ASSOCIATION OF GREENSBORO HEALTH CARE REFORM JANUARY 6, 2011

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1 HUMAN RESOURCE MANAGEMENT ASSOCIATION OF GREENSBORO HEALTH CARE REFORM JANUARY 6, 2011

2 HEALTH CARE REFORM: SHORT-TERM IMPLEMENTATION & LONG-TERM IMPLICATIONS 2

3 DISCUSSION ITEMS Putting the Legislation in Perspective Implementation Timeline of Key Provisions Summary of Current Interim Final Regulations Long-Term Strategic Considerations Communication Tactics 3

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7 HEALTH CARE REFORM LEGISLATION IN PERSPECTIVE Landmark legislation, but much still to be accomplished to meet Administration s goals Access: make coverage available to about 3/4 of current un-insureds, primarily through subsidies/credits, market reforms and coverage mandates Affordability: improvement for low/mid-income individuals and small employers; problem for high income individuals, Medicare providers and large employers (at least short-term) Cost Control: total employer costs likely to increase at least ; decrease in uninsured cost-shifting and marketplace efficiencies/quality improvements in hopefully provides offsetting savings Potential employer plan cost-shifting: Medicare provider payment reductions, $100B+ health industry fees 7

8 HEALTH CARE REFORM LEGISLATION IN PERSPECTIVE Lots of new regulations to be issued 1,045 references to the Secretary shall determine. Many key employer regulations expected to come jointly from HHS, DOL and IRS has been a slow process Some uncertainties remain about the legislation s outcome and even future States challenging constitutionality and ability to implement 2010 and future national elections could influence regulation development and/or legislation Recommendation: begin implementation of immediate provisions and take long-term assessment/planning/implementation of provisions 8

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10 IMPLEMENTATION TIMELINE OF KEY PROVISIONS Effective Date 1st plan year following September 23, 2010 January 2011 Federal Health Care Reform Bill Provisions Uninsured children covered to age 26 Lifetime benefit maximums prohibited Fair annual benefit limits permitted until 2014 Pre-existing conditions exclusions prohibited for dependents < 19 Various disclosure and reporting requirements New employee auto-enrollment 100% preventive services coverage OTC medicines not covered under FSA Plans W-2 reporting of medical benefit value to each employee (report in 2012 for 2011 tax year) Voluntary national disability/long-term care plan (HHS establishes in 2011, effective date unclear) 10

11 IMPLEMENTATION TIMELINE OF KEY PROVISIONS Effective Date January 2013 Federal Health Care Reform Bill Provisions Medicare tax increase on earned and unearned income for high-income employees FSA contributions limited to $2,500 Employer plans pay $1 fee/employee for comparative effectiveness research (Plan Year beginning on/after 10/1/12); $2 fee/employee for 2014 and 2015 Employer mandate Employee vouchers HIPAA-allowed wellness incentives increased to 30% Individual mandate Waiting periods longer than 90 days prohibited Out-of-pocket limits tied to HSA maximums State insurance exchanges Federal subsidies for lower-income individuals Annual benefit limits prohibited January 2014 gp g y p January 2018 Excise tax on high-value benefits plans 11

12 SUMMARY OF CURRENT INTERIM FINAL REGULATIONS Grandfathered plans: allowed changes Coverage Reduction, Elimination Coinsurance Insurer Annual Limit % Increase Change * Reduction, Addition Deductibles and OOP changes Copays Employer Subsidy 15% (+) annual medical CPI increase ** Greater of a) $5 or b) 15% (+) annual medical CPI increase 5% or less reduction in subsidy as % of total cost * TPA change OK ** 3.6% in April

13 SUMMARY OF CURRENT INTERIM FINAL REGULATIONS Annual/Lifetime Limits (Effective 1 st plan year following September 23, 2010) June 22 nd IFR Restrictions on Limits for Essential Benefits Lifetime Maximum: Prohibited (special enrollment if previously lost coverage and still eligible) Annual Maximum: Phased-in minimum limits 2011 plan year: $750, plan year: $1,250, plan year: $2,000,000 January 1, 2014: Prohibited Individual limits on specific, non-essential benefits is allowed Mini-med med plan waiver on annual limits until 2014 if HHS approves (must prove there s a significant benefit access or cost issue) Essential Benefits Definition Ambulatory patient services Emergency services Hospitalization Surgery Maternity/newborn care Mental health/substance abuse Prescription drugs Rehab services Lab services Preventive & wellness services Pediatric dental and vision 13

14 SUMMARY OF CURRENT INTERIM FINAL REGULATIONS 100% Coverage of Preventive Health Services (effective plan year following 9/23/10) No cost-sharing requirement applies only to in-network coverage Preventive services and screenings rated A and B by US Preventive Services Task Force are the required covered 100% General categories of covered services Evidence-based preventive services, primarily prominent preventive screenings Routine vaccinations Preventive services for children Preventive services for women 14

15 LONG-TERM CONSIDERATIONS 2013 AND LATER 2013 Prepare participating employees for reduction in FSA maximum to $2,500 (cap increased with CPI in future years) 2014 Take advantage of increase in wellness program incentives limit to 30%, maybe as much as 50% in the future Consider whether to be player (offer coverage) or payor (pay employer mandate penalty) in offering medical/rx benefits to employees Player Considerations Payor Considerations Competitive advantage to attract and retain talent outweighs regulations, additional costs and other health reform issues Continued control of plan design, cost-shifting shifting and costsharing strategies Annual plan cost increases are manageable/affordable Compliance, additional reform fees and provision administration outweigh value of employer medical plan Employees feel same/better about Exchange plans Mandate penalties and direct pay increases, if any, are less expensive Annual plan cost increases are intolerable 15

16 EMPLOYER RESPONSIBILITY PROVISIONS IN 2014 Mandate Provision Individual Subsidies Employees who are offered employer-sponsored plan aren t eligible for subsidies UNLESS: Employer plan is < 60% actuarial value ( insufficient benefits ) or Employee contribution is > 9.5% of household income ( unaffordable plan ) Doesn t offer coverage Employers with > 50 FTEs Offers insufficient benefit or unaffordable coverage $2,000 per FTEs annual penalty (excludes 30 FTES) If at least 1 FTE receives a premium subsidy, annual fee of $3,000 per FTE receiving premium subsidy to a maximum of $2,000/FTEs Part-time Employees potential 2014 issue? A full-time employee (FTE) works an average of 30 hours/week Appears part-timers (working 30 hours/week k)included donly to calculate # of full-time equivalents used to determine employer s size (> 50 FTEs) regarding employer mandate requirements From this perspective, part-timer inclusion doesn t apply to # FTEs when calculating penalty assessment Speculation that regulators interpretation of bill s intent is for full- time equivalents to be included d in calculating l penalty assessment regulations to clarify Voucher Provision Allows eligible employee to purchase Exchange coverage rather than employer-sponsored plan Eligible employee Household income < 400% of Federal Poverty Level Required employee contribution in employer plan between 8% and 9.8% of income Voucher amount equals employer subsidy Employee must use voucher to buy Exchange plan; may keep any overage 16

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18 COMMUNICATION TACTICS Acknowledge that employees may have concerns about the impact of health care reform on their benefits Reassure them the organization is taking the necessary steps to comply with the new law Identify provisions that will impact employees in both the short and long term and develop a communications plan for explaining them Keep it SIMPLE Showcase executive and key influencer participation Be prepared to address difficult questions and give employees a place to get answers As the various provisions i take effect, give employees a way to connect with information. Start a short-term blog, distribute frequently asked questions, arm managers with talking points to address employee inquiries, etc. Reiterate t the employee value proposition Reassure them you re committed to providing comprehensive benefits as part of their total rewards package, and as motivation for staying with the company. 18

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