100 Questions, 100 Answers Private Exchanges & Defined Contribution

Transcription

1 100 Questions, 100 Answers Private Exchanges & Defined Contribution

2 What is an Exchange?

3 What is an Exchange?

4 What is an Exchange?

5 What is a Health Insurance Exchange?

6 What is a private exchange and how does it differ from the exchanges being developed by HHS?

7 What is a private exchange and how does it differ from the public exchange? Source:

8 What is a private exchange and how does it differ from the public exchange? Two Types of Public Exchanges: Lots of Private Exchanges: Individual SHOP (small group) Medicare Large Group fully insured and self-insured Small Group multiple carrier Small Group single carrier Individual

9 What is a private exchange and how does it differ from the public exchange? Private exchanges have been around for years they just weren t called private exchanges. The term was popularized by the health reform legislation. While interest and investment in private exchanges has increased as a result of the health reform legislation, they would have continued to grow and evolve with or without the legislation. Private exchanges come in all shapes and sizes and are not limited by the same rules and regulations that will define the public exchanges. Private exchanges will allow for the sale of multiple product lines and will have more bells and whistles than public exchanges. Private exchanges serve customers who want to purchase coverage in the outside market.

10 What is a private exchange and how does it differ from the public exchange? More Opportunity More Control

11 Who will buy coverage through the public exchange and who will buy coverage in the outside market?

12 Who will buy coverage through the FFE and who will buy coverage in the outside market? Public Exchange Individual: Individuals and families without affordable employer-sponsored coverage who earn between 100% and 400% of FPL SHOP: Small employers receiving the small group tax credit (groups with 10 or fewer EEs and $25kor less in average wages receive full 50% credit, groups with 25 or fewer EEs and $50k or less in average wages receive partial credit) Outside Market Everyone else: the majority of these individuals will purchase coverage through a private exchange

13 Are private exchanges and the outside market the same thing?

14 Are private exchanges and the outside market the same thing? Public Exchanges: Outside Market: Individual SHOP (small group) One or two options like you offer your clients today Private exchange Multiple options Online quoting/enrollment Online decision-making tools Defined contribution by employers Ancillary products available

15 Can private exchanges only be used for sales in the outside market?

16 Can private exchanges only be used for sales in the outside market? No!!! Brokers may have the option of selling subsidized plans through the exchange using their own private exchange platform.

17 Can private exchanges only be used for sales in the outside market? Source: PPACA Section 1312

18 Can private exchanges only be used for sales in the outside market? Source:

19 Can private exchanges only be used for sales in the outside market? Source:

20 Can private exchanges only be used for sales in the outside market? Source:

21 Can private exchanges only be used for sales in the outside market? It s all up to Texas

22 Why is an individual private exchange better than the individual exchange being developed by HHS?

23 Why is an individual private exchange better than the individual FFE? Federally Facilitated Exchange Private Exchange Will have a broker portal Limited options from each carrier Medical only Clunky put together in a hurry, designed by the government Owned by the broker More options from each carrier Medical + ancillary benefits Better decision support tools Could be paired with call center to help enrollees select a plan and purchase additional products More streamlined longer development cycle, designed by private companies

24 Where can I get an individual private exchange (and how much will it cost me)?

25 Where can I get an individual private exchange (and how much will it cost me)? General Agency (free) BenefitMall uses e-health platform and has been calling their solution an individual private exchange for a couple years. Quoting Engine (monthly fee) Norvax is now calling their solution an individual exchange. Quotit is owned by Word & Brown, which also owns Choice Administrators, a private exchange. Private Exchange Company (monthly fee) Health Partners America has developed a private exchange supported by a call center. End to end solution with interchangeable parts. Build Your Own (price varies) Create a website, plug in a quoting engine, decision-making tools, and a call center, and you have all the ingredients of a private exchange.

26 What types of small group exchanges will there be?

27 What types of small group exchanges will there be? Multiple carrier (similar to SHOP exchange) Carriers would compete side-by-side and employees would be able to choose which company/plan to enroll with (slice business) CalChoice in California does this. There is also a private exchange that competes with the group exchange in Massachusetts. Most carriers aren t thrilled about this option. They d rather get the whole group. Single carrier Multiple medical plans offered by same carrier Ancillary benefits available through same carrier (or a different carrier if a different platform is used) UHC has introduced an option called Multi-Choice and BCBS of Texas is an owner of Bloom Health.

28 What types of small group exchanges will there be? Both of these strategies are characterized by a defined contribution from the employer. Employees apply the employer contribution and pay the difference.

29 Isn t the multiple option / defined contribution strategy more difficult to administer?

30 Is the multiple option / defined contribution strategy more difficult to administer? If done correctly, no. SHOP Exchange Must explain multiple levels (bronze, silver, gold, platinum), multiple options (low, medium, high), and multiple carriers to employees. Contribution difficult because of age-banded rating. Billing and enrollment handled through exchange (list bill) Customer service difficult because there are multiple carriers to deal with. Single Carrier Exchange One carrier easier to explain Composite-rating One bill One carrier for customer service issues

31 Aren t carriers worried about adverse selection?

32 Interview with Mark Bellman Is UHC worried about adverse selection? We have evidence from the other 24 markets that much of the adverse selection from multiple options is offset by the increased participation from the multiple plan offerings and the defined contribution strategy.

33 What s the difference between this strategy and defined contribution for individual plans?

34 How does this differ from defined contribution for individual plans? Small Group Employer is required to contribute carrier s minimum contribution amount (usually 50% of lowest priced plan), but employees can apply that contribution to any available plan. Individual Employer does not offer a group plan. Instead, the employer sets up an HRA and opens it to all eligible 213(d) expenses. Individual premiums are an eligible expense. Employees are also allowed to pay with pre-tax dollars through a Section 125 Premium Only Plan. Individual premiums are also an eligible 125 expense. This is a cafeteria plan.

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37 Isn t defined contribution for individual plans illegal in Texas?

38 COMMISSIONERS BULLETIN B August 1, 2006 TO: All Insurance Companies, Corporations, Exchanges, Mutuals, Reciprocals, And Lloyds Licensed to Issue Accident and Health Insurance; All Health Maintenance Organizations; All Licensed Agents; All Third Party Administrators; Trade Associations; and The Public Generally. RE: Individual Employer Health Plan Coverage

39 COMMISSIONERS BULLETIN B Texas law does not prohibit an employer from funding employees health benefit plan coverage premiums through an HRA, cafeteria plan, or other alternative employee welfare benefit plan.

40 COMMISSIONERS BULLETIN B When a health benefit plan issuer offers an individual health benefit plan in conjunction with such an arrangement, however, and TIC does not exclude the coverage from the scope of TIC Chapter 1501, the individual plan is subject to TIC Chapter Guarantee Issue Rules State Mandated Benefits

41 What changes in 2014? All Plans Guaranteed Issue Mandated Benefits Identical for Group/Ind.

42 PPACA Sec What does that mean

43 Change to IRC Section 125 SEC OFFERING OF EXCHANGE-PARTICIPATING QUALIFIED HEALTH PLANS THROUGH CAFETERIA PLANS. (A) IN GENERAL. Subsection (f) of section 125 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (3) CERTAIN EXCHANGE-PARTICIPATING QUALIFIED HEALTH PLANS NOT QUALIFIED.363 (A) IN GENERAL. The term qualified benefit shall not include any qualified health plan (as defined in section 1301 (a) of the Patient Protection and Affordable Care Act) offered through an Exchange established under section 1311 of such Act. (B) EXCEPTION FOR EXCHANGE-ELIGIBLE EMPLOYERS. Subparagraph (A) shall not apply with respect to any employee if such employees employer is a qualified employer (as defined in section 1312(f)(2) of the Patient Protection and Affordable Care Act) offering the employee the opportunity to enroll through such an Exchange in a qualified health plan in a group market.

44 Permitted outside the exchange? What does that mean So does that mean that we could purchase individual plans with pre-tax dollars as long as they re not qualified health plans offered through an Exchange?

45 If the employer will make a contribution, why not just set up a group plan?

46 If the employer contribute, why not just set up a group plan? Not every employer can meet the carrier s contribution requirements. Not every employer can meet the carrier s participation requirements. Small employers, especially those that qualify for the small group tax credit, have low wage employees (for full credit, average wages are $25k per year or less) who may be eligible for substantial premium and cost-sharing subsidies through individual FFE. The group plan may prevent them from accessing the subsidies. By diverting the employer contribution to ancillary benefits, the employer can still offer good benefits while allowing employees to benefit from the subsidy.

47 Example: Family of 4 making $55k a year Family premium of $14,556, Single premium $5,400 Employer Contribution Employee Contribution Government Contribution Minimum contribution from ER (9.5% AGI) $175 $14,381 $0 50% of single $2,700 $11,856 $0 100% of single $5,400 $9,156 $0 50% of family $7,278 $7,278 $0 Offer no coverage $0/2k $4,135 $10,421

48 If the employer contribute, why not just set up a group plan? One possibility is employer-sponsored ancillary benefits. The problem is that some employees won t qualify for government subsidy and will have to pay for medical on their own. Another strategy is to sink the employer contribution into an HRA and allow those employees who don t qualify for a subsidy to be reimbursed for an individual plan purchased in the outside market (through your private exchange). Employees who do qualify for a subsidy could purchase the plan through your private exchange and use their HRA money on other eligible expenses (out of pocket costs or premiums for ancillary benefits).

49 Josh Hilgers As seen in: Employee Benefits Adviser Benefits Selling Magazine CDHC Solutions Josh Hilgers President, Health Partners America

50 Please tell us a little about what your company does. We provide training tools and technology to help independent brokers succeed in the new health insurance environment, namely defined contribution and private exchanges.

51 Private Exchange Broker Blueprint

52 Rick Lindquist, President While individual commissions may go down, they re unlikely to go away completely. A broker s success will depend on his ability to find qualified leads. A good source of qualified leads is a group of employees whose employer is making a contribution toward their health insurance premiums.

53 The End