What you can legally do about employer health plan costs

Medical and prescription costs continue to rise, and renewal season may have you searching for ways to respond. Trend is outpacing what you may have seen in the past, and large claims and specialty drugs — including GLP-1s and gene therapies — are putting pressure on both fully insured and self-funded plans. These costs are often not easy for a plan to control, and not every cost control solution is allowed, opening you up to legal or employee-relations challenges.

We’ve partnered with attorneys at Sandberg Phoenix to help you understand what you can do and what to watch for.

Start with the legal guardrails

• Avoid treating people differently based on health status. You can adjust plan design for everyone, but can’t change eligibility, premiums or benefits in response to an individual’s condition.
• Keep your distance from individual health information. Working through a broker or third-party administrator and reviewing only aggregate data can help mitigate the risk you may be exposed to.

Medicare adds another layer. Depending on the size of your organization, the group health plan may need to remain the primary payer for active employees who are Medicare-eligible. That means offering incentives to move those employees off the plan can lead to legal consequences, even when it seems like a win for both sides.

Strategies worth a closer look

There are several options that have been around for a while and newer ones gaining traction.

• Established plan design strategies include tiered and narrow networks, high-deductible health plans paired with health savins accounts, and prior authorization. Some self-funded employers also look at reference-based pricing, which pays providers a percentage of Medicare rates instead of relying on a traditional network. It can offer savings, but provider participation and employee experience need careful planning.
• Wellness incentives can tie financial rewards to healthy activities or outcomes. The rules differ depending on whether a program simply rewards participation or requires meeting a health target, and offering a reasonable alternative for employees who can’t meet a target is a key piece.
• Individual coverage health reimbursement arrangements (ICHRAs) are a newer option that allows an employer to contribute a set amount that employees use toward individual coverage they choose themselves. Some employers use ICHRAs in place of a group plan, while others offer them to a defined class of employees, such as those in a certain location. When designed properly, an ICHRA may also satisfy the Affordable Care Act’s offer-of-coverage requirement, but classes and contributions must follow specific rules.

Don't let renewal pressure rush the decision

When faced with a large increase, you might feel pressure to move quickly on a solution that sounds promising, but remember that it’s important to build in time for due diligence. Our team offers a four-part framework for evaluating any cost containment solution, covering savings, impact on employees and what it takes to implement well. Clear communication with employees is one of the biggest factors in whether a change succeeds.

Watch the full recording on-demand

The full webinar goes deeper into how each option works, the compliance details that can trip you up and the Q&A from attendees. Simply fill out the form to get the recording sent directly to you.

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Content sponsored by Sandberg Phoenix law firm. This update is not intended to be exhaustive, nor should any discussion or opinions be construed as legal, tax or financial advice. TrueNorth Companies recommends consulting with legal, tax or benefits professionals before making any decisions related to employee benefit plans.