IRS revises HSA family contribution limit and other inflation-adjusted amounts

The Internal Revenue Service (IRS) published Revenue Procedure 2018-18 containing inflation-adjusted amounts revised due to the December 2017 enactment of the Tax Cuts and Jobs Act (P.L.115–97). The law revised the basis for certain tax adjustments from the Consumer Price Index for Urban Consumers (CPI-U) to the Chained CPI-U, effective in 2018. Thus, the new revenue procedure replaces figures previously announced for 2018 in Revenue Procedure 2017-37 (regarding health savings accounts [HSAs] and high-deductible health plans [HDHPs]) and Revenue Procedure 2017-58 (tax provisions, including those covering employer-provided benefits, that are subject to annual cost-of-living adjustments [COLAs]).

Revenue Procedure 2018-18 revises the following items (changed amounts are boldfaced):

HSAs/HDHPs: The maximum contribution limit to an HSA for family coverage under an HDHP is reduced by $50, while all other amounts remain the same. The HSA $1,000 annual “catch-up” contribution limit for individuals aged 55 or older was set by law for 2009 and later years and is not subject to inflation adjustments.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Benefit Self-Only Family Self-Only Family
HSA Maximum Annual Contribution $3,450 $6,900 $3,450 $6,850
HDHP Minimum Annual Deductible $1,350 $2,700 $1,350 $2,700
HDHP Maximum Annual Out-of-Pocket Expenses $6,650 $13,300 $6,650 $13,300

Archer Medical Savings Accounts: Some figures decrease for 2018.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Benefit Self-Only Family Self-Only Family
HDHP Annual Deductible Between $2,300 and $3,450 Between $4,600 and $6,850 Between $2,300 and $3,450 Between $4,550 and $6,850
Annual Out-of-Pocket Expenses $4,600 $8,400 $4,550 $8,400

Adoption Assistance Programs: All figures decrease for 2018.

Amounts under Rev. Proc. 2017-37 2018 Updated Amounts under Rev. Proc. 2018-18
Excludible amounts
For adoption of special
needs child
$13,840 $13,810
For other adoptions $13,840 $13,810
Phase-out Income Thresholds
Phase-out Begins $207,580 $207,140
Phase-out Ends $247,580 $247,140

Employee Health Insurance Expense for Small Employers: The amount decreases for 2018.

Amounts under Rev.
Proc. 2017-37
2018 Updated Amounts under Rev.
Proc. 2018-18
Small Employer Health Insurance Expense $26,700 $26,600

Employers that offer HSAs/HDHPs, Archer medical savings accounts, or adoption assistance to their employees, and/or employers that receive tax credits for health insurance premiums they pay for employees enrolled in qualified health plans under the Small Business Health Options Program (SHOP) should review their programs and consider modifying the amounts to comply with the updated figures. There are potential penalties and other tax consequences for noncompliance with the revised limits. For example, an employee contributing to an HSA for family coverage could be subject to additional taxes if he or she contributes at the outdated maximum amount. At this time, however, the IRS has not provided guidance on the steps necessary to make the midyear changes, so consulting with tax counsel or other expert advisers may be prudent. Employers also may have to modify administrative systems (e.g., to accommodate payroll withholding) and update communications materials to employees.

For further information about the IRS’s revised figures for 2018, please contact your Milliman consultant.

Genomic testing: Cost-savings or cost-inflating for payers

Private payers are gradually adopting genomic testing to guide decision making in treatment pathways for selected disorders. There is still some uncertainty regarding the future uptake of genomic testing and the levels of sophistication of new tests. An article by Milliman’s Didier Serre and Joanne Buckle discusses some relevant considerations that can support a greater appreciation of the risks and gains to payers involved in funding these tests now.

This article was originally published in the February 2018 issue of Health Watch.

Diagnosed opioid use disorder by payer

Over 25 million American adults report suffering from chronic pain on a daily basis, and a range of adverse health outcomes accompanies their pain. Beginning in the early 2000s, opioid analgesics were increasingly seen as a solution to the problem of under-treatment that had been a concern in the 1990s. From 1991 to 2011, the number of opioid prescriptions filled at U.S. retail pharmacies nearly tripled, increasing from 76 million to 219 million per year, though those numbers have started to decrease since the peak in 2011.

Despite the recent decrease in prescriptions of opioids, the human toll of the opioid crisis has continued to intensify. Illegally acquired heroin and synthetic opioids such as fentanyl have become the leading cause of overdose deaths. Opioid overdose deaths are now the single largest factor slowing the growth in U.S. life expectancy, and if current trends continue, opioid overdose deaths could outnumber suicides by 2019.

In this article, Milliman’s Stoddard Davenport and Katie Matthews help explain the scale of the opioid epidemic within the insurance industry.

Based on a sample of over 42 million people with commercial insurance, nearly 1.3 million Medicare beneficiaries, and a Kaiser Family Foundation analysis of Medicaid beneficiaries in 49 states, we estimate that over 1.5 million insured Americans were diagnosed with an opioid use disorder in 2015 (the most recent year available). Figures 3 and 4 summarize these findings by payer. These results (and others presented throughout this report) have been age- and area-adjusted to be representative of the U.S. insured population as of 2015 using U.S. Census Bureau data.12

Figure 3: Diagnosed opioid use disorder by payer, 2015 (or most recent year)

Commercial
(2015)
622,000
Medicare
(2015)
239,000
Medicaid
(2013)
642,000

We found that about 41.4% of those with diagnosed opioid use disorder were commercially insured, 15.9% were Medicare beneficiaries, and 42.7% were Medicaid beneficiaries. Overall, the diagnosed prevalence rate of opioid use disorder was 3.28 per 1,000 for the commercially insured, 5.39 per 1,000 for those with Medicare, and 8.90 per 1,000 for those with Medicaid. Across all insurance payers, we found that the prevalence of opioid use disorder was 4.91 per 1,000.

Figure 4: National estimates of opioid use disorder diagnosis by payer, 2015 (or most recent year)

Payer Diagnosed prevalence per 1,000 Total diagnosed nationally No. (%)
Commercial (2015) 3.28 622,000 (41.4)
Medicare (2015) 5.39 239,000 (15.9)
Medicaid (2013) 8.90 642,000 (42.7)
Total 4.91 1,503,000 (100.0)

The authors also highlight the rate of opioid use disorder by age and sex.

Rates of opioid use disorder varied widely by age and sex, with men generally experiencing higher rates of opioid use disorder through age 65, and women experiencing higher rates from 66 and older. Rates were quite low through childhood, followed by a marked increase in the late teen years, peaking in the mid-20s at a rate of 5.47 per 1,000 for women (at age 24) and 10.00 per 1,000 for men (at age 25). Rates showed a sharp drop-off in the late 20s, followed by a rise to another peak in the mid-30s of about 3.76 per 1,000 for women (at age 35) and 6.37 per 1,000 for men (at age 36). From the late 30s through age 64, the gap between men and women closed and both experienced prevalence rates hovering between 3.50 to 4.00 per 1,000 through retirement age. Opioid use disorder rates for Medicare beneficiaries were generally higher for women than for men, and tapered off with advancing age. Comparable data for Medicaid were not available.

Medicare Advantage’s transition from RAPS to EDS risk scores

In 2017, there were many changes to Medicare Advantage (MA) risk adjustment as the transition continued from Risk Adjustment Processing System (RAPS) data to Encounter Data System (EDS) data. MA organizations will also experience complexity and challenges in payment year (PY) 2019.

This article by Milliman’s Deana Bell, David Koenig, and Charlie Mills compares EDS and RAPS risk scores and details some of the program highlights from the past 12 months:

• A 25% EDS weight for PY 2017
• EDS file layout updates
• PY 2016 EDS deadline extension and change to payment timing
• PY 2017 RAPS and EDS deadline extensions
• Including inpatient RAPS diagnoses in EDS risk scores for PY 2019

Plan sponsors must consider several strategies to manage pharmacy costs

In recent years, pharmacy costs have been a hot topic. Plan sponsors must remain vigilant and stay current on industry strategies used to manage pharmacy costs. In this article, Milliman consultant Ajanthan Balasinkam outlines a number of important considerations for plan sponsors, including plan design, contracts, the opioid crisis, and the specialty pipeline.

Has the MPL specialty industry reached its peak in financial strength ratings?

The profitability experienced by the medical professional liability (MPL) industry since the mid-2000s, and the resulting strengthening of balance sheets, has not gone unnoticed by A.M. Best. This article by Milliman’s Eric Wunder and Sarah Rice examines the A.M. Best financial strength ratings as well as A.M. Best’s outlook for MPL specialty insurers.

This article was originally published in the 2018 First Quarter issue of Inside Medical Liability.