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May 5, 2011Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Health Care Reform
History is Made……….
Now What?
Outlook for Health Reform 2011-2014
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Agenda
Why is reform important?
What does reform attempt to achieve?
How much does reform cost and how is it paid
for?
What happens next?
2010 – Building Support And Maintaining Coverage
2011-2013 – Preparing for A New World
2014 and Beyond – Major Market Reform
2
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
How It Came About
3
On March 23, 2010 President Obama signed
comprehensive health reform, the Patient Protection
and Affordable Care Act (PPACA) into law.
President Obama signed the Health Care
Reconciliation Act (HCRA) on March 30, 2010.
White House View – provide for expanded coverage,
decrease health care costs, improve quality, and
improve the health care delivery system.
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
This Is Big..
4
Universal Coverage
PPACA
Co-ops
Pay or Play
Pre-Existing Condition
Exchanges
Catastrophic Costs Guarantee
issue
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Why Is Reform Important?
Costs are out of control 1 in 6 dollars is spent on health care
Employer premiums doubled in last 10 years
Medicare now pays out more than it collects in taxes
5
Quality inconsistent U.S ranks #1 in the world in health care spending — $7,500 per
capita — yet ranks 20th in life expectancy and 27th in infant mortality
More people in America die after heart attacks in higher-spending regions compared to lower spending regions
Too many shut out 46 million uninsured
80% of uninsured come from working families
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
What Does Reform Attempt To Achieve?
Expand coverage
Require all to participate
Make care more affordable
Change insurance practices
Increase choice, competition
Improve quality of care
Reduce cost
6
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Key Provisions
Requires:
Most U.S. citizens and legal residents to
have health insurance – subsidies apply
<400% Federal Poverty Level* (FPL).
Expands Medicaid to 133% FPL.
Guarantee issue of insurance
No pre-existing conditions
Individuals who do not purchase insurance to pay penalties
Employers with 50+ employees to provide health insurance
or pay penalties
*FPL is $10,830 for individual and 22,050 for a family of four.
7
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Key Provisions (Cont’d)
Creates:
A definition of “essential health benefits” levels.
Establishes minimum Medical Loss Ratio (MLR) requirements for health plans. 80% individual/small
85% large group
State-based Exchanges through which individuals and small employers can purchase coverage.
8
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
What Does It Cost?
9
The
Grand $1.05T
Total
$ in Billions
New
Programs
Other
Expenses
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
How Is It Paid For?
10
Savings = $693 B
New Revenue = $431 B
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Implementation
Patience and Wisdom
11
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Phases of Healthcare Reform
12
2010: Building
Support &
Maintaining Coverage
2011-2013:
Preparing for A
New World
2014: Major
Market Reforms
Benefit Enhancement
Preserve/Enhance Eligibility
Scrutiny of insurance premiums
Reporting/Standardization
Beginning to Pay
Innovation
Insurance Rate Reforms
Individual Mandate
Essential Benefits
Subsidies
Exchanges
Employer Responsibilities
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Phases of Healthcare Reform
2010: Building Support and Maintaining Coverage
2011 – 2013: Preparing for A New Word
2014+: Major Market Reforms
13
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2010: Building Support &
Maintaining Coverage
Enhancing Benefits No lifetime dollar limits
No annual dollar limits
100% coverage for preventive care *
Direct access to OB/GYN services *
Selection of pediatrician as PCP *
Emergency services same benefit for in-network and
out-of-network *
Enhanced appeals process with external review *
* May not apply to Grandfathered Plans
14
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2010: Building Support &
Maintaining Coverage
Expand Eligibility
Dependents to 26*
No pre-existing conditions for children under 19
Automatic enrollment of full time employees
Maintaining CoverageSmall employer tax credit
Early retiree reinsurance
No rescissions except for fraud
15
* May not apply to Grandfathered Plans
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Phases of Healthcare Reform
2010: Building Support and Maintaining Coverage
2011 – 2013: Preparing For A New World
2014+: Major Market Reforms
16
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2011-2013 Preparing For A New World
Focus On Insurance Premiums
Medical Loss Ratio
80% individual and small group
85% large group
Rate Review Regulations
State vs. federal role
What is unreasonable
17
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2011-2013 Preparing For A New World
Reporting/Standardization
Insurers reporting on quality and transparency
Enhanced employer report on covered employees, benefit levels, contribution amounts, etc.
W-2 Forms contain info on the value of health benefits
Uniform coverage descriptions for employers and insurers
Employer required to educate employees on Exchanges
18
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2011-2013 Preparing For A New World
Beginning to Pay
2011 Doubling the penalty for nonqualified distributions from health savings accounts, to 20%
Changes to Flexible Spending Account rules
2012 Annual fees on Pharmaceutical Industry
Comparative effectiveness fee
Reduction in Medicare Advantage payments
2013 Tax on retiree drug subsidy
Medicare tax on high income earners
Comparative effectiveness fee
Impose taxes on medical devices
Spending account
2014 Health Insurance Provider Tax
19
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2011-2013 Preparing For A New World
Innovation
ACOs (Accountable Care Organizations)
Integrated Providers
Quality based
Focus on prevention and care coordination
Movement away from Fee-For-Service (FFS)
Bundled payments, Global payments & Incentives
Reform legislation focuses on Medicare, not commercial
20
Co-ops (Consumer Organized and Oriented Plans)
Potential new insurance competitors
Need to be non-profit and member-owned
Cannot have issued insurance prior to July 2009
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Phases of Healthcare Reform
2010: Building Support and Maintaining Coverage
2011 – 2013: Preparing for a New World
2014+: Major Market Reforms
21
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
22
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Individual Mandate
Most individuals required to have “minimum essential
coverage”
Penalties apply for non-compliance
$95 in 2014 $695 in 2016
or
1% taxable income in 2014 2.5% in 2016
(whichever is greater)
Available for subsidies up to 400% Federal Poverty Level
(FPL)
Medicaid coverage expanded to 133% FPL
23
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Insurance is still about Managing Risks….
Rating Reforms
24
Underwriting Guarantee Issue
- Pre-existing conditions - No Pre-existing conditions - Health Status - Age- Age - Tier
- Sex - Geography
- Geography - Tobacco Use
- Wide Rate Bands - 3:1 Rate Bands
Current 2014
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
25
Insurance is still about Managing Risks….
Risk Pool
Balanced Risk Pool
Female
Young
Chronic
Middle
AgedMale
HealthyOlder
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Potential Impact of Rate Reforms
26(Impact of Changing Age Rating Bands in “America’s Healthy Future Act of 2009” - Oliver Wyman)
$95.00/Year
Penalty
Getaway??
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Insurance is still about Managing Risks….
27
Toxic
MLR &
Rate
Review
Weak
Penalties
Guarantee
Issue
No
Pre-Ex
3:1 Rate
Bands
Individual Mandate
Open Enrollment
Risk Adjusters
Subsidies
Thoughtful
Exchange Rules
Be careful of
unintended
consequences!
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014:Major Market Reform Exchanges - 2014
28
Individuals Small Group Large Group
Choice Pool
Bronze Plan Silver Plan Gold Plan Platinum
Plan
Medicaid
CONSISTENT MARKET RULE BASE
$ $ $$
INSURERS
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
29
Essential Benefit Package Requirements
Four levels of cost-sharing:
Ist tier (bronze) actuarial value: 60%
2nd tier (silver) actuarial value: 70%
3rd tier (gold) actuarial value: 80%
4th tier (platinum) actuarial value: 90%
60%70%
80%
90%
$5,950
$11,900
Out-of-pocket maximum capped at:
HSA level of $5,950 for individuals and
$11,900 for families
Small group maximum deductible $2,000 individual and $4,000 family
Catastrophic policy for young adults and those unable to find a plan with
a premium <8% of income
Note: Actuarial value is the average percent of medical costs covered by a health plan.
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Exchange Functions
Develop Internet Website for standardized comparison to facilitate purchase
Facilitate enrollment and open enrollment periods
Provide Customer Service Functions – Toll Free Hotline
Provide Calculator to determine individual cost including subsidy and tax
credits
Grant Exceptions
Make eligibility determinations for subsidies and public programs
(Medicaid, CHIP)
Coordinate with employer based coverage
Establish a navigator program
Assign Ratings to Health Plans
30
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Income Eligibility for Subsidy Qualification
31
Family
SizeBy % Gross Yearly Income (2011 FPL)
133%
Annual
Max.
Premium at
3%
200%
Annual
Max.
Premium at
6.3%
300%
Annual
Max
Premium at
9.5%
400%
AnnualMax Premium
at 9.5%
1 $14,484 $434 $21,780 $1,372 $32,670 $3,103 $43,560 $4,138
2 $19,564 $586 $29,420 $1,853 $44,130 $4,192 $58,840 $5,589
3 $24,645 $739 $37,060 $2,334 $55,590 $5,281 $74,120 $7,041
4 $29,726 $891 $44,700 $2,816 $67,050 $6,369 $89,400 $8,493
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
32
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
33
Employer Mandate
Employer with more than 50 full time employees
Offer Coverage
+
NO EEs on assistance
1Offer Coverage
+
EE(s) on assistance
2No Coverage
+
EE(s) on assistance
3
OROR
$3,000/ee on asst
(with a cap)
$2,000/FTE less 1st
30 ees
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Potential Annual Penalties Beginning in 2014 for Large Employers
Applies to For-profit and Non-profit Organizations
34
Not a large
employer: Less
than 50 full-time
equivalent
employees
Large Employer: 50 or more full-time equivalent employees
Does not offer coverage Offers coverage
ANo full-time
employees receive
credits for
exchange coverage
B1 or more full-time
employees receive
credits for
exchange coverage
CNo full-time
employees receive
credits for
exchange coverage
D1 or more full-time
employees receive
credits for
exchange coverage
No penalty No penalty Number of full-time
employees minus 30
multiplied by $2,000
(penalty if $0 if
employer has 30 or
fewer full-time
employees)
No penalty Lesser of:
Number of full-time
employees minus 30
multiplied by $2,000.
Number of full-time
employees who receive
credits for exchange
coverage, multiplied by
$3,000.
(Penalty is $0 if
employer has 30 or
fewer full-time
employees-because
penalty is based on the
lesser of the two
calculations)
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014: Major Market Reform
Free Choice Voucher
Relevant when employers offer minimum essential coverage at affordable levels
Voucher for purchase on Exchange, if: Employee income is less than 400% FPL
Share of Premium exceeds 8% but less than 9.8%
Voucher must equal what employer would have otherwise contributed to employee – At highest benefit level
No Penalties apply
Repealed as part of ―2011 Spending Bill‖35
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
2014+ Major Market Reform
36
20102020
1Baseline estimated from Deloitte 2010-2020 Market Enrollment Analysis; Exchange membership in addition to government programs membership
Commercial Groups, 154
million
Individual, 14 million
Government Programs,
89 million
Uninsured, 52 million
257 millionTotal Insured Commercial Groups,
139 million
Individual, 4 million
Government Programs,
121 million
Uninsured, 25 million
311 millionTotal Insured
SHOP, 19 million
Exchanges, 27 million
Total Exchange
Membership: 46 MM
Total US Insured Population
2010 and 2020 (Projected)
Group
Insurance
Individual
Insurance
Uninsured
+3%
+49%
-52%
Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
Where the Debate is Going..
The Hot Topics for the next 2 years…
Repeal and Replace
De-Funding
Maintaining Individual Mandate
Increase Penalties
Re-Evaluation of Subsidy levels
Revisiting HCR Health Insurance Tax
Going beyond insurance reform
Be careful of unintended consequences
37
May 5, 2011Independence Blue Cross is an independent licensee of the Blue Cross and Blue Shield Association
THANK YOU
Outlook for Health Reform 2011-2014
