Jay Hancock

Anthem Blue Cross, the country’s second-biggest health insurance company, is behind on billions of dollars in payments owed to hospitals and doctors because of onerous new reimbursement rules, computer problems and mishandled claims, say hospital officials in multiple states.

Anthem, like other big insurers, is using the COVID-19 crisis as cover to institute “egregious” policies that harm patients and pinch hospital finances, said Molly Smith, group vice president at the American Hospital Association. “There’s this sense of ‘Everyone’s distracted. We can get this through.’ ”

Hospitals are also dealing with a spike in retroactive claims denials by UnitedHealthcare, the biggest health insurer, for ED care, the AHA said.

Disputes between insurers and hospitals are nothing new. But this fight sticks more patients in the middle, worried they’ll have to pay unresolved claims. Hospitals say it is hurting their finances as many cope with COVID surges – even after the industry has received tens of billions of dollars in emergency assistance from the federal government.

“We recognize there have been some challenges” to prompt payments caused by claims-processing changes and “a new set of dynamics” amid the pandemic, Anthem spokesperson Colin Manning said in an email. “We apologize for any delays or inconvenience this may have caused.”

Virginia law requires insurers to pay claims within 40 days. In a Sept. 24 letter to state insurance regulators, VCU Health, a system that operates a large teaching hospital in Richmond associated with Virginia Commonwealth University, said Anthem owes it $385 million. More than 40% of the claims are more than 90 days old, VCU said.

For all Virginia hospitals, Anthem’s late, unpaid claims amount to “hundreds of millions of dollars,” the Virginia Hospital and Healthcare Association said in a June 23 letter to state regulators.

Nationwide, the payment delays “are creating an untenable situation,” the American Hospital Association said in a Sept. 9 letter to Anthem CEO Gail Boudreaux. “Patients are facing greater hurdles to accessing care; clinicians are burning out on unnecessary administrative tasks; and the system is straining to finance the personnel and supplies” needed to fight Covid.

Complaints about Anthem extend “from sea to shining sea, from New Hampshire to California,” AHA CEO Rick Pollack told KHN.

Substantial payment delays can be seen on Anthem’s books. On June 30, 2019, before the pandemic, 43% of the insurer’s medical bills for that quarter were unpaid, according to regulatory filings. Two years later that figure had risen to 53% – a difference of $2.5 billion.

Anthem profits were $4.6 billion in 2020 and $3.5 billion in the first half of 2021.

Alexis Thurber, who lives near Seattle, was insured by Anthem when she got an $18,192 hospital bill in May for radiation therapy that doctors said was essential to treat her breast cancer.

The treatments were “experimental” and “not medically necessary,” Anthem said, according to Ms. Thurber. She spent much of the summer trying to get the insurer to pay up – placing two dozen phone calls, spending hours on hold, sending multiple emails and enduring unmeasurable stress and worry. It finally covered the claim months later.

“It’s so egregious. It’s a game they’re playing,” said Ms. Thurber, 51, whose cancer was diagnosed in November. “Trying to get true help was impossible.”

Privacy rules prevent Anthem from commenting on Ms. Thurber’s case, said Anthem spokesperson Colin Manning.

When insurers fail to promptly pay medical bills, patients are left in the lurch. They might first get a notice saying payment is pending or denied. A hospital might bill them for treatment they thought would be covered. Hospitals and doctors often sue patients whose insurance didn’t pay up.

Hospitals point to a variety of Anthem practices contributing to payment delays or denials, including new layers of document requirements, prior-authorization hurdles for routine procedures and requirements that doctors themselves – not support staffers – speak to insurance gatekeepers. “This requires providers to literally leave the patient[’s] bedside to get on the phone with Anthem,” AHA said in its letter.

Anthem often hinders coverage for outpatient surgery, specialty pharmacy and other services in health systems listed as in network, amounting to a “bait and switch” on Anthem members, AHA officials said.

“Demanding that patients be treated outside of the hospital setting, against the advice of the patient’s in-network treating physician, appears to be motivated by a desire to drive up Empire’s profits,” the Greater New York Hospital Association wrote in an April letter to Empire Blue Cross, which is owned by Anthem.

Anthem officials pushed back in a recent letter to the AHA, saying the insurer’s changing rules are intended partly to control excessive prices charged by hospitals for specialty drugs and nonemergency surgery, screening and diagnostic procedures.

Severe problems with Anthem’s new claims management system surfaced months ago and “persist without meaningful improvement,” AHA said in its letter.

Claims have gotten lost in Anthem’s computers, and in some cases VCU Health has had to print medical records and mail them to get paid, VCU said in its letter. The cash slowdown imposes “an unmanageable disruption that threatens to undermine our financial footing,” VCU said.

United denied $31,557 in claims for Emily Long’s care after she was struck in June by a motorcycle in New York City. She needed surgery to repair a fractured cheekbone. United said there was a lack of documentation for “medical necessity” – an “incredibly aggravating” response on top of the distress of the accident, Ms. Long said.

The Brooklyn hospital that treated Ms. Long was “paid appropriately under her plan and within the required time frame,” said United spokesperson Maria Gordon Shydlo. “The facility has the right to appeal the decision.”

United’s unpaid claims came to 54% as of June 30, about the same level as 2 years previously.

When Erin Conlisk initially had trouble gaining approval for a piece of medical equipment for her elderly father this summer, United employees told her the insurer’s entire prior-authorization database had gone down for weeks, said Ms. Conlisk, who lives in California.

“There was a brief issue with our prior-authorization process in mid-July, which was resolved quickly,” Gordon Shydlo said.

When asked by Wall Street analysts about the payment backups, Anthem executives said it partly reflects their decision to increase financial reserves amid the health crisis.

“Really a ton of uncertainty associated with this environment,” John Gallina, the company’s chief financial officer, said on a conference call in July. “We’ve tried to be extremely prudent and conservative in our approach.”

During the pandemic, hospitals have benefited from two extraordinary cash infusions. They and other medical providers have received more than $100 billion through the CARES Act of 2020 and the American Rescue Plan of 2021. Last year United, Anthem and other insurers accelerated billions in hospital reimbursements.

The federal payments enriched many of the biggest, wealthiest systems while poorer hospitals serving low-income patients and rural areas struggled.

Those are the systems most hurt now by insurer payment delays, hospital officials said. Federal relief funds “have been a lifeline, but they don’t make people whole in terms of the losses from increased expenses and lost revenue as a result of the COVID experience,” Mr. Pollack said.

Several health systems declined to comment about claims payment delays or didn’t respond to a reporter’s queries. Among individual hospitals “there is a deep fear of talking on the record about your largest business partner,” AHA’s Ms. Smith said.

Alexis Thurber worried she might have to pay her $18,192 radiation bill herself, and she’s not confident her Anthem policy will do a better job next time of covering the cost of her care.

“It makes me not want to go to the doctor anymore,” she said. “I’m scared to get another mammogram because you can’t rely on it.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

Anthem Blue Cross, the country’s second-biggest health insurance company, is behind on billions of dollars in payments owed to hospitals and doctors because of onerous new reimbursement rules, computer problems and mishandled claims, say hospital officials in multiple states.

Anthem, like other big insurers, is using the COVID-19 crisis as cover to institute “egregious” policies that harm patients and pinch hospital finances, said Molly Smith, group vice president at the American Hospital Association. “There’s this sense of ‘Everyone’s distracted. We can get this through.’ ”

Hospitals are also dealing with a spike in retroactive claims denials by UnitedHealthcare, the biggest health insurer, for ED care, the AHA said.

Disputes between insurers and hospitals are nothing new. But this fight sticks more patients in the middle, worried they’ll have to pay unresolved claims. Hospitals say it is hurting their finances as many cope with COVID surges – even after the industry has received tens of billions of dollars in emergency assistance from the federal government.

“We recognize there have been some challenges” to prompt payments caused by claims-processing changes and “a new set of dynamics” amid the pandemic, Anthem spokesperson Colin Manning said in an email. “We apologize for any delays or inconvenience this may have caused.”

Virginia law requires insurers to pay claims within 40 days. In a Sept. 24 letter to state insurance regulators, VCU Health, a system that operates a large teaching hospital in Richmond associated with Virginia Commonwealth University, said Anthem owes it $385 million. More than 40% of the claims are more than 90 days old, VCU said.

For all Virginia hospitals, Anthem’s late, unpaid claims amount to “hundreds of millions of dollars,” the Virginia Hospital and Healthcare Association said in a June 23 letter to state regulators.

Nationwide, the payment delays “are creating an untenable situation,” the American Hospital Association said in a Sept. 9 letter to Anthem CEO Gail Boudreaux. “Patients are facing greater hurdles to accessing care; clinicians are burning out on unnecessary administrative tasks; and the system is straining to finance the personnel and supplies” needed to fight Covid.

Complaints about Anthem extend “from sea to shining sea, from New Hampshire to California,” AHA CEO Rick Pollack told KHN.

Substantial payment delays can be seen on Anthem’s books. On June 30, 2019, before the pandemic, 43% of the insurer’s medical bills for that quarter were unpaid, according to regulatory filings. Two years later that figure had risen to 53% – a difference of $2.5 billion.

Anthem profits were $4.6 billion in 2020 and $3.5 billion in the first half of 2021.

Alexis Thurber, who lives near Seattle, was insured by Anthem when she got an $18,192 hospital bill in May for radiation therapy that doctors said was essential to treat her breast cancer.

The treatments were “experimental” and “not medically necessary,” Anthem said, according to Ms. Thurber. She spent much of the summer trying to get the insurer to pay up – placing two dozen phone calls, spending hours on hold, sending multiple emails and enduring unmeasurable stress and worry. It finally covered the claim months later.

“It’s so egregious. It’s a game they’re playing,” said Ms. Thurber, 51, whose cancer was diagnosed in November. “Trying to get true help was impossible.”

Privacy rules prevent Anthem from commenting on Ms. Thurber’s case, said Anthem spokesperson Colin Manning.

When insurers fail to promptly pay medical bills, patients are left in the lurch. They might first get a notice saying payment is pending or denied. A hospital might bill them for treatment they thought would be covered. Hospitals and doctors often sue patients whose insurance didn’t pay up.

Hospitals point to a variety of Anthem practices contributing to payment delays or denials, including new layers of document requirements, prior-authorization hurdles for routine procedures and requirements that doctors themselves – not support staffers – speak to insurance gatekeepers. “This requires providers to literally leave the patient[’s] bedside to get on the phone with Anthem,” AHA said in its letter.

Anthem often hinders coverage for outpatient surgery, specialty pharmacy and other services in health systems listed as in network, amounting to a “bait and switch” on Anthem members, AHA officials said.

“Demanding that patients be treated outside of the hospital setting, against the advice of the patient’s in-network treating physician, appears to be motivated by a desire to drive up Empire’s profits,” the Greater New York Hospital Association wrote in an April letter to Empire Blue Cross, which is owned by Anthem.

Anthem officials pushed back in a recent letter to the AHA, saying the insurer’s changing rules are intended partly to control excessive prices charged by hospitals for specialty drugs and nonemergency surgery, screening and diagnostic procedures.

Severe problems with Anthem’s new claims management system surfaced months ago and “persist without meaningful improvement,” AHA said in its letter.

Claims have gotten lost in Anthem’s computers, and in some cases VCU Health has had to print medical records and mail them to get paid, VCU said in its letter. The cash slowdown imposes “an unmanageable disruption that threatens to undermine our financial footing,” VCU said.

United denied $31,557 in claims for Emily Long’s care after she was struck in June by a motorcycle in New York City. She needed surgery to repair a fractured cheekbone. United said there was a lack of documentation for “medical necessity” – an “incredibly aggravating” response on top of the distress of the accident, Ms. Long said.

The Brooklyn hospital that treated Ms. Long was “paid appropriately under her plan and within the required time frame,” said United spokesperson Maria Gordon Shydlo. “The facility has the right to appeal the decision.”

United’s unpaid claims came to 54% as of June 30, about the same level as 2 years previously.

When Erin Conlisk initially had trouble gaining approval for a piece of medical equipment for her elderly father this summer, United employees told her the insurer’s entire prior-authorization database had gone down for weeks, said Ms. Conlisk, who lives in California.

“There was a brief issue with our prior-authorization process in mid-July, which was resolved quickly,” Gordon Shydlo said.

When asked by Wall Street analysts about the payment backups, Anthem executives said it partly reflects their decision to increase financial reserves amid the health crisis.

“Really a ton of uncertainty associated with this environment,” John Gallina, the company’s chief financial officer, said on a conference call in July. “We’ve tried to be extremely prudent and conservative in our approach.”

During the pandemic, hospitals have benefited from two extraordinary cash infusions. They and other medical providers have received more than $100 billion through the CARES Act of 2020 and the American Rescue Plan of 2021. Last year United, Anthem and other insurers accelerated billions in hospital reimbursements.

The federal payments enriched many of the biggest, wealthiest systems while poorer hospitals serving low-income patients and rural areas struggled.

Those are the systems most hurt now by insurer payment delays, hospital officials said. Federal relief funds “have been a lifeline, but they don’t make people whole in terms of the losses from increased expenses and lost revenue as a result of the COVID experience,” Mr. Pollack said.

Several health systems declined to comment about claims payment delays or didn’t respond to a reporter’s queries. Among individual hospitals “there is a deep fear of talking on the record about your largest business partner,” AHA’s Ms. Smith said.

Alexis Thurber worried she might have to pay her $18,192 radiation bill herself, and she’s not confident her Anthem policy will do a better job next time of covering the cost of her care.

“It makes me not want to go to the doctor anymore,” she said. “I’m scared to get another mammogram because you can’t rely on it.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

Anthem Blue Cross, the country’s second-biggest health insurance company, is behind on billions of dollars in payments owed to hospitals and doctors because of onerous new reimbursement rules, computer problems and mishandled claims, say hospital officials in multiple states.

Anthem, like other big insurers, is using the COVID-19 crisis as cover to institute “egregious” policies that harm patients and pinch hospital finances, said Molly Smith, group vice president at the American Hospital Association. “There’s this sense of ‘Everyone’s distracted. We can get this through.’ ”

Hospitals are also dealing with a spike in retroactive claims denials by UnitedHealthcare, the biggest health insurer, for ED care, the AHA said.

Disputes between insurers and hospitals are nothing new. But this fight sticks more patients in the middle, worried they’ll have to pay unresolved claims. Hospitals say it is hurting their finances as many cope with COVID surges – even after the industry has received tens of billions of dollars in emergency assistance from the federal government.

“We recognize there have been some challenges” to prompt payments caused by claims-processing changes and “a new set of dynamics” amid the pandemic, Anthem spokesperson Colin Manning said in an email. “We apologize for any delays or inconvenience this may have caused.”

Virginia law requires insurers to pay claims within 40 days. In a Sept. 24 letter to state insurance regulators, VCU Health, a system that operates a large teaching hospital in Richmond associated with Virginia Commonwealth University, said Anthem owes it $385 million. More than 40% of the claims are more than 90 days old, VCU said.

For all Virginia hospitals, Anthem’s late, unpaid claims amount to “hundreds of millions of dollars,” the Virginia Hospital and Healthcare Association said in a June 23 letter to state regulators.

Nationwide, the payment delays “are creating an untenable situation,” the American Hospital Association said in a Sept. 9 letter to Anthem CEO Gail Boudreaux. “Patients are facing greater hurdles to accessing care; clinicians are burning out on unnecessary administrative tasks; and the system is straining to finance the personnel and supplies” needed to fight Covid.

Complaints about Anthem extend “from sea to shining sea, from New Hampshire to California,” AHA CEO Rick Pollack told KHN.

Substantial payment delays can be seen on Anthem’s books. On June 30, 2019, before the pandemic, 43% of the insurer’s medical bills for that quarter were unpaid, according to regulatory filings. Two years later that figure had risen to 53% – a difference of $2.5 billion.

Anthem profits were $4.6 billion in 2020 and $3.5 billion in the first half of 2021.

Alexis Thurber, who lives near Seattle, was insured by Anthem when she got an $18,192 hospital bill in May for radiation therapy that doctors said was essential to treat her breast cancer.

The treatments were “experimental” and “not medically necessary,” Anthem said, according to Ms. Thurber. She spent much of the summer trying to get the insurer to pay up – placing two dozen phone calls, spending hours on hold, sending multiple emails and enduring unmeasurable stress and worry. It finally covered the claim months later.

“It’s so egregious. It’s a game they’re playing,” said Ms. Thurber, 51, whose cancer was diagnosed in November. “Trying to get true help was impossible.”

Privacy rules prevent Anthem from commenting on Ms. Thurber’s case, said Anthem spokesperson Colin Manning.

When insurers fail to promptly pay medical bills, patients are left in the lurch. They might first get a notice saying payment is pending or denied. A hospital might bill them for treatment they thought would be covered. Hospitals and doctors often sue patients whose insurance didn’t pay up.

Hospitals point to a variety of Anthem practices contributing to payment delays or denials, including new layers of document requirements, prior-authorization hurdles for routine procedures and requirements that doctors themselves – not support staffers – speak to insurance gatekeepers. “This requires providers to literally leave the patient[’s] bedside to get on the phone with Anthem,” AHA said in its letter.

Anthem often hinders coverage for outpatient surgery, specialty pharmacy and other services in health systems listed as in network, amounting to a “bait and switch” on Anthem members, AHA officials said.

“Demanding that patients be treated outside of the hospital setting, against the advice of the patient’s in-network treating physician, appears to be motivated by a desire to drive up Empire’s profits,” the Greater New York Hospital Association wrote in an April letter to Empire Blue Cross, which is owned by Anthem.

Anthem officials pushed back in a recent letter to the AHA, saying the insurer’s changing rules are intended partly to control excessive prices charged by hospitals for specialty drugs and nonemergency surgery, screening and diagnostic procedures.

Severe problems with Anthem’s new claims management system surfaced months ago and “persist without meaningful improvement,” AHA said in its letter.

Claims have gotten lost in Anthem’s computers, and in some cases VCU Health has had to print medical records and mail them to get paid, VCU said in its letter. The cash slowdown imposes “an unmanageable disruption that threatens to undermine our financial footing,” VCU said.

United denied $31,557 in claims for Emily Long’s care after she was struck in June by a motorcycle in New York City. She needed surgery to repair a fractured cheekbone. United said there was a lack of documentation for “medical necessity” – an “incredibly aggravating” response on top of the distress of the accident, Ms. Long said.

The Brooklyn hospital that treated Ms. Long was “paid appropriately under her plan and within the required time frame,” said United spokesperson Maria Gordon Shydlo. “The facility has the right to appeal the decision.”

United’s unpaid claims came to 54% as of June 30, about the same level as 2 years previously.

When Erin Conlisk initially had trouble gaining approval for a piece of medical equipment for her elderly father this summer, United employees told her the insurer’s entire prior-authorization database had gone down for weeks, said Ms. Conlisk, who lives in California.

“There was a brief issue with our prior-authorization process in mid-July, which was resolved quickly,” Gordon Shydlo said.

When asked by Wall Street analysts about the payment backups, Anthem executives said it partly reflects their decision to increase financial reserves amid the health crisis.

“Really a ton of uncertainty associated with this environment,” John Gallina, the company’s chief financial officer, said on a conference call in July. “We’ve tried to be extremely prudent and conservative in our approach.”

During the pandemic, hospitals have benefited from two extraordinary cash infusions. They and other medical providers have received more than $100 billion through the CARES Act of 2020 and the American Rescue Plan of 2021. Last year United, Anthem and other insurers accelerated billions in hospital reimbursements.

The federal payments enriched many of the biggest, wealthiest systems while poorer hospitals serving low-income patients and rural areas struggled.

Those are the systems most hurt now by insurer payment delays, hospital officials said. Federal relief funds “have been a lifeline, but they don’t make people whole in terms of the losses from increased expenses and lost revenue as a result of the COVID experience,” Mr. Pollack said.

Several health systems declined to comment about claims payment delays or didn’t respond to a reporter’s queries. Among individual hospitals “there is a deep fear of talking on the record about your largest business partner,” AHA’s Ms. Smith said.

Alexis Thurber worried she might have to pay her $18,192 radiation bill herself, and she’s not confident her Anthem policy will do a better job next time of covering the cost of her care.

“It makes me not want to go to the doctor anymore,” she said. “I’m scared to get another mammogram because you can’t rely on it.”

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.

Small employers will more easily be able to band together to buy health insurance under rules issued June 19 by the Trump administration, but the change could raise premiums for plans sold through the Affordable Care Act’s (ACA’s) online marketplaces, analysts say.

The move loosens restrictions on so-called association health plans, allowing more businesses, including sole proprietors, to join forces to buy health coverage in bulk for their workers.

By effectively shifting small-business coverage into the large-group market, it exempts such plans from ACA requirements for 10 “essential” health benefits, such as mental health care and prescription drug coverage, prompting warnings of “junk insurance” from consumer advocates.

Supporters say the new Labor Department rules, which the government estimated could create health plans covering as many as 11 million people, will lead to more affordable choices for some employers.

When it comes to health insurance, “the regulatory burden on small businesses should certainly not be more than that on large companies,” Labor Secretary Alexander Acosta told reporters June 19.

Existing rules limit association plans to groups of employers in the same industry in the same region.

The new regulations eliminate the geographical restriction for similar employers, allowing, for example, family-owned auto-repair shops in multiple states to offer one big health plan, said Christopher Condeluci, a health benefits lawyer and former Senate Finance Committee aide.

The rules, to be implemented in stages into next year, also allow companies in different industries in the same region to form a group to offer coverage – even if the only reason is to provide health insurance.

Like other coverage under the ACA, association insurance plans will still be required to cover preexisting illnesses.

Analysts warn that, because these changes will likely siphon away employers with relatively healthy consumers from ACA coverage into less-expensive trade-association plans, the result could be higher costs in the online marketplaces.

“If you have a group that is healthier than average, you might get a better rate from one of these plans, and your broker is going to come and say, ‘Hey, I can get you a better deal,’ ” said Dan Mendelson, president of Avalere Health, a consulting firm.

That would mean that, on balance, consumers insured through ACA small-group and individual plans could be older, sicker, and more expensive, adding to years of erosion of the ACA marketplaces engineered by Republicans hostile to the law.

Loosening rules for association plans would lead to 3.2 million people leaving the ACA plans by 2022 and raising premiums for those remaining in individual markets by 3.5%, Avalere calculated this year.

America’s Health Insurance Plans, the largest medical insurance trade group, issued a statement saying the regulation “may lead to higher premiums” in ACA insurance and “could result in fewer insured Americans.”

Unlike ACA plans, association coverage does not have to include benefits across the broad “essential” categories, including hospitalization and emergency care.

The National Association of Insurance Commissioners previously warned that such plans “threaten the stability of the small group market” and “provide inadequate benefits and insufficient protection to consumers.”

The American Academy of Actuaries has expressed similar concerns.

Business groups praised the change, proposed in draft form earlier this year.

“We’ve been advocating for association health plans for almost 20 years, and we’re pleased to see the department moving aggressively forward,” said David French, senior vice president of government relations for the National Retail Federation.

Association plans have been around for decades, although enrollment has been more limited since the ACA’s passage. While some of the plans have worked well for their members, others have a checkered history.

In April, for example, Massachusetts regulators settled with Kansas-based Unified Life Insurance Company, which agreed to pay $2.8 million to resolve allegations that it engaged in deceptive practices, such as claiming it covered services that it did not.

The coverage “was sold across state lines and was issued through a third-party association,” according to a release from the Massachusetts attorney general’s office.

Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

Small employers will more easily be able to band together to buy health insurance under rules issued June 19 by the Trump administration, but the change could raise premiums for plans sold through the Affordable Care Act’s (ACA’s) online marketplaces, analysts say.

The move loosens restrictions on so-called association health plans, allowing more businesses, including sole proprietors, to join forces to buy health coverage in bulk for their workers.

By effectively shifting small-business coverage into the large-group market, it exempts such plans from ACA requirements for 10 “essential” health benefits, such as mental health care and prescription drug coverage, prompting warnings of “junk insurance” from consumer advocates.

Supporters say the new Labor Department rules, which the government estimated could create health plans covering as many as 11 million people, will lead to more affordable choices for some employers.

When it comes to health insurance, “the regulatory burden on small businesses should certainly not be more than that on large companies,” Labor Secretary Alexander Acosta told reporters June 19.

Existing rules limit association plans to groups of employers in the same industry in the same region.

The new regulations eliminate the geographical restriction for similar employers, allowing, for example, family-owned auto-repair shops in multiple states to offer one big health plan, said Christopher Condeluci, a health benefits lawyer and former Senate Finance Committee aide.

The rules, to be implemented in stages into next year, also allow companies in different industries in the same region to form a group to offer coverage – even if the only reason is to provide health insurance.

Like other coverage under the ACA, association insurance plans will still be required to cover preexisting illnesses.

Analysts warn that, because these changes will likely siphon away employers with relatively healthy consumers from ACA coverage into less-expensive trade-association plans, the result could be higher costs in the online marketplaces.

“If you have a group that is healthier than average, you might get a better rate from one of these plans, and your broker is going to come and say, ‘Hey, I can get you a better deal,’ ” said Dan Mendelson, president of Avalere Health, a consulting firm.

That would mean that, on balance, consumers insured through ACA small-group and individual plans could be older, sicker, and more expensive, adding to years of erosion of the ACA marketplaces engineered by Republicans hostile to the law.

Loosening rules for association plans would lead to 3.2 million people leaving the ACA plans by 2022 and raising premiums for those remaining in individual markets by 3.5%, Avalere calculated this year.

America’s Health Insurance Plans, the largest medical insurance trade group, issued a statement saying the regulation “may lead to higher premiums” in ACA insurance and “could result in fewer insured Americans.”

Unlike ACA plans, association coverage does not have to include benefits across the broad “essential” categories, including hospitalization and emergency care.

The National Association of Insurance Commissioners previously warned that such plans “threaten the stability of the small group market” and “provide inadequate benefits and insufficient protection to consumers.”

The American Academy of Actuaries has expressed similar concerns.

Business groups praised the change, proposed in draft form earlier this year.

“We’ve been advocating for association health plans for almost 20 years, and we’re pleased to see the department moving aggressively forward,” said David French, senior vice president of government relations for the National Retail Federation.

Association plans have been around for decades, although enrollment has been more limited since the ACA’s passage. While some of the plans have worked well for their members, others have a checkered history.

In April, for example, Massachusetts regulators settled with Kansas-based Unified Life Insurance Company, which agreed to pay $2.8 million to resolve allegations that it engaged in deceptive practices, such as claiming it covered services that it did not.

The coverage “was sold across state lines and was issued through a third-party association,” according to a release from the Massachusetts attorney general’s office.

Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

Small employers will more easily be able to band together to buy health insurance under rules issued June 19 by the Trump administration, but the change could raise premiums for plans sold through the Affordable Care Act’s (ACA’s) online marketplaces, analysts say.

The move loosens restrictions on so-called association health plans, allowing more businesses, including sole proprietors, to join forces to buy health coverage in bulk for their workers.

By effectively shifting small-business coverage into the large-group market, it exempts such plans from ACA requirements for 10 “essential” health benefits, such as mental health care and prescription drug coverage, prompting warnings of “junk insurance” from consumer advocates.

Supporters say the new Labor Department rules, which the government estimated could create health plans covering as many as 11 million people, will lead to more affordable choices for some employers.

When it comes to health insurance, “the regulatory burden on small businesses should certainly not be more than that on large companies,” Labor Secretary Alexander Acosta told reporters June 19.

Existing rules limit association plans to groups of employers in the same industry in the same region.

The new regulations eliminate the geographical restriction for similar employers, allowing, for example, family-owned auto-repair shops in multiple states to offer one big health plan, said Christopher Condeluci, a health benefits lawyer and former Senate Finance Committee aide.

The rules, to be implemented in stages into next year, also allow companies in different industries in the same region to form a group to offer coverage – even if the only reason is to provide health insurance.

Like other coverage under the ACA, association insurance plans will still be required to cover preexisting illnesses.

Analysts warn that, because these changes will likely siphon away employers with relatively healthy consumers from ACA coverage into less-expensive trade-association plans, the result could be higher costs in the online marketplaces.

“If you have a group that is healthier than average, you might get a better rate from one of these plans, and your broker is going to come and say, ‘Hey, I can get you a better deal,’ ” said Dan Mendelson, president of Avalere Health, a consulting firm.

That would mean that, on balance, consumers insured through ACA small-group and individual plans could be older, sicker, and more expensive, adding to years of erosion of the ACA marketplaces engineered by Republicans hostile to the law.

Loosening rules for association plans would lead to 3.2 million people leaving the ACA plans by 2022 and raising premiums for those remaining in individual markets by 3.5%, Avalere calculated this year.

America’s Health Insurance Plans, the largest medical insurance trade group, issued a statement saying the regulation “may lead to higher premiums” in ACA insurance and “could result in fewer insured Americans.”

Unlike ACA plans, association coverage does not have to include benefits across the broad “essential” categories, including hospitalization and emergency care.

The National Association of Insurance Commissioners previously warned that such plans “threaten the stability of the small group market” and “provide inadequate benefits and insufficient protection to consumers.”

The American Academy of Actuaries has expressed similar concerns.

Business groups praised the change, proposed in draft form earlier this year.

“We’ve been advocating for association health plans for almost 20 years, and we’re pleased to see the department moving aggressively forward,” said David French, senior vice president of government relations for the National Retail Federation.

Association plans have been around for decades, although enrollment has been more limited since the ACA’s passage. While some of the plans have worked well for their members, others have a checkered history.

In April, for example, Massachusetts regulators settled with Kansas-based Unified Life Insurance Company, which agreed to pay $2.8 million to resolve allegations that it engaged in deceptive practices, such as claiming it covered services that it did not.

The coverage “was sold across state lines and was issued through a third-party association,” according to a release from the Massachusetts attorney general’s office.

Kaiser Health News is a nonprofit national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation that is not affiliated with Kaiser Permanente.

As a drug salesman, Mike Courtney worked hard to make health care expensive. He wined and dined doctors, golfed with them and bought lunch for their entire staffs – all to promote pills often costing thousands of dollars a year.

Now he’s on a different mission. When Mr. Courtney calls on doctors these days, he champions generic drugs that frequently cost pennies and work just as well as the kinds of pricey brands he used to push.

Instead of Big Pharma, he works for Capital District Physicians’ Health Plan (CDPHP), an Albany, N.Y., insurer. Instead of maximizing pill profits, his job is to save millions of dollars by educating doctors about expensive prescriptions and the stratagems used to sell them.

“Having come from Big Pharma, I do really feel my soul has been cleansed,” laughs Mr. Courtney, who formerly worked for Pfizer and Johnson & Johnson. “I do feel like I’m more in touch with the physicians” and plan members, he added.

Costs for prescription drugs have been rising faster than those for any other health segment, marked by high-profile cases such as the reported 400% increase for Mylan’s EpiPen and 5,000% spike for Turing Pharmaceuticals’ Daraprim.

Health plans and others paying those costs are fighting back. Many have tried to give doctors academic research on pill effectiveness or simply removed high-cost drugs from coverage lists.

Consumer groups and medical societies have tried to spread the word about expensive drugs. Startup GoodRx lets patients compare retail prices online.

CDPHP is one of the few insurers to have taken the battle against pricey pills a step further. It is recruiting across enemy lines, hiring former pharma representatives and staffing what may be a new job category: a sales force for cost-effective medicine.

“Insurers are taking matters into their own hands,” said Lea Prevel Katsanis, a marketing professor at Canada’s Concordia University who specializes in the pharmaceutical industry. “They’re saying, ‘We can’t really rely on drug companies to talk to doctors about what’s cost-efficient.’ ”

If insurance companies can curb drug costs, premiums paid by employers, taxpayers, and consumers need not rise as fast.

Two years ago, when one company increased the cost of a common diabetes medicine to 20 times what it had been a few years earlier, Mr. Courtney and five other former pharma and medical-device reps working for CDPHP knew what to do.

Valeant Pharmaceuticals had cranked up the price of one common dosage of its Glumetza medicine for lowering blood sugar to an astonishing $81,270 a year, according to Truven Health Analytics, a data firm. Meanwhile a similar, generic version can be bought for as little as a penny a pill.

Because Glumetza was on CDPHP’s list of approved drugs, the insurer and its members had to pay for it when doctors prescribed it, resulting in millions in extra costs and stinging copayments for patients.

Eric Schnakenberg, MD, an upstate New York family medicine doctor, was shocked when patients began complaining about what he assumed was an inexpensive prescription. Doctors are famously unaware about the cost of the care they order, a situation exploited by drug sellers and other vendors.

While physicians’ electronic prescribing programs and even pharmaceutical guides like the Physicians’ Desk Reference contain prescribing information – some are even peppered with ads – they contain no specific information about prices. Drug sales reps who visit their offices don’t highlight high prices as they drop off free samples, and drug makers can quietly, but substantially, hike the price of a drug from one year to the next.

“As physicians, we’re blindsided by that,” Dr. Schnakenberg said. “We get patient complaints saying, ‘Hey, I can’t afford this,’ and we say: ‘It’s cheap!’ ”

After Mr. Courtney and his colleagues alerted doctors to what Valeant was up to, all but a handful of the 60 plan members who were taking Glumetza switched to metformin, the generic alternative. That saved about $5 million in a year.

Following an outcry over its practices, Valeant agreed last year to raise annual prices by no more than single-digit percentages, the company said through a spokesman. But such hikes could still outpace the inflation rate.
 

Using ‘Those Powers For Good’

Cardiologist John Bennett got the idea to hire pharma reps a few years ago, after he became CDPHP’s chief executive. He knew reps are smart, genial, and motivated. Overhiring by pharma had put many back on the job market.

His sales pitch to them, he says half-jokingly, was: “You know everything they taught you in Big Pharma? How would you like to use those powers for good?”

Pharma companies spend billions on TV ads, doctor blandishments, and expensive salespeople to keep prescriptions flowing.

Pfizer, Johnson & Johnson, and other sellers responded to critics a few years ago by restricting gifts of entertainment, coffee mugs, and some meals. But the industry’s ethics code still allows lavish consulting contracts for doctors and sponsorship of physician conferences as well as meals for doctors and their staffs who listen to an “informational presentation” from sales reps touting expensive pills.

“When those products go generic, nobody’s promoting them anymore,” Mr. Courtney said. Generics makers lack big marketing budgets. CDPHP’s remedy: The insurer promotes generics with its own reps.

“It’s a great idea,” said Alan Sorensen, an economist at the University of Wisconsin who has studied drug prices. “Even a small moving of the needle on their [doctors’] prescribing behavior can have a pretty big impact on costs.”

At first the team concentrated on educating doctors about cheaper alternatives to Lipitor, a widely prescribed cholesterol-lowering medicine, and Nexium, for stomach problems. That saved around $10 million the first year, much in the form of copayments that would have been owed by plan members.

Recently the plan has focused on Seroquel, a branded antipsychotic that costs far more than a similar generic. Switching to the generic saves $600 to $1,000 a month, estimates Eileen Wood, the insurer’s vice president of pharmacy and health quality.

CDPHP’s repurposed reps have helped keep the insurer’s annual drug-cost increases to single-digit percentages, whereas without them and other measures “we would certainly be well into double-digit” increases, she said.

Educating doctors about drug costs is part of a larger push for “transparency” in an industry where Princeton economist Uwe Reinhardt says consumers face the same experience as somebody shopping in Macy’s blindfolded.

Current research by the University of Wisconsin’s Mr. Sorensen finds physicians with access to data about drug prices and insurance coverage are more likely to prescribe generics.

That gives Mr. Courtney and his colleagues a fighting chance, even if, he said, “we don’t have the freewheeling, unlimited green Amex card like I did back in the day.”
 

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.

As a drug salesman, Mike Courtney worked hard to make health care expensive. He wined and dined doctors, golfed with them and bought lunch for their entire staffs – all to promote pills often costing thousands of dollars a year.

Now he’s on a different mission. When Mr. Courtney calls on doctors these days, he champions generic drugs that frequently cost pennies and work just as well as the kinds of pricey brands he used to push.

Instead of Big Pharma, he works for Capital District Physicians’ Health Plan (CDPHP), an Albany, N.Y., insurer. Instead of maximizing pill profits, his job is to save millions of dollars by educating doctors about expensive prescriptions and the stratagems used to sell them.

“Having come from Big Pharma, I do really feel my soul has been cleansed,” laughs Mr. Courtney, who formerly worked for Pfizer and Johnson & Johnson. “I do feel like I’m more in touch with the physicians” and plan members, he added.

Costs for prescription drugs have been rising faster than those for any other health segment, marked by high-profile cases such as the reported 400% increase for Mylan’s EpiPen and 5,000% spike for Turing Pharmaceuticals’ Daraprim.

Health plans and others paying those costs are fighting back. Many have tried to give doctors academic research on pill effectiveness or simply removed high-cost drugs from coverage lists.

Consumer groups and medical societies have tried to spread the word about expensive drugs. Startup GoodRx lets patients compare retail prices online.

CDPHP is one of the few insurers to have taken the battle against pricey pills a step further. It is recruiting across enemy lines, hiring former pharma representatives and staffing what may be a new job category: a sales force for cost-effective medicine.

“Insurers are taking matters into their own hands,” said Lea Prevel Katsanis, a marketing professor at Canada’s Concordia University who specializes in the pharmaceutical industry. “They’re saying, ‘We can’t really rely on drug companies to talk to doctors about what’s cost-efficient.’ ”

If insurance companies can curb drug costs, premiums paid by employers, taxpayers, and consumers need not rise as fast.

Two years ago, when one company increased the cost of a common diabetes medicine to 20 times what it had been a few years earlier, Mr. Courtney and five other former pharma and medical-device reps working for CDPHP knew what to do.

Valeant Pharmaceuticals had cranked up the price of one common dosage of its Glumetza medicine for lowering blood sugar to an astonishing $81,270 a year, according to Truven Health Analytics, a data firm. Meanwhile a similar, generic version can be bought for as little as a penny a pill.

Because Glumetza was on CDPHP’s list of approved drugs, the insurer and its members had to pay for it when doctors prescribed it, resulting in millions in extra costs and stinging copayments for patients.

Eric Schnakenberg, MD, an upstate New York family medicine doctor, was shocked when patients began complaining about what he assumed was an inexpensive prescription. Doctors are famously unaware about the cost of the care they order, a situation exploited by drug sellers and other vendors.

While physicians’ electronic prescribing programs and even pharmaceutical guides like the Physicians’ Desk Reference contain prescribing information – some are even peppered with ads – they contain no specific information about prices. Drug sales reps who visit their offices don’t highlight high prices as they drop off free samples, and drug makers can quietly, but substantially, hike the price of a drug from one year to the next.

“As physicians, we’re blindsided by that,” Dr. Schnakenberg said. “We get patient complaints saying, ‘Hey, I can’t afford this,’ and we say: ‘It’s cheap!’ ”

After Mr. Courtney and his colleagues alerted doctors to what Valeant was up to, all but a handful of the 60 plan members who were taking Glumetza switched to metformin, the generic alternative. That saved about $5 million in a year.

Following an outcry over its practices, Valeant agreed last year to raise annual prices by no more than single-digit percentages, the company said through a spokesman. But such hikes could still outpace the inflation rate.
 

Using ‘Those Powers For Good’

Cardiologist John Bennett got the idea to hire pharma reps a few years ago, after he became CDPHP’s chief executive. He knew reps are smart, genial, and motivated. Overhiring by pharma had put many back on the job market.

His sales pitch to them, he says half-jokingly, was: “You know everything they taught you in Big Pharma? How would you like to use those powers for good?”

Pharma companies spend billions on TV ads, doctor blandishments, and expensive salespeople to keep prescriptions flowing.

Pfizer, Johnson & Johnson, and other sellers responded to critics a few years ago by restricting gifts of entertainment, coffee mugs, and some meals. But the industry’s ethics code still allows lavish consulting contracts for doctors and sponsorship of physician conferences as well as meals for doctors and their staffs who listen to an “informational presentation” from sales reps touting expensive pills.

“When those products go generic, nobody’s promoting them anymore,” Mr. Courtney said. Generics makers lack big marketing budgets. CDPHP’s remedy: The insurer promotes generics with its own reps.

“It’s a great idea,” said Alan Sorensen, an economist at the University of Wisconsin who has studied drug prices. “Even a small moving of the needle on their [doctors’] prescribing behavior can have a pretty big impact on costs.”

At first the team concentrated on educating doctors about cheaper alternatives to Lipitor, a widely prescribed cholesterol-lowering medicine, and Nexium, for stomach problems. That saved around $10 million the first year, much in the form of copayments that would have been owed by plan members.

Recently the plan has focused on Seroquel, a branded antipsychotic that costs far more than a similar generic. Switching to the generic saves $600 to $1,000 a month, estimates Eileen Wood, the insurer’s vice president of pharmacy and health quality.

CDPHP’s repurposed reps have helped keep the insurer’s annual drug-cost increases to single-digit percentages, whereas without them and other measures “we would certainly be well into double-digit” increases, she said.

Educating doctors about drug costs is part of a larger push for “transparency” in an industry where Princeton economist Uwe Reinhardt says consumers face the same experience as somebody shopping in Macy’s blindfolded.

Current research by the University of Wisconsin’s Mr. Sorensen finds physicians with access to data about drug prices and insurance coverage are more likely to prescribe generics.

That gives Mr. Courtney and his colleagues a fighting chance, even if, he said, “we don’t have the freewheeling, unlimited green Amex card like I did back in the day.”
 

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.

As a drug salesman, Mike Courtney worked hard to make health care expensive. He wined and dined doctors, golfed with them and bought lunch for their entire staffs – all to promote pills often costing thousands of dollars a year.

Now he’s on a different mission. When Mr. Courtney calls on doctors these days, he champions generic drugs that frequently cost pennies and work just as well as the kinds of pricey brands he used to push.

Instead of Big Pharma, he works for Capital District Physicians’ Health Plan (CDPHP), an Albany, N.Y., insurer. Instead of maximizing pill profits, his job is to save millions of dollars by educating doctors about expensive prescriptions and the stratagems used to sell them.

“Having come from Big Pharma, I do really feel my soul has been cleansed,” laughs Mr. Courtney, who formerly worked for Pfizer and Johnson & Johnson. “I do feel like I’m more in touch with the physicians” and plan members, he added.

Costs for prescription drugs have been rising faster than those for any other health segment, marked by high-profile cases such as the reported 400% increase for Mylan’s EpiPen and 5,000% spike for Turing Pharmaceuticals’ Daraprim.

Health plans and others paying those costs are fighting back. Many have tried to give doctors academic research on pill effectiveness or simply removed high-cost drugs from coverage lists.

Consumer groups and medical societies have tried to spread the word about expensive drugs. Startup GoodRx lets patients compare retail prices online.

CDPHP is one of the few insurers to have taken the battle against pricey pills a step further. It is recruiting across enemy lines, hiring former pharma representatives and staffing what may be a new job category: a sales force for cost-effective medicine.

“Insurers are taking matters into their own hands,” said Lea Prevel Katsanis, a marketing professor at Canada’s Concordia University who specializes in the pharmaceutical industry. “They’re saying, ‘We can’t really rely on drug companies to talk to doctors about what’s cost-efficient.’ ”

If insurance companies can curb drug costs, premiums paid by employers, taxpayers, and consumers need not rise as fast.

Two years ago, when one company increased the cost of a common diabetes medicine to 20 times what it had been a few years earlier, Mr. Courtney and five other former pharma and medical-device reps working for CDPHP knew what to do.

Valeant Pharmaceuticals had cranked up the price of one common dosage of its Glumetza medicine for lowering blood sugar to an astonishing $81,270 a year, according to Truven Health Analytics, a data firm. Meanwhile a similar, generic version can be bought for as little as a penny a pill.

Because Glumetza was on CDPHP’s list of approved drugs, the insurer and its members had to pay for it when doctors prescribed it, resulting in millions in extra costs and stinging copayments for patients.

Eric Schnakenberg, MD, an upstate New York family medicine doctor, was shocked when patients began complaining about what he assumed was an inexpensive prescription. Doctors are famously unaware about the cost of the care they order, a situation exploited by drug sellers and other vendors.

While physicians’ electronic prescribing programs and even pharmaceutical guides like the Physicians’ Desk Reference contain prescribing information – some are even peppered with ads – they contain no specific information about prices. Drug sales reps who visit their offices don’t highlight high prices as they drop off free samples, and drug makers can quietly, but substantially, hike the price of a drug from one year to the next.

“As physicians, we’re blindsided by that,” Dr. Schnakenberg said. “We get patient complaints saying, ‘Hey, I can’t afford this,’ and we say: ‘It’s cheap!’ ”

After Mr. Courtney and his colleagues alerted doctors to what Valeant was up to, all but a handful of the 60 plan members who were taking Glumetza switched to metformin, the generic alternative. That saved about $5 million in a year.

Following an outcry over its practices, Valeant agreed last year to raise annual prices by no more than single-digit percentages, the company said through a spokesman. But such hikes could still outpace the inflation rate.
 

Using ‘Those Powers For Good’

Cardiologist John Bennett got the idea to hire pharma reps a few years ago, after he became CDPHP’s chief executive. He knew reps are smart, genial, and motivated. Overhiring by pharma had put many back on the job market.

His sales pitch to them, he says half-jokingly, was: “You know everything they taught you in Big Pharma? How would you like to use those powers for good?”

Pharma companies spend billions on TV ads, doctor blandishments, and expensive salespeople to keep prescriptions flowing.

Pfizer, Johnson & Johnson, and other sellers responded to critics a few years ago by restricting gifts of entertainment, coffee mugs, and some meals. But the industry’s ethics code still allows lavish consulting contracts for doctors and sponsorship of physician conferences as well as meals for doctors and their staffs who listen to an “informational presentation” from sales reps touting expensive pills.

“When those products go generic, nobody’s promoting them anymore,” Mr. Courtney said. Generics makers lack big marketing budgets. CDPHP’s remedy: The insurer promotes generics with its own reps.

“It’s a great idea,” said Alan Sorensen, an economist at the University of Wisconsin who has studied drug prices. “Even a small moving of the needle on their [doctors’] prescribing behavior can have a pretty big impact on costs.”

At first the team concentrated on educating doctors about cheaper alternatives to Lipitor, a widely prescribed cholesterol-lowering medicine, and Nexium, for stomach problems. That saved around $10 million the first year, much in the form of copayments that would have been owed by plan members.

Recently the plan has focused on Seroquel, a branded antipsychotic that costs far more than a similar generic. Switching to the generic saves $600 to $1,000 a month, estimates Eileen Wood, the insurer’s vice president of pharmacy and health quality.

CDPHP’s repurposed reps have helped keep the insurer’s annual drug-cost increases to single-digit percentages, whereas without them and other measures “we would certainly be well into double-digit” increases, she said.

Educating doctors about drug costs is part of a larger push for “transparency” in an industry where Princeton economist Uwe Reinhardt says consumers face the same experience as somebody shopping in Macy’s blindfolded.

Current research by the University of Wisconsin’s Mr. Sorensen finds physicians with access to data about drug prices and insurance coverage are more likely to prescribe generics.

That gives Mr. Courtney and his colleagues a fighting chance, even if, he said, “we don’t have the freewheeling, unlimited green Amex card like I did back in the day.”
 

KHN’s coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation. Kaiser Health News is a national health policy news service that is part of the nonpartisan Henry J. Kaiser Family Foundation.