Aon Consulting Health Care Reform Presentation

Transcription

1 Aon Consulting Health Care Reform Presentation Sponsored by CCAO/CEBCO July 27,

2 Health Reform Overview Health reform is a journey; not an event. Legislation spans The legislation is complex and lacks clarity. Employers will need professional advice and services to achieve compliance, assess cost implications, redesign benefit structure and establish long term strategy Legislation drives coverage expansion and insurance market reform. Minimal near-term assistance for employers to help control costs. 2

3 Health Reform Overview Significant Impact Administrative burden New taxes Mandates, Exchanges, Employer decisions Low/Moderate Impact Direct employer benefit cost Health care delivery reform Cost Drivers Short term ( ): 0%-5% Longer term: (+) trend from health industry fees, cost-shifting (-) trend from universal coverage 3

4 Healthcare Reform Impact on Stakeholders Access Affordability Consumer Protections Individual Mandate Individuals Increase in Demand Changes in Medicare Reimbursements Healthcare Providers Employers Insurance Companies Reform Builds on Employer- Sponsored System Play-or-Pay Starting 2014 Short-term Trend Increase Increase in Customers Fees / Taxes Min Loss Ratio Requirements Consumer Protections Reform focus is on Access, not on Cost Control 4

5 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 5

6 Adult Child Dependent Coverage to Age 26 - Federal Reform Interim Final Regulations issued May 10 addresses coverage extension Effective for plan years beginning on or after September 23, 2010 regardless of plan s grandfathered status Requires plans that provide dependent coverage to children to make coverage available to all children under the age of 26 o Student status, marital status, residency, financial support, dependent status for tax purposes, or other criteria not applicable Mandates special enrollment opportunity for certain adult children o o Timing: no later than 1st day of plan year; must last 30 day days Must provide written notice to eligible adult children IRS Notice issued April 27 addresses taxation of coverage Health coverage or reimbursement of medical expenses for a child who has not attained age 27 by the end of the taxable year will not be taxable to the employee o Tax exclusion applies even if the child is not a tax dependent o Effective on or after March 30,

7 Adult Child Dependent Coverage to Age 26 - State Reform - Ohio HB1 Effective for plan years beginning on or after July 1, 2010 Requires plans that provide dependent coverage to children to make coverage available to adult dependent children who qualify up to the age of 28 Federal law will cover those up to age 26; state law will be effective between ages 26 and 28 Federal Law Adult dependents up to age 26 (terminate at time of 26th birthday) Married or unmarried; no requirement for full-time student status Ohio Law age 26 up to age 28 Must be unmarried; if not Ohio resident, must be a full-time student Legal child, adopted child, foster child does not have to live with parent or be financially dependent on parent Not otherwise eligible for employer-sponsored coverage (this does not apply beginning in 2014) No additional premium can be charged if adding adult dependent child(ren) unless tier changes (i.e., from single to single plus 1 or family) Natural child, step-child, adopted child does not have to live with parent or be financially dependent on parent or be a full-time student, unless not residing in Ohio Not otherwise eligible for employer-sponsored coverage or eligible for Medicare/Medicaid Can be charged the full cost of adding an adult dependent child 7

8 Health Care Law Provisions Applicable to All Grandfathered and New Plans Coverage of Adult Children to Age 26 (2011-Exception for Nonparent Plan 2014-All) No Preexisting Condition Exclusions (Age 19: 2011 All: 2014) Reduction in the Cost of Insured Health care Coverage (2011) No Rescissions Except for Fraud or Intentional Misrepresentations (2011) No Lifetime or Annual Limits on Essential Health Benefits (2011) Continue to Comply with IRC, ERISA and PHSA Requirements (2011) Uniform Explanation of Coverage Statements (2012) No Excessive Waiting Periods (2014) 8

9 Health Care Law Provisions Applicable to All Grandfathered and New Plans Preventive Health Services Without Cost Sharing (2011) Transparency in Coverage Disclosures (2011) No Prior Authorization for OBGYN or Emergency Services (2011) Quality of Care Reporting (2011) Nondiscrimination by Insured Plans for HCI s (2011) Choice of Health Care Professionals (2011) New Claim and Appeal Procedures (2011) Coverage for Clinical Trials (2014) Insurance Premium Rating Restrictions (2014) Guaranteed Availability of Health Insurance (2014) Essential Health Benefit Packages (2014) Guaranteed Renewability of Health Insurance (2014) Nondiscrimination With Respect to Health Providers (2014) Nondiscrimination\Based on Health Status (2014) Annual Cost Sharing Limits (2014) 9

10 Changes That Can Cause Health Plan to Lose Grandfathered Status New Insurance Policies (Union Plan Exception) Decrease in Employer Contribution Rate Mergers or Acquisitions (Depending on Purpose) Eliminating All or Substantially All Benefits to Diagnose or Treat a Condition New or Modified Annual Limits Increase in Fixed Amount Copayment Increasing Percentage Cost Sharing Transfers of Employees Increase in Fixed Amount Cost Sharing (Other than Copayments) 10

11 Changes That Can Be Made Without Losing Grandfathered Plan Status Increasing Benefits Comply with Federal and State Laws Renewal of Policy of Insurance Changes to Fixed Amount Copayments (Within Limits) Formula Based Contribution Rate Changes (Within Limits) Changes to Premiums Voluntary Health Care Reform Law Changes Addition of Annual Limits (Not Less Than Existing Lifetime Limit) Changes to Third-Party Administrator (For Self-Insured Plans) Increase in Fixed Amount Cost Sharing Other than Copayments (Within Limits) 11

12 Grandfathered Plan Regulations Interim Final Regulations issued June 14 (published in Federal Register June 17) Grandfathered Health Plan Definition: A plan in which individuals were enrolled on March 23,2010 and continuously covers at least one individual since then (need not be same individual Exempt from certain health reform provisions Permitted to add family members new enrollees Grandfather status applies separately to each benefit package (option) If no impermissible changes are made, plan can retain grandfather status indefinitely 12

13 Changes Resulting in Loss of Grandfathered Plan Status Issuance of new policy, certificate or contract of insurance Elimination of benefits for a particular condition Increase in percentage coinsurance requirements Increase in copays by more than the greater of $5 or 15% (adjusted for medical inflation) Increase deductibles or OOP Max by increased more than 15% (adjusted for medical inflation). Decrease in employer contribution rates by more than 5% Decrease or add a new annual limit on the dollar value of benefits Plans that lose grandfather status become subject to all health reform law provisions upon the applicable effective date 13

14 Changes Permitted Without Loss of Grandfathered Plan Status Change amount of premiums (as long as employee contribution rates don t increase by more than 5%) Increase benefits Change third party administrators Changes to comply with federal/state laws Voluntary health reform plan changes Renewal of policy, certificate or contract of insurance Special transition rules Changes made to comply with contracts, plan amendments or State insurance department filings entered into prior to March 23, 2010 Good faith changes prior to the issuance of regulations Revocation/modification of any impermissible changes 14

15 Collectively Bargained Plans No delayed effective date for self-funded collectively bargained plans in effect on March 23, 2010 (need to comply with health reform law provisions at the same time as other grandfathered plans) Fully-insured collectively bargained plans may make changes and still retain grandfather status until the end of the last collectively bargained agreement in effect on March 23, 2010 At that time, collectively bargained plan either retains or immediately loses grandfather status, depending on changes made 15

16 Grandfathered Plan Disclosure & Record-Keeping Requirements Participant Disclosure Requirements Plan materials (e.g., open enrollment materials, SPDs, SMMs, etc.) must include a statement indicating that the plan is considered to be grandfathered, and must provide contact information for questions or complaints Model language provided Maintenance of Records Plans must maintain records that document the benefit terms that were in effect on March 23, 2010, and that verify grandfathered status Must make records available upon request to any participant, beneficiary, policy subscriber, or state or Federal agency official 16

17 Changes that May Result in Loss of Grandfathered Plan Status Changes the agencies are considering adding to the list of impermissible changes: Changes to plan structure (i.e., switching from Health Reimbursement Arrangement to major medical coverage) Changes in a network plan s provider network Changes to a prescription drug formulary Any other substantial changes to the overall benefit design 17

18 Health Reform Provisions Applicable to Grandfathered Plans No lifetime or annual limits Extension of dependent coverage until age 26 Prohibition of preexisting condition exclusions Prohibition on rescissions of coverage Prohibition on waiting periods > 90 days Uniform explanation of coverage 18

19 Health Reform Provisions Not Applicable to Grandfathered Plans (what plans that lose grandfathered status need to comply with) Coverage of preventive health services without any cost-sharing Coverage for individuals participating in approved clinical trials Insurance premiums rating restrictions Guaranteed availability of health insurance coverage Guaranteed renewability of insurance coverage Nondiscrimination based on health status Nondiscrimination with respect to health providers Nondiscrimination by insured plans in favor of highly compensated individuals Essential health benefits package requirements No prior authorizations to select doctors for obstetrical care or for emergency services Annual cost-sharing limits Certain claims and appeals procedures Uniform rating rules Quality of care reporting requirements 19

20 HIPAA-Excepted Benefits HIPAA excepted benefits (e.g., standalone dental and vision plans) are not subject to the insurance market reform provisions of the health reform law 20

21 New HHS Regulations (June 22, 2010) Annual/Lifetime Limits Restricted Annual Limits: for plan years beginning before January 1, 2014, a group health plan or group health insurance policy may impose restricted annual limits on essential health benefits as follows: Plan Year Beginning Plan Year Ending Annual Limit Must Exceed September 23, 2010 September 23, 2011 $750,000 September 23, 2011 September 23, 2012 $1,250,000 September 23, 2012 September 23, 2013 $2,000,000 Mini-Med or Limited Benefit Plans: a process will be established by which such plans may seek a waiver to permit the establishment of restricted annual limits lower than those required by the Regulations if compliance with these would result in a significant decrease in access to benefits or a significant increase in premiums. Applies to grandfathered plans 21

22 New HHS Regulations (June 22, 2010) Patient Protections Requires group health plan or group health insurance coverage that offers a network of providers to permit any practitioner in the network to be designated as an individual s primary care provider, pediatrician or gynecologist Requires that notice be provided informing each participant of his/her right to make such a designation. Requires that emergency services be covered without the need for pre-authorization and without regard to whether the provider is in its network Requires group health plan or group health insurance coverage that offers a network of providers, covers emergency services, and subjects such services to a co-payment or to co-insurance, to ensure that the rate imposed for out-of-network emergency providers does not exceed the cost-sharing requirements that would be imposed if the services were rendered by a network provider Does not apply to grandfathered plans 22

23 New HHS Regulations (June 22, 2010) Pre-Existing Conditions Prohibits the exclusion of coverage of specific benefits associated with a pre-existing condition Prohibits a complete exclusion from the plan if based on a pre-existing condition Leaves unchanged the existing rule under HIPAA that permits an exclusion of benefits for a condition if the exclusion applies regardless of when the condition arose relative to the effective date of coverage Applies to plan years beginning on or after January 1, 2014, except for individuals under age 19, applies for plan years beginning on or after September 23, 2010 Rescissions Prohibits the rescission of health coverage except in the case of fraud or intentional misrepresentation of a material fact Applies to insured plans in the group and individual markets, as well as self-insured plans Does not prohibit coverage from being cancelled on a prospective basis Does not prohibit coverage from being cancelled retroactively if the cancellation is attributable to a failure to pay required premiums or contributions Requires 30 days advance notice of a rescission, when still permitted Applies to grandfathered plans 23

24 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board 9 Reference: Health Reform Chronology 24

25 Implementation of Health Reform Regulatory Challenges Complex and challenging new law to implement 2,400 pages plus 153 page reconciliation bill plus managers amendments HHS (Health and Human Services), DOL and IRS on point for implementation Date of enactment was March 23 Plan Sponsor Near Term Challenges Limited or delayed guidance from HHS Market reform changes must be implemented for January 1 plan year Coverage of dependents up to 26 Elimination of lifetime/annual maximums Medical plan impact Accounting changes related to Medicare retiree drug subsidy tax Early retiree reinsurance program 25

26 Key Action Steps for Plan Sponsors Year Provision Temporary Reinsurance for Pre-65 Retirees Insurance Market Reforms Action Steps Determine if eligible per May 3 guidelines Apply for claim re-imbursement File quickly Conduct actuarial impact modeling Update plan documents, HIPAA certificates, & SPDs Communicate plan design changes Comply with Class Act If participating, prepare enrollment and payroll systems Communicate value of enrollment for long term care & disability OTC Drugs Paid Through Accounts Need Prescription Update administrative process with vendors Communicate new guidelines prior to and during annual enrollment 26

27 Key Action Steps for Plan Sponsors Year Provision Model the cost impact of the health reform law Disclosure of Cost of Group Coverage on W-2 Action Steps Conduct cost modeling over a 3-5 year period Model the cost to the organization to drop sponsorship of group health coverage beginning in 2014 when the Exchanges are operational Model the cost impact of remaining grandfathered versus moving to a new plan with modified plan design If the employer has retiree medical coverage, model the cost impact of insurance market reforms and other provisions of the new law Calculate plan costs once HHS issues guidelines Develop employee communications to explain new cost reporting 27

28 Key Action Steps for Plan Sponsors Year Provision Develop Uniform Summary of Benefits Action Steps Await HHS guidelines on model summary Develop and distribute to workforce Fee for Comparative Effectiveness Program FSA deductions limited to $2,500 indexed to CPI Employee Communications about Insurance Exchanges Budget for fee of $1/ participant in Year 1 and $2 /participant up to 2019 Update plan documents, HIPAA certificates, and SPDs Communicate new guidelines to workforce prior to annual enrollment Create and distribute notices to workforce 28

29 Key Action Steps for Plan Sponsors Year Provision Plan for Shared Responsibility Provisions Effective Date for Key Employer Responsibilities Action Steps Review and modify employee contributions to avoid Free Rider penalty & Vouchers in 2014 Eliminate > 90 day waiting period Communicate updated SPDs and plan document. Eliminate annual limits Determine compliance with minimum 60% of actuarial value Determine number of employees at risk for both the free rider penalty and employee vouchers Comply with federal requirements to inform new hires about Insurance Exchanges and their potential eligibility for subsidized coverage 29

30 Key Action Steps for Plan Sponsors Year Provision Implement federal requirement to auto enroll new hires and continue enrollment of existing enrollees Action Steps Determine medical plan that new hires would be enrolled in Update SPDs and plan documents Work with employee benefit outsourcing partner to update systems Comply with federal requirements to provide enrollment to new hires and create opt-out procedures. 30

31 Other Key Provisions Tax credits for middle income Americans up to 400% of FPL (Federal Poverty Level) Fee for Comparative Effectiveness Research of $2 for each covered individual Individual Mandate begins with penalties in 2015 Medicaid expansion to 133% of FPL State-based Insurance Exchanges are operational for individuals and small groups; may be expended by states in 2017 to larger employer groups. Medicare Part D donut hole closed 31

32 Employer Call to Action Employer s long-term strategy should consider all potential factors that impact costs Potential Factor Direct impact of health reform legislation Expected cost increases by insurers from significantly increased tax and regulatory burden Cost - shifting from reduced Medicare payments over the next 10 years How to Determine Cost Impact Aon s actuarial cost modeling Cost impact to become clearer upon renewal Difficulty to quantify employer impact by location; partially offset by less cost shifting from coverage expansion 32

33 Employer Call to Action National health reform law addresses coverage for the uninsured and insurance market reforms; little help for plan sponsors to lower long term medical trend. Health reform could add an additional 2% to 5% health care costs for plan sponsors. Congress is likely to raise the $2,000/EE penalty by 2014 for employers who do not offer group coverage. Penalty is also not tax deductible. Employers will get little help from Washington to lower EE health costs; resulting in the need for new health care strategy. 33

34 Next Steps for Plan Sponsors Focus on near term compliance with insurance market reforms Model the long term impact of national health reform on costs of group coverage. Consider new strategies to lower long term medical trend. Decide on communication approach for employees on impact of new national health reform law Monitor development of HHS regulations providing guidance on implementation of new health reform law 34

35 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 35

36 Potential Impact of 2014 Reforms Exchange costs for employers may significantly increase by the time Exchanges are available in The $2,000 annual employer assessment for not providing coverage will probably increase over time due to medical inflation, adverse claims experience, new benefits being added to Exchange programs as a result of lobbying efforts and public demand, etc., and become a more significant percentage of payroll. Employers likely will be pressured to provide additional compensation to employees who participate in an Exchange. Some employees may need greater compensation initially to afford coverage through an Exchange if they are ineligible for subsidy. If government subsidies to individuals for Exchange coverage are reduced or eliminated, employers may need to provide employees with additional compensation so they can afford coverage. State Exchanges could emerge as insurers of last resort, becoming even more expensive for employees. Any additional compensation to cover Exchange costs may increase payroll (FICA/FUTA) taxes for the employer, and income and payroll (FICA) taxes for the employee. 36

37 Potential Impact of 2014 Reforms Some employees (e.g., higher compensated employees making more than 4 times the federal poverty limit, which is now approximately $88,000 for a family of 4) will have to pay premiums in the Exchanges that may be higher than for group coverage. Paying for coverage of younger employees through an Exchange will result in a cost subsidy for higher compensated Exchange participants. Employers with employees in multiple states may have different Exchange benefit structures according to the employee s state of residence. Employers may lose control over health and wellness initiatives, which may impact absenteeism or productivity. If most other employers continue to provide health insurance and you do not, you may no longer be considered an employer of choice. 37

38 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 38

39 Insurance Exchanges Features State based marketplace for buyers and sellers of health insurance Operational in 2014 for uninsured individuals and ERs with <50EE Family of 4 earning less than $88,000 is eligible for subsidized coverage when purchasing in the Exchange Federal funding to states to design Exchange but must be self sufficient by 2016 Key Challenges Reforms such as guarantee issue, guaranteed renewal, 3:1 age banding, & insurance market reforms will drive premiums higher Weak individual mandate with modest penalties for not purchasing health insurance. Use of traditional health plans such as PPOs and HMOs will not result in lower costs under the Exchange Only insured medical products - self funding not permitted 39

40 Insurance Exchanges-Implications for Plan Sponsors Exchange health plans options will vary from state to state and carriers will selectively participate state by state. May increase administrative burden on employers with multi state locations Carriers must develop new health products (replacing traditional plans) to be successful in demanding Exchange environment Premium trends may increase above current levels Some employers will consider dropping their group coverage in 2014 Negative implications for recruitment and retention of employees Employees using the Exchange who earn <$88,000 for a family of 4 will see higher premiums offset by federal subsidies resulting lower EE contributions. Employees using the Exchange who earn >$88,000 for a family of 4 will see higher premiums given the absence of federal subsidies Modest $2,000 penalty in 2014 for ERs not sponsoring group health coverage-penalty likely to increase before

41 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 41

42 Impact of HCR on Prescription Drugs Enhancements Increased Rx volume - PBMs are the biggest winners New FDA authorized process for generic availability of biologics Grants for reimbursements for MTM services Federal Upper Limit (FUL) pricing calculated by new Average Manufacturer Price (AMP) Contracts with Long Term Care (LTC) facilities for waste reduction Closing of coverage gap from % $250 rebate to Part D enrollees in coverage Restrictions Retiree Drug Subsidy no longer taxdeductible income Annual Fees for Pharma Health FSA cap and reimbursement restrictions on OTC products. Excise taxes on medical device manufacturers and importers Increase in Medicaid drug rebate percentage Payments cuts to Medicare Advantage Plans Decreased bargaining power for pharmacy benefit managers due to transparency requirements? 42

43 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 43

44 Health Reform Self-Service Tools Aon s Health Care Reform Microsite is a great resource: Weekly briefings Webinar recordings Regularly updated FAQs Side-by-side comparison of the Senate and Reconciliation Bills Survey findings 44

45 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 45

46 Health Care Reform Wellness Grants Provision HHS is charged with developing program criteria for Wellness Grant recipients based on evidence-based research and best practices. Wellness Grants will be available for qualified small employers that: Employ fewer than 100 employees (who work 25 or more hours per week) Did not provide a workplace wellness program as of March 23, 2010 The program is funded with $200 million for the period of federal fiscal years 2011 through Qualification Eligible employers are required to provide a workplace wellness program to all employees that includes: Health awareness initiatives (including health education, preventive screenings, and health risk assessments) Efforts to maximize employee engagement and encourage participation Initiatives to change unhealthy behaviors and lifestyle choices Supportive environment efforts (including workplace policies to encourage healthy lifestyles, increased physical activity, and improved mental health) Call to Action Eligible employers who want to participate must submit an application to HHS (application details are yet to be determined by HHS) that includes a proposal for a qualified comprehensive workplace wellness program. Before the application, employers must prepare to provide evidence for the requirements: Developed health awareness initiatives Effort to maximize employee engagement and encourage participation Initiatives to change unhealthy behaviors and lifestyle choices Supportive environment 46

47 Today s Discussion 1 Latest Regulatory Guidance 2 Key Action Steps for Plan Sponsors 3 Potential Impact of 2014 Reforms 4 Insurance Exchanges 5 Impact of Health Reform on Prescription Drugs 6 Health Reform Self-Service Tools 7 Wellness Grants 8 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 9 Reference: Health Reform Chronology 47

48 Grandfathering Grandfathered Plans Generally, individual and group plans in effect on date of enacted are grandfathered Allows enrollment of new employees or family members after date of enactment Unclear whether grandfather is maintained if plan amended significantly or offered to new categories of previously ineligible employees Collectively Bargained Plans Collectively bargained plans under agreements ratified before date of enactment are grandfathered until date on which last agreement relating to coverage expires. 48

49 Grandfathering (cont d) Provisions Applicable to All Plans Provisions applicable to all plans regardless of grandfathered status: Coverage of adult dependents up to age 26 (prior to 2014, only if no other employer coverage available) Lifetime limits Restricted annual limits Prohibition on rescissions Preexisting condition exclusion (prior to 2014, children under 19) Waiting periods Uniform summary of benefits Grandfathered Plan Provisions Grandfathered plans apparently are exempt from the following provisions: Coverage of preventive services without cost sharing Cost sharing limits Nondiscrimination rules Appeals and review process Selection of doctors and referral requirements Coverage of clinical trials No discrimination against providers 49

50 Plan Design Changes/Benefit Mandates Dependent Coverage Coverage of adult children up to age 26, regardless of marital or student status If not eligible for other group plan Applies even if the child is not a tax dependent Effective 6 months after enactment, or September 23 (1/1/2011 for CY plans) Annual and Lifetime Maximums No lifetime maximums permitted for overall benefits (annual/lifetime limits on specific benefits permitted) Effective 6 months after enactment (1/1/2011 for CY plans) Complete elimination of annual limits beginning January 1, 2014 Restrictions on annual limits prior to 2014 TBD by regulation Effective 6 months after enactment (1/1/2011 for CY plans) 50

51 Plan Design Changes/Benefit Mandates (cont d) Pre-existing Conditions Exclusions Preventive Benefits Not permitted for children under 19 Effective 6 months after enactment (1/1/2011 for CY plans) Not permitted for all plan enrollees Effective 1/1/2014 Must provide first dollar coverage for evidence based preventative care (not for grandfathered plans) Effective 6 months after enactment (1/1/2011 for CY plans) Waiting Periods Waiting periods greater than 90 days are not permitted Effective 1/1/

52 Plan Design Changes/Benefit Mandates (cont d) Health Accounts Cost Sharing Limitations OTC drugs no longer reimbursable under health FSA, HRA or HSA, unless prescribed by physician Effective 1/1/2011 Penalty on withdrawal of HSA funds for non-medical expenses increased to 20% Effective 1/1/2011 Annual contributions to health FSAs limited to $2,500 annually Effective 1/1/2013 Indexed to CPI as of 1/1/2014 Out of pocket expense will not exceed HSA related coverage Deductibles cannot exceed $2,000 single & $4,000 family as indexed Effective 1/1/2014 Wellness Incentives Employers permitted to increase employee reward for participation in wellness programs to 30% of total plan cost HHS may increase to 50% Effective 1/1/

53 Employer Shared Responsibility Provisions Free Rider Provision Applies to large ERs with 50 or more FTEs FTE = 30+ hours/week Employers not offering health coverage pay $2,000 per EE Employer offering coverage pay $3,000 for each EE who receives Exchange subsidy if: coverage <60% of allowed costs EE pays >9.5% of their household income for health coverage First 30 employees not included in calculation of assessment Effective 1/1/2014 Employee Voucher Applies to ERs who offer minimum essential coverage Employers would convert health coverage subsidy to cash for any employees who: pay between 8% and 9.8% of their household income for health coverage whose household income is less than 400% of poverty line opt out of employer sponsored coverage for coverage in an Exchange based plan No penalties imposed for EEs who receive vouchers Effective 1/1/

54 Administrative Requirements Auto Enrollment Applies to new hires Employees can opt-out Employer can choose plan for auto enrollment Effective date unclear; may be upon enactment or until guidance issued W-2 Reporting Employers required to report the value of health benefits provided to each employee Value defined as COBRA cost Effective 1/1/2011(W2 delivered in 2012) Appeals Process Employer plans must have HHS approved external review process Effective 6 months after enactment (1/1/2011 for CY plans) 54

55 Administrative Requirements (cont d) Uniform Explanation of Coverage Annual distribution of summary of benefits and coverage Not to exceed 4 pages; 12 point font Culturally and linguistically appropriate Uniform Explanation is in addition to the SPD required by ERISA HHS to issue standards Effective 2012 (first summary due within 24 months of enactment) Exchange Notification Employers must notify employees at time of hire of the availability of Exchanges and their potential eligibility for a subsidy No requirement to offer same coverage as Exchange based plans Effective 1/1/2013 Transparency Requirements Same transparency requirements as Exchange based plans Claims payment policies and data Information on rating policies, cost sharing and payment for OON 55

56 Administrative Requirements (cont d) CLASS Act Voluntary federal LTC insurance program No underwriting restrictions 5-year waiting period Eligible for benefit if at least 2 ADLs for 90 days Lifetime benefit payments ERs may auto-enroll EEs and offer access via payroll deductions EEs may opt-out Must be actively employed to enroll Effective 1/1/

57 Tax Provisions Medicare Payroll Surtax Adjusted gross income >$200K for individuals and >$250K for couples Additional surtax on wages of 0.9% Additional surtax on investment income of 3.8% Additional taxes on higher income individuals replaces lost revenue from delayed enactment of high cost excise tax (estimated $210 billion) Effective 1/1/2013 High Cost Plan Excise Tax 40% excise tax on health plans whose annual cost exceeds: $10,200 single/$27,500 family Cost includes all health plans, including FSAs or HRAs, ER HSA contributions Higher thresholds for retirees and high risk professions; age/gender differences Indexed to CPI-U (+1% in 2019) Effective 2018; no delayed effective date for collectively bargained plans 57

58 Tax Provisions (cont d) Comparative Effectiveness Research Fee Fee to fund federal comparative clinical effectiveness research Applies to insurers and plan sponsors Applies to all plans, regardless of grandfather status $2 for each covered individual annually ($1 for plan years ending in 2013), indexed to CPI Effective for plan years ending after 9/30/2012 (1/1/2013 for CY plans) Fee sunsets after

59 CLASS Act (Title VIII of the Patient Protection and Affordable Care Act) Provision Objective Employer Impact CLASS Program nominally effective January 1, 2011, but still subject to: - HHS finalizing operating details and structure during HHS finalizing benefit design and premium structure by October 1, 2012 Benefits expected to be $50- $75 per day, graded based on level of impairment. No benefit duration limit. Eligibility for benefits requires: - 5 years prior enrollment and premium payment ( Vesting Period ) - Loss of 2 or 3 (TBD) of 6 Activities of Daily Living or substantial cognitive impairment Creates a voluntary, government-administered Long Term Care Insurance plan To enable those in need to remain at home or in their community. Pays for home care and related services. To guarantee access to basic coverage for all working, taxable wage earners over age 18. Current average monthly premium estimates vary widely: - Congressional Budget Office: $123 - Centers for Medicare and Medicaid Services: $240 - American Academy of Actuaries: $160 Benefits unlikely to fully cover costs in most cases. CLASS does not eliminate the need for private Long Term Care Insurance. No penalty for employers who do not offer CLASS. Individual enrollment alternative will be available. Employer Option: offer CLASS coverage and payroll deductions. All employees are automatically enrolled unless they opt-out. Employer may contribute but not required. 59

60 Tort Reform-Demonstration Program Designed to evaluate alternatives to current medical tort reform litigation Grants would by awarded to states by HHS for a period not to exceed 5 years. Key objectives include Increase prompt and fair resolutions of disputes Encourage disclosure of health errors Improve access to liability insurance Inform patients of options Not curtail patient s legal rights Review panel would include 9-13 patient advocates, health care providers, attorneys, medical malpractice carriers, state officials, or patient safety experts. 60

61 Independent Payment Advisory Board May be the key control feature in HCR law-effective in 2014 Focus of Board is fee and payment reforms to bring Medicare spending in line with spending targets. Cannot modify Medicare eligibility or benefits 15 person full time Board serving 6 year terms with potential reappointment Board s recommendations become effective if approved or not voted on by Congress. Recommendation also become effective if Congress disapproves but the President vetos action but Congress lack two/thirds to override veto. Board can make challenging decisions on controlling Medicare costs that Congress has difficulty making for political reasons. Board decisions impact Medicare fees and spending but will likely be embraced by private sector 61

62 Health Care Reform Impact On Limited Medical Plans Health Care Reform (HCR) provisions that will impact medical plan designs for removal of annual and lifetime maximums and providing child coverage to age 26 - have raised questions on whether employers can continue their existing Limited Medical programs. The most significant HCR provision is removing annual maximums as all Limited Medical plans have them. There are 2 Limited Medical plan designs: Copay/Deductible Model: Also referred to as expense incurred plans, they are similar to Major Medical with having out-of-pocket costs including copays, deductibles and coinsurance. Plans have much lower annual limits than Major Medical and have pre-existing condition exclusions. Fixed Indemnity Model: Also known as reimbursement plans, this model provides flat dollar amounts per benefit category for covered services. Other than Rx copays, these plans provide first dollar coverage without deductibles or coinsurance. There are no pre-existing condition exclusions. The Copay/Deductible plans are filed as group health plans and are subject to HCR provisions. In addition to extending the child coverage age to 26, these plans will be required to remove annual and lifetime maximums and pre-existing condition exclusions. As group health plans, the Copay/Deductible model includes COBRA and issues creditable coverage certificates. 62

63 Health Care Reform Impact On Limited Medical Plans Health Care Reform (HCR) provisions that will impact medical plan designs for removal of annual and lifetime maximums and providing child coverage to age 26 - have raised questions on whether employers can continue their existing Limited Medical programs. The most significant HCR provision is removing annual maximums as all Limited Medical plans have them. There are 2 Limited Medical plan designs: Copay/Deductible Model: Also referred to as expense incurred plans, they are similar to Major Medical with having out-of-pocket costs including copays, deductibles and coinsurance. Plans have much lower annual limits than Major Medical and have pre-existing condition exclusions. Fixed Indemnity Model: Also known as reimbursement plans, this model provides flat dollar amounts per benefit category for covered services. Other than Rx copays, these plans provide first dollar coverage without deductibles or coinsurance. There are no pre-existing condition exclusions. The Copay/Deductible plans are filed as group health plans and are subject to HCR provisions. In addition to extending the child coverage age to 26, these plans will be required to remove annual and lifetime maximums and pre-existing condition exclusions. As group health plans, the Copay/Deductible model includes COBRA and issues creditable coverage certificates. 63

64 Today s Discussion 1 Latest Regulatory Guidance 2 Early Retirement Reinsurance Program 3 Key Action Steps for Plan Sponsors 4 Case Studies and Impact Analysis 5 Considerations for Dropping Group Coverage (2014) 6 Insurance Exchanges 7 Impact of Health Reform on Prescription Drugs 8 Health Reform Self-Service Tools 9 Wellness Grants 10 Appendix: Legislative Details, Tort Reform, Independent Payment Advisory Board, and Impact on Limited Medical Plans 11 Reference: Health Reform Chronology 64

65 Health Care Reform Chronology March (date of enactment) 2010 June (90 days after enactment) September (6 months after enactment) Senate Bill (H.R. 3590) enactment March 23, 2010 Reconciliation Bill (H.R. 4872) enactment March 30, 2010 Small business under 25 employees eligible for tax credit (retroactive to 1/1/2010) Temporary reinsurance program for employers who provide coverage for early retirees Provides immediate access to high risk pools for uninsured (pre-existing conditions) Seniors will receive a $250 rebate to help fill the Medicare donut hole Bans pre-existing conditions exclusions for dependents under age 19 Prohibits lifetime / restrictive annual dollar maximums Mandates dependent coverage to age 26 for those not eligible for other group coverage Prohibits rescissions except for fraud Preventive care covered without cost sharing (new plans) Group plans must cover ER services without prior authorizations and in- or out-of-network (new plans) Group plans must allow designation of OB/GYN or pediatrician as PCP (new plans) Employer plans must have HHS approved external appeal process (new plans) Insured group health plans subject to nondiscrimination rules re: highly compensated individuals (new plans) 65

66 Health Care Reform Chronology March (date of enactment) 2010 June (90 days after enactment) September (6 months after enactment) Senate Bill (H.R. 3590) enactment March 23, 2010 Reconciliation Bill (H.R. 4872) enactment March 30, 2010 Small business under 25 employees eligible for tax credit (retroactive to 1/1/2010) Temporary reinsurance program for employers who provide coverage for early retirees Provides immediate access to high risk pools for uninsured (pre-existing conditions) Seniors will receive a $250 rebate to help fill the Medicare donut hole Bans pre-existing conditions exclusions for dependents under age 19 Prohibits lifetime / restrictive annual dollar maximums Mandates dependent coverage to age 26 for those not eligible for other group coverage Prohibits rescissions except for fraud Preventive care covered without cost sharing (new plans) Group plans must cover ER services without prior authorizations and in- or out-of-network (new plans) Group plans must allow designation of OB/GYN or pediatrician as PCP (new plans) Employer plans must have HHS approved external appeal process (new plans) Insured group health plans subject to nondiscrimination rules re: highly compensated individuals (new plans) 66

67 Health Care Reform Chronology Employers with more than 50 employees must offer coverage or pay free rider penalty Employers required to offer free choice vouchers to qualified employees Cost sharing limits for group health plans annual OOP limits cannot exceed HSA limits; deductibles cannot exceed $2,000 single and $4,000 family coverage (new plans) Bans pre-existing conditions exclusions for all individuals Bans waiting periods greater than 90 days Employers permitted to offer employees wellness incentive rewards of up to 30 percent of health plan premiums Employers must report on provision of minimum essential coverage and EE contributions exceeding 8% of wages Requires individual mandate to obtain health care coverage Provides subsidies for families earning up to 400 percent of the poverty level or, under current guidelines, about $88,000 a year to purchase health insurance State based Insurance Exchanges operational for individuals and small groups; expanded to large groups in 2017 Health plans must cover routine costs for clinical trial participants (new plans) Group plans/insurers cannot discriminate against any provider with regard to plan participation (new plans) Auto-enrollment of new hires for employers with more than 200 employees (likely effective when HHS regulations issued) Imposes a 40% excise tax on high cost health plans that exceed $10,200 for individual and $27,500 for family coverage 67

68 Thank you for your time today! Toni Donahue, Vice President, Senior Consultant Terri Copley, Vice President, Actuary Aon Consulting, Columbus, Ohio Additional sources of information can be found at: