Employer advocates fear Cut Inflation Act will increase health plan costs

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A party-line vote in the US Senate on August 7 advanced HR 5376also known as the Inflation Reduction Act 2022, or IRA, bringing in a package of legislative proposals affecting areas such as climate change, taxation and — perhaps most important for employers — Health care.

Among its provisions, the latest version of the bill would create a program allow Medicare to negotiate the price of certain pharmaceutical drugs from 2026.

Although efforts to allow Medicare to negotiate drug prices have recently benefited from the support of employer groupsthe development also creates potential concerns for employers who will not directly benefit, according to Garrett Hohimer, director, policy and advocacy at the Business Group on Health.

“We understand the importance of Medicare addressing the pricing of its drug costs, but focusing only on providing Medicare somehow abandons the larger reforms that are needed throughout the system to make it sustainable for all people. stakeholders,” Hohimer told HR Dive in an interview. .

The primary concern of employers is that if Medicare negotiations lead to reduced revenues for prescription drug manufacturers, these manufacturers may then seek to recoup lost profits by charging more to group health insurance plans, such as those in which employers participate.

While BGH does not have exact projections of the expected cost increase should the IRA pass, or which specific drugmakers might seek to target cost shifting, Hohimer said he would be “naive” to dismiss the idea. . “It’s just another thing employers need to be diligent about with their suppliers, consultants and [pharmacy benefit managers],” he added. “The market impacts are incredible, and it will be up to employers to monitor them.”

Other stakeholders believe that while cost shifting may be the result of Medicare’s ability to negotiate prices, this outcome is not necessarily inevitable.

Shandon Fowler, vice president of product marketing at consumer-focused healthcare platform Alegeus, said the Medicare negotiations could help establish a baseline for other negotiators. Another possibility, he noted, is that employers and associations with the right kind of leverage and good relationships with PBMs could still lock in more favorable costs for their plan members.

“The main point is that Medicare’s ability to negotiate these rates will have a huge impact on the ecosystem anyway,” Fowler said. “It’s really still to be seen if everyone who’s not in Medicare is going to foot the bill.”

How could ACA grant extensions impact the market?

Drug pricing is just one area of ​​focus for employers as the bill heads to President Joe Biden’s desk. The House of Representatives is due to vote on the Senate version of the IRA on Friday, August 12, House Speaker Nancy Pelosi said. a press conference Wednesday.

Another of the IRA’s provisions concerns premium subsidies for Affordable Care Act individual market plans.

In 2021, the American Rescue Plan established premium subsidies with the goal of further expanding health coverage options for US consumers. Federal officials later credited the subsidies, in part, when the percentage of Americans without health insurance fell to a record low of 8% in the first quarter of 2022, Dive health reported.

These grants are due to expire at the end of 2022, but the IRA extend them until 2025. That represents a “sigh of relief” for individual markets, said Fowler, who could see continued consumer interest from the extension. Additionally, greater stability in the ACA market could attract the attention of employers who are weary of rising healthcare costs.

“The stability of [the individual] The market makes it attractive for companies that want to get out of the health insurance underwriting business, so to speak,” Fowler said, adding that the grant extension “helps with those options instead of being a setback for the stability of these exchanges. ”

However, employers’ interest in the individual market is not new. Recent federal efforts have sought to expand the ability of employers to forgo traditional group health insurance plans in favor of other frameworks, such as tax-exempt health reimbursement accounts. The HRAs were at the center of the Trump administration, who published regulations in 2020 to enable employers to provide funds to workers, through an HRA, to enable them to purchase coverage in the individual market.

So far, HRA scrutiny has mostly taken place among small and medium-sized employers, said John Staub, director of outreach at health benefits software company Remodel Health, though larger employers may soon agree. the idea too. “We’ve seen the number of employers leaving their group plans increase every year,” he noted.

Staub said he likens traditional group health plans to pensions in the retirement space; both are legacy models that allow employers some control, but they are also expensive. And with Health care price inflation set to continue for the foreseeable future, alternative models may become even more attractive as the individual market stabilizes, he added.

BGH, which primarily represents large employers, does not oppose the extension of ACA premium subsidies, Hohimer said in an email. “When it comes to trends, our members believe their plans play an important role in the health and well-being of their workforce,” he noted.