Healthcare Reform and Exchanges Impacts

Transcription

1 Producer Webinar Welcome Healthcare Reform and Exchanges Impacts To listen to this presentation please do ONE of the following: Call the conference line and enter the participant code , OR Listen through the speaker in your computer. Your computer must be equipped with a sound card and either built in or external connect speakers. Q & A To ask questions during the webinar, please use the Question & Answer feature at the bottom of the screen and type in your question for the presenters. We will get to as many questions as possible at the end of the session. The webinar will begin at 1:00 p.m. Alaska Time ( )

2 Healthcare Reform and Impacts of Exchanges Jim Grazko Vice President & General Manager, Underwriting For audio call toll free: PIN:

3 Agenda Exchange Overview Timeline for Exchanges Concept versus Reality Decision Points for State Government Draft HHS Exchange Rules Alaska Activity Market Impacts of the Exchanges Cost Impacts of Reform Impacts to Insurers Conclusions 3

4 What are Exchanges? Exchanges will be a new marketplace in 2014 Individuals and Small Groups can purchase coverage Purpose of the Exchange concept is to provide access and transparency for consumers Also provides a mechanism to provide access to premium and cost sharing subsidies (Individuals) and tax credits (Small Groups) Exchanges will be designed and operated by the states Federal Exchange is default in absence of a state Exchange Funding for Exchange operations Federal government pays for implementation and for the first year of operation Effective 1/1/2015 states will be required to determine funding for Exchanges, although sources of funding for the ongoing operation of Exchanges have not yet been identified 4

5 What are Exchanges? The Exchange will offer products called Qualified Health Plans with defined actuarial value thresholds for Essential Health Benefits Products will be relative to a 100% product where there is no cost sharing for the member for Essential Health Benefits Metallic Plans Actuarial Value Bronze 60% Silver 70% Gold 80% Platinum 90% Must sell these metallic plans and cannot offer products with a lower actuarial value than Bronze 5

6 Potential Timeline for Exchanges Key Exchange Implementation Dates as specified by the PPACA HHS establishes dates for initial Exchange open enrollment HHS decision to operate Exchanges in certain fallback states Federal funding for Exchange administration ends, states must fund 1/1/11 1/1/12 7/1/12 1/1/13 1/1/14 1/1/15 1/1/17 July 2011 Exchange regulations Issued States notify HHS of intent to establish/ operate Exchange States must publish requirements for Qualified Health Plans Exchanges operational for Individual and Small Groups States may permit large employers to purchase through the Exchange 6

7 Concept: Intended Operation of Exchanges The Exchange is intended to provide the front end shopping experience, matching consumers with Qualified Health Plans No wrong door concept will apply Exchange must enroll applicants who are eligible for Medicaid and Children s Health Insurance Program (CHIP) in those programs Shopping and enrolling is intended to be straightforward and uniform Health plans will provide coverage and service to members 7

8 Reality: Actual Exchange Operations We believe that the actual operations will be challenging and there are still many unanswered questions Subsidy Administration How will the multifaceted subsidy determination and reporting to the Health Plans by the Exchange and/or Treasury work? Will the Exchange or Health Plan handle reconciliation of subsidy payments with member payments? Premium Administration Will the Exchange or the Health Plan aggregate all subsidies and premium contributions? How will the states fund mandates that are not included in Essential Health Benefits? Customer Service to the member Will the Exchange provide customer service? Who will respond to questions regarding eligibility and premium status with payments coming from multiple sources? 8

9 Decision Points for State Governments States are currently formulating approaches on major decision points for their Exchange in 2011 or 2012 legislation Participation: i i Allow all health hplans that qualify or limit i competition i to a subset of Qualified Health Plans? Risk Pools: Merge Individual and Small Group risk pools or maintain them separately? High Risk Pools: Retain or eliminate high risk pools? Eligibility: Open Exchange to small groups with 1 50 employees or employees? Accreditation: Specify accrediting agency or give Health Plans flexibility to choose? Model: State specific, regional or federal Exchange? 9

10 State Healthcare Exchange Legislation

11 Draft HHS Exchange Rules Released on Monday, July 11, 2011 with a 75 day comment period. In general, states provided with a great deal of flexibility in developing Exchanges: HHS indicates it will grant conditional approval to states that appear to be progressing even if it cannot demonstrate complete readiness by January 1, States that are not ready for 2014 can apply to operate the exchange in 2015 or any subsequent year. Does not address the following (subsequent regulations expected): Proposed benefits Actuarial value requirements Processes for determining subsidy eligibility Health plan quality reporting requirements 11

12 Draft HHS Exchange Rules Specific components: 1. Certification of Health Plans States have flexibility to: allow all qualified plans into Exchange, use competitive bidding or selective contracting. 2. Rate Review Exchange must consider rate increases when determining health plan availability. 3. Network Requirements States define a sufficient choice of providers. 4. Governance Governing board cannot have a majority of voting representatives with a conflict of interest, including health plans, agents, brokers, etc. 5. Open Enrollment Periods Proposes initial OE period of Oct 1, 2013 Feb 28, 2014 then beginning in 2015, proposes annual OE period of Oct 15 Dec 7 or Nov 1 Dec 15. Special enrollment periods (SEPs) also proposed to align with ACA. 6. SHOP (Small Business) Requirements Must offer metallic level of coverage; can be designed to allow employers to keep their group together by selecting a health plan for their employees. 12

13 Draft HHS Exchange Rules Reinsurance, Risk Corridors and Risk Adjustment (Three R s Rule): Creates temporary reinsurance and risk corridor programs and a permanent risk adjustment program. Conveys more questions than answers, with many key issues to be determined. Program: Reinsurance Risk Corridors Risk Adjustment What: Provides funding to Limit issuer loss (and Transfers funds from lowest plans that cover highest cost individuals gains) risk plans to highest risk plans Who Participates: All issuers and TPAs contribute funding; non grandfathered individual market plans (inside and outside the Exchange) are eligible for payments Qualified Health Plans (QHPs) Non grandfathered individual and small group market plans, inside and outside the Exchange When: Throughout year After reinsurance and risk adjustment After end of benefit year 2014 and subsequent years 13

14 Alaska Exchange Activity SB 70 sought to establish the Alaska Health Benefit Exchange. Passed neither the House nor Senate before legislative special session ended on May 14. Opponents were concerned that, if the bill was passed and healthcare reform was then foundunconstitutional, unconstitutional, the bill would still belaw. Alaska also turned down grant funding to study / establish an Exchange from the Department of Health and Human Services. Looking ahead: Alaska may use state funds to establish a small business Exchange based on a market aggregator, an Internet based information portal that uses a standardized application and enrollment system and connects individuals and small businesses to health plan information. 14

15 Market Impacts of the Exchange 15

16 Impacts to Large Employers For employer, if employee qualifies for and obtains subsidy bid in Exchange then penalty applies Employees qualify for Exchange subsidies if: Employer does not provide minimum essential coverage and/or Employer coverage provided would cost employee > 9.5% of household income Will the health status of the employees going to the Exchange differ from those remaining on group coverage? 16

17 Impacts to Individual Market Individual market is predicted to change and grow significantly, based on: Subsidies offered exclusively through the Exchange will be primary driver of Individual market membership growth. How employers react to Exchange availability for their employees will be a major driver. Unknown: if and how many small employers will continue to offer benefits Effectiveness of Exchange functions will impact membership growth in Exchanges. Eligibility shifting of individuals who straddle the 133% federal poverty level threshold, bouncing between Medicaid and individual market eligibility Feb 2011 Health Affairs study found 35% of adults in their sample would have experienced a change in eligibility within 6 months, 50% within 1 year; 24% would have experienced at least 2 eligibility changes in 1 year 17

18 Market Predictions Vary Greatly Especially in the Individual market; individual market covers over 14 million people today 1 2 Notes: (1) Illustration reflects national forecast (2) % growth represents changes between 2013 and

19 Non Exchange Market Along with an Exchange, a non Exchange based market is allowed. Purchaser outside of the Exchange is not eligible for subsidy or tax credit. Consistent rules apply inside and outside the Exchange: Products must meet Essential Health Benefits Package levels For rating purposes, pools outside are merged with the Exchange pool Rates and rating rules Participation requirements, enrollment rules and open enrollment periods 19

20 Viability of Individual Market Future stability of the market remains unclear: Weak mandate is not a strong incentive for consumers to maintain coverage. Mechanism to prevent members from jumping in and out of coverage is essential to maintaining viable risk pools. What happens to markets outside the open enrollment period? Subsidies will insulate consumers from cost of care and may encourage utilization. Inability to collect health information will make it more difficult to triage members into appropriate care management programs. High risk poolsmaybe eliminated andsignificantly increase costs in the individual pool. 20

21 Cost Impacts of Reform 21

22 Reform and Costs Growth in spending on health care programs remains the central fiscal challenge. In CBO's judgment, the health care legislation enacted earlier this year made a dent in the problem, but did not substantially diminish that challenge. Director Douglas Elmendorf, Congressional Budget Office July 1,

23 Impacts of Reform on Premiums Reform will increase access to coverage, but changes to benefit plans and new taxes and fees will drive costs higher. Near Term Provisions (2010) No dollar lifetime maximums Restrictions on annual limits Preventive care with no cost sharing No pre existing condition exclusions for enrollees under age 19 Dependent age extension to age Provisions Mandated Essential Health Benefit packages Guaranteed issue with weak individual mandate Adjusted community rating Insurer fee New Individual Plans: 2 6% Rate Impact? Rate Impact 23

24 Impacts to Insurers 24

25 Significant Impacts for Insurers Medical Loss Ratio (MLR) Requirements and Rebates Carriers must meet minimum MLRs, otherwise rebates required 80% for individuals and small groups 85% for large groups Several states concerned about viability of MLR requirements Waivers: Maine, Nevada, New Hampshire, 5 others pending Rebates will be issued to employees and members based on contribution allocation: liability remains with insurer Federal and State Rate Review and Disclosure Accreditation Requirements Will specific accreditation organization be named or flexibility for an insurer to select? Some requirements require 2 years of data; collection needs to start now for

26 Conclusions Individual id market will be significantly different in These changes will create membership growth, potential market instability, and definitely new added risk to the system. Membership changes and resulting subsidy costs will be behaviorally based and therefore very unpredictable. 26