Plan sponsors are looking for innovative health benefit designs that will help control medical spending, including the cost of prescription and specialty drug coverage. While a number of very large employers have been pursuing alternative programs for some time, last year’s announced alliance of Berkshire Hathaway, Amazon and JP Morgan to tackle healthcare costs and quality has spurred other employers to explore new health plan designs. Even smaller employers are considering referenced-based pricing and other mechanisms that are easier to understand and administer. Before heading down these new paths, however, employers need to recognize the evolving compliance challenges that these initiatives bring.
The term “value-based purchasing” encompasses varying approaches to achieve three health policy goals: better care for individuals, improved health for populations and lower costs. Here are some examples:
Employers are seeking more transparency about benefit claims, costs and other information to improve plan designs and participants’ ability to compare prices. Self-insured plan sponsors hope clearer data will let them better predict costs and negotiate fees with service providers, while sparing participants from surprise bills. This transparency push has launched data warehouses for health plan sponsors to use, as well as tools for participants to price what they’ll pay for the same service at different facilities or providers.
Some Affordable Care Act initiatives may broaden access to cost and claim data. For example, under updated guidance from the Centers for Medicare & Medicaid Services (CMS), hospitals must disclose their standard charges for services in a machine-readable format via the internet. While this cost information could prove valuable, converting the raw data into something more usable by plan sponsors and participants will take some time.
Employers should involve legal and compliance staff when designing innovative plan arrangements — even if simply evaluating vendor services that provide “point” solutions in various areas. Emerging payment models and transparency initiatives present unique legal and regulatory issues, some of which are new to employers and benefit plan administrators. Consider these examples:
Employers will need to stay on top of these novel legal issues before implementing any innovative payment or transparency arrangement. This is especially true for designs aiming to reduce prescription drug costs by using value-based criteria. As the effectiveness and accuracy of novel cost-saving and quality-focused models evolve, employers should periodically revisit potential compliance concerns.