Senate Hears Testimony on Health Insurance Bills

February 3, 2020

Last week, the Michigan Senate Health Policy and Human Services Committee heard testimony on legislation to make changes to prior authorization and step therapy processes. The Michigan Chamber provided input on the legislation, voicing member questions and concerns. 

In the era of rising health care prices, employers have increasingly turned to insurers for help in controlling health care costs and the prescription drug spend. One of the most popular coping mechanisms among employers has been to use a multitiered drug formulary. This tactic also involves the use of techniques such as requiring prior authorization for some medications and step therapy to see if less-expensive drugs work before allowing payment for more-expensive drugs. According to the Society for Human Resource Management, 64 percent of all plans in 2019 established utilization management for drugs, such as requiring prior authorization, step therapy and quantity limits.

We told the Senate that, although our members and insurers have reported measured success with these tactics, the cost of health insurance remains a concern. In fact, the total cost of health care, including premiums and out-of-pocket costs for employees and dependents, was estimated to average $14,800 per employee in 2019 - up from $14,099 in 2018. Large employers will cover roughly 70 percent of those costs, leaving $4,400 on average for employees to pick up in premium contributions and out-of-pocket expenses. Health benefit costs are still rising at two times the rate of wage increases and three times general inflation, making this cost trend unaffordable and unsustainable over the long term.

We also told the Senate that Chamber members have concern with the one-sidedness of the legislation as introduced and questioned whether this issue requires governmental interference in private contracts and/or a legislative fix. In addition, our members have raised questions and concerns about whether the timeliness standards, documentation requirements and independent review and appeal requirements are realistic and attainable. 

The Chamber is encouraging the Senate Committee to convene a stakeholder meeting or workgroup to see if middle ground can be found on this important issue. 

If you have any questions or concerns, please contact Wendy Block at wblock@michamber.com.