New DOL Rule on Redefining Spouse Under FMLA Temporarily Placed On Hold. Our previous issue of Health and Welfare Notes reported that the Department of Labor issued a Final Rule on February 25, 2015 revising the regulatory definition of spouse under the Family and Medical Leave Act of 1993 (FMLA) in keeping with the U.S. Supreme Court ruling in United States v. Windsor.  The final rule determines spousal status based on the laws of the state where the employee was married—the “place of celebration”—regardless of whether the laws of the state where the couple lives recognize such marriages. This Final Rule was to take effect March 27, 2015, but on March 26, a federal judge in Texas granted a preliminary injunction staying implementation of the rule temporarily pending a full determination of the matter.  The Attorneys General for Texas, Arkansas, Louisiana and Nebraska (states which do not recognize same‑sex marriages) challenged the Department of Labor’s new rule, arguing that it violated the federal Full Faith and Credit provision of the Defense of Marriage Act, which says that no state is required to recognize another state’s “public act, record, or judicial proceeding . . . respecting a relationship between persons of the same sex that is treated as a marriage . . . .” The Attorneys General argued that by requiring their states to recognize same‑sex marriages entered into in other states, the Department of Labor’s new FMLA rule violated the Full Faith provision.  A great deal of uncertainty surrounds this final rule with additional court rulings expected in the coming months. In the meantime, if you are covered by the FMLA, prepare for the changes proposed in the expanded definition of “spouse” so that if the stay on the rule’s application is lifted, you will be prepared to comply.
[Mondaq Business Briefing, Paula Ardelean, Butler Snow LLP, April 27, 2015]

ACA Implementation FAQs Part XXIV Addresses Proposed SBC Changes.   On March 30, 2015, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury released Affordable Care Act (ACA) Implementation FAQs Part XXIV addressing when the Departments intend to finalize proposed changes to the Summary of Benefits and Coverage (SBC) regulations, template, instructions, updated uniform glossary, and other materials that the Departments published on December 30, 2014.  These changes were proposed to apply beginning September 1, 2015.

SBC Regulations:  The Departments intend to finalize changes to the regulations in the near future, which are intended to apply in connection with coverage that would renew or begin on the first day of the first plan year (or, in the individual market, policy year) that begins on or after January 1, 2016 (including open enrollment season periods that occur in the Fall of 2015 for coverage beginning on or after January 1, 2016).

SBC Template and Associated Documents: The Departments also intend to utilize consumer testing and offer an opportunity for the public, including the National Association of Insurance Commissioners, to provide further input before finalizing revisions to the SBC template and associated documents.  The Departments anticipate the new template and associated documents will be finalized by January 2016 and will apply to coverage that would renew or begin on the first day of the first plan year (or, in the individual market, policy year) that begins on or

after January 1, 2017 (including open enrollment season periods that occur in the Fall of 2016 for coverage beginning on or after January 1, 2017).  The Departments are fully committed to updating the template and associated documents (including the uniform glossary) to better meet consumers’ needs as quickly as possible.

Prescription Drug Trend Reports and Analysis

Highest Increase in U.S. Drug Spend Over Past Decade. According to  Express Scripts’ 2014 Drug Trend Report, which provides detailed analysis of U.S. prescription drug costs and utilization, as well as the marketplace factors that affect future changes, in 2014, the pharmacy landscape underwent a seismic change, and the budgetary impact to healthcare payers was significant. U.S. prescription drug spend increased 13.1% in 2014, the largest annual increase since 2003, and this was largely driven by an unprecedented 30.9% increase in spending on specialty medications. Utilization of traditional medications stayed flat (‑0.1%), while the use of specialty drugs increased 5.8%. The largest factors contributing to the increased spending, however, were the price increases for these medication categories, 6.5% for traditional and 25.2% for specialty. While specialty medications represent only 1% of all U.S. prescriptions, these medications represented 31.8% of all 2014 drug spend (an increase from 27.7% in 2013).  Increased inflation and utilization of hepatitis C and compounded medications were the most significant accelerators of U.S. drug spend in 2014. Excluding those two therapy classes, overall drug spend would have increased only 6.4%. See more at: lab.express-scripts.com/drug-trend-report.

Double‑Digit Cost Hike Predicted for Pharmacy Drugs. Driven by the developmental and retail costs of specialty drugs and a less‑than‑robust generic drug market, pharmaceutical price increases will move into the double‑digit range by 2016.  That’s what an analysis of cost factors by Aon Hewitt forecasts, based on the results from an actuarial analysis of medical trend cost information from various sources, from client experience, government sources and carriers to third‑party sources.  Without plan design changes to counter pharmacy cost increases, Aon Hewitt predicts a 9.5 percent increase in 2015, a 10 percent increase in 2016, and a 10.5 percent increase in 2017.

“Medical cost increases over the past few years have offset some of the higher pharmacy costs in the short‑term, but for 2015 and 2016, there will be more pressure than relief on pharmacy cost,” said Tim Nimmer, global chief actuary for Aon Health. “This is primarily due to high price inflation for brand and specialty drugs, a slowdown in blockbuster drugs losing patent protection, generic dispensing rates leveling off, and the robust pipeline of specialty drugs including the new Hepatitis C treatments. If left unmanaged, these issues could have a significant impact in pushing these increases even higher.”

“The dramatic increase in specialty costs means that implementing strategies to promote generic utilization, 90‑day prescriptions and member adherence in non‑specialty categories is more important than ever,” said John Malley, leader of Aon Hewitt’s Innovation Pharmacy Team. “On the specialty side, PBMs have been aggressively negotiating rebate contracts with manufacturers to keep the total cost of these medications in a range employers can reasonably absorb. Employers should continuously monitor their pharmacy pricing, either through discussions with their current PBM or a competitive bid process, to ensure they are receiving the full value of these improved rebate contracts.”
[Excerpt from BenefitsPro, Dan Cook, Apr 20, 2015]

Disclaimer – This newsletter’s purpose is to inform our clients and colleagues of recent legislative health care-related developments.  It is not intended, nor should it be used, as a substitute for specific legal advice.

Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News.  If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.

richard Gabriel associates
Actuarial and Employee Benefits Consultants
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Horsham, PA   19044-2203
Phone (215) 773-0900   —   Fax (215) 773-9907   —   Email: rga@rgabriel.com