Going for the Gold (level plan)!

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1 Going for the Gold (level plan)! Chris Bartnik Practice Leader April 2014 Wells Fargo Insurance 2014 Wells Fargo Insurance, Inc. All rights reserved. Discussion Outline Paradigm Shift Market Trends Survey data local employers/2014 data Questions 1 1

2 Going for the Gold! Gold Silver Bronze 2 The Game Changer Cadillac Tax 40% excise tax on the total cost of applicable employersponsored health coverage in excess of certain thresholds Effective as of 2018 Thresholds set at $10,200 for single and $27,500 for non-single coverage (subject to general CPI adjustments thereafter, and certain other adjustments) Total cost of applicable employer-sponsored coverage includes both employee and employer contributions for most types of group health plan coverage Except for stand-alone dental and vision coverage, long-term care, and certain types of employee-paid excepted benefits (such as fixed dollar hospital indemnity coverage) Since post-2018 threshold adjustments are not tied to medical inflation, almost all employers will eventually become subject to this excise tax which will raise their cost of providing health coverage Many large employers with not have a significant play or pay exposure in 2015, but may have a significant Cadillac plan excise tax exposure in Wells Fargo Insurance Services USA, Inc. All rights reserved. No reprints without permission 3 2

3 The Game Changer Cadillac Tax 4 The Value of Metals - Redefined Average Local Actuarial Values PPO 89% HMO 91% Platinum 90% Gold 80% Silver 70% Bronze 60% Copper? 5 3

4 Strategy to Address Cadillac Tax in 2018 Source : 2014 Greater Mid Atlantic Employer Benefit Survey Employers by Size 50% 46% 45% 40% 35% 36% Small employers don t expect to hit the threshold Middle market undecided Large employers stay under 38% 32% 30% 27% 25% 20% 15% 10% 22% 19% 16% 16% 15% 17% 14% 5% 0% Plan to stay under threshold Attempt to stay below threshold 2% 0% 0% No special effort to stay below threshold Don't expect to exceed threshold Undecided < > 1,000 6 Cost Control Strategies 4

5 Cost Control Strategies 3 Levers Plan Management Change insurance carriers or networks Offer a choice of plans (HMO, POS, PPO, Health Savings Account - HSA, Health Reimbursement Accounts - HRA etc.) Change funding methodology (Insured vs. Self-Insured) Change eligibility provisions Accountable Care Organizations Cost Shifting Introduce or adjust employee contributions (Decrease employer contributions, defined contribution, spousal surcharge etc.) Adjust plan designs and benefit provisions (Increase deductibles, copays, coinsurance etc.) Employee Engagement Improve employee education and communication Introduce or expand consumerism (HSA/HRA coupled with a Consumer Driven Health Plan - CDHP) Increase disease management and wellness programs Private Exchange (Incorporates all three strategies) 8 How Employer Managed Costs in 2014 Source : 2014 Greater Mid Atlantic Employer Benefit Survey For the 2014 plan year, employers made a variety of changes to manage their fringe. Per our survey data, these are the ways employers are saving: All Respondents < > 1,000 Plan Management (% of participants) Reviewed marketplace for a more competitive medical plan 25% 26% 30% 17% Changed medical plan funding methodology 8% 6% 12% 4% Reviewed marketplace for a more competitive RX plan on a carve-out basis 6% 3% 5% 15% Cost Shifting Increased employee payroll contributions 58% 57% 55% 66% Increased family payroll contributions 57% 55% 55% 64% Increased deductibles 23% 23% 20% 28% Increased office visit copayments 17% 14% 19% 21% Increased Emergency Room copayments 14% 12% 15% 15% Increased pharmacy copayments 10% 7% 7% 21% Company absorbed the total increase 8% 8% 8% 6% Implemented spousal surcharge if coverage is available at the spouse's employer 3% 1% 1% 8% Added a pharmacy plan deductible 2% 1% 1% 6% Implemented employee credit or incentive to waive coverage 0% 0% 0% 0% Employee Engagement Implemented or increased focus on wellness programs 20% 8% 24% 38% Introduced Consumer Driven Healthcare Plan as an option 10% 7% 12% 13% Implemented or increased focus on disease management programs 7% 0% 8% 19% Introduced Consumer Driven Healthcare Plan on a full replacement basis 3% 0% 1% 9% 9 5

6 Market Trends Market Trends Exchanges Public Exchanges only option to qualify for government subsidies Private Exchanges Carrier, Broker, Employer sponsored marketplaces Less flexibility and require move to Defined Contribution approach Consumerism Full replacement options including an HRA or an HSA Cost containment strategy with an eye towards the 2018 Cadillac Tax Cost shifting through increased deductibles and out of pocket maximums Wellness Integrated strategies incorporate program into plan options, plan design, or contribution strategies Introduction of onsite clinics, telemedicine, wellness coaching Funding Considerations Small market (<50 employee) community rating reform, expands to <100 for 2016 Self-funding and alternative funding solutions available from multiple carriers for groups of 25 lives and greater Defined Contribution Employer provides a set annual allocation for employees to purchase their benefit plans Couples cost containment, web enrollment, decision support software, core and voluntary benefit offerings Voluntary Benefits Traditional benefits requiring a higher level of employee contributions (vision, dental) Introduction of new products to address the impact of Health Care Reform and consumerism Accident, Hospital Indemnity, Critical Illness policies which lessen the impact of higher deductible based plans Health Care Reform Design Considerations Development of health care plan options to meet the Actuarial Value and Affordable Cost requirements of Health Care Reform Introduction of additional options, High or Low, that address the unique requirements of an employers population and the financial impact of the law on their organization Administration and Communication Education on Health Care Reform and how it impacts employees and their employer Utilization of alternative communication options (like Social media) Automation of the enrollment and education process 11 6

7 What Should You Do Next? Disciplined Approach Define your guiding principles Assess how your plans align with these principles Evaluate your readiness for change versus market trends Evaluate, implement, monitor 13 7

8 Market Trends Area Market Trends Sample Client Analysis vs. Market Exchanges Consumerism Wellness/PHM Funding/Rating Voluntary Benefits Defined Contribution HCR Plan Design Considerations Public Exchanges Private Exchanges < flexibility, requires move to Def. Cont. approach Full replacement options Cost containment strategy Cost shifting Integrated strategies Onsite clinics, telemedicine, wellness coaching Community Rating Reform Self/Alternative Funding Traditional ER paid benefits (vision, dental) to 100% EE paid New products to address the impact of HCR and HDHP: Accident, Hospital Indemnity, Critical Illness Defined annual allocation for Ees to purchase benefits Web enrollment, decision support software, core and voluntary benefit offerings Options to Meet plan and cost requirements of HCR Additional Options (High or Low) Likely not viable strategy for client; however, WFI would like to schedule a demo during 2 nd quarter to provide baseline of options Client offers two HDHP with HRAs Good 1 st step into consumerism Desire to do something, though no true organization commitment at this time Not impacted by Community Rating Currently in an ASO arrangement Legal/Vision already 100% EE paid Future strategies with new supplemental benefits will hinge on overall strategy with plan design Current contribution strategy varies by plan option and tier Multiple Plan offerings in place that meet requirements of HCR Administration/ Communication HCR Education Social Media Automated enrollment process Online Enrollment utilized Opportunity for additional education with staff on HCR implications Leading Maintaining Pace Lagging 14 Multi-Year Strategy 11 Short Term Goals (2014) Mid Term Goals ( ) Long Term Goals (2017+) Plan Design Establish clear difference between High and Low PPO plan designs Move from custom plan platform to standard carrier plan new plan may be Health Savings Account Eligible Reduce actuarial value of plans Continued plan design evaluation across all health and welfare benefits Modify plan to meet acceptable standards under Affordable Care Act Communication Develop 2014 Communication Strategy to include calendar, method of communication and topic Continue to enhance and develop ongoing communications Engaging employees to be good stewards Engaging employees to be good stewards Financial Lower fringe costs Reevaluate employee contribution strategy (wellness and consumer driven health plans) Explore funding options Lower fringe costs Reevaluate employee contribution strategy (wellness and consumer driven health plans) Explore funding options Lower fringe costs Administrative Move to Vendor Benefits Administration system Utilize Vendor Benefits Administration Open Enrollment Employee survey Compliance Continued updates on Health Care Reform and other necessary compliance areas Document maintenance Continued updates on Health Care Reform and other necessary compliance areas Document maintenance Continued updates on Health Care Reform and other necessary compliance areas Document maintenance Wellness Schedule Carrier Wellness Planning meeting to utilize wellness funds Greater emphasis on wellness Consider incentives to participate in healthy living programs Greater emphasis on wellness 15 8

9 Questions 9

Health Insurance Exchange Summit West. Employer Health Insurance Exchange Strategies

www.pwc.com Health Insurance Exchange Summit West Employer Health Insurance Exchange Strategies November, 2013 Agenda Key strategic considerations for employers How to play and when to pay Bending the