Medical Costs

The FDA on Aug. 4 approved Zurzuvae (zuranolone) for the treatment of postpartum depression (PPD), making it the first oral pill available to treat a condition that affects an estimated 500,000 people annually. While that ostensibly would be good news for the drug’s manufacturers — Biogen Inc. and Sage Therapeutics, Inc. — Sage’s shares plummeted amid the FDA’s decision not to approve Zurzuvae for major depressive disorder, which affects a much larger patient population.

That setback, plus the FDA’s addition of a boxed warning that cautions patients not to drive or operate heavy machinery for at least 12 hours after taking Zurzuvae, led analysts to express significant concerns about the sales potential of the drug. Meanwhile, from a coverage standpoint, experts tell AIS Health, a division of MMIT, that rebates will play a significant role in whether payers choose to put the new drug on their formularies.

As health insurers decide how to price their Affordable Care Act exchange plans for the 2024 plan year, inflation, COVID-related costs and Medicaid redeterminations are some of the major factors influencing their calculations, according to a new issue brief from the American Academy of Actuaries. Industry experts say that overall, gross premiums are likely to go up — but because few consumers will feel the impact on their net premiums thanks to expanded subsidies, insurers and regulators may not be driven to aggressively keep rates in check.

“I think the early read right now is the rate increases are going to be higher than last year,” says Fritz Busch, a principal and consulting actuary at Milliman who helped produce the report. In 2023, the average benchmark ACA exchange premium rose by 3.4%. “It’s going to vary by state, but you’re already seeing some [rate requests] well into the double digits — and some single as well — but I think, on average, it’s going to be higher.”

Since implementing diabetes-related programs in 2021, Capital Blue Cross said it has saved its members and their employers nearly $6 million in health care costs. Meanwhile, Humana Inc. has launched a diabetes self-management education and support (DSMES) program through its CenterWell Home Health subsidiary that has seen an uptick in usage among health plans. The initiatives are part of a growing trend among payers that recognize the health burden and huge costs associated with diabetes.

Kelly Brennan, Capital Blue Cross’s senior director of Health Promotion and Wellness, tells AIS Health that the insurer’s beneficiaries with diabetes often have other chronic conditions, “which can be expensive to manage, both for our members and for business leaders who rely upon us to provide strategic solutions that curb health care spending and ensure their employees can be their healthiest.”

The Biden administration released new regulatory guidance meant to block a loophole in the No Surprises Act (NSA) that payers and providers had exploited to send large bills to some patients. However, an attorney tells AIS Health, a division of MMIT, that providers and payers will find ways to work around NSA provisions.

The No Surprises Act, a 2021 law, banned balance or “surprise” billing in most cases. Balance billing occurs when an out-of-network provider will not accept the payment rate offered by a patient’s insurance plan. The law also set up the Independent Dispute Resolution (IDR) arbitration process, which is meant to resolve bills that insurers and providers are unable to agree on themselves. During IDR, providers submit unresolved bills to an HHS-approved arbitrator, who then selects an amount submitted by either the payer or the provider using criteria laid out by HHS. The plan is then required to pay that amount to the provider.

Payers generally applauded the passage of the No Surprises Act (NSA) in 2020 and the Consolidated Appropriations Act (CAA) of 2021, thinking the bills would lead to more transparency and lower costs. However, although the two pieces of legislation have contributed to larger amounts of publicly available claims and pricing data, state employee health plans (SEHPs) report that “significant barriers constrain translating improved access to data into more aggressive cost containment strategies,” according to a report released on July 10 from Georgetown University’s Center on Health Insurance Reforms (CHIR).

Sabrina Corlette, CHIR’s founder and co-director, tells AIS Health that from conducting the research and speaking with SEHP administrators she’s found “it’s going to take a while for the impact of those laws to be felt.” SEHPs provide health insurance for state and local government employees and are often among the largest payers in any given state.

Not long after UnitedHealth Group sparked an insurer-stock selloff by revealing that it is seeing higher-than-usual outpatient care utilization, Humana Inc. disclosed that it, too, is seeing elevated medical costs due to an increased use of services.

“At this point it appears that there may be a new trend brewing with a rise in utilization and claims, particularly in the Medicare Advantage segment,” A.M. Best Senior Director Sally Rosen remarked in a new video released by the insurance-focused credit rating firm.

And that’s significant for the managed care industry writ large, Rosen tells AIS Health, a division of MMIT. “Medicare Advantage comprised more than one-third of the industry’s underwriting income in 2022, and while the dollar amount has fluctuated, the percentage of underwriting income coming from Medicare Advantage has made up about one third for each of the past three years,” she says.

The share of group health insurance plan enrollees with high health care spending increased from 2013 to 2021, and over 80% of them in 2021 had one or more chronic diseases, according to two studies from the Employee Benefit Research Institute.

By analyzing health care claims of millions of enrollees in a group health plan from the Merative MarketScan Commercial Database, the study found that the share of enrollees incurring spending $100,000 or more per year on health care went up 50%, from 0.6% in 2013 to 0.9% in 2021. The group with the highest spending ($2,000,000 or more) was 2.5 times larger in 2021 compared to 2013.

UnitedHealth Group’s stock took a nosedive on June 13 after Chief Financial Officer John Rex said elevated outpatient care utilization might push the insurer’s 2023 medical loss ratio (MLR) higher than it originally expected. Since UnitedHealth is the bellwether of the managed care sector, other insurers’ stock traded down in the wake of Rex’s comments. However, equities analysts suggested that the highly diversified UnitedHealth isn’t in any danger of taking a major earnings hit.

During the Goldman Sachs Global Healthcare Conference, Rex said UnitedHealth has seen higher levels of outpatient care activity since the first quarter of 2023, and looking at data from the second quarter, the trend doesn’t appear to be going away. He cited hip and knee replacements as well as cardiovascular care — all “very localized in [the] Medicare business” — as the areas where UnitedHealth is seeing higher utilization.

The Biden administration reached a deal with the Texas company Braidwood Management to preserve the Affordable Care Act’s preventive coverage mandate while the firm’s legal challenge to that provision is litigated. In March, Texas District Court Judge Reed O’Connor ruled that it’s unconstitutional for the ACA to require group and individual health plans to fully cover certain services recommended by the U.S. Preventive Services Task Force, and he said requiring employer plan sponsors to cover preexposure prophylaxis (PrEP) for HIV violates the Religious Freedom Restoration Act of 1993. The Fifth Circuit Court of Appeals temporarily stayed the ruling in May and instructed the parties in the case to agree on how the ACA’s preventive coverage mandate should be handled as an appeal of O’Connor’s ruling proceeds. As part of the agreement — which still has to be approved by the appeals court — just the parties challenging the preventive coverage mandate may opt out of covering USPSTF-recommended services or PrEP; all other health plans must cover those services without cost sharing.

For years, payers and plan sponsors have pushed to broaden so-called site neutral policies, which generally aim to prevent hospital outpatient departments from commanding greater reimbursement for the same services as those provided in doctor’s offices. In the latest salvo, the sponsors of newly proposed legislation are aiming for a seemingly easier-to-achieve goal: billing transparency.

That legislation, sponsored by Reps. Kevin Hern (R-Okla.) and Annie Kuster (D-N.H.), is called the Facilitating Accountability in Reimbursements (FAIR) Act. The legislation would require all off-campus hospital outpatient departments to have separate national provider identification (NPI) numbers by Jan. 1, 2025. It would also direct CMS to prioritize auditing provider facilities that were recently purchased by large health systems “to ensure they are meeting the remote location of a hospital facility requirements,” according to Hern’s office.