructions are in draft form.   HHS is not currently accepting applications.   A final application should be available sometime later this month and will be posted on the HHS Office of Consumer Information and Insurance Oversight's (OCIIO) website.  See link below

http://www.hhs.gov/ociio/index.html

The New Model COBRA Forms Are In (Reflects May 31st Extension Window)

We understand the government has updated its model COBRA subsidy forms, to reflect the extension of the "qualifying event window" to May 31, 2010. The documents are available here.

HHS Cracks the Door on the Retiree Reinsurance Money Grab

The Department of Health and Human Services (HHS) has issued the first in what promises to be a decades-long series of regulations and other guidance on the new health reform law. The new guidance concerns the temporary $5 billion retiree healthcare reinsurance fund authorized by the health reform legislation. The purpose of the reinsurance fund is to provide an incentive for employers supplying retiree health coverage for certain pre-Medicare-eligible retirees to continue providing that coverage. Congress recognizes that coverage for individuals in their mid-fifties and at later ages is substantially more expensive than health insurance for younger individuals, and hopes employers will continue to supply the retiree coverage.

The federal program reimburses sponsors of self-funded and fully insured retiree health plans for a substantial portion of the costs associated with providing benefits to the plans' most expensive retirees and dependents between age 55 and Medicare-eligibility age. The plan is entitled to claim up to 80% of its annual costs, minus negotiated price concessions, for medical, surgical, hospital and prescription drug benefits paid by the plan on behalf of these individuals, within a "reinsurance corridor."

The Re-insurance Corridor

The 80% reimbursement rate applies to the plan's expenses between $15,000 and $90,000 per retiree or dependent. Thus, a plan that pays $100,000 on behalf of a retiree in a given year could receive $60,000 from the fund (80% of the $75,000 in expenses between $15,000 and $90,000). The reinsurance corridor is to be adjusted in later years by the medical component of the consumer price index.

The future adjustment may be largely a moot point, as Lockton's actuaries don't expect the $5 billion to last more than a couple years.

"Show Me the Money!"

The program comes online June 23, 2010, and will be handled much the way Medicare Part D retiree drug subsidy payments are handled (there will be an application process and deadline, data verification and reconciliation requirements, potential for federal audit, etc.). It appears from the HHS guidance that the reimbursements are paid annually, after the close of a plan year. Reimbursement is available for retiree healthcare expenses incurred by the plan on and after the June 23, 2010 start date. The program ends after 2013, unless the money runs out sooner.

To be eligible for reimbursements, a retiree health plan must implement programs and procedures to generate cost savings for participants with chronic and high-cost conditions.

Payments will be made to the employer-sponsored retiree health plan. According to HHS, the payee must use the reimbursements to "lower health costs for enrollees (e.g., lower premium contributions, co-payments, deductibles, etc.)."

The reimbursement payments to the plan sponsor are nontaxable.

Reimbursement is not confined to retiree plans maintained by private sector, for-profit companies. Plans maintained by state and local governments, not-for-profit businesses, tax-exempt entities such as churches, and unions may also apply for a bite at the reimbursement apple.

Stay Tuned...Then Act Fast!

HHS will issue additional guidance in the coming weeks and months, specifying precisely how claims are to be made against the $5 billion fund. We'll let you know when we receive that guidance. Then, be prepared to move quickly, as the $5 billion - while it seems like a lot of money - won't last long.

A copy of the HHS guidance is available by clicking here.

A summary provided by: Edward C. Fensholt, J.D. Lockton Benefit Group, Compliance Services

A Quote to Share on Health & Wealth

So many people spend their health gaining wealth, and then have to spend their wealth to regain their health. - A.J. Reb Materi, Our Family

Health Reform Will Cost Me How Much?

The Health Care Reform  and Reconciliations Bill signed into law by President Obama will vastly change  how care is delivered,  purchased, consumed and taxed over a lifecyle that begins for plans with  anniversary dates as early as October 1, 2010 through  2018.   While the media has been quick to report the 100 million dollar plus  charges of company's like AT&T and Catepillar, these reflect hits to earnings as a result of   a loss of a tax benefit for covering seniors under their drug plans instead of through Medicare Part D.   For most employers who do not offer coverage for inactive employees, the question is often how and when will this bill cost my company. There will be three primary costs a company can expect to pay under this bill:

1. Benefit Adjustments - As the government will soon require bans on lifetime maximums and coverage for dependents up to age 26 (regardless of student status), there will be underwriting adjustments that will impact health premiums.   These adjustments will impact plans with anniversaries of October 1, 2010 or later.

2. Communication Expenses - With the complexity of this bill, expect to invest more in your corporate communications or rely more heavily on firms like mine.   In 2014, certain employees will have the option of electing coverage under the state exchanges.   Let's all look forward to  explaining family income limits and federal poverty levels,  state exchanges  and medicaid choices in an open enrollment meeting that will boggle the mind.

3. Compliance & Reporting Costs - These charges will be the actuarial and filing expenses your company must now pay to adhere to the new federal regulations.   In the same way that Sarbanes Oxley made it more expensive to be a public company, there will be  federal reporting and disclosure costs for all employers.

Click here for a year by year report of the major changes the reform will bring.

Online CMS Disclosure — A How To Guide for Employers

Reminder: Employers with Calendar Year Health Plans Must Complete Online CMS Disclosure by March 1, 2010 In addition to distributing Medicare Part D coverage notices to Medicare-enrolled employees, plans sponsors must also complete an annual on-line disclosure form with CMS. The plan sponsor must complete the disclosure within 60 days after the beginning of the plan year (sponsors of insured plans may choose to file within 60 days after the beginning of the insurance contract year). For calendar year health plans, this means filing with CMS by March 1, 2010. A CMS filing is also required within 30 days of termination of a prescription drug plan and for any change in creditable coverage status of a plan.

Employer plans that do not offer drug coverage to any Part D eligible individuals at the beginning of the plan year are exempt from filing. Similarly, employers who qualified for the retiree drug subsidy are exempt from filing with CMS, but only for the individuals and plan options for which they are claiming the subsidy. If an employer offers prescription drug coverage to any Part D eligible individuals who are not claimed under the subsidy, the employer must complete an on-line disclosure for plan options covering such individuals.

To learn more go to  How Do I Complete My Online CMS Disclosure?

Health Reform Tea Leaves Turn "Brown"

In a move that caught most of the nation by surprise, voters in heavily Democratic Massachusetts catapulted Republican Scott Brown into the U.S. Senate last night to fill the seat vacated by the late Ted Kennedy. This morning, just hours after that stunning development, the precise implications for health reform remain unclear. Brown ran on a campaign pledge to deliver a death blow to the pending federal health reform legislation, a message that apparently resonated with enough moderate Democrats and Independents in Massachusetts to send him to Washington. That will be hard for many Congressional Democrats to simply ignore.

And it may be difficult for the President to ignore. Swirling within the Beltway this morning are rumors that the White House is weighing several options, including a plan to pull the insurance exchanges and taxpayer-provided premium subsidies out of reform legislation, essentially leaving some insurance market reforms and changes to the Medicare program.

But Democratic leaders still have meaningful cards to play. Under White House pressure, the House of Representatives might quickly offer up the Senate's health reform bill for a straight "yes or no" vote, entertaining no amendments. If Speaker Nancy Pelosi (D-CA) can find 217 other Democrats willing to vote "yes," we'll have health reform, Senate style, perhaps in less than a fortnight.

Many House Democrats have said recently that they cannot vote for the Senate legislation as it stands, so great are the differences between the health reform bills passed by the two chambers. But those views might change now that it appears the House cannot send a comprehensive health reform bill of any kind back to the Senate and expect it to pass, with Scott Brown supplying the Republicans with sufficient seats to sustain a filibuster.

Another option is for the House to quickly take its health reform legislation and break it into two bills, one with all the budget-related provisions (such as the government-run "public option," the insurance exchanges, taxpayer-provided subsidies toward the purchase of insurance, tax increases and Medicare changes), and one with everything else, such as the insurance market reforms. If the House can pass both bills, the Senate would then take them up and could employ its "reconciliation" process to push the budget-related bill through with a filibuster-proof simple majority of 51 votes. The non-budget-related bill would be vulnerable to a filibuster. However, most of that bill's provisions would not be particularly controversial.

A third option is a sort of hybrid approach, where the House passes the Senate bill but House leaders assure their more progressive colleagues that the Congress will quickly come back to fix the contentious issues later, using the reconciliation process.

But the question nobody can answer this morning is what individual Democratic senators and representatives, particularly the moderates, infer from last night's election, and what they're willing to risk to push the pending legislation through. In the hard, cold light of dawn today, the reality is that the Democratic Party lost a senate race it never expected to lose. True, Brown's opponent ran an uninspired campaign, but there might be something else at play here. Polls have shown a slow but steady erosion in public support for the current health reform plans, and Brown's surprising victory puts an unexpected GOP face on what the polls have been suggesting.

We should know very shortly now which track the health reform train will take from this point forward. If Brown's win does, indeed, signal the beginning of the end for the President's ambitious health reform measure, the demise will come with a hard bit of irony. Brown replaces Ted Kennedy, who fought all his political life for health reform of the sort sitting now in the Congress, just short of the goal line.

History tells us that epic, defining battles sometimes turn on unexpected twists. Now it appears the health reform fight might turn on the most implausible of events: a little known Republican, campaigning from a pickup truck in the very heart of the Democratic Party's most secure bastion, wins the Senate seat held by a Kennedy for almost half a century. After nine months of bitter Congressional wrangling over health reform, it's difficult to imagine anything more astonishing.

Lockton Benefit Group prepares this Health Reform Briefing Summary to keep you apprised about the unfolding health reform effort in Washington, D.C.

Texas Fight! — Attorney General Jumps in on Federal Healthcare Debate

In a letter dated January 5, 2010, Texas Attorney General Greg Abbott has called into question the constitutiality of the so called Nebraska compromise and the federal mandate to require individuals to purchase insurance.   He joins 12 other State Attorney Generals who have called into the legality of provisions under both the House and Senate bills.    A copy of the letter is available here: Texas Attorney General Letter to Senators.

Reid Secures 60 Senate Votes for Clearance

WASHINGTON–The Democratic-controlled Senate, voting 60-40, swept aside Republican objections and moved to close off debate on health overhaul legislation, marking a milestone moment for President Barack Obama's most pressing domestic initiative.   All 58 Democrats and two independents voted to approve the first -- and most crucial -- of three motions needed to break off action, as the Senate entered a fourth week of debate on the bill. All Republicans voted no.

Key Provisions of the Senate Bill

Source: Wall Street Journal

Generic Utilization Rates Continue Increasing — Compare Your Plan to the Averages

A 50% GENERIC RATE IS NO LONGER ACCEPTABLE A recent study was conducted of employer groups by the Pharmacy Benefit Management Institute (PBMI).   Here are the latest 2009-10 generic dispensing rate results:

Generic Retail Dispensing rate = 63.5%

Generic Mail Order Dispensing rate = 53.6%

"Drug benefit management indicators are trending in the right direction as a result of effective use of economic incentives and clinical tools, says Dana H. Felthouse, MBA, PBMI president. "Employer use of multiple-tier drug benefit designs continues to increase for a third year, encouraging plan member use of low cost medications when medically appropriate. Generic dispensing rates increased in both retail and mail, with the average retail rate at 63.5% and the average mail rate at 53.6%."

For the first time, the study notes differences among fully-insured, self-insured, carve-out and carve-in drug benefit programs. For example, self-insured employers and those with carve-out drug plans are most likely to use multi-tiered cost sharing. Another significant difference occurs in management of specialty pharmacy. More carve-out employers than carve-in employers offer a specialty pharmacy benefit, with carve-out employers more likely to use their PBMs as exclusive suppliers of specialty drugs.

The 2009 survey was completed by 417 U.S. employers representing more than 7 million members. Almost 70 percent of the respondents have a self-insured plan compared to 32 percent with a fully-insured plan. There's a fairly even use of carve-in and carve-out designs.

Click here for your free copy of the 2009-10 Prescription Drug Benefit Cost and Plan Design Report.

Covering the Cost of Flu Vaccinations?

While all of the major carriers have announced they will cover the cost of flu vaccinations for their fully-insured customers, some of   my self-funded clients questioned the value of paying $20.00 for each regular or swine flu vaccination for each employee.   Well as a patient stricken with the infamous Swine Flu, I thought I would share the cost of my personal experience: Cost of a Primary Care Visit, Chest X-Ray, and Nasal Swab =   $134.77

Cost of Tamiflu =   $108.11

Total Medical & Rx Cost =   $242.88 (In-network contracted rate)

Amount Paid Under my HSA Account = $242.88

COST OF NOT INFECTING ANYONE ELSE:   PRICELESS

While the above scenario clearly shows the cost avoided under your healthplan for $20 worth of prevention, we haven't even factored in the greatest cost for a company .... lost productivity.   Since my PCP recommended 5 days quarantine from my wife and kids (and everyone else), I had to undergo 5 days of isolation and lost productivity.   Since I had my laptop at home and could work 50% of the time, I will factor that into the equation.   Total cost of medical, rx, and lost productivity = $5,742.88.

Should you cover the cost of a flu vaccination ... the answer is a resounding YES.   Your employees will know they work for a company that invests in its greatest asset ... their people ...VALUE OF LOYALTY TO YOUR ORGANIZATION: PRICELESS

Find Out How Your Favorite Hospital Ranks

THE LEAPFROG GROUP'S 2009 HOSPITAL SURVEY DATA IS IN

The Leapfrog Hospital Survey, collected and administered annually by Thomson Reuters, produces the most comprehensive set of hospital performance data available. The survey focuses on important national patient safety, quality, and efficiency standards – resulting in a rich collection of hospital performance metrics.

The data set is the sole public source of national information on:

• Hospital rates of CPOE adoption and performance
• Rates of elective normal deliveries
• Rates of central-line associated blood stream infections in ICUs
• Hospital adherence to the National Quality Forum's Safe Practices
• Hospital efficiency

The data set includes information from more than 1,200 urban and rural hospitals in 38 regions throughout the United States. Leapfrog drills down to the areas with the greatest impact on improved outcomes and savings through the implementation of safety practices.   Click here and send me a thank you note after your surgery! There is no charge to you as a client or patient.

A Market Driven Approach to Healthcare

Another innovative employer, Whole Foods, demonstrates in this clip how a market based approach to healthcare has forced his employees to spend their healthcare dollars like its their own money.   What would happen if we bought our food at the supermarket using grocery insurance?   Whole Foods CEO, John Mackey, explains why more people would start eating steak in this interview with 20/20's John Stossel. John Stossel: Why Obama's Health Plan Gets It Wrong - ABC News

Shared via AddThis

Please email me at sharris@lockton.com if you have an interest in learning more about both sides of the issue in reforming your own healthcare plan.

The House Democrats Unveil Their Healthcare Plan

This week the House Democrats unveiled their healthare plans.     We have obtained a flowchart of how the program is designed to work.   [polldaddy poll=1789172]

Please share your comments and opinions.

It's Time to Nudge our Employees

The science of behavioral economics is readily available for deployment in the workplace.   If we play a role in the health and retirement options available to our employees, we are "Choice Architects".   Listen to Professor Thaler describe the concept of "Nudge" and what it means to be a "Choice Architect". Since Nudge: Improving Decisions About Health, Wealth, and Happiness exploded onto the scene this summer, politicians in the United States and United Kingdom have embraced the book's belief that with a gentle guidance from designers, employers, or even the government, people can make better decisions independently. The work of coauthors Richard Thaler, the Ralph and Dorothy Keller Distinguished Service Professor of Behavioral Science and Economics in the Chicago Graduate School of Business, and Cass Sunstein, the Harry Kalven Jr. Visiting Law Professor, has become part of the political conversation around the world, finding allies on all sides of the political spectrum.

The key may be that the central idea in Nudge does not fall neatly into any political camp. Instead, it requires what Thaler calls "libertarian paternalism," a phrase that, he admits, sounds like an oxymoron. "By 'libertarianism,' we mean protecting people's right to choose," Thaler says. "By 'paternalism,' we mean caring about people's outcomes. We want to devise policies that will make people better off–choices that they themselves think are better."

http://www.youtube.com/watch?v=-poue9NaMRQ

If video does not appear in your browser click link: http://www.uchicago.edu/features/20081006_nudge.shtml

Source:   University of Chicago - Graduate School of Business (P. Houlihan)

The Power of Engagement

This video is for any HR professional that is in need of help in changing the culture and mentality of the senior management team.     The companies that make the "Best Companies to Work" list understand this.   Their culture is typically driven by a way of doing things in the organization that   comes from the top down.   Employee benefit programs alone play only one part of what keeps you on the "Best Companies" lists over the long haul. http://www.youtube.com/watch?v=4ZlfReH8znM

Texas Housebill 2015 (Reporting of Claims Information)

A Texas Housebill has been signed into law that will impact employers who sponsor group healthcare plans and are in the process of negotiating terms for the next calendar  plan year. This bill has received little notice from those that would benefit the most from it - the plan sponsor and brokerage/consulting community.     House bill 2015, sponsored by State Representative. John Smithee (R-Amarillo) allows greater access to healthcare claims information from health plans to negotiate at renewal. This information has been limited in the past, as carriers have been less than forthcoming with information that might weaken their negotiating position or overextend protections afforded to them under the federal HIPAA laws. Within 30 days from the date of a written request from the sponsoring employer, plan, or plan administrator, the health carrier must provide a report on claims information. The contents of this report would include:

- aggregate paid claims experience by month, including claims experience for medical, dental, and pharmacy benefits, as applicable; - total premium paid by month; - total number of covered employees on a monthly basis by coverage tier; - the total dollar amount of claims pending as of the date of the report; - a separate description and individual claims report for any individual whose total paid claims exceeded $15,000 during the 12- month period preceding the date of the report, including the following information – a unique identifying number or code for the individual, the amounts paid, dates of service, and applicable procedure codes; and - for claims that were not part of the report, a statement of precertification requests for hospital stays of five days or longer made during the 30 days preceding the date of the report.

The report, which must be provided in writing or through a secure electronic file or web portal, must contain all information that the issuer has that, is requested by the employer, plan, or plan administrator for a 36 month period. "Having a better understanding of a company's risks is an important of negotiating from a position of strength, explains Steve Harris, CEBS, a Vice President with Lockton Dunning Benefits in Dallas. "Since the top 30% of claimants can often account for 80% of the claim costs, understanding these conditions can play a key factor in the final negotiated rates." For most employers, the impact of this bill will be felt in the latter half of this year, as negotiations begin for plan years beginning on or after January 1, 2009.

You might find that carrier representatives or brokers may be uninformed about the new law or might claim that disclosure is in violation of HIPAA privacy rules. The bill does prohibit the disclosure of information the issuer is otherwise prohibited from disclosing under a state or federal law that is more stringent in its privacy.