With the rapid modifications in healthcare legislation, it is essential for plan sponsors and employers to stay informed.

Christine Cooper and Jack Towarnicky’s recent BenefitsPRO article provides a comprehensive analysis of how this landmark legislation could reshape the dynamics of employer-sponsored health plans.

Understanding the Inflation Reduction Act (IRA)

The Inflation Reduction Act (IRA) introduces sweeping changes aimed at reducing prescription drug costs and enhancing Medicare benefits. While these changes provide relief for Medicare recipients, they raise potential cost concerns for employer-sponsored health plans, which are excluded from Medicare’s pricing negotiations.

Cooper and Towarnicky highlight cost shifting as a key concern. Historically, Medicare cost reductions have indirectly resulted in higher prices for employer-sponsored plans. For decades, Congress has fixed the prices providers could charge, as well as moderated increases so that reimbursements are typically below the cost to actually provide services. Further, Congress eliminated balance billing for most Medicare beneficiaries. In response, providers often limit the number of Medicare patients they include in their practice and raise the price for everyone who is not subject to government price fixing. This pattern has been in place for over four decades, and one study shows that employer-sponsored plans are now charged more than two and half times what Medicare allows!

The Ripple Effect on Employer-Sponsored Plans

As Medicare “negotiates” prices, that increases the financial pressure on employer-sponsored plans. This dynamic has already been observed with Medicare’s Parts A and B, where provider reimbursements are capped and private payers bear the brunt of cost adjustments. We expect this pattern will repeat under the IRA, with pharmaceutical companies and healthcare providers compensating for revenue losses from Medicare “negotiations”, by increasing prices for everyone else.

For employers, the implications of the IRA are expected to increase the benefits paid by the plan and the out-of-pocket expenses borne by plan participants. The increased benefits will, in turn, raise the cost of coverage paid by employers and employees.

Strategies for Plan Sponsors

To address these challenges, Cooper and Towarnicky recommend that plan sponsors take proactive steps to safeguard their health plans:

• Cost Management Initiatives: Partnering with a medical billing entity like aequum can help plan sponsors identify and implement cost-saving measures. This includes negotiating better pricing with providers and exploring alternative funding models.
• Plan Design Adjustments: Reevaluating health plan structures to ensure they align with the evolving regulatory landscape can help control costs while maintaining compliance.
• Employee Education: Educating employees about their healthcare options and the potential effects of the IRA can empower them to make cost-effective choices, benefiting both employees and employers.

How aequum Can Help

aequum, a tech-driven company specializing in medical billing and healthcare cost management, is uniquely positioned to support plan sponsors in navigating the challenges posed by the IRA. By leveraging real-time data and analytics, aequum helps clients anticipate cost increases and implement strategies to mitigate their impact.

aequum’s expertise in compliance ensures that plan sponsors remain aligned with evolving healthcare regulations, reducing the risk of penalties and inefficiencies.

For a deeper dive into these insights and strategies, read the full BenefitsPRO article by Christine Cooper and Jack Towarnicky. With the right guidance, tools and trusted advisors like aequum, plan sponsors can navigate this evolving landscape and protect both their employees and their bottom lines.