PPACA Update: Financial Impact on Leavenworth USD 453

Transcription

1 PPACA Update: Financial Impact on Leavenworth USD 453

2 Health Care Reform Overview What s Next For Employers? Move forward with planning for implementation of all provisions.. In Place Requirements Maintain compliance with existing provisions Grandfathered plans must Annually monitor degree of changes against requirements fulfill annual notification requirements Plans losing GF status must Implement non-gf status requirements 100% preventive care coverage appeals processes provider selection/referral rules OON ER coverage etc Continue to implement: Summaries of Benefits and Coverage W-2 reporting $2,500 HC FSA limit Coverage of additional women s preventive care Effectiveness research fees Medicare tax increase for high earners Medicare retiree Rx subsidy elimination Medical loss ratio rebate distribution (insured plans) Exchange notifications for employees 2014 and Beyond Develop strategies for: Individual and employer mandates Health insurance exchanges & Medicaid expansion 90-day waiting period limit New health plan fees Required notices & reporting No essential benefit or pre-ex limits Wellness incentives 30-50% OOP limits HSA limits (Non-GF small group) Coverage of clinical trials (Non-GF) Insured non-discrimination rules (date?) Cadillac tax (2018) Auto-enrollment (date?)

3 INDIVIDUAL AND EMPLOYER MANDATES

4 Individual Mandate Summary Individuals must have qualifying minimum coverage or pay tax penalty. Potential annual penalties are: 2014: greater of $95 per individual or 1% of household income* 2015: greater of $325 per individual or 2% of household income* 2016: greater of $695 per individual or 2.5% of household income* State Exchange Medicaid Employer Pay $ Plan Penalty Individuals with no employer coverage or with insufficient or unaffordable employer coverage are eligible for Exchange coverage and may receive a federal tax credit subsidy (sliding scale based on income). *Penalty cannot exceed the national average cost for Bronze plans in the exchange Employee Choices

5 Employer Mandate Summary Applicable to employers with 50 or more full-time equivalent employees: Pay If no employer plan is offered and 1 or more FT employee receives the exchange coverage tax credit subsidy, employer pays penalty of $2,000/FT employee (first 30 FT employees excluded from penalty) Play If employer plan is offered but is offered to less than 95% of FT employees or is not offered to employees children, rules outlined above apply. If coverage is offered to 95%+ of FT employees and children but is insufficient or unaffordable and 1 or more FT employee receives the exchange coverage tax credit subsidy, employer pays penalty of $3,000/FT employee receiving subsidy (or $2,000 per FT employee, if less) Pay or Play Decision Tree Do you offer coverage to at least 95% of FT employees and their children? Yes Are plan benefits sufficient? Ye es Yes Is the coverage affordable? No No No Employer pays $2,000 for every FT employee (exception on first 30) if at least 1 FT employee receives a tax credit Employer pays the lesser of $3,000 per affected FT employee who receives a tax credit, or $2,000 for every FT employee Insufficient Benefits plan s actuarial value is <60% (benefits pay less than 60% of cost of services) Unaffordable Benefits household income <400% federal poverty level ($46K single, $94K family) and single-tier contribution is >9.5% of employee s W-2 income Full-Time Employee employee working avg. 30+ hrs/wk No Penalty

6 Employer Mandate Financial Considerations How Do I Account For: Penalties 2014 Auto Enrollment Compensation increases due to loss of benefits? Individual Mandate Expanded Eligibility Medicaid Expansion

7 LEAVENWORTH USD 453 PAY OR PLAY ANALYSIS

8 Leavenworth USD 453 Pay or Play Analysis Potential Employer Penalty Exposure Employee Eligibility Employee Income (Affordability) Currently Enrolled in Major Medical Employees Who Would Become Eligible in 2014 Under PPACA Currently Waiving Major Medical 649 All Other Employees Potentially Eligible for Premium Assistance

9 Leavenworth USD 453 Pay or Play Analysis Potential Employer Cost Scenarios Graph $3,500,000 $3,000,000 $2,500,000 $1,080,000 $1,080,000 $2,000,000 $1,500,000 $2,590, $1,000,000 $500,000 $1,564,203 $1,997,679 $1,997,679 $1,958,000 $0 Pre-PPACA Current Eligibility Strategy PPACA Compliant Eligibility PPACA Compliant Eligibility Strategy Strategy with Penalty Reduction Drop Coverage without Adjusting Salaries Plan Cost Penalties

10 Leavenworth USD 453 Pay or Play Analysis Potential Employer Cost Scenarios Detail Pre-PPACA Maintain Current Plan Strategy Compliant Eligibility Strategy Compliant Strategy w/ Penalty Reduction Drop Coverage without Adjusting Salaries Enrolled / Eligible Employees 362 / 1, / 1, / 1, / 1,009 0 / 0 Employer Plan Costs for Employees Currently Enrolled $1,564,203 $1,481,742 $1,481,742 $1,578,638 $0 Employer Plan Costs for Employees Currently Waiving Coverage $0 $465,908 $465,908 $954,146 $0 Employer Plan Costs for Employees Currently Ineligible $0 $0 $0 $0 $0 Mandated Employer Fees $0 $50,029 $50,029 $57,441 $0 Mandated Eligibility Penalties $0 $0 $0 $0 $1,958,000 Plan Affordability and Sufficiency Penalties $0 $1,080,000 $1,080,000 $0 $0 Voluntary Salary Adjustments $0 $0 $0 $0 $0 Tax Deductibility Loss $0 $0 $0 $0 $0 Total Net Employer Cost $1,564,203 $3,077,679 $3,077,679 $2,590,225 $1,958,000 Change in Net Employer Cost from Pre- PPACA $0 $1,513,475 $1,513,475 $1,026,021 $393,797 PEPY Employer Plan Cost (Enrolled) $4,321 $4,391 $4,391 $4,972 $0 PEPY Salary Adjustment (Eligible) $0 $0 $0 $0 $0 *Current employer plan year cost is approximately $1,387,320

11 Leavenworth USD 453 Pay or Play Analysis Employer Cost Timeline $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ Pre-PPACA Compliant Eligibility Strategy Drop Coverage and Increase Salaries Maintain Current Plan Strategy Compliant Strategy with Penalty Reduction Drop Coverage without Adjusting Salaries

12 PAY OR PLAY STRATEGIES

13 Pay or Play Strategies It s a Business Decision You first should decide how important offering competitive healthcare benefits is to your business and if it is important, then decide how to effectively manage annual employer costs Determine health benefits not key to retention/recruitment Pay $2,000 penalty Pay adjustment on all FT to keep employees employees (minus 1 st 30) whole OR Determine health benefits matter Play Engage employees to manage health Aggressively manage plan on a long term basis

14 Pay or Play Strategies Alternatives to Consider for 2014 Implement results driven population health management program Increase dependent tier contributions to offset cost increases resulting from single tier contribution reduction and new opt-ins due to individual mandate Create salary-based contribution, i.e. lower contributions only for those potentially eligible for penalty-generating subsidies (income below 400% of FPL) SAMPLE Low Value Plan Design High Deductible + HSA (Minimum 60% value; can be increased) In Network Out of Network Deductible $2,000 / $4,000 $4,000 / $8,000 Health Savings Account Up to $250 can be earned for compliance with one or more health management programs Offer a 60% value plan and position current plan as a buy-up option Decrease number of staff working 30+ hours per week (reduce hours of those currently working just over 30 hrs/week) Coinsurance 50% Preventive Services Out of Pocket Maximum 100% Not covered $5,950 / $11,900 (incl. deductible) $11,900/ $23,800 (incl. deductible) Consider alternative funding options (e.g., ASO, level funding, captives, etc.) Pharmacy Subject to deductible & coinsurance

15 Pay or Play Strategies Decision to Keep Coverage Will employers keep coverage after 2014? Recent surveys have shown that only 10-15% of employers plan to drop coverage Why employers choose to keep coverage? If employers wish to maintain the same level of employee compensation they will need to increase employee salaries to account for the cost of coverage elsewhere Remain competitive in the marketplace for recruiting talent and reducing turnover Allows employer to have control over the employee population s overall health and productivity Employers Likely To Drop Coverage in 2014 What Employers Are Considering Employer s Likely Actions Regarding Employees Working 30+ Hours/Week 20% 19% Make all employees working 30+ hours/week eligible for full-time employee plan(s) 45% 6% 9% 3% 4% Change workforce strategy so that fewer employees work 30+ hours/week 32% Add a lower-cost plan for employees that work fewer than 40 hours/week Small employers (10 All large employers Employers with 18% to 499 employees) (500+ employees) 5,000+ employees Make no change and pay penalty as necessary % Source: Mercer Survey of Employer-Sponsored Health Plans 2011

16 NON-DISCRIMINATION RULES AND HIGH-VALUE PLAN TAX

17 Non-discrimination Rules For Insured Plans Summary Effective date of legislation has been indefinitely delayed until guidance is issued still important to consider when developing future fully insured strategies Designed to apply similar nondiscrimination standards to fully insured plans that are already in place for self insured plans Eligibility tests Benefits test Actual testing, including complete analysis, is typically performed by benefits counsel Potential Penalties $100 per day per affected individual, capped at lesser of 10% of yearly premium or $500,000/year

18 High Value ( Cadillac ) Plan Excise Tax Summary Includes medical/rx, individual reimbursement accounts, EAP, and onsite medical clinics 2018 thresholds are $10,200 for single coverage and $27,500 for family coverage will be indexed annually thereafter based on CPI 40% excise tax on the coverage value that t exceeds these thresholdsh Threshold adjustments permitted for pre-65 retirees, high-risk professions, significant age/gender g factors, and multi-employer plans 21% Will do whatever is necessary to bring plan cost below threshold amounts 39% Will attempt to bring cost below threshold amounts, but may not be possible 4% 36% Will take no special steps to reduce cost below threshold amounts Believe plan(s) are unlikely to ever trigger excise tax Source: Mercer Survey of Employer-Sponsored Health Plans 2011

19 LEAVENWORTH USD 453 CADILLAC TAX ANALYSIS

20 Leavenworth USD 453 Cadillac Tax Analysis Plan Cost Timeline Exhibit $35,000 BCBSKS Option 1 - $1,500 Deductible $30,000 $25,000 $20,000 $15,000 $10,000 Family Threshold Family 6% Family 8% Family 10% Individual Threshold Individual 6% Individual 8% Individual 10% $5,000 $ plan Excise Tax estimated at $0

21 Leavenworth USD 453 Cadillac Tax Analysis Plan Cost Timeline Exhibit $35,000 BCBSKS Option 2 - $1,000 Deductible $30,000 $25,000 $20,000 $15,000 $10,000 Family Threshold Family 6% Family 8% Family 10% Individual Threshold Individual id 6% Individual 8% Individual 10% $5,000 $ plan Excise Tax estimated at $0

22 Leavenworth USD 453 Cadillac Tax Analysis Plan Cost Timeline Exhibit $40,000 BCBSKS Option 3 - $500 Deductible $35,000 $30,000 Family Threshold $25,000 Family 6% Family 8% $20,000 Family 10% Individual Threshold $15,000 Individual 6% Individual 8% $10,000 Individual 10% $5,000 $ plan Excise Tax estimated at $16,341

23 FEES AND TAXES

24 Health Care Reform Update Tax and Fee Provisions of PPACA DATE TAX OR FEE PROVISION FINANCIAL IMPACT % tax on indoor tanning services Individual direct 2011 Tax on non-qualified withdraws increased from 10% to 20% for HSAs and from 15% to 20% for MSAs 2011 Annual fees on pharmaceutical manufacturers/importers increases from $2.3B to $4.8B per year over 10 years, apportioned among entities by market share 2012 Annual fee on insured and self-funded health plans to fund Patient Centered Outcomes Research, applicable plan years ending 10/1/12 through 9/30/19 $1 per covered life in 1 st year, $2 in 2 nd year, indexed thereafter Individual direct Pass through in product costs Pass through in insured premiums; employer direct for self-funded 2013 Employee Medicare tax increases from 2.9% to 3.8% for those earning $200K+/single Individual direct or $250K+/couple; 3.8% tax also applied to investment income for same individuals 2013 Elimination of business expense tax deduction for Medicare D expenses for employers Employer direct receiving Part D subsidies 2013 Annual fees on medical device manufacturers/importers 2.3% of product sale price Pass through in product costs 2013 $500K per person limit on tax-deductible salary expenses for insurance companies? 2013 Threshold for itemized medical deductions increases from 7.5% to 10% of income Individual direct 2014 Annual fees on health insurers increases from $8B to $14.3B over 5 years and indexed thereafter, apportioned among insurers by market share 2014 Quarterly fees on insurers and self-funded plan TPAs for state transitional reinsurance programs for first 3 years state exchanges are available rate $63 per person 1 st year Pass through in insured premiums Pass through in insured premiums or admin fees % excise tax on value in excess of thresholds for high-value health plans Employer direct

25 Health Care Reform Update A Trio of New Fees Patient-Centered Outcomes Research Fee Health Insurance Industry Fee Reinsurance Assessment What is it? Annual fee on insured and self Annual fee on all insured Annual fee on insured and insured plans beginning on/after 10/2/2011 plans beginning in 2014 self-insured plans, Excludes Dental/Vision i Includes Dental/Vision i Excludes Dental/Vision i How Much? Annual fee of $1, then $2; indexed to medical inflation until 2019 First payable July 2013 Estimated costs: Estimated costs: 2 to 2.5% for 2014 $63 PMPY in t to 4%for later years $40 to $60 PMPY in 2015 $25 to $35 PMPY in 2016 IS tax-deductible NOT tax-deductible IS tax-deductible Who Pays? FI: carrier pays, most likely Carrier pays FI: full amount built into rates built into rates SF: employer must calculate and pay own fee Applies to all insured plans and will be based on each insurer s share (among all U.S. insurers) for 1/1/2014 plus partial load in 2013 SF: client is liable but carrier will submit payment on behalf of client

26 Health Care Reform Update What s the Projected Rate Impact? RENEWAL PROJECTION - ABC COMPANY Renewal Date: January 1, 2014 Experience Period 7/1/ /30/2013 Experience Period Average Monthly Membership 325 Factor Total PMPM Paid Premium $1,300,000 $ Paid Claims $950,000 $ Minus Pooled Claims ($100,000) ($45,000) ($11.54) Net Paid Claims $905,000 $ Trend (Blended Medical and RX) 11% / 18 Months Trended Claims $1,058,398 $ Retention 16.00% $169,344 $43.42 Pooling Charge 9.00% $117,000 $30.00 Needed Premium $1,344,741 $ Projected Increase: Pre-PPACAPPACA 3.0% Estimated PPACA Fees PCOR $2.00 $650 $0.17 Reinsurance $63.00 $20,475 $5.25 Health Insurer Excise Tax 2.30% $30,929 $7.93 Total PPPACA Fees $52,054 $13.35 Total Premium Required $1,396,795 $ Projected Increase: Post-PPACA 7.4%

27 SUMMARY

28 New Burdens for Employers Cost Burden Coverage requirements Pay or Play Provisions Auto enrollment = more people on employer plan Fees Administrative and Compliance Burden Reporting requirements Payroll requirements Increased questions from employees New SBC requirements Exchange notices Rebate notices