President Trump announced earlier today a new pharmacy cost reduction program, “American Patients First”. The program aims to provide new tools to Medicare to negotiate lower prices, stop limiting pharmacists from helping patients save money and speed up approval of over-the-counter medicines so that fewer will require prescriptions.
The plan has 4 components:
Creating incentives to lower prices.
Lowering out-of-pocket spending on drugs.
“American Patients First” calls for reforms in Medicare Part D to allow plan sponsors to negotiate lower prices for high-cost drugs, including negotiation tools that may be available to private payers. The administration also plans to address incentives in Part D to push drug companies to lower prices.The plan includes a five-part plan to restructure the Part D program to reduce drug costs. The budget includes proposals to cap spending in Medicare Part B and move Part B coverage into Part D to facilitate better negotiation.
The Food and Drug Administration will begin acting quickly to bring more generics and biosimilars to the market to address competition issues, for example.
Another area of particular focus is using a US large buying group much as other countries have been doing traditionally. The U.S. pays for 70% of the profits of branded drugs among 35 leading countries because many have government-run health systems that pay one price for drugs, senior administration officials said. According to Trump the U.S. is essentially subsidizing the R&D costs for other countries.
Last Sundays 60 Minutes segement on how the Town of Rockford, Illinois can NOT meet its budgetery obligations due to crushing PBM influenced pricing. Example: In 2001 an infant drug cost $40/vile and now
The Dept of Health and Human Services reiterated the agency’s focus on price transparency and said that was another crucial element of the drug pricing plan. The FDA, for example, is going to immediately begin
to examine ways to push drug companies to disclose prices in their advertising.Long awaited and a welcomed consumer policy.
In a first step toward repealing and replacing Obamacare ie. Affordable Care Act (ACA), the House of Representatives narrowly passed the American Health Care Act (AHCA) today by a vote 217-213. Every House Democrat and 20 House Republicans opposed the measure. The bill will now be sent to the U.S. Senate. Until this legislation is passed by the U.S. Senate and signed into law by President Trump, all existing ACA requirements remain in effect, including penalties for noncompliance.
Notable Provisions of the American Health Care Act
If signed into law, the American Health Care Act would, among other changes, make the following revisions to key features of the ACA over the next three years:
Pre-Exissting Conditions Covered: Under the Affordable Care Act, insurance companies are required to cover pre-existing conditions. This is still the case under the AHCA, but the creation of High Risk Pools, funded with $8 billion dollars was an added amendment to the AHCA. Pools provide coverage if you have been locked out of the individual insurance market because of a pre-existing condition, and are subsidized by a state government. The premium is up to twice as much as individual coverage. Individuals who have a lapse in coverage of more than 63 days will be required to pay a 30 percent premium surcharge for 12 months when coverage is purchased.
Adult Coverage to Age 26 Covered: People who are under 26 years old can stay on their parents’ health insurance plan under both the ACA and the AHCA.
No Lifetime Cap: People who are under 26 years old can stay on their parents’ health insurance plan under both the ACA and the AHCA.
“Pay or Play”: Penalties for noncompliance with the “pay or play” coverage requirement (which mandates, in general, that employers with 50+ FT
employees [including full-time equivalent employees] must offer affordable, minimum value coverage to their full-time employees, or pay a penalty tax) are zeroed out. However, the Form 1094 & 1095 reporting requirements are unchanged by the bill.
Individual Mandate: Penalties for noncompliance with the individual mandate are zeroed out, effectively repealing the mandate. In its place, the bill requires issuers in the individual or small group markets to impose a 30% penalty on the health insurance premiums of individuals who do not maintain continuous health insurance coverage.
Essential Health Benefits: AHCA eliminates the requirement for Essential Health Benefits. The AHCA allows limited policies that are only in case of major illness or injury.
HSA Contribution Limits: Limits on contributions to health savings accounts (HSAs) are increased to equal the inflation-adjusted annual out-of-pocket expenses limitation imposed on high deductible health plans (currently $6,550 (self-only coverage)/$13,100 (family coverage)).
Health FSA Contribution Limits: Limits on contributions to health flexible spending arrangements (health FSAs) are eliminated.
Tax Credits for Individual Coverage: Replaces the ACA’s premium tax credits for individual market coverage with advanceable, refundable tax credits adjusted for both age and income.
Market Reforms: Permits states to seek waivers from the ACA’s essential health benefits and age and health status community rating requirements.
Medicaid: Allows states to elect to receive federal Medicaid funding via a block grant or per capita allotment, and alters the ACA’s Medicaid expansion.
The chart below summarizes some of the significant changes made by the AHCA.
Affordable Care Act (ACA)
American Health Care Act (AHCA)
Employer mandate on applicable large employers (ALEs)
No individual or employer mandate effective retroactive to Jan. 1, 2016
Insurers can impose a one year 30% surcharge on consumers with a lapse in continuous coverage (individual and small group market)
Income-based subsidies for premiums that limit after-subsidy cost to a percent of income
Cost sharing reductions for out-of-pocket expenses
Age-based refundable tax credits for premiums, phased out for higher incomes
No cost sharing reductions for out-of-pocket expenses
ACA subsidies phased out after 2019; AHCA credits effective in 2020
Matching federal funds to states for anyone who qualifies
Expanded eligibility to 138% of poverty level income
Federal funds granted to states based on a capped, per-capita basis starting in 2020
States can choose to expand Medicaid eligibility, but would receive less federal support for those additional persons
Premium Age Differences
5:1 (and the MacArthur amendment would allow a higher ratio)
Health Savings Account Limits
Contribution limits increased to maximum out-of-pocket limit for HDHP coverage
$6,550/$13,100 (effective retroactively to Jan. 1, 2017)
Cadillac tax on high-cost employer plans implemented in 2020
Cadillac tax on high-cost employer plans delayed until 2026
3.8% tax on net investment income
Limit placed on contributions to flexible spending accounts
Annual health insurance provider tax
Over-the-counter medication excluded as qualified medical expense
0.9% Medicare tax on individuals with an income higher than $200,000 or families with an income higher than $250,000
Repeal of these taxes retroactive to the beginning of 2017 (except for the repeal of the Medicare tax, which would begin in 2023)
Essential Health Benefits
Individual and small group plans are required to offer ten essential health benefits
Under the MacArthur amendment, individual and small group plans are required to offer the ten essential health benefits, but a waiver option is available
Some Medicaid plans are not required to offer mental health and substance abuse benefits
The following chart summarizes the changes made to the AHCA by the MacArthur amendment.
Insurance Market Provisions
The MacArthur amendment:
Reinstates Essential Health Benefits (EHB) as the federal standard (removes ability of states to define EHBs, but see waiver option)
Maintains the following provisions of the AHCA:
Prohibition on preexisting condition exclusions
Prohibition on discrimination based on gender
Guaranteed availability and renewability of coverage
Coverage of adult children to age 26
Community Rating rules (but see waiver option)
Limited Waiver Option
States may obtain waivers from certain federal standards, in the interest of lowering premiums and expanding the number of enrollees. States could seek waivers from:
Essential Health Benefits (states could set their own definition of EHBs for the individual and small group markets starting in 2020, and increase the age rating ratio above 5:1 starting in 2018)
Community rating rules, except for the following categories, which are not waivable:
Health Status (unless the state has established a high-risk pool or is participating in a federal high risk pool)
Limited Waiver Requirements
States must explain how the waiver will benefit the insurance market in their state, such as reducing average premiums, increasing enrollment, stabilizing premiums for individuals with pre-existing conditions, or increasing the choice of health plans.,Applications are automatically approved within 60 days unless denied by HHS.
As always, please contact us [email protected] for a compliance review of your benefits offering. Click here to read the American Health Care Act in its entirety.