Author: Sarah Sipek

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Supreme Court Rules in Favor of Insurance Subsidies

UPDATED: June 25, 2015, 12:08 p.m. CT

The U.S. Supreme Court has ruled in favor of keeping a key provision from the Affordable Care Act.

Thanks to a 6-3 decision in the King v. Burwell case, millions of Americans will retain their right to receive federal tax subsidies under the ACA.

The justices sided with the Obama administration, saying that the health care reform law allows Americans in all states — not just those in states that have established their own exchanges — to receive federal subsidies.

"Five years ago, after nearly a century of talk, decades of trying, a year of bipartisan debate, we finally declared that in America, health care is not a privilege for a few but a right for all," President Barack Obama said in a statement from the White House. "The Affordable Care Act is here to stay."

Chief Justice John Roberts wrote the court’s majority opinion.

During the March hearings on King v. Burwell, Roberts said he saw “a serious constitutional problem” in the idea that Congress would force states to set up exchanges or risk their residents losing tax credits.

Many feared that if the Supreme Court ruled against the legality of federal subsidies, millions of Americans would be left uninsured and that the U.S. health care system could effectively fall apart.

The ACA laid out a plan in which states had the ability to set up their own health insurance exchanges, but the federal government could step in and set up the exchanges for the states if they could not do it on their own. King v. Burwell questioned whether the U.S. government can subsidize insurance in the 34 states that have not yet set up their own insurance markets.

Justice Antonin Scalia wrote the dissenting opinion, saying that the decision “rewrites the law” and was “a bit of interpretive jiggery-pokery” on the part of the court.
 
 "We should start calling this SCOTUScare," he said. 
 
"Rather than rewriting the law under the pretense of interpreting it, the court should have left it to Congress to decide what to do about the act's limitation of tax credits to state exchanges," Scalia wrote.
 
Scalia’s dissent stems from the interpretation of the word “state” to also mean “federal government.” 
"The Secretary of Health and Human Services is not a state," he wrote. "Words no longer have meaning if an exchange that is not established by a state is 'established by the state.” 
Scalia’s dissent stems from the interpretation of the word “state” to also mean “federal government.” 
"The Secretary of Health and Human Services is not a state," he wrote. "Words no longer have meaning if an exchange that is not established by a state is 'established by the state.” 
Scalia’s dissent stems from the interpretation of the word “state” to also mean “federal government.” 
 
"The secretary of Health and Human Services is not a state," he wrote. "Words no longer have meaning if an exchange that is not established by a state is established by the state.”
 
The ruling, the second Supreme Court case in which the justices have decided in favor of the ACA, preserves benefits for an estimated 6.4 million Americans.
 
In National Federation of Independent Business v. Sebelius from 2012, the justices upheld the “individual mandate," which requires Americans to purchase health insurance or pay a penalty.

While Americans can now celebrate their continued access to affordable health care, not much changes for employers, according to Gary Kushner, a Workforce columnist who is the president and CEO of Kushner & Co., a benefits consulting firm.

“Employers and individuals alike will be able to continue their planning for ACA compliance now knowing all exchanges will be treated the same,” Kushner said. “It also means that the employer responsibility provisions of the ACA will be unaffected. Any employer holding back on their planning in anticipation that the court would overturn some or all of the ACA should get started immediately.”

If the decision had gone the other way, the employer mandates and shared responsibility payments would have been removed in states that have federal exchanges, added Rachel Cutler Shim, counsel in the Tax, Benefits & Wealth Planning Group at law firm Reed Smith.

"That would have put into question all of the reporting requirements and whether they were still required and all of the work that employers have been doing to implement look-back period and the measurement method and to track hours so that they can determine which employees are full time would have all been for naught if you weren’t operating in a state that had a state-run exchange," Shim said. "Under the current decision where they essentially said federal exchange and marketplaces can give subsidies, then the shared responsibility payment remains intact, the individual mandate remains intact, and employers can move forward and implement the requirements of the act that they have been working on."

Though their responsibilities have not changed, employers must still be content with the numerous challenges of getting in compliance with ACA mandates, a task the Society for Human Resource Management has pledged to assist: “Today the Supreme Court reaffirmed the constitutionality of a key element of the Affordable Care Act," SHRM said in a written statement. "While this provision of the statute remains intact, other challenges in the ACA remain for employers. SHRM pledges to work with policymakers to address these challenges, including the definition of a full-time employee for coverage mandate, the pending excise tax on high-value health care plans and employer flexibility in offering wellness programs.” 

Jane Perkins, the legal director of the National Health Law Program, added in a written statement: "More than 8 million Americans can now breathe a sigh of relief knowing that the law — not ideology — carried the day."

Check back throughout the day with continuing coverage of the King v. Burwell ruling.

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Prescription Calls for Consolidation

that federal regulators bless UnitedHealth Group Inc.’s $12.8 billion acquisition of Catamaran Corp. later this year, it appears to be a relatively small price to pay for a deal that some experts contend will boost competition rather than shrink it among pharmacy benefit manager companies.
The deal announced this spring would create the nation’s third-largest PBM company by combining UnitedHealth Group’s pharmacy-benefits business, OptumRx, with Schaumburg, Illinois-based Catamaran, which manages more than 400 million prescriptions annually on behalf of 35 million people — about 1 in every 5 prescription claims in the United States.
But when companies grow bigger, some argue that a more powerful industry player could justify raising prices and limiting access to vital prescription drugs. With the skyrocketing costs of these drugs, along with the perception of a dwindling marketplace in the post-acquisition landscape, caution is understandable. 
“There was concern in the marketplace that this would lead to some of these PBMs being able to charge what they want, which would lead to a lack of price competitiveness,” said Ritu Malhotra, vice president and national pharmacy benefits practice leader at consultancy Segal Co. The UnitedHealth deal, however, could foster fresh competition among industry heavyweights Express Scripts Holding Co. and CVS Health Corp. “The industry had gotten a little lopsided, and the third and fourth players were distant from the top two.”
Adam Fein, president of Pembroke Consulitng Inc., echoed those sentiments in an email, stating: “By acquiring Catamaran, OptumRx is signaling that it wants to compete more seriously as a stand-alone PBM. Large employers will now have a third large, viable competitor when bidding their PBM business.” 
PBMs are the intermediaries between the employer and other players in the health care system, Malhotra said. They can save companies significant dollars by using the buying power of enrollees to bargain for lower prices from drugmakers and contract with pharmacies. They can also help patients adhere to their medications through specialty pharmacies and disease management experts and act as the employer’s guide through the increasingly complex world of prescription drugs.
And the role is in high demand. Managing pharmacy benefits is expected to quadruple to a $400 billion market in 2020, up from $100 billion in 2014.
It may come as a surprise to some that a union of this size only moves UnitedHealth into the No. 3 slot among the nation’s largest PBMs, but Express Scripts holds the top spot by volume, with 90 million lives covered while CVS is No. 2 at 85.1 million lives, according to a study from publishing and information company Atlantic Information Services Inc. UnitedHealth will reach about 65 million covered lives when the deal is completed.
The pervading fear around any large-scale consolidation, whether it’s UnitedHealth’s acquisition of Catamaran or RiteAid’s proposed purchase of EnvisionRx for $2 billion in combined cash and stock, which is also expected to close later this year, is that the deals will decrease competition and ultimately hurt the employers who, in theory, would be at the mercy of their PBMs.
This year’s activity comes four years after Express Scripts’ blockbuster $29.1 billion acquisition of Medco, and SXC Health Solutions Corp.’s $4.4 billion deal to acquire Catalyst Health Solution Inc.
The Express Scripts deal ignited lawsuits charging antitrust violations by shrinking competition and raising consumer prices, shining a spotlight on an industry that few tracked and even fewer understood. 
Yet UnitedHealth Group’s acquisition of Catamaran differs in that the combined strengths of the two companies creates a competitive third PBM at the top of the industry to negotiate prices and drive down costs for both employers and employees.
“The combined entity has a unique value proposition,” Malhotra said. “Catamaran comes in with really strong technological sophistication. With UnitedHealth Group’s clinical analysis, the pairing makes them a really unique PBM.”
Traditionally, competition, not industry domination, has been the driving force behind corporate consolidations, explained Jonathan Roberts, an executive vice president at CVS Health. 
“The industry has been consolidating for quite some time, and I think it will continue to consolidate,” said Roberts, who is also the president of CVS/caremark, the pharmacy benefit management and mail service pharmacy division of CVS Health. “Size and scale are important in this business. You need to be able to invest back in the company with technology enhancements, whether that is a move to digital or to keep up with regulatory changes. We view what continues to happen as a natural evolution of the industry.”
Companies, like living organisms, evolve to compete against their peers and defend against predators. The predator in this instance is the rising cost of prescription drugs. With the help of mergers and acquisitions, PBMs are able to bargain for lower prescription drug costs more effectively and work to ensure that the health of the employees taking these drugs is protected.
Feat of Strength 
The role of a PBM is not new. Express Scripts has been in existence for 28 years. The historical lack of interest in PBMs has a lot to do with the fact that, for the past 15 years, the pharmacy industry has been relatively steady because of a rich pipeline of generic drugs. Easy access to generics kept the price of branded drugs low, a fact that gave many employers the courage to navigate the prescription drug market on their own. 
“Historically, because pharmacy costs were relatively flat, the benefit didn’t have to be aggressively managed,” Roberts said. 
Until 2014, the year-to-year inflation rate for generic drugs held below 1 percent, according to the 2015 “Workers’ Compensation Drug Report” conducted by Helios, a workers’ compensation PBM headquartered in Memphis, Tennessee. Then in 2014, the average wholesale price of generic drugs rose nearly 10 percent. 
Without generics to act as a deflationary agent in the market, the cost of specialty drugs skyrocketed. According to an Express Scripts study, “Super Spending: Trends in High-Cost Medication Use,” 575,000 Americans had medication costs in excess of $50,000 in 2014 — almost $29 billion and an increase of 63 percent from 2013. Cancer and hepatitis C drugs lead the way as the most expensive, according to the report (See “Specialty Drug Costs: Hard Pills to Swallow,” June 2015, p. 34). 
Hepatitis C drugs, in particular, were costing patients $1,000 a day and in excess of $150,000 to cure, said Brian Henry, vice president of corporate communications at Express Scripts. Many employers’ response to the high cost put their employees at risk.
“In a marketplace where there was really only one drug available, what a lot of companies did was ration the care for only the sickest patients,” Henry said. “As you can imagine, if you had hepatitis C you would want to get the treatment, but that wasn’t an option for the majority of patients.” 
Suddenly, PBMs were a hot topic among employers. 
Using its size and consequent buying power, Express Scripts was able to intervene on the part of employers and employee patients when a competitor drug entered the market last December. Express Scripts brokered a deal to provide exclusive access to the new drug, which had similar adherence and clinical data at a much more accessible price point. As a result, the PBM was able to drive down the cost of care by 67 percent.
But all large PBMs are not created equal, which keeps the market competitive. 
More than One Way to Get the Job Done
Express Scripts’ strength lies in its size, brokering expensive deals as in the case of the hepatitis C medication. According to Henry, it operates on a “pure-play PBM model,” meaning that it focuses on mail order and specialty drugs and primarily deals with its members over the phone. 
“Our size gives us the ability to act as an independent counterweight for clients in the marketplace,” Henry said. 
CVS/caremark runs on an integrated model that includes the PBM, retail pharmacies, specialty pharmacies, immediate care clinics and pharmacy advisers, Roberts said. CVS’s approach addresses another leading reason prescription drugs are so expensive: nonadherence. In order to be considered adherent to a prescription drug regimen, a patient must take their medication 80 percent of the time. 
“If you take 100,000 retirees, for example, their medical costs are around $1.2 billion,” Roberts said. “If we could keep all of those retirees on their medications, we could actually reduce the overall health care cost by $230 million. When people historically think of a PBM, they think about managing drug costs, but I think people often miss the value we can deliver to their members around keeping them on their medication.” 
The strength of UnitedHealth’s new OptumRx is its ability to collect and analyze user data. Tracking patient usage data as soon as possible in the claim means that employers are less likely to spend wastefully. 
“You want to capture a company’s pharmacy expenses as soon as possible so that you can start looking at that data and then manage it clinically to ensure that they are related to the claim and that it is the right medication for the disease and stage of the disease as well,” said Sarah Berger, vice president of marketing at Helios. 
Even though Helios is a smaller PBM, it provides a platform that manages patient data similar to Catamaran’s. The process begins with the first prescription, or “first fill,” that an employee receives after a company partners with a PBM. From there, all data regarding patient usage, response to the medication and market cost are tracked to ensure that the employee is healthy and the employer is not overspending.
PBMs that effectively deliver utilization management services to company clients are expected to be in high demand, especially with the anticipated release of a new specialty drug developed to treat high cholesterol later this year. 
The injectable drug, known formally as PCSK9 inhibitors, for instance, is a more expensive treatment than the generic statins such as Lipitor to treat and manage high cholesterol, Roberts said. The generic equivalent of Lipitor costs between $200 and $300 a year. This new drug will likely cost between $6,000 and $10,000.
Utilization management technology will allow employers to effectively discern which employees should be on which drugs based on their past response to statins. 
“It should be used by people whose condition is not controlled by statins,” Roberts said. “They’ve been on a statin, and their cholesterol is still higher than it should be. Or they can’t tolerate statins. If we use the new drug to treat those people, then the cost is more justified than if you just opened it up and let anyone who wanted to be on the new drug be on it.”   
Small Package, Big Results 
Access to upward of 68,000 pharmacies across the United States has historically given large PBMs like Express Scripts and CVS the advantage over their smaller competitors. However, Roberts and Malhotra both anticipate a move to formulary solutions that will make smaller players more competitive in the pharmacy benefits market. 
The PBMs will create a preferred list of products that will be vetted by pharmacy therapeutic committees made up of leading physicians, pharmacists and experts across the country, Malhotra said. They will analyze the formulary design strictly from a clinical lens and not a cost lens. Narrowing the selection of prescription drugs in this way will increase competition among drug providers and drive down costs for employers. 
“In the end the manufacturers give the PBMs a rebate for any of their products the benefits manager chooses to dispense,” Malhotra said.
A narrower market helps smaller providers that typically have access to only 20,000 pharmacies, Roberts said. 
Bells and whistles aside, choosing the correct PBM comes down to knowing an organization’s workforce and its needs.
“At the end of the day it’s collaboration and communication,” Berger said. “And we find the most success when we can have frank, open communication with our clients where we can work together toward a goal of right medication, right time to get the right results.”

Provided that federal regulators bless UnitedHealth Group Inc.’s $12.8 billion acquisition of Catamaran Corp. later this year, it appears to be a relatively small price to pay for a deal that some experts contend will boost competition rather than shrink it among pharmacy benefit manager companies.

The deal announced this spring would create the nation’s third-largest PBM company by combining UnitedHealth Group’s pharmacy-benefits business, OptumRx, with Schaumburg, Illinois-based Catamaran, which manages more than 400 million prescriptions annually on behalf of 35 million people — about 1 in every 5 prescription claims in the United States.

 
But when companies grow bigger, some argue that a more powerful industry player could justify raising prices and limiting access to vital prescription drugs. With the skyrocketing costs of these drugs, along with the perception of a dwindling marketplace in the post-acquisition landscape, caution is understandable. 
 
“There was concern in the marketplace that this would lead to some of these PBMs being able to charge what they want, which would lead to a lack of price competitiveness,” said Ritu Malhotra, vice president and national pharmacy benefits practice leader at consultancy Segal Co. The UnitedHealth deal, however, could foster fresh competition among industry heavyweights Express Scripts Holding Co. and CVS Health Corp. “The industry had gotten a little lopsided, and the third and fourth players were distant from the top two.”
 
Adam Fein, president of Pembroke Consulitng Inc., echoed those sentiments in an email, stating: “By acquiring Catamaran, OptumRx is signaling that it wants to compete more seriously as a stand-alone PBM. Large employers will now have a third large, viable competitor when bidding their PBM business.” 
 
PBMs are the intermediaries between the employer and other players in the health care system, Malhotra said. They can save companies significant dollars by using the buying power of enrollees to bargain for lower prices from drugmakers and contract with pharmacies. They can also help patients adhere to their medications through specialty pharmacies and disease management experts and act as the employer’s guide through the increasingly complex world of prescription drugs.
 
And the role is in high demand. Managing pharmacy benefits is expected to quadruple to a $400 billion market in 2020, up from $100 billion in 2014.
 
It may come as a surprise to some that a union of this size only moves UnitedHealth into the No. 3 slot among the nation’s largest PBMs, but Express Scripts holds the top spot by volume, with 90 million lives covered while CVS is No. 2 at 85.1 million lives, according to a study from publishing and information company Atlantic Information Services Inc. UnitedHealth will reach about 65 million covered lives when the deal is completed.
 
The pervading fear around any large-scale consolidation, whether it’s UnitedHealth’s acquisition of Catamaran or RiteAid’s proposed purchase of EnvisionRx for $2 billion in combined cash and stock, which is also expected to close later this year, is that the deals will decrease competition and ultimately hurt the employers who, in theory, would be at the mercy of their PBMs.
 
This year’s activity comes four years after Express Scripts’ blockbuster $29.1 billion acquisition of Medco, and SXC Health Solutions Corp.’s $4.4 billion deal to acquire Catalyst Health Solution Inc.
 
The Express Scripts deal ignited lawsuits charging antitrust violations by shrinking competition and raising consumer prices, shining a spotlight on an industry that few tracked and even fewer understood. 
 
Yet UnitedHealth Group’s acquisition of Catamaran differs in that the combined strengths of the two companies creates a competitive third PBM at the top of the industry to negotiate prices and drive down costs for both employers and employees.
 
“The combined entity has a unique value proposition,” Malhotra said. “Catamaran comes in with really strong technological sophistication. With UnitedHealth Group’s clinical analysis, the pairing makes them a really unique PBM.”
 
Traditionally, competition, not industry domination, has been the driving force behind corporate consolidations, explained Jonathan Roberts, an executive vice president at CVS Health. 
 
“The industry has been consolidating for quite some time, and I think it will continue to consolidate,” said Roberts, who is also the president of CVS/caremark, the pharmacy benefit management and mail service pharmacy division of CVS Health. “Size and scale are important in this business. You need to be able to invest back in the company with technology enhancements, whether that is a move to digital or to keep up with regulatory changes. We view what continues to happen as a natural evolution of the industry.”
 
Companies, like living organisms, evolve to compete against their peers and defend against predators. The predator in this instance is the rising cost of prescription drugs. With the help of mergers and acquisitions, PBMs are able to bargain for lower prescription drug costs more effectively and work to ensure that the health of the employees taking these drugs is protected.
 
Feat of Strength 
 
The role of a PBM is not new. Express Scripts has been in existence for 28 years. The historical lack of interest in PBMs has a lot to do with the fact that, for the past 15 years, the pharmacy industry has been relatively steady because of a rich pipeline of generic drugs. Easy access to generics kept the price of branded drugs low, a fact that gave many employers the courage to navigate the prescription drug market on their own. 
 
“Historically, because pharmacy costs were relatively flat, the benefit didn’t have to be aggressively managed,” Roberts said. 
 
Until 2014, the year-to-year inflation rate for generic drugs held below 1 percent, according to the 2015 “Workers’ Compensation Drug Report” conducted by Helios, a workers’ compensation PBM headquartered in Memphis, Tennessee. Then in 2014, the average wholesale price of generic drugs rose nearly 10 percent. 
 
Without generics to act as a deflationary agent in the market, the cost of specialty drugs skyrocketed. According to an Express Scripts study, “Super Spending: Trends in High-Cost Medication Use,” 575,000 Americans had medication costs in excess of $50,000 in 2014 — almost $29 billion and an increase of 63 percent from 2013. Cancer and hepatitis C drugs lead the way as the most expensive, according to the report (See “Specialty Drug Costs: Hard Pills to Swallow,” June 2015, p. 34). 
 
Hepatitis C drugs, in particular, were costing patients $1,000 a day and in excess of $150,000 to cure, said Brian Henry, vice president of corporate communications at Express Scripts. Many employers’ response to the high cost put their employees at risk.
 
“In a marketplace where there was really only one drug available, what a lot of companies did was ration the care for only the sickest patients,” Henry said. “As you can imagine, if you had hepatitis C you would want to get the treatment, but that wasn’t an option for the majority of patients.” 
 
Suddenly, PBMs were a hot topic among employers. 
 
Using its size and consequent buying power, Express Scripts was able to intervene on the part of employers and employee patients when a competitor drug entered the market last December. Express Scripts brokered a deal to provide exclusive access to the new drug, which had similar adherence and clinical data at a much more accessible price point. As a result, the PBM was able to drive down the cost of care by 67 percent.
 
But all large PBMs are not created equal, which keeps the market competitive. 
 
More than One Way to Get the Job Done
 
Express Scripts’ strength lies in its size, brokering expensive deals as in the case of the hepatitis C medication. According to Henry, it operates on a “pure-play PBM model,” meaning that it focuses on mail order and specialty drugs and primarily deals with its members over the phone. 
 
“Our size gives us the ability to act as an independent counterweight for clients in the marketplace,” Henry said. 
 
CVS/caremark runs on an integrated model that includes the PBM, retail pharmacies, specialty pharmacies, immediate care clinics and pharmacy advisers, Roberts said. CVS’s approach addresses another leading reason prescription drugs are so expensive: nonadherence. In order to be considered adherent to a prescription drug regimen, a patient must take their medication 80 percent of the time. 
 
“If you take 100,000 retirees, for example, their medical costs are around $1.2 billion,” Roberts said. “If we could keep all of those retirees on their medications, we could actually reduce the overall health care cost by $230 million. When people historically think of a PBM, they think about managing drug costs, but I think people often miss the value we can deliver to their members around keeping them on their medication.” 
 
The strength of UnitedHealth’s new OptumRx is its ability to collect and analyze user data. Tracking patient usage data as soon as possible in the claim means that employers are less likely to spend wastefully. 
 
“You want to capture a company’s pharmacy expenses as soon as possible so that you can start looking at that data and then manage it clinically to ensure that they are related to the claim and that it is the right medication for the disease and stage of the disease as well,” said Sarah Berger, vice president of marketing at Helios. 
 
Even though Helios is a smaller PBM, it provides a platform that manages patient data similar to Catamaran’s. The process begins with the first prescription, or “first fill,” that an employee receives after a company partners with a PBM. From there, all data regarding patient usage, response to the medication and market cost are tracked to ensure that the employee is healthy and the employer is not overspending.
 
PBMs that effectively deliver utilization management services to company clients are expected to be in high demand, especially with the anticipated release of a new specialty drug developed to treat high cholesterol later this year. 
 
The injectable drug, known formally as PCSK9 inhibitors, for instance, is a more expensive treatment than the generic statins such as Lipitor to treat and manage high cholesterol, Roberts said. The generic equivalent of Lipitor costs between $200 and $300 a year. This new drug will likely cost between $6,000 and $10,000.
Utilization management technology will allow employers to effectively discern which employees should be on which drugs based on their past response to statins.
 
“It should be used by people whose condition is not controlled by statins,” Roberts said. “They’ve been on a statin, and their cholesterol is still higher than it should be. Or they can’t tolerate statins. If we use the new drug to treat those people, then the cost is more justified than if you just opened it up and let anyone who wanted to be on the new drug be on it.”   
 
Small Package, Big Results 
 
Access to upward of 68,000 pharmacies across the United States has historically given large PBMs like Express Scripts and CVS the advantage over their smaller competitors. However, Roberts and Malhotra both anticipate a move to formulary solutions that will make smaller players more competitive in the pharmacy benefits market. 
 
The PBMs will create a preferred list of products that will be vetted by pharmacy therapeutic committees made up of leading physicians, pharmacists and experts across the country, Malhotra said. They will analyze the formulary design strictly from a clinical lens and not a cost lens. Narrowing the selection of prescription drugs in this way will increase competition among drug providers and drive down costs for employers. 
 
“In the end the manufacturers give the PBMs a rebate for any of their products the benefits manager chooses to dispense,” Malhotra said.
 
A narrower market helps smaller providers that typically have access to only 20,000 pharmacies, Roberts said. 
Bells and whistles aside, choosing the correct PBM comes down to knowing an organization’s workforce and its needs.
 
“At the end of the day it’s collaboration and communication,” Berger said. “And we find the most success when we can have frank, open communication with our clients where we can work together toward a goal of right medication, right time to get the right results.”
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Few Companies Taking a L(EAP) of Faith

Today's benefit managers have their hands full. The Affordable Care Act legislation and its rapidly approaching deadlines and penalties have made issues such as compliance and exchanges top priority. It’s no wonder employee assistance programs seem to have gotten lost in the shuffle.

According to Chestnut Global Partners’ “Trends Report 2015,” the cumulative EAP usage rate is 5.5 percent, which suggests that both employers and employees have placed their attention elsewhere.

This isn’t cause for concern among employers though. Low usage rates are par for the course in EAPs. The National Behavioral Consortium, a nonprofit trade association composed of regional Managed Behavioral Healthcare Organizations — groups that follow evidence-based practices for providing high-quality care, access and consumer protection — and EAP member organizations, conducted a benchmark survey in 2013 to gauge program use and effectiveness among EAP vendors.

Employers are increasingly using employee assistance programs to help employees receive assistance for personal problems that might affect overall job performance. Oftentimes, stress, physical and emotional health, alcoholism, substance abuse and family issues can lead to an employee’s decreased productivity in the workplace.

The purpose of a successful EAP is to provide voluntary services consisting of short-term counseling and referrals for employees facing these difficult issues.

EAPs are almost always free for employees, and they are mostly voluntary. The goal is not to punish an employee but rather to encourage that worker to receive services needed to help deal with personal issues. EAPs should always be confidential. It is only when confidentiality is maintained that employees will fully use the program. 

Confidentiality Key to a Successful EAP

 Here are five tips to implementing a successful EAP.

1. Know your company goals. Employers exploring whether to offer an EAP should analyze company needs and workforce trends. Is there high company turnover that needs to be addressed? Have there been prevalent examples of employee dissatisfaction and work-relationship issues? Is absenteeism or tardiness a recurring problem? Employers should create a working group of qualified human resources practitioners, among others, to discuss whether an EAP would be a worthwhile benefit to employees. 

2. Hire a qualified third-party EAP service provider. To save costs, some employers provide EAP services internally through employee counselors, which can have negative consequences. Confidentiality is key to maintaining a successful EAP. Workers may perceive an internally handled EAP as not confidential in nature. Internal EAP departments also may find themselves in the conflicted position of seeking to help an employee while also cooperating with an employer’s inquiries as to particular employees. Using a third-party EAP provider avoids these problems. Third parties usually have a wide range of experience regarding EAP services. Employers, however, should thoroughly screen any EAP third parties as to qualifications. And, both the employer and the third-party EAP service provider should clearly define their roles regarding each other so as not to create any conflicts or diminished service. 

3. Make sure employees know you have an EAP. This may sound obvious, but one of the main reasons why EAPs are underutilized is that employees oftentimes do not even know they exist. Once an employer has implemented an EAP, it should inform all employees of three things: the EAP’s existence and purpose, the process for employees to use the services, and that it is a strictly confidential process. 

Process and confidentiality are very important. Employees should be able to contact an EAP counselor without any need to first involve a superior. And, EAP counseling should ideally be conducted in a place that is either off-site, or, if on-site, very private. EAP services also should be sensitive to an employee’s time constraints and preferences. Finally, employees should be made aware that EAP counselors are able to provide not only short-term counseling but also referrals, follow-up services and educational programs.  

4. Understand supervisor roles regarding EAPs. EAPs are usually a voluntary process and most effective when employees, themselves, seek services. But supervisors still have a role in this process. Supervisors should be trained to identify workforce issues, and, in appropriate circumstances, discreetly suggest to an employee that EAP services are available. This is especially appropriate where the employee admits to the supervisor difficult personal issues, such as alcoholism, substance abuse or severe depression. 

5. Evaluate the EAP’s success. Finally, employers should track the EAP’s progress and achievement of company goals. A third-party EAP service provider may, as part of its services, assist in this analysis. Both employees and EAP counselors should be allowed to anonymously provide feedback as to the EAP process.

A successful EAP program should result in increased attendance and morale, decreased turnover and labor disputes, and a work force that feels valued. All of these benefits in turn lead to increased productivity. 

Daniel R. Saeedi is an attorney at Taft, Stettinius & Hollister in Chicago. To comment, email editors@workforce.com.

The survey found the average EAP counseling usage rate among the 82 companies surveyed was just 4.5 percent of the 146 million lives they collectively cover.

It’s hard to understand why an employer would continue to pay for a program that is so poorly received by employees until you look at the cost. As part of its 2015 trends report on the state of the EAP industry, Chestnut, a Bloomington, Illinois-based EAP provider, reported that the typical employer allots just 1 percent of its benefits budget for EAP programs. 

“Because it is such a small percentage, I think [employers] are only looking for the best price and may not fully comprehend that there are different levels of services and different levels of quality,” said Todd Donalson, director of training and consultation at Chestnut. “There are different levels of service based on what your organizational goal is. You have to dig deeper into what the product actually delivers.”

EAPs were originally developed to provide assessment and services for addressing a range of personal problems and concerns that interfere with employees’ well-being and work performance. Interventions for issues ranging from depression to substance abuse were delivered in person, by telephone or over the Internet.

To their credit, over the past five years EAPs have been striving to deliver a wider array of useful services to employees. ComPsych Corp., the world’s largest provider of EAP services, has seen the industry expand dramatically from its roots in mental health services over the past few years. The Chicago-based company specifically focuses on integrating EAP services into other corporate wellness initiatives to boost participation and bottom-line results for employers.

“Today, it’s not only mental wellness,” said ComPsych CEO Richard Chaifetz. “It’s absence management. It’s health navigation. It’s a variety of different services to give people the requisite tools and guidance to help them solve their personal problems.”

The integration of EAPs into wellness and health management programs could not have come at a better time. Given the pressure the Affordable Care Act has placed on employers to provide access to quality health care for employees, low-cost programs that keep employees well and cut down on insuranceclaims have made EAPs more popular. According to the Chestnutsurvey, EAP usage in North America increased by 7 percent across all businesses in 2014. 

Employee Assistance Program Providers
Source: Companies

“If the issue is of a personal nature, people are intimidated by having to go through an employer plan or out onto an exchange, and it becomes a block to care,” said Matt Mollenhauer, managing director at Chestnut. “Given the ACA legislation, the EAP’s value is derived from the fact that it provides an easy and safe place to go and get support.”

Furthermore, a September 2014 ruling by the Labor, Treasury and Health & Human Services departments found that EAPs are an excepted benefit and as such do not need to comply with certain requirements under the ACA. As a result, EAPs don’t need to be in compliance with out-of-pocket limitations; they are not subject to lifetime dollar limits on essential health benefits and they are not subject to pre-existing condition exclusions.

In order for EAPs to live up to their potential, employers must put in the effort to choose the right EAP for them.

Free and Easy

Employers have two options when it comes to choosing an EAP for their company: free and fee-based.

Free, or embedded EAPs as they are formally known, are offered as part of a larger insurance product by insurance giants such as Aetna Inc., Humana Inc. and Optum Inc. Employees don’t need to sign up for it. It comes as part of a suite of services for essentially no additional cost.

According to Winning Workplaces, a nonprofit dedicated to creating better work environments, employers adopted embedded EAPs as a means of offering accessible care to all employees.

Employees must elect fee-based EAPs, but their active choice to participate in the program gives the service more leverage to make an impact. At ComPsych, fee-based EAPs are integrated into wellness programs, Chaifetz said. For example, if an employee calls in saying that they are experiencing stress and depression and it is determined that they are overweight and possibly suffering from diabetes, the employee would not only be referred to a counselor for the depressive symptomology, but also they  would be engaged in wellness coaching to deal with the weight problem and manage their diabetes situation.

“Fee-based EAPs allow us to focus on the entire individual, not just some symptoms they might be presenting,” Chaifetz said.

In this vein of treating the underlying cause of a problem instead of the presenting ailment, many fee-based EAPs are moving into the area of fatigue management.

“In the last five to 10 years, we’ve had researchers come out with studies that link inefficient sleep not only to workplace safety initiatives but also more into public health issues,” Donalson said. “Now it’s linked to more health problems like diabetes, depression and heart disease.”

Fee-based EAPs are now being designed to screen for possible sleep disorders and intervene with techniques to improve employee sleep quality, according to Chestnut. Integrating with largerwellness programs then allows employers to develop technology policies that help employees get better quality sleep.

Intuitive Value

One of the biggest hurdles EAPs face is the lack of hard data to support their value to a company. In a workplace environment where return on investment is everything, the inability to provide hard numbers linking EAP intervention to measurable increases in employee health leaves employers unconvinced that EAPs are something they should invest time and effort in developing.

“We know intuitively that people who are healthier perform better,” Chaifetz said. “If you have a grossly obese person who is smoking, they are going to miss more work, be more lethargic and not be as good of a performer. There is just an inherent return on that.”

Source: Chestnut Global Partners 2015 Trends Report

Mines & Associates, a Denver-based EAP provider, found that employers can expect anywhere from a $2 to $7 return on their investment in EAP programs.

Right now, one of the greatest perceived values of EAPs is employee engagement. As a result, many EAPs are looking to expand their technology presence so that their services are easier for employees to interact with.

“The EAP industry has been relatively slow to adopt technology into their delivery services,” Chestnut’s Donalson said. “It’s about the ability to connect in a meaningful way. In the next year or two, you’re going to see upwards of 50 to 60 percent of EAPs use technology to collect data to prove to customers that they are actually making an impact on work.”

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Special Report: Vision and Dental Benefits — More to See, More to Chew On

Since the Affordable Care Act was passed in 2010, many employers have escalated cuts in benefits, instituted high-deductible health plans and moved employees to the private exchange to shift the rising cost of health care onto their employees. 

With the PricewaterhouseCoopers Health Research Institute predicting that in 2015 the price of health care will increase 6.8 percent for employers, there are seemingly few options available to control their benefits costs.

But with dental and vision benefits, employers have the opportunity to offer some relief — as well as a bright smile, a new pair of spectacles and some hidden health benefits. 

According to the Segal Group 2015 Health Plan Cost Trend Survey, trends for dental coverage costs are expected to climb steadily at 4 percent in 2015, while vision plan costs are expected to dip below 3 percent in the coming year. This dental and vision coverage is stand-alone and separate from any coverage a comprehensive health plan might provide.

Unlike the cost of medical care, which is driven up with the arrival of new treatments and ways of managing care that better align with the Affordable Care Act’s mandates, dental and vision benefits have remained somewhat insulated from such inflation, said Vinny Graziano, vice president of Segal Consulting, an independent benefits, compensation and human resources consultancy headquartered in Chicago.

“In terms of inflation, medical is still the biggest chunk of the benefits pie,” Graziano said. “When it comes to dental and vision, it’s pretty much renew it and put it in place again. There is not as much energy, thought or focus given to it because the medical side is so demanding.”

MetLife Inc.’s 12th annual U.S. Employee Benefit Trends Study released at the end of 2014 found that when employers were asked to cite issues that they find “very challenging,” understanding the effects of the Affordable Care Act ranked second, with 49 percent of employers citing it as a top concern.

The relatively low cost of dental and vision plans means that continuing to offer coverage should be a no-brainer.

The Henry J. Kaiser Foundation’s 2014 Employer Health Benefits Survey of 2,052 firms of small and large size found that 53 percent of companies offering health benefits offer or contribute to a dental insurance plan for their employees that is separate from any coverage the health plans might include. This number has held steady since 2012.

The same study found that 35 percent of surveyed firms offer or contribute to a vision benefit plan for their employees that is separate from the health care plan the company offers. This is up from the 17 percent of employers who offered vision benefits in 2012.

“An aging workforce would indicate a greater need for vision correction,” said Lukas Ruecker, president of EyeMed Vision Care. “We also know that blue light from tablets and other mobile devices can increase the risk for macular degeneration, so the need for annual vision exams and correction will continue to increase.”

“I think employers look at dental and vision benefits with a sense of relief,” Graziano added. “Dental only went up 4 percent this year. They can use the same strategy. They don’t have to cut benefits. It means they don’t have to kick employees one more time. It’s a small part of the overall picture with a big impact.”

Graziano’s characterization of dental and vision benefits at a low cost as “not a beating” is viewed as an understatement by others in the industry. The positive effect the coverage has on employees’ overall health and productivity makes it worthwhile for employers to find a way to continue to offer the benefits.

Dental (and Vision) to the Rescue

Even though offering these benefits is not a significant cost to employers, the effort is appreciated by their employees. According to the MetLife benefits trend study, vision care insurance was the most popular voluntary benefit among employees (health care coverage was not listed as a voluntary benefit in this survey), with 71 percent indicating an interest.

A 2014 Society for Human Resource Management study on vision care found that 83 percent of employees who were offered vision coverage by their employers chose to enroll in 2013 compared with 78 percent in 2012.

After medical coverage, dental benefits are the most frequently selected benefit, according to Tom Palmer, senior vice president of sales and service at United Concordia Dental Cos. The MetLife benefits trend study also found that 76 percent of employees report that they would be interested in voluntary dental insurance if their employer offered it.

High demand and enrollment rates indicate that benefits managers are providing a service that employees appreciate, which is part of the goal. But in addition to keeping employees happy, these benefits are keeping them healthy in unexpected ways.

An eye exam, for example, is the first line of defense for several chronic diseases.

“Preventive vision checkups can help discover and treat potential issues such as diabetes and hypertension earlier and at a lower cost than having the disease diagnosed by a physician on an employee’s medical insurance plan,” said Alan Hirschberg, vice president of MetLife. 

Broken blood vessels in the retina are an indicator of diabetes. That kind of bleeding usually signals that a buildup of sugar in the patient’s bloodstream has begun to break down the capillaries that feed the retina. Elevated blood-sugar levels are a warning sign of diabetes.

Catching the disease at this early stage translates to dollars saved for employers. According to the Vision Council, the representative body for the manufacturers and suppliers in the optical industry, employers can gain as much as $7 for every $1 spent on vision coverage. This translates to $8 billion saved annually in lost productivity for the treatment of chronic illnesses, according to the council.

Dental coverage yields similar results. An article published in the Journal of Periodontal Research found that high glucose levels often result in a higher instance of gum disease, so catching the oral issue early on can help prevent further health complications.

“You can’t be truly healthy without good oral health,” said Dr. Bill Kohn, vice president of dental science and policy at Delta Dental. “There is more and more of a recognition that oral health is part of overall health, and that’s true no matter how the benefit is offered.”

Even though the Affordable Care Act targets the provision of medical benefits, employers must still consider the legislation when constructing their dental and vision benefits plans. 

The ACA does not require employers to provide either dental or vision benefits to their employees. However, pediatric dental and vision coverage are a part of the legislation’s 10essential health benefits that must be provided by all health plans.

If an employer chooses to offer dental and vision benefits, it can be done in one of two ways, said Melissa Larkin, director of national sales support at Delta Dental. The choice employers make has a significant effect on both cost and quality of coverage.

The first option is for an employer to embed a dental or vision plan within its health insurance plan. Employees will pay a single monthly premium that includes all services, Larkin said.

While a packaging approach may seem convenient, it is not always beneficial to employees. An embedded approach requires employees to hit a large medical deductible, sometimes upward of $5,000 before any dental benefits can be received, Kohn said. 

“That’s a big concern when you’re talking about embedding into a medical plan,” Kohn added. “Employees aren’t always clear on how the deductible is handled, so they end up being surprised when dental work is not covered.”

In addition, folding dental and vision into a medical plan means these plans have the potential to become subject to the excise tax, commonly referred to as the “Cadillac” tax, that will go into effect in 2018. Dental and vision add to the premium total and may end up requiring some employers to pay the 40 percent tax rate, Larkin said. 

By far, the more popular option is for an employer to offer dental and vision benefits as stand-alone options that exist outside of the medical benefits package. If the stand-alone option is chosen, the ACA legislation does not apply, and dental and vision coverage does not count toward an employee’s medical deductible, Kohn said.

“There is no deductible involved, so with the first dollar the employee is getting his benefit,” Kohn said. 

Employers should also know that moving their employees to high-deductible health plans or shifting them to the private exchange will not affect access to quality stand-alone dental and vision benefits.

“I haven’t seen a decrease in uptake on dental on the private exchanges,” Larkin said. “It’s kind of the opposite, actually. There isn’t an adversity to the benefit once you go out to the private exchange. It’s taken just as frequently as it is on a traditional benefit setting.”

According to Palmer, high-deductible plans and private exchanges will continue to make dental and vision a viable option to employees.

“Employees have deemed these products important,” Palmer said. “If employers give them X amount of dollars to spend on coverage, they will continue to buy into dental and vision plans.”

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Accenture Doubles Maternity Leave

Global management consulting firm Accenture strives to provide its employees with great career opportunities. In pursuit of that goal, the company announced on March 12 that it is doubling its maternity leave benefits.

Part-time and full-time female employees will now be offered up to 16 weeks of paid leave, according to a statement released by the company. According to Accenture’s rewards and benefits page, other primary caregivers’ leave remains unchanged at up to eight weeks off.

This is a vast improvement from the leave required by the government under the Family and Medical Leave Act, which states that qualifying female employees must be offered 12 weeks of job-protected unpaid leave.

“These expanded benefits will help us attract, retain and inspire the best people,” said Steve Rohleder, group chief executive at Accenture, in a written statement.

The new policy went into effect March 1. It also offers up to eight weeks of paid parental leave after the birth or adoption of a new child for other primary caregivers and enhances the amount of paid leave for secondary caregivers.

The additional benefits build on Accenture’s current comprehensive support for parents, which includes access to 40 hours of backup child care per year and a library of community-based programs and resources, the company said.

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Mercer Focuses on Benefits With Benefitfocus Deal

The Affordable Care Act is helping introduce a new concept into health care: choice. Now more than ever employees have the ability to pick and choose the coverage that best suits them.

In recognition of this changing dynamic, global human resources and financial services firm Mercer announced Feb. 24 that it will expand its relationship with cloud-based benefits technology provider Benefitfocus Inc. Mercer made an initial 9.9 percent investment with the option to increase its ownership over time, according to a written statement.

Expanding its relationship with Benefitfocus will allow the company to remain competitive in the private exchange marketplace, the company said.

“This is a milestone for Benefitfocus and a testament to the power of combining our technological expertise with Mercer’s proven execution and broad client reach,”said Benefitfocus President and CEO Shawn Jenkins in a written statement.

Mercer Marketplace has become a leading private benefits exchange “for active employees,” said Julio Portalatin, Mercer’s president and CEO in a statement. “The success of Mercer Marketplace is driven by the flexibility that allows it to meet the needs of a wide range of companies and individuals. Our proprietary solution, powered by Benefitfocus technology, is critical to that flexibility as we continue to innovate and grow together.”

Given the current state of the industry, Mercer’s move is a smart one, according to R. Ray Wang, principal analyst and founder of Constellation Research Inc.

“This is a smart move by Mercer in building out its ecosystem,” Wang said. “The benefits marketplace is a very hot area, especially post-ACA. Employers are looking for one-stop shops and also to have economies of scale.”

Mercer Marketplace said it grew the number of participating employers, eligible employees and eligible lives by five times in 2014. The expansion combined with Mercer’s flexible offerings has allowed employers to save up to 15 percent on medical plan costs and up to 10 percent on nonmedical benefits such as voluntary life and disability, according to a statement.

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Mapping Out Workforce Wellness in Eastern and Western Europe

Wellness and employee assistance programs tend to follow industry, and according to the United Nations Conference on Trade and Development, foreign industry is moving into developing economies.

Eastern Europe is one of those economies.

Foreign investors couldn’t be coming at a better time, at least in terms of the well-being of employees. With Europe still in the midst of an economic crisis, governments across the continent have been making budget cuts. Wellness programs, which are traditionally provided by the state, were among the first to go.

“There is a budget problem in Europe, so the government will not spend as much on these issues as they used to,” said Dirk Antonissen, CEO of ISW Limits, a wellness program provider headquartered in Leuven, Belgium. “The influence of U.S.-based multinationals coming in is also driving other companies doing these kinds of initiatives in the field of employee assistance.”

The region has been slowly positioning itself as a favorable environment for foreign business since it began transitioning from state-controlled to an open, free-market economy in the early 1990s. According to a report on the economic growth in Central and Eastern Europe by the McKinsey Global Institute, a business and economics research firm, at 18 percent, the region boasts the lowest corporate income tax rate of any foreign market.

Given the appealing tax incentives, an educated workforce and inexpensive pay rates — the hourly wage of Eastern European workers is 75 percent less than their Western European counterparts — it’s not surprising that companies such as financial-services company UniCredit Group and tech giant Hewlett-Packard Co. have set up shop in Poland. The U.N. report also states that Eastern Europe’s outsourcing and offshoring industry is growing at twice the rate of India’s.

But rolling out a wellness program in Europe is not as simple as carrying over U.S. practices. The region has its own unique set of health concerns that are heavily influenced by the struggling economic situation.

“If you look at the top health risks driving organizational wellness strategies, there is a difference between Europe and the United States,” Antonissen said. “In the U.S. it’s more physical activity or exercise. Stress, psychosocial — the well-being of employees in the work situation is really something that most organizations and companies in Europe are concerned with.”

Unlike in the U.S., where it is often assumed that a company’s workforce will benefit from nutrition and exercise, wellness programs initiated in Eastern Europe must start on the ground floor. Antonissen said that employee assistance programs, which typically focus on mental well-being, are not culturally part of the well-being services in Europe. Therefore, extensive audits must be performed to flesh out company-specific wellness issues.

The best thing that a company expanding to the region can do is leave all assumptions at home and take the advice of locals, said Matt Mollenhauer, vice president of operations at Chestnut Global Partners, a wellness provider that is partnered with ISW Limits.