The Excise Tax on High-Cost Health Insurance and Your County · Indexed by a cost-of-living adjustment annually (CPI-U, plus an additional 1% in 2019), or about 2.4% (~3.4% in 2019)

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The Excise Tax on High-Cost Health Insurance and Your County

February 12. 2015

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Healthy Counties Initiative Sponsors

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Webinar Recording and Evaluation Survey

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Today’s Speakers

Commissioner Berks County, Pa.

Hon. Christian Leinbach

Benefits Manager Tarrant County, Texas

Joyce Kirk

Employee Benefits Manager Pinellas County, Fla.

David Blasewitz

Actuary UnitedHealthcare

Karen Shelton

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How many people are viewing today’s webinar from your computer? a. One

b. Two

c. Three

d. Four

e. Five or more

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Are you a(n)…?

a. Elected county official

b. County Administrator/Manager

c. Human Resources/Benefits Staff

d. Other

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Are you familiar with this excise tax?

a. Yes

b. No

c. Not Sure

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Has your county assessed its liability for the excise tax? a. Yes

b. No

c. Not sure

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Why This Excise Tax Matters to Counties

Hon. Christian Leinbach Commissioner

Population: 411,442 (2010 Census) Health Plan Demographics: 4,149 enrollees 2018 Projected Tax Liability: $1,215,684

Berks County is self-insured and projects its liability will increase to $3,591,493 by 2022. Over the course of 5 years, the county anticipates paying a minimum total of $11,649,499.

Berks County, Pa.

Understanding the Excise Tax on High-Cost Coverage

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The Patient Protection and Affordable Care Act

One County Reports

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Proprietary Information of UnitedHealth Group. Do not distribute or reproduce without express permission of UnitedHealth Group. These materials shall not constitute legal advice.

If this excise tax were implemented in 2014, it would apply to at least 6 percent of the health plans offered by responding counties. One county estimates that the impact of the excise tax as currently interpreted, could cost the county, its employees and retirees an estimated $4.1 million in increased premium rates annually.

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Source: NACo Trends Analysis Paper Series. Issue 2, page 16, County Health Benefits 2014

No regulatory guidance has been issued with respect to the excise tax and there is considerable uncertainty in terms of how the tax will affect future benefits.

Actual thresholds will be based on medical inflation between 2010 and 2018 using a measure that looks to the Federal Employees Health Benefits Program (FEHBP)

Indexed by a cost-of-living adjustment annually (CPI-U, plus an additional 1% in 2019), or about 2.4% (~3.4% in 2019) Health care cost trends likely to exceed CPI-U

Increased for retirees aged 55 or older who are not eligible for Medicare and for employees in high-risk professions

Age and gender adjustments apply to the threshold

Excise Tax on High Cost Coverage

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Beginning in 2018 a permanent excise tax of 40% will be assessed on total benefit costs of employer-sponsored coverage that are in excess of specified thresholds

What is it?

Estimated thresholds are $10,200 for single and $27,500 for coverage other than single in 2018

Due to these multiple adjustments, it’s difficult to assess the impact of the tax with certainty.



What is it?

What coverage may be subject to the tax? • Tax applies broadly to FSAs, HRAs, Archer

MSAs, as well as more traditional fully insured and self-funded group health plans.

• Health savings account contributions appear to

be subject to the tax when they are made on a pre-tax basis (i.e., through a cafeteria plan), but after tax contributions do not appear to be subject to the tax.

• It would appear the tax applies to both employer and employee contributions to plans.


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What is it?

What coverage is likely excluded from the tax? • Fully insured stand-alone vision and dental • Specific disease coverage; hospital or fixed

indemnity insurance when it is non-coordinated; supplemental coverage; accident or disability income benefits; auto; workers’ comp; credit only coverage.

In the absence of regulations, however, it is difficult to understand the full-scope of coverage subject to or exempt from the tax.


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Pinellas County Florida

❶Worked with our health plan consultants to provide a projection of future federal excise tax

❷Developed a list a measures that could help mitigate the tax

Components that drive high performance

Affordability and Excise

Tax Risk Employee Value Proposition Financial constraints

PPACA compliance Economy Changing healthcare delivery

External Influences Employer Objectives

A. Benefit and premiums

B. Consumer engagement

C. Population health

D. Benefit delivery

E. Participant segmentation

Multi-year Strategy Development • Financial Impact • Readiness for Change

towerswatson.com

Creating a sustainable high performance health plan

17 © 2014 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers

Watson and Towers Watson client use only.

1. Re-design POS plan to a “Consumerism Lite” PPO plan, with no reduction in actuarial value, to encourage better utilization of healthcare services • For 2015 implemented changes to pricing for name brand medications • Coinsurance with minimums and maximums, instead of flat copayments • Higher coinsurance percentage (and maximums) for non-preferred which have

lower priced alternatives 2. Comply with the new out-of-pocket maximum (OOPM) rule by integrating medical

and pharmacy benefits under one OOPM • This will provide more protection to high utilizers of the plan • Assumes Pinellas County medical plan will no longer be grandfathered

3. Remove vision from the medical plan and offer an optional insured vision plan • Will help avoid “Cadillac Plan” excise tax

towerswatson.com

A. Benefits and premium considerations



Benefits and Premium

4. Add a Health Pro to coach members on how to select the right provider (based on cost and quality) • This service will be utilized to a greater extent if the POS plan design is changed to

a “consumerism lite” plan design and more employees migrate to the HSA plan 5. Provide a financial incentive to use “high performing” providers (good combination of

cost and quality); the financial incentive could take various forms. For example: • Change the plan design to a three tier design to provide a financial incentive to

members to use a UHC Premium Provider or a UHC high performing network • Provide $300 if an employee uses a Health Pro to select health providers • Provide low cost access to an near site employee health center in 2015

towerswatson.com

B. Consumer engagement considerations



Consumer Engagement

6. Change wellness program from a participation-based program to a combination of participation-based and outcomes-based and add a “carve out” wellness vendor • Typical outcomes measures include attaining or improving against the following

targets: BMI, cholesterol, and blood pressure • According to Towers Watson research (2013/2014 Staying@Work Survey Report),

26% of organizations currently reward (or penalize) for biometric outcomes other than tobacco and 68% of organizations plan to do so by 2016

• Evaluate overall clinical performance (case management, utilization management, disease management and wellness) and explore alternatives with proven greater impact and guaranteed ROIs

• For example move to face to face health coaching and diabetes management programs housed in or near the employee health center

towerswatson.com

C. Population health considerations



Population Health

7. Evaluate Pharmacy Benefits Manager pricing improvement opportunities and clinical management program opportunities • Negotiate fully transparent contract • Evaluate better ways to manage specialty pharmacy costs • Exclude coverage when Nexium becomes available as an over the counter and

include a pre-authorization process to cover exceptions for higher doses 8. Enhance employee communications to better communicate the value of the HSA

plan: • Show employees that by contributing to their HSA and using the HSA debit card,

the employee can greatly reduce (or eliminate) their out-of-pocket cost • Use an online enrollment system that illustrates the two plan choices on a total

cost basis, i.e., sum of employee premium and plan design cost share, based on members healthcare usage

• Small group employee meetings with a credible meeting leader • Provide leadership support to the HSA communications message

towerswatson.com

D. Benefit delivery considerations



Benefit Delivery

Tarrant County 3,700 Active Employees & Retirees (7,500 Plan Members)

Our Challenge: Rising cost and an aging population with an

increasing burden of chronic disease (diabetes/hypertension)

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It wasn’t necessarily the Excise Tax, but plan sustainability that prompted changes.

90% of our population was on an EPO (HMO look alike) with no deductible and very little cost share

A population that needed help understanding and engaging the healthcare system

Historical Review • Moved from a Regional Network/Claims Payer TPA to UnitedHealthcare 1/1/2011 • Implemented plan design changes effective 1/1/2012

– Increased copays/deductibles and out-of-pocket (OOP) maximum on the PPO plan – Increased copays and out-of-pocket maximum on the EPO plan (still no deductible)

• Implemented and promoted consumer tools 1/1/2013 – Implemented NurseLine to address Emergency Room utilization – Promoted pricing transparency using the Treatment Cost Estimator tool on medical

and a similar tool on pharmacy – Began leveraging information to better understand member claim risk, how members

engage and utilize the plan benefits, and how we can improve plan performance

• Replaced the EPO plan with an actuarially equivalent High Deductible Health Plan (HDP) with Health Savings Account (HSA) effective 1/1/2014

– 90% of the population moved to the PPO with increased cost share (Deductible/OOP) – 10% of the population elected the new Account-based Health Plan (HDP/HSA) that

included HSA seed money

Tarrant County Plan Trends

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• Medical Net Paid Per Member Per Month (PMPM) Trend Since 2011:

2011 – 2012 Trend 5.6% 2012 – 2013 Trend 2.9% 2013 – 2014 Trend -5.2%

• Tarrant County continues to see improvements within our population

around the utilization of preventive care, and the way our population is managing chronic disease.

• 2% Reduction in Emergency Room (ER) Utilization and improved decision-making around appropriate level of care (Urgent Care vs ER)

What’s New for Plan Year 2015?

• Integrated existing Working on Wellness program with Benefits and Implemented 3 year Health and Wellness strategy effective 1/1/2015 – Year 1 Targets Employees only (participation based) – Year 2 Targets Employees and Adult Dependents (participation based) – Year 3 Targets Employees and Adult Dependents and will be outcomes

based (Are you at risk? And did you take action)

• Implemented additional plan design changes (primarily related to Pharmacy Benefits Management) effective 1/1/2015 – Added the Express Advantage Network (EAN) program and applied an

upcharge on prescriptions filled at a non-EAN retail pharmacy – Increased Pharmacy Manager review/approval on pharmaceutical

categories trending upward and targeted special case management – Increased PPO office visit copays (chiropractor, urgent care, non-premium

specialists), deductible, and out-of-pocket (OOP) maximum

What’s Next for Tarrant County?

• We will continue to leverage plan data and analytics to evaluate plan options.

– Expansion of Consumer Driven Plan Offerings

• Integrating Health Incentives into Health Savings Account

– Out of Network Avoidance Strategies – Emergency Room Utilization – Preventive Care and Wellness – Incentives for Managing Chronic Conditions – Network Strategies

• Performance Based Contracting • Tiered Physician copays based on Performance

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You may ask a question using the

questions box on the right side of the webinar window.

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NACo’s publication on the excise tax is available at: www.naco.org/healthexcisetax

http://www.naco.org/healthexcisetax

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Excise Tax “Cheat Sheets”

UHC’s publication on the excise tax is available at: www.naco.org/healthexcisetaxcheatsheet

http://www.naco.org/healthexcisetax

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Legislative Conference Workshop

What? Health Policy Outlook: What lies ahead for counties as employers?

Why? Join us to discuss the impact of the Affordable Care Act on counties as employers. What are some factors the federal government should consider as it develops and finalizes various regulations, including those regarding the excise tax on high cost employer-sponsored insurance? You will not want to miss this roundtable.

When? Monday, February 23rd, 3:15p.m. to 4:15p.m.

Where? Marriott Wardman Park Hotel, Washington, DC

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Contact Information

Emmanuelle St. Jean Health Program Manager E: [email protected] P: 202.942.4267

Documents

The Excise Tax on High-Cost Health Insurance and Your County · Indexed by a cost-of-living adjustment annually (CPI-U, plus an additional 1% in 2019), or about 2.4% (~3.4% in 2019)