An Rx for Treasury Managers When Healthcare Reform Arrives

Transcription

1 An Rx for Treasury Managers When Healthcare Reform Arrives October 29, 2013 Las Vegas, NV Dale Sorenson, CTP Vice President Associated Bank Rick Noble, CTP Staff Vice President WellPoint, Inc.

2 Outlook for Healthcare Reform It will cause involuntary disruption The end product may be much different than the blueprint It will require perennial rethinking

3 Affordable Care Act *Patient Protection & Affordable Care Act To increase number of dues-paying insured Pre-existing conditions must be ignored ( community ratings ) 2. You must have insurance, and your employer must provide it 3. Government subsidizes lower-income individuals (*Source: Paul Krugman, NYT, 5/27/13)

4 Options for large employers* (post 2014) Cover >60% of medical expenses Charge <9.5% of household income or Less Offer insurance less or and/or no coverage more pay NO PENALTY PENALTY $2-$3,000/FTE *Employers with more than 50 FTE (30 hours/week or more) are considered large.

5 Source of Insurance Impact for employees (2014) Government (Medicare/Medicaid) Tax Status Tax-Free Benefit Subsidy Government Employer Tax-Free Free Benefit Employer S Exchange After-Tax Premium Government Individual None After-Tax Premium Tax Penalty Tax Penalty 2014: 1% of income or $ : 2.5% or $695

6 Insurance purchased via exchange Government-run exchange with 1-13 private insurers per state Online shopping portal Subsidized for low-income citizens Narrower networks of hospitals/doctors Policies categorized by all-in cost

7 State health insurance exchanges AK WA OR NV CA ID UT AZ MT WY CO NM ND SD NE KS OK TX MN WI IA IL MO AR MS LA NH VT NY MI PA IN OH WV VA KY NC TN SC AL GA DE ME MA RI CT NJ DC MD HI FL Default to Federal Exchange Planning for Partnership Exchange Declared State-based Exchange

8 Policies offered on exchanges $328 1 avg. premium for individual policy Platinum Gold Silver Bronze 90 % 80 % 70 % 60 % All provide Essential Health Benefits 1. Source: New York Times, 9/25/13 Officials Detail Premium Costs of Health Plan.

9 Cost pressures on employers $ 16,000 family premium for group plans 70% average portion paid by employer 6.5% annual premium growth since 99 Source: 2013 Employer Health Benefits Survey, Kaiser Family Foundation

10 Cost pressures on insurers Premiums above 10% subject to regulatory review PREMIUMS Must spend 80%-85% of premiums on claims & quality improvements MEDICAL LOSS RATIO Expenses & profits limited to 15%-20% of premiums EXPENSES & PROFITS

11 Cost pressures on healthcare providers Opportunities Threats Accountable Care Organizations Medicare cut of $716 billion Vanishing charity services Collecting A/R

12 How can treasury managers contribute? Seek ways to reduce treasury costs Leverage banking services that automate other functions Contribute to strategic decisions

13 Reduce treasury costs By 2014, Medicare must pay 100% of claims electronically Medicare Payments (millions) ACH Check All Healthcare Claims* (millions) Electronic Check *Source: McKinsey & Company 2007

14 Leverage banking services to automate other functions For ACH health care payments, TRN (Trace Reassociation Number) accelerates cash application (9/20/13) ACH & Banks $ + TRN $ + TRN Medicare or Insurer Hospital Medical Provider TRN ERA (Electronic remittance advice) TRN

15 Contribute to strategic decisions for all employers Employer Pay Factors More Bang for the Buck Employee Pay Factors Contain Spiraling Costs Attract Quality Hires Consumerism

16 What will treasury managers do? Provide financial and cash flow insights Uncover new services and vendors Contain treasury costs

17 New considerations due to Healthcare Reform (HCR) Employers Providers Health Insurers Banks

18 WLP has nearly 36 million medical members BC or BCBS plans in 14 states & Medicaid presence in 19 states Diverse customer base ` Local Group 41% Medicaid 13% Medicare 4% 35.7 million FEP 4% Individual 5% National Accounts BlueCard 14% 19% BC or BCBS licensed plans (7) Medicaid presence (12) BC or BCBS licensed plans + Medicaid presence (7) Note: Data as of 6/30/13.

19 Positioning for a changing landscape A shift towards government-sponsored business is anticipated Uninsured US population in millions Large Group Risk & ASO Small Group Individual Medicaid Medicare Population 2015 Population * Sources: Booz & Company analysis; Kaiser Employer Health Benefits Survey 2009; U.S. Census Bureau; Congressional Budget Office; and WellPoint estimates, 2010.

20 Employers

21 Cost to employer rising $2.50 Health benefit costs, dollars per hour worked, private industry March 1999-March 2012 $2.34 $2.00 $1.50 $1.00 $1.03 $1.09 $1.16 $1.29 $1.41 $1.53 $1.64 $1.72 $1.83 $1.92 $2.00 $2.08 $2.12 $0.50 $0.00 March 1999 March 2000 March 2001 March 2002 March 2003 March 2004 March 2005 March 2006 March 2007 March 2008 March 2009 March 2010 March 2011 March 2012 Source: U.S. Bureau of Labor Statistics

22 ASO example

23 Providers

24 The provider challenges Revenue Reduction Secure Payments Drive down costs Quality & Reporting Uninsured patients

25 Potential savings for Healthcare providers HIPAA Standard Transactions Manual Claims Cost Electronic Claims Cost Savings per Transaction Claims $6.63 $2.90 $ 3.73 Eligibility Verification $3.70 $0.74 $ 2.96 Referrals $8.30 $2.07 $ 6.23 Preauthorization $10.78 $2.07 $ 8.71 Payment Posting $2.96 $1.48 $ 1.48 Claim Status $3.70 $0.37 $ 3.33 Total Potential Cost Per Visit $36.07 $9.63 $26.44 Source: Electronic Transaction Savings Opportunities for Physician Practices, Milliman USA, June 11, 2006.

26 How much does a $ 200 claim cost the provider to deposit? Credit Card $6.00 Check $0.30 ACH $0.10 $

27 Health Insurers

28 Medical Loss Ratio (MLR) Claims data Premium data MLR calculation Marketing Disbursements Mail room Cash forecasting Customer service General ledger Reconciliation Escheatment

29 EFT project Reconcilement Systems Codes Enrollment

30 Consumers pay differently than businesses Bank Bill Pay, 25% Biller Direct, 25% Check, 23% Auto-Debit Checking, 8% Auto-Charge Credit/Debit Card, 7% Phone, 3% In Person, 7% Other, 2% 1 Source: 2011 Consumer Trends Survey, Fiserv, August Source: 2012 Online Banking and Bill-Payment Forecast, Javelin Strategy & Research, August 2012

31 Banks

32 Bank products for HCR Outsourcing of payments (MLR) Online bill pay Health Savings Accounts (HSA)

33 Can you relate?

34 Summary HCR is hard to understand IT is strapped Scale is important

35 Dale R. Sorenson Vice President Associated Bank Rick Noble Staff Vice President WellPoint, Inc