2013 Fall Health Care Symposium PK Sy… · Understanding Obamacare •In order to insure the uninsured, we first have to un-insure the insured. •Next, we require the newly uninsured

2014 Fall Health Care Symposium

Agenda

• ACA – What’s Happening Now

• Group vs. Individual Coverage

• Alternative Funding Options

• Why Wellness Matters

• Transforming HR Through Technology

Understanding Obamacare

• In order to insure the uninsured, we first have to un-insure the insured.

• Next, we require the newly uninsured to be re-insured.

• To re-insure the newly uninsured, they are required to pay extra charges to be re-insured.

• The extra charges are required so that the original insured, who became uninsured, and then became re-insured, can pay enough extra so that the original uninsured can be insured, which will be free of charge to them.

The ACA Health Care Coverage Landscape - Changes in Effect Prior to 2014

• Loss of Medicare Part D retiree subsidy deduction

• $2500 PY cap on FSA salary reductions (Notice 2012-40)

• Amendment required by 12/31/2014

• Significant Limitations on HRAs Announced in 2013

• January 2013 FAQ Guidance

• Transition (spend down) rule for some pre-existing HRAs

• September 13, 2013 - Notice 2013-54

• Curtails stand-alone HRAs, prohibits pre-tax individual policies

• Carryover Guidance for FSAs - Notice 2013-71

• Up to $500

• Cannot be combined with FSA grace period changes

The ACA Health Care Coverage Landscape - Changes in Effect 2014 and Beyond

• Individual mandate - no penalty imposed due to coverage gap if individual enrolls by end of open enrollment (March 31, 2014)

• Employer play or pay requirement - NOW DELAYED UNTIL 2016 for employers with less than 100 FTE employees. With some limited “Sledgehammer" transition relief for larger employers.

• Employer Coverage Reporting. DELAYED UNTIL 2015

(Final regs March 2014)

• Required to report minimum essential coverage and premium costs

• Applies to insurers and self funded plans

The ACA Health Care Coverage Landscape - Changes in Effect 2014 and Beyond

• Exchanges - First open enrollment for individual coverage commenced October 2013

• October 1st Exchange Notice Requirement; on-going for new hires

• Changes Generally Effective First Plan Year On/After January 1, 2014

• Employer Quality of Care Coverage Reporting - Delayed pending guidance

• Will require information on health care outcome, safety, and wellness

• Must make available to enrollees and on internet

Court Decisions of Interest

• Hobby Lobby Decision

• Religious objections to providing contraceptives

• Supreme Court ruled in favor of for-profit employers under Religious Freedom Restoration Act (RFRA)

• But state contraceptive equity laws may still apply

• Other challenges working their way through the courts

• Halbig and King - Availability of federal tax subsidies in state run exchanges

Reforms Effective Plan Years On/After 2014

• (ALL) No pre-existing condition exclusions or limitations are permitted • First wave of reforms applied only to persons under age 19

• (ALL) Prohibition on excessive waiting periods- i.e. no waiting period in excess of 90 days • March 2013 Proposed Regulations substantially retained • Final Regulations issued February 2014 • New 30 day "orientation period" • Eliminates HIPAA Certificates after 12/31/14

• (NGF) Fair Health Insurance Premiums (applicable only to health insurers of small group plans) • Limitations on premium setting (e.g. limitations on

premium setting based on age 3:1. tobacco use 1.5:1, geography)

• Final Regulations issued in February 2013


• (NGF) No discrimination based on health status is permitted • Essentially, the same rules that currently exist under HIPAA • The law raises maximum incentive amount for wellness

programs that provide the incentive based on achieving a health standard from 20 to 30 percent of the COBRA cost of coverage • Also gives the Secretaries of Labor, HHS, and the Treasury leeway to

increase the percentage to 50 percent • Final regulations published June 3, 2013 • Some new requirements for standard based wellness plans (activity

only vs. standard based distinction) • 50% limited to tobacco cessation

• (All) Coverage of dependent children to age 26 - end of special rule for GF plans • Under transition rule, GF plans could exclude adult children if

the adult child is eligible to enroll in an eligible employer-sponsored health plan other than a group health plan of a parent This special rule for GF plans does not apply to plan years beginning on or after January 1, 2014


• (NGF) Cost limitations • ALL PLANS - Out-of-pocket expenses do not exceed the

amount applicable to coverage related to health savings accounts (HSAs) ($6350 single, $12700 family

• 2015 amounts $6600 and $13,200 differs from HSA amounts ($6450,$12900)

• ACA compliance does not mean HSA eligible • Small Fully Insured Plans - Deductibles do not exceed $2,000

for single coverage and $4,000 for family coverage (as indexed)

• February 2013 final Regulations clarify • the deductible requirement only applied to fully insured plans in

small group market, but OOP applies to ALL • Transition OOP relief allowed where separate PBM administrator

only for the 2014 plan year

• Medicare SGR Fix (Sec 213) • Eliminates deductible (but not OOP) limit • Reopens door for Integrated HRA arrangements coupled with

super high deductible coverage


• (NGF) Fully insured plans in small group market must provide essential health benefits (EHB) as determined by reference to a State benchmark plan

• Not applicable to fully insured plans in large group market or self-funded plans • For purposes of applying the prohibition on lifetime and

annual limits, large group and self-funded plans may use any single permissible benchmark plan

• Final regulations address Minimum Value for pay/play purposes and IRS issues MV calculator

• (NGF) Group and individual plans required to cover routine costs of participation in clinical trials by qualified individuals

• Agency FAQ says good faith compliance standard applies until guidance is issued


• (NGF) Additional preventive care requirements for PY beginning on/after 9/24/14

• In accordance with new guidelines Issued by the United States Preventive Services Task Force (USPSTF), non-grandfathered plans will need to cover cancer medication preventive services without charge. The effective date Is based on when the USPSTF added the new requirement.

http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca.Implementation.faqs18.html








Cadillac Plan Tax Beginning in 2018, ACA imposes a 40 percent excise tax on: • "Coverage providers:" for the sum of months in which the

aggregate value of employer sponsored health coverage for the employee exceeds: • 1/12 of $10,200 for single coverage and $27,500 for family (i.e.,

other than single) coverage • These amounts are to be adjusted automatically if health costs increase

by more than anticipated before 2018 • The thresholds are increased by Consumer Price Index + 1 in 2019, and

by CPI thereafter

• An employer may make an adjustment to reduce the cost of plans when calculating the tax if the employer's age and gender demographics are not representative of a national average

• No adjustment for high cost states

• The annual limit for retirees between ages 55 and 64, individuals engaged in certain high-risk professions (e.g., law enforcement professionals, EMTs. longshoremen, construction workers, and miners), and those employed to install electrical or telecommunication lines is increased to $11,850 for individual coverage and $30,950 for family coverage

Cadillac Plan Tax Determined by the employer and assessed against "coverage providers”

• "Coverage providers" are defined to include the following:

• In the case of fully insured plans, the health Insurer

• In the case of HSA or medical savings account (MSA) contributions. the employer making the contributions

• In the case of a self-insured plan or flexible spending account (FSA), the person that administers the plan (e.g., the TPA)

• In many cases, employer-sponsored coverage will include both fully insured and self-insured contributions (it may also include HSA contributions)

Cadillac Plan Tax • The coverage subject to the excise tax rule includes:

• The applicable premium (determined in accordance with COBRA rules) for all accident and health coverage provided by the employer, even if paid for with after-tax dollars by the employee (except vision only insurance, dental insurance, accident and disability insurance, long term care insurance, and after-tax funded hospital indemnity and/or specified disease coverage)

• Both non-elective and salary reduction contributions to a health FSA

• Employer contributions (presumably including salary reductions) to an HSA


Group vs. Individual Coverage- Pros & Cons

Keep Group Plan

• Pros

• Employees can contribute on a pre-tax basis! • Pre-tax contributions reduce taxable income to the employee and

the employer

• The “net” cost of the employees portion is more favorable when paying with pre-tax contributions

• Group plans typically have lower out-of-pocket costs • Most group plans pay 100% after the deductible has been met

• Co-pays for Office Visits, Prescriptions etc. are typically lower vs. individual coverage

• Employee retention • Employees appreciate a comprehensive benefits package

• Recruiting • Benefits are one of the first things prospective employees will ask

about


Keep Group Plan (Cont.) • Cons

• Individual Rating • *Groups in the 2-50 market that renew 6/1/14 or later have the

ability to keep their “old” plan and composite rating methodology

• Individual rates are based on age, geographic location (by county) & tobacco use

• PPACA plans are individually rated which makes cost-sharing more challenging

• Employers have typically paid a flat percentage or dollar amount towards premiums

• Individual premiums make this more difficult: • Take an average of all the individual rates and create a composite rate? • Provide a flat-dollar amount to each person and have them pay the actual

difference based on their rate? • Provide a flat percentage to each person and have them pay the actual

difference based on their rate?


Keep Group Plan (Cont.)

• Cons

• Rates have increased significantly for many groups

• December renewals have average increases of 35% with many groups receiving 50% increases

• Subsides – By offering a group plan you essentially “lock-out” employees from Marketplace subsidies

• Subsides are income dependent and wont apply to all employees


Convert To Individual Plans

• Pros

• Employees can pick from a variety of plans • Carriers offer multiple plan designs within the 4 “metal-levels” of

Bronze, Silver, Gold & Platinum

• Some employees may receive subsidies • Subsides are based on household income as it relates to the

Federal Poverty Level (FPL)

• Households that are between 100%-400% of FPL will qualify for a subsidy

• Employer is removed from the decision making process • Employees make their own decisions based on individual needs


Convert To Individual Plans

• Cons

• Employees must pay for premiums with a post-tax dollar • A $300 premium may require an employee to “gross” $400 in

order to “net” $300

• Out-of-Pocket Costs • Plans range from $1650 per person up to $6350 per person for

deductibles, co-insurance and co-pays

• Out-of-Pocket will increase to $6550 per person for 2015

• Employer Contributions Towards Premiums • Technically not legal – Could be done through a “merit” raise but

should not be explicitly for individual health insurance

• Additional taxes for the Employer

• Additional taxes for the employee

• May eliminate subsidy based on increased compensation


Convert To Individual Plans- “On” or “Off” Marketplace

• Plans Are The Same!

• Plans purchased directly from the insurance carrier (i.e. Highmark, Capital etc.) are the exact same plans you can purchase through the Marketplace (www.healthcare.gov)

• Pricing for the plans are identical unless you qualify for a subsidy

• If you qualify for a subsidy & you want to apply that subsidy towards your premium you must purchase your individual plan through the Marketplace (web-site, phone or mail)

• Subsides are based on household income & household size

http://www.healthcare.gov/

Who’s Eligible?

• Tax Credits • $11,490 to $45,960 for individuals • $15,510 to $62,040 for a family of two • $19,530 to $78,120 for a family of three • $23,550 to $94,200 for a family of four • $27,570 to $110,280 for a family of five

• Reduced out-of-pocket costs

• $11,490 to $28,725 for individuals • $15,510 to $38,775 for a family of two • $19,530 to $48,825 for a family of three • $23,550 to $58,875 for a family of four • $27,570 to $68,925 for a family of five

Income

Level

Premium as a

Percent of Income Up to 133%

FPL 2% of income

133-150%

FPL 3 – 4% of income

150-200%

FPL 4 – 6.3% of income

200-250%

FPL 6.3 – 8.05% of income

250-300%

FPL 8.05 – 9.5% of income

300-400%

FPL 9.5% of income

What are employers doing? • Few Groups Have Dropped Coverage

• Small group market

• Most renewing “as is” in pre-PPACA plans

• Carriers interpretation of “if you like your plan”

• Large group market

• Carriers providing offers “not to shop”

• Carriers concerned about groups moving to self-funded

• Small & Large Groups

• QHDHPs & HSAs

• Self Funding


Self Funding vs. Fully Insured

• Employer assumes all or a portion of the risk for health benefits.

• Administrative Services Only (ASO) – an arrangement in which an organization funds its own benefit plan

• Administrative options available to employers choosing self-funding:

• Payment Arrangements

• Paying at the maximum funding level

• Pay claims as you go

Self Funded Terms

• Administrative Fee:

• Fee charged for claims adjudication, billing, eligibility, customer service, plan document maintenance, access fees, managed care fees

• Setup Fee:

• One-time charge for the input of eligibility and benefits in order for the plan to be administered

• Expected Claims:

• Total claims underwriter expects you to have in one policy year, actuarially determined from your past claims experience

Self Funded Terms

• Laser:

• A provision within the stop loss contract that excludes a member from the stop-loss insurance. All claims for that individual would be the responsibility of the employer

• Shock Claim: • A shock loss may be defined as an abnormally large and

unexpected claim.

• Could be the result of severe accident or serious illness

• Stop-Loss Insurance:

• Insurance purchased to protect the employer from a shock claim and/or unexpectedly high utilization

• Specific

• Aggregate

Self Funding Advantages

• Flexibility in Plan Design

• Self-funded plan not bound by state mandates

• Risk Management effectiveness through Stop Loss Insurance

• Employer may choose the amount of risk to retain and the amount to be covered under stop loss protection. Under an insured arrangement, insurance company sets the pooling level.

Self Funding Advantages

• Tax Savings

• No premium tax for the self-funded claim fund

• Transparency

• Know what you are paying for

• Margin • Insurance companies typically charge 3-10% for margin (for

fluctuations in claims) • Under self-funded arrangement, this component is eliminated

Self Funding Disadvantages

• Risk Assumption

• Employer assumes risk between the normally anticipated claim level and Stop Loss Coverage level

• Lasers

• Under fully insured arrangement, this component is eliminated

• Fiduciary Responsibility

• Employer assumes risk

Self Funding Options

• ASO Plans

• Potential for lasers

• Negotiating on a small premium

• Should have 300 employees or more

• Carrier Options for Small Groups

• Down to 20 enrolled (underwriting required)

• Level premiums

• No lasers

Self Funding Options

• Consortium Model

• Level premiums

• No lasers

• Stop Loss Purchasing Power

• Medical Loss Ratio

• Captive Model

• Potential cash advantage

• Collateral required up-front

• Commitment to wellness

Questions?

•

Documents

2013 Fall Health Care Symposium PK Sy… · Understanding Obamacare •In order to insure the uninsured, we first have to un-insure the insured. •Next, we require the newly uninsured