Meaningful Retiree Healthcare Benefit Strategies for the Public Sector National Conference on Public Employees Retirement Systems Annual Conference: May 15, 2018
2 Aon | Health & Benefits National Conference on Public Employee Retirement Systems Annual Conference | 2018
Challenges Facing the Public Sector
Budget Pressures
Disappearing Funding
Managing OPEB Liability
Public Perception
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Retiree Health Care Landscape – After Health Care Reform
Health Care Reform RDS and Medicare program changes
Benefit design requirements and coverage mandates
Health insurance exchanges
Excise tax
Universal Sponsor Objectives Support overarching business and HR
strategies
Manage cost, risk, and ongoing program management burden
Simplify administration
Modified Group-Based
Sourcing Strategies
Individual Market-Based
Sourcing Strategies
Confluence of new challenges, new opportunities, and common plan sponsor objectives are dramatically reshaping the retiree health care market into two primary
benefit sourcing strategies
Two Fundamental Approaches
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Individual Market-Based Sourcing—In General
Eliminate the traditional group insurance approach and support open-market purchasing
– Through individual market for Medicare eligible retiree members
– Through public exchanges for early retiree members
Create Health Reimbursement Arrangement (HRA) for retirees to use to offset cost of coverage on exchange market
Retirees use HRA to reimburse their costs for individual market products and/or associated expenses
– Generally, the plan sponsor sets the “HRA use” rules
HRAs generally need to be provided through a stand-alone, retiree-only legal plan structure to avoid the requirement to comply with the ACA group insurance market reforms (e.g., no annual limit on essential health benefits, no lifetime limit on benefits, etc.)
Partner with an administrative coordinator, or “exchange”, to facilitate guided access to the individual market, support retiree understanding, decision-making, and perform enrollment/administrative functions, at little to no cost to plan sponsor
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Individual Market-Based Benefit Delivery: Why Now?
Individual Market
Retiree Health Strategy
Efficiency Benefit Parity
De-Risk Mature
Exchange Market
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Exchanges: Public vs. Private/Active vs. Retiree
Facilitator
Target Population
Actives and (optional) Pre-Medicare-eligible
Retirees
Retirees Medicare-Eligible Pre-Medicare-Eligible
Health Care Options
Group-Based: Standardized designs
with the choice of carrier and funding varying based on facilitator
Comments
Platforms have been emerging since PPACA
was passed in 2010
Platforms have been emerging since the
Medicare Part D program began in
2006
State or Federal Government (11 states plus D.C. opted to run marketplaces for 2018)
All Pre-Medicare-eligible uninsureds and individuals
without affordable employer-sponsored coverage
Metallic designs (i.e., platinum, gold, silver,
bronze) with multiple carriers
Options for Medicare-eligibles are not included on
the public marketplaces
Platforms are emerging to source coverage on/off the public marketplaces
with a high touch customer service
experience
Private Exchanges
PPACA Public Exchanges (i.e., Marketplaces)
Benefit Consultants, Administrators, and Insurance
Carriers
Individual-Based: Medicare Advantage, Medigap, and Part D
Individual-Based: Metallic designs
with multiple carriers
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Private Medicare Exchange Mechanics
Plan Sponsor HRA/Subsidy Strategy
If HRA is desired, Plan Sponsor converts current group-based health care subsidy into an HRA credit, which may be set at or below the actuarial equivalent of the current subsidy
Exchange Platform
Insured health care offerings Communications Decision Support Enrollment Advocacy HRA Administration
Insured Health Care Offerings
Retiree HRA
Medicare Advantage
Medigap
Individual Part D
Other (dental, vision)
Private exchange platform assumes many of the current plan sponsor group program responsibilities, but with a significantly “higher-touch” retiree
experience
Retiree Enrollments Commission Revenue
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Pre-Medicare Private Exchange as a Portal—Mechanics
Plan Sponsor HRA/Subsidy Strategy
Plan Sponsor converts current group-based health care subsidy into an HRA credit, which may be set at or below the actuarial equivalent of the current subsidy
Private Exchange Platform Public Exchange and Other Health Care Offerings
HRA
Platinum
Gold
Silver
Bronze
Web Based Entities may be allowed by the states to enroll premium tax credit-eligible participants into qualified health plans.
Enrollments Commission Revenue
Insured health care offerings Education Online Decision Support Federal Subsidy Data Collection Application and Enrollment Advocacy HRA Administration
Enrollee Federal Subsidy Eligible?
Subsidy Eligibility Determination CHIP, Medicaid, Tax Credit Tax Credit Processing
Leveraging a Private Exchange Partner to Support a National, Consistent Public Exchange Strategy
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Pre-Medicare Individual Market—Key Benefit Features
Area Comments
Individual Plan Designs
Guaranteed issue with no medical underwriting or exclusions based on health status Four comprehensive “metallic” benefit levels Provide Essential Health Benefits (EHB), with the definition varying by state Provider networks supporting the designs can be limited
Premiums Vary based on geography, carrier, benefit level, tier, age band, and tobacco use Cannot vary based on health status, claims activity, or employment status
Highest age-band premium for a particular plan cannot exceed 3X the lowest age-band premium Actual cost for Pre-Medicare retirees is 4X - 5X that for a twenty year-old Results in relatively lower premiums for retirees through implicit premium subsidies across
the enrolled population
Federal Subsidies (Only available on the Public Exchanges)
Provides explicit federal premium and cost-sharing subsidies for individuals with earnings up to 4X the federal poverty level Premium subsidy is based on the premium for the second-lowest priced Silver Plan Participants can enroll in any plan on the exchange and put the subsidy toward the cost of
that elected option Retirees should control, if possible, receipt of pension and savings plan distributions to
manage income -- to maximize the federal subsidies The payment of cost sharing subsidies has been ended. As a result, insurers have increased Silver premiums by 20% or more in 2018 to cover the loss.
Whether an individual can secure affordable coverage in the individual market depends on a number of factors including location, age, participating providers, and eligibility for federal subsidies
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Pre-Medicare Individual Market—Market Risks
Political
Operational
Economic
Legal
Many plan sponsors are anxious to take advantage of the new public exchange opportunity but, given the newness and risks inherent in the current market, plan sponsors should proceed cautiously
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Pre-Medicare Individual Market—Strategy Considerations
There is a different “employment-based health care” test for actives and Pre-Medicare retirees, with respect to their ability to secure a federal subsidy through a public exchange, and the rules for retirees are very liberal
Party Comments Plan Sponsor
For retirees, Shared Responsibility/Free Rider program and the associated penalties do not apply Minimum Essential Coverage (MEC) is NOT REQUIRED for retirees, nor is affordability
or minimum actuarial value (60%) required No penalties apply if a Pre-Medicare retiree enrolls in a state exchange and receives a
federal subsidy
Pre-Medicare Retirees
Pre-Medicare retirees are eligible for federal subsidies through state exchanges only if they DO NOT ENROLL in employer-sponsored coverage which is considered MEC, regardless of affordability or minimum actuarial value (60%) Enrolling in employer-sponsored MEC disqualifies the retiree from the opportunity to
secure a federal subsidy on a public exchange Offering retirees access to employer-sponsored coverage does not disqualify a retiree
from securing a federal subsidy in-and-of-itself
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15.2 %
6.1 %
0.0 %
0.0 %
78.8 %
We do not anticipate changing our Pre-Medicare retireestrategy to leverage the state exchanges/individual
coverage opportunities
Employer subsidies through a defined contribution withPre-Medicare benefit sourcing through state
exchanges/individual market
Eliminating Pre-Medicare retiree coverage andsubsidies altogether
Other
Unsure at this time
In light of the ACA marketplaces and individual insurance market reforms, which of the following long-term strategies are you favoring with respect to Pre-Medicare retiree coverage?
Pre-Medicare Individual Market— Public Plan Sponsor Feedback
Source: 2017 Aon Hewitt Retiree Health Care Strategy Survey – Public Sector Cut (n=33)
Employers are generally unsure about their long term strategy for pre-Medicare retirees
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12%
12%
76%
We are comfortable leveraging the ACAmarketplaces for Pre-Medicare retireecoverage for at least a portion of ourretiree group.
We are hopeful that the market willstabilize over time and we caneventually send retirees to themarketplace to secure coverage.
We are not confident that we will becomfortable sending our retirees to themarketplace to secure coverage in thefuture
Pre-Medicare Individual Market— Public Plan Sponsor Feedback In light of the recent market challenges, many public plan sponsors have an unfavorable
outlook on the 2017 marketplaces
– Health plan withdrawals, network restrictions, and premium increases have colored plan sponsor opinion and are driving at least short-term market pessimism
Source: 2017 Aon Hewitt Retiree Health Care Strategy Survey – Public Sector Cut
In Light of These Recent Market Challenges, What is Your Current Outlook Concerning Leveraging the ACA Marketplaces to Support Pre-Medicare Retiree Coverage?
(n=33)
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Pre-Medicare Individual Market—Conservative Approach
Consider both Immediate and Longer-Term Strategies Plan sponsors who find the public exchange opportunity appealing will consider a three-step
approach:
Public Exchange newness, political/operational uncertainty, and potential ongoing volatility may dampen a broad Pre-Medicare retiree sourcing strategy in the near term
Step Details 1) Continue to Support the
Group Program Educate retirees on the state/federal marketplace, opportunity for federal subsidies, etc.,
through a simple communication campaign and (potentially) a call center or web-site Explain any coverage implications of leaving the group plan for Pre-Medicare state
exchange coverage
2) Choice Strategy
Continue the group program, but retirees have another choice - optional HRA to reimburse coverage on the public marketplace Provide customer service support to help retirees make smart choices
Support for no more than 1-2 years to mitigate impact of adverse selection on group program
3) Full Replacement Strategy (Assuming the Market has Stabilized; 2022+)
Coincident with scheduled 2022 Excise Tax implementation Source coverage through the public marketplace
Provide a tax-free optional HRA for all or a portion of the group Partner with a private exchange platform to provide “high touch” customer service
Develop a Medicare retiree health care strategy that dovetails with the new Pre-Medicare retiree benefit sourcing strategy
OHSERS uses a unique choice strategy to benefit their retirees
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Marketplace Wraparound Plan
NCPERS Annual Conference
May 15, 2018
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Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
SERS Marketplace Wraparound Plan
®
Up to $2,000 reimbursement toward your deductible
Additional coverage for your out-of-pocket health care costs
Personal enrollment assistance from a HealthSCOPE counselor
SERS has partnered with HealthSCOPE Benefits to offer this coverage option for SERS’ health care participants. SEE INSIDE FOR DETAILS.
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
About SERS
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• SERS was established on Sept. 1, 1937, thanks to the efforts of Cleveland custodians.
• SERS is one of five public pension
funds in the state of Ohio.
• SERS serves bus drivers, custodians, administrators, educational aides, food service providers, and school treasurers.
Richard H. Retired Custodian
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
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Limited Wraparound Pilot Program * Vision, Dental, Long-term Care
Individual Marketplace Wrap - Retirees & Part-Time Employees - Plan Sponsor must also offer group plan
Excepted Benefits Under ACA 45 CFR 146.145
* Must begin no later than 2018, sunset after 3 years
Limited Wraparound Plan Requirements - Benefits Limited in Amount - Benefits Beyond Cost Sharing - Individual Marketplace or Multi-State Option
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
SERS Marketplace Wraparound Plan
How it works: • Members select a Health Insurance
Marketplace plan with assistance from a HealthSCOPE counselor
• SERS then “wraps” the Marketplace plan with added benefits at no additional cost
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Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Covered Prescription Drugs
Physician office co-pay
Inpatient hospital stay
Imaging (X-rays, CT/PET scans, MRI)
Hearing Aid
50% of your plan’s prescription drug co-pay (up to $200 per prescription)
up to $50 per visit
up to $300 per admission
up to $100 per service
one hearing aid per year; up to $1,500
* The 2018 SERS Marketplace Wraparound Plan benefits noted above only apply to covered services under your Marketplace plan. Claims for non-
covered services are not eligible for reimbursement, except for hearing aids.
WRAPAROUND BENEFITS*
Maximum Reimbursement
Deductible up to $2,000
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
*Assumes 20 up to 35 years of service
How Does This Work?
Example using a Silver HMO Marketplace Plan for Sally, age 55, who earns $25,000 a year, and lives in Columbus.
SERS Non-Medicare Plan
2018 Cost Sharing
Marketplace Plan Silver
2018 Cost Sharing ($535 premium subsidy allowed)
SERS WRAPAROUND 2018 Benefits
+ (up to dollar amounts below)
= = =
= = = =
What Sally Pays
Premium $260 - $678* $168 $0 $168
Deductible $2,000 $3,900 $2,000 $1,900
Primary Doctor Specialist Doctor
$20 co-pay $40 co-pay
$10 co-pay $40 co-pay
$50 per visit $50 per visit
$0 $0
Generic Drugs Brand Name Drugs Specialty Drugs
$7.50 25% of cost (max $100) 25% of cost (max $100)
$10 $50 40%
50% of co-pay/cost sharing up to $200 per prescription
$5 $25 will
vary
Inpatient Hospital 20% coinsurance after $250 co-pay
$300 per day $300 per stay will vary
Imaging 20% coinsurance $150 per procedure $100 per procedure $50
Hearing Aid, one per year
not covered
not covered
$1,500 limit any amount
over $1,500
Out-of-Pocket Maximum (The most you could pay annually)
$7,350
$5,850
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
200 217 239 248 251
295
372 416
482 498 495 492 508 516 517
0
100
200
300
400
500
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Wraparound Enrollment
22
Pension Reform
2017 2018
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
2018 Marketplace Plan Preference
75%
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3% 22%
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
2017 Claims Cost by Benefit
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Deductible 75%
Rx 13%
Copay 9%
Hearing Aid, Imaging and
Inpatient 3%
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
2017 Claims Experience Claims Incurred in 2017
(Paid through 4/3/18) Members 501
Claimants 262
Total Paid $154,449
Claim Cost PMPM $34.60
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Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Marketplace Wraparound Cost vs. Non-Medicare Group Plan Cost
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Per Member Per Month
SERS Non-Medicare Plan $750 (net of premium) PMPM
Marketplace Wraparound $59* PMPM *Claims and administrative costs, preliminary result through March, 2018
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Cumulative Potential Savings for 492 Enrolled in Wraparound
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$6,924,000
$10,980,000
2018 2019 Calendar Year
Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Wrap Advocacy
1. HHS/CMS issued two Requests for Comment –Should the pilot be made permanent or extended?
2. National groups, plan sponsors and others have commented in support.
3. Other options?
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Serving the People Who Serve Our Schools® National Conference on Public Employee Retirement Systems Annual Conference | 2018
Thank You
For questions, please contact: Anne Jewel
Director of Health Care Services Ohio School Employees Retirement System
[email protected] 614-222-5810
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Contact for Aon
Cathy Furr, FSA, MAAA Senior Vice President Aon Health & Benefits Consulting +1.410.200.1541 [email protected]
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About Aon
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