HEALTH CARE REFORM OVERVIEW

Transcription

1 HEALTH CARE REFORM OVERVIEW 1

2 Health Care Reform General Status On June 28, 2012, the U.S. Supreme Court announced its ruling to uphold the Patient Protection and Affordable Care Act (PPACA) passed by Congress in March Therefore, employers must move forward with planning to: Comply with the requirements of the law Adjust/refine health care strategies to comply with the law and support business and HR objectives Some major concerns for employers while the legalities of the legislation are resolved, much uncertainty still exists Considerable delegation to Federal Regulators under the Act Increased regulatory activity by the states Potential legal challenges to the Act Unknown cost increases in 2015 and beyond Strategic Thinking is Required Now 2

3 Health Care Reform Timeline Focus on 2014 and Beyond Dependent coverage to 26 (grandfathered plans may limit to children without access to own employer coverage) 1 Additional standards for nongrandfathered health plans, including: 100% coverage for preventive care, mandatory internal and external appeals processes 3 No lifetime dollar limits for essential benefits 1 Restricted annual dollar limits for essential benefits (phased out by 2014) 1 No coverage rescissions 1 No pre-existing condition limitations up to age 19 1 No health FSA/HRA/HSA reimbursement for OTC drugs without prescription Penalties for non-qualified HSA distributions increases to 20% Pharmaceutical manufacturers fees start Medicare, Medicare Advantage benefit and payment reform Income-based Medicare D premiums Insurers subject to medical loss ratio rules Health insurance marketplaces Individual mandate 6 Financial assistance for marketplace coverage of low-income individuals State Medicaid expansion Wellness limit increase 2 No annual dollar limits for essential benefits (no standalone HRAs) 2 Health insurance industry fees Additional standards for non-grandfathered plans, including: OOP limits and coverage for routine care in clinical trials 7 No waiting period over 90 days 2 No pre-existing condition limits 2 Dependent coverage to age 26 for any covered employee s child 2 Transitional reinsurance fees (first due late 2014/early 2015) Small market nongrandfathered plans must cover essential benefits with limited deductibles using form of community rating Insurers must guarantee issue and renewability for non-grandfathered plans Date Unclear: Auto-enrollment of FT employees Non-discrimination for insured plans Repealed: Voluntary long-term care program Employee free-choice vouchers 40% excise tax on high cost or Cadillac plans Change in tax treatment for over-age dependent coverage Accounting impact of change in Medicare retiree drug subsidy tax treatment Early retiree reinsurance program Medicare prescription drug donut hole beneficiary rebate Break time/private room for nursing moms Uniform benefit summaries and 60-day advance notice of material modifications Employers report health coverage value on 2012 W-2s (report in 2013) 4 100% coverage for expanded women s preventive care 5 Comparative effectiveness fees (plan years ending on or after 10/1/12 to before 10/1/19 (first due in 2013) $2,500 health FSA contribution cap (as of 2013 plan year) Employers notify employees about exchanges Medical device manufacturers fees start Higher Medicare payroll tax on wages exceeding $200,000/ individual; $250,000/couples New tax on net investment income for taxpayers with incomes exceeding $200,000/ individual; $250,000/couples Change in Medicare retiree drug subsidy tax treatment takes effect Health insurance exchange initial open enrollment period Employer reporting and disclosures ERs 100+: Employer shared responsibility for FT EEs (70% threshold) ERs 50+: Employer shared responsibility for FT EEs and children (95% threshold) 1. Applies to all plans effective plan years beginning on or after 9/23/ Applies to all plans effective plan years beginning on or after 1/1/ Applies to non-grandfathered plans effective plan years beginning on or after 9/23/ A temporary exemption applies to certain categories of employers. 5. Applies to non-grandfathered plans effective plan years beginning on or after 8/1/ Temporary exemption applies to employees of employers with non-calendar yr. plans. 7. Applies to non-grandfathered plans effective plan years beginning on or after 1/1/14. 3

4 EMPLOYER MANDATE 4

5 Health Care Reform Overview Employer Mandate Delays In July 2013, the employer mandate was delayed for all employers until 2015, due to delay in employer information reporting requirements On February 10, 2014, the IRS issued final regulations for the shared responsibility rules. The final regulations grants another extension to the mandate delay, for qualified employers. Mandate Applies in 2015 Mandate Applies in or more Full Time Employees or combination of Full-Time Employees and Full-Time Equivalents Must offer affordable and sufficient coverage to at least 70% of all FT employees in 2015 Must offer affordable and sufficient coverage to at least 95% of all FT employees in Full-Time Employees or combination of Full-Time Employees and Full-Time Equivalents, and: Limited Workforce Size. Maintenance of Workforce and Aggregate Hours of Service. Maintenance of Previously Offered Health Coverage. 5

6 Employer Mandate Summary Applicable to employers with 100 or more full-time equivalent employees in 2015; applicable to employers with 50 or more full-time equivalent employees in 2016: Pay If employer plan is not offered at all or is offered to less than 95% of FT employees and their children (70% of employees only in 2015) and 1 or more FT employee receives the marketplace coverage tax credit subsidy, employer pays penalty of $2,000/FT employee minus the first 30 FT employees (minus 80 in 2015) Play If coverage is offered to 95%+ of FT employees and children (70% of employees only in 2015) but is insufficient or unaffordable and 1 or more FT employee receives the marketplace coverage tax credit subsidy, employer pays penalty of $3,000/FT employee receiving subsidy (or $2,000 per FT employee, if less) Do you offer coverage to at least or 95% of FT employees and their children (70% of employees only in 2015)? Yes Yes Yes Are plan benefits sufficient? Is the coverage affordable? No No No Employer pays $2,000 for every FT employee minus the first 30 (minus 80 in 2015) if at least 1 FT employee receives a tax credit Employer pays the lesser of $3,000 per affected FT employee who receives a tax credit, or $2,000 for every FT employee minus the first 30 Insufficient Benefits plan s actuarial value is <60% (benefits pay less than 60% of cost of services) Unaffordable Benefits household income <400% federal poverty level ( $46K single, $94K family) and single-tier contribution for lowest cost sufficient plan is >9.5% of employee s W-2 income Full-Time Employee employee working avg. 30+ hrs/wk No Penalty 6

7 Employer Mandate Example Insurance Not Offered OR Is Insufficient or Unaffordable Full- Time Employee Obtains Insurance in an Exchange That Is Subsidized Employer Penalty EE Contribution Plan A Plan B Plan C EE Only $50 $100 $150 EE+Sp $250 $350 $450 EE+Ch $300 $400 $500 EE+Fam $500 $600 $850 7

8 Employer Mandate Part-Time Variable and Seasonal Labor Proposed safe harbor process measurement and stability periods for determining full-time status of variable hour part-time and seasonal workers: Employer may choose a look-back measurement period of 3 to 12 months and a stability period of no less than 6 months or the length of the measurement period, if greater If employee averages 30+ actual hours worked/week during measurement period, employee must be considered full-time for subsequent stability period; if not, employee will be considered not full-time for the stability period Employer may use administrative period up to 90 days between measurement and stability periods to conduct enrollment Employees not employed for full standard measurement period must be evaluated on a rolling basis when employment reaches the length of the initial measurement period selected for new employees (e.g. on the employee s 1-year anniversary for a 12-month measurement period). Additional rules apply for transition from initial to standard measurement/stability periods. Sample 12-Month Measurement & Stability Periods (With Administrative Period) Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Standard Measurement Period 10/15/12 10/14/13 Adm. Pd. (77 days) Standard Stability Period 1/1/14 12/31/14 New Hire DOH 3/15/13 Initial Measurement Period 3/15/13-3/14/14 47 days Standard Measurement Period 10/15/13 10/14/14 Initial Stability Period 5/1/14 4/30/15 Adm. Pd. (77 days) Standard Stability Period 1/1/15 12/31/15 8

9 Employer Mandate Financial Considerations How Do I Account For: Penalties 2015 Auto Enrollment Compensation increases due to loss of benefits? PLAY Individual Mandate Expanded Eligibility Medicaid Expansion 9

10 ABC COMPANY PAY OR PLAY ANALYSIS 10

11 ACA Impact: Employer Pay or Play Projected Financial Cost Client Profile: Fast-Casual Restaurant Franchise Food and Liquor 5 Units, operating 24 Hours / 7 Days Corporate Office based in Southwest US Eligible for Benefits: Corporate and exempt employees only. Full-time non-exempt employees are not benefits-eligible. Full Time Employees > 30 Hours / Week 422 Full Time Eligible Employees 189 Eligible for Group Plan Company Contribution to Coverage $4,432 Single Coverage (Annual) Maximum Employer Cost to Provide Coverage (Current) $837,648 Single Coverage (Annual) 189 Eligible Employees 11

12 ABC Company Pay or Play Analysis Potential Employer Penalty Exposure Employee Eligibility Employee Sufficiency & Affordability Currently Enrolled in Major Medical Currently Waiving Major Medical Employees Who Would Become Eligible in 2015 Under PPACA 422 Eligible for Premium Assistance - Not Currently Enrolled Potentially Eligible for Premium Assistance - Currently Enrolled All Other Employees *422 full-time (30 or more hours/week) employees *0 part-time (<30 hours/week) employee 12

13 ABC Company Pay or Play Analysis 2015 Potential Employer Cost Scenarios Graph $2,500,000 $2,000,000 $1,500,000 $1,103,226 $1,000,000 $500,000 $811,731 $842,973 $1,017,225 $1,017,225 $1,103,226 $0 Pre-PPACA Current Eligibility Strategy PPACA Compliant Eligibility PPACA Compliant Eligibility Strategy Strategy with Penalty Reduction Drop Coverage without Adjusting Salaries Plan Cost Penalties 13

14 ABC Company Pay or Play Analysis 2015 Potential Employer Cost Scenarios Detail a b c d e Pre-PPACA Maintain Current Plan Strategy Compliant Eligibility Strategy Compliant Strategy w/ Penalty Reduction Drop Coverage without Adjusting Salaries Employer Expenses 1 Enrolled / Eligible Employees 146 / / / / / 0 2 Employer Plan Costs for Employees Currently Enrolled $811,731 $811,731 $811,731 $811,731 $0 3 Employer Plan Costs for Employees Currently Waiving $0 $0 $0 $0 $0 4 Employer Plan Costs for Employees Currently Ineligible $0 $0 $168,750 $168,750 $0 5 Mandated Employer Fees $0 $31,242 $36,744 $36,744 $0 6 Voluntary Salary Adjustments $0 $0 $0 $0 $0 7 Subtotal Tax-Deductible Health Care & Salary Increases $811,731 $842,973 $1,017,225 $1,017,225 $0 8 Plan Eligibility Penalties $0 $684,000 $0 $0 $684,000 9 Plan Affordability and Sufficiency Penalties $0 $0 $0 $0 $0 10 Subtotal Non-Tax Deductible Penalties $0 $684,000 $0 $0 $684,000 Gross Revenue Required to Fund Expenses Gross Revenue Required to Fund Tax-Deductible Health Care & 11 Salary Increase Expenses $811,731 $842,973 $1,017,225 $1,017,225 $0 Gross Revenue Required to Fund Non-Tax-Deductible Penalty 12 Expenses (@38% Tax Rate) $0 $1,103,226 $0 $0 $1,103,226 TOTAL GROSS REVENUE REQUIRED TO FUND TAX- 13 DEDUCTIBLE AND NON-TAX-DEDUCTIBLE EXPENSES $811,731 $1,946,199 $1,017,225 $1,017,225 $1,103, CHANGE FROM PRE-PPACA $1,134,468 $205,494 $205,494 $291,495 Gross Revenue Required to Fund Potential Penalties for the First 15 7 Months of the 2015 Calendar Year $0 $643,548 $643,548 $643,548 $643,548 Per Capita Health Care & Salary Increase Costs PEPY Employer Plan Cost (Enrolled) $5,560 $5,774 $5,382 $5,382 $0 PEPY Salary Adjustment (Eligible) $0 $0 $0 $0 $0 *Current employer plan year cost is approximately $647,107 **Numbers are projected to plan year

15 ABC Company Pay or Play Analysis 2016 Potential Employer Cost Scenarios Graph $2,500,000 $2,000,000 $1,500,000 $1,264,516 $1,000,000 $500,000 $909,139 $943,117 $1,137,981 $1,137,981 $1,264,516 $0 Pre-PPACA Current Eligibility Strategy PPACA Compliant Eligibility PPACA Compliant Eligibility Strategy Strategy with Penalty Reduction Drop Coverage without Adjusting Salaries Plan Cost Penalties 15

16 ABC Company Pay or Play Analysis Employer Cost Timeline $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $ Pre-PPACA Compliant Eligibility Strategy Drop Coverage without Adjusting Salaries Maintain Current Plan Strategy Compliant Strategy with Penalty Reduction 16

17 PAY OR PLAY STRATEGIES 17

18 Alternatives to Consider for 2015 Plan alternatives Offer a 60% value plan and position current plan as a buy-up option Implement consumer-driven health plan Consider alternative funding options (e.g., ASO, level funding, captives) Private exchange Large ERs 2017 State Marketplace Options PLAY Defined Contribution/ Private Exchanges CDHP/Health Management/ Plan Design/ Contribution Strategy PAY Contribution strategies Increase dependent tier contributions to offset cost increases resulting from single tier contribution reduction and new opt-ins due to individual mandate Create salary-based contribution, i.e. lower contributions only for those potentially eligible for penaltygenerating subsidies (income below 400% of FPL) Consider defined contribution approach Health management Implement results-driven population health management program Leverage increased limits for results-based wellness incentives Workforce management Decrease number of staff working 30+ hours per week (reduce hours of those currently working just over 30 hrs/week) Employee communications 18

19 Plan Design CDHP & Minimum Value Plans CDHP MINIMUM VALUE CDHPs typically far exceed the 60% test but cost about 20% less than PPO and HMO coverage. Enrollment nearly doubled in the last 3 years 40% of recently surveyed employers will offer CDHP 2013 Medical Plan Cost Per Employee Offer a base medical and pharmacy plan that equates to the minimal sufficient benefit plan under ACA SAMPLE Minimum Value Plan Design High Deductible + HSA (Minimum 60% value; can be increased) In Network Out of Network Deductible $3,500 / $7,000 $5,000 / $10,000 HSA Account Employer and Employee Can Contribute up to $3,300/$6,550 Plan Coinsurance Preventive Services 80% 100% Not covered Out of Pocket Maximum $6,3500 / $12,700 (incl. deductible) $10,000/ $20,000 (incl. deductible) Source: Mercer Survey of Employer-Sponsored Health Plans 2012 Pharmacy Subject to deductible & coinsurance 19

20 Plan Design Minimum Essential Coverage Plan No coverage < < Minimum essential coverage (MEC) Affordable MEC meeting minimum value (MV) Minimum Essential Coverage (MEC): Broadly defined as government-sponsored program, employer-sponsored plan, individual coverage and other coverage as determined by HHS (no value specification) Satisfies individual mandate and requirement that employer offer coverage to 95% of FT employees and children (70% of employees in 2015) or pay $2,000 per FT employee (- first 30 (-80 in 2015)) Minimum Value (MV): Plan pays at least 60% of costs for allowed benefits Employees with household incomes <400% FPL may qualify for a marketplace subsidy if the employersponsored plan (MEC) does not meet MV and/or is unaffordable, which triggers an employer penalty of $3,000 per FT employee that receives a subsidy Lower-cost MEC that does not meet MV might be incorporated into a strategy that still enables employees to avoid individual penalties and employer to avoid some or all employer penalties: MEC is only option offered Employee satisfies individual mandate Employer avoids $2,000 penalty on all FT employees (-30 (-80 in 2015)) by offering coverage, but could be subject to $3,000 penalty for employees who receive subsidy due to insufficient plan value MEC is offered alongside affordable MV plan Employee satisfies individual mandate Employer avoids all penalties because affordable, sufficient coverage is offered, even if employees choose MEC plan 20

21 Contribution Strategy Defined Contributions Why are employers looking at a defined contribution approach to medical? Reset how the employer and employee share the cost of coverage Connect employees to their health care and its cost and be a catalyst for employees to make better choices Improve financial predictability in medical program budgeting Parallel retirement plans transition from defined benefit to defined contribution Source: Mercer Survey of Employer-Sponsored Health Plans 2012 Total percent of employers noted above using or considering a DC approach is 58%; the remaining 42% of employers surveyed are not considering a DC approach. 21

22 Health Management Leverage Data to Identify: Gaps in Care Predictive Modeling Value Based Benefits Establish Cross Sectional Team Goals & Objectives Action Plan Implement Results Driven Population Health Management Program 22

23 Workforce Management Under ACA some variable hour employees will be considered FT for health insurance in 2015 Monitor employees that are expected to work less than 30 hours/week Strategies Reset status for full-time employees to 30 hours per week Create additional classes for employees working between 30 & current FTE level that are FT Healthcare only 23

24 Employee Communications Leverage changes in the health care landscape to reposition company value proposition and value of benefits package Take advantage of public awareness to engage employees Identify your audiences and their different needs/perceptions Full-time employees Part-time or variable hour employees Union employees Retirees Incorporate educational themes that tie in with global strategies How benefits work Why health and engagement matters Employee accountability Reform and what employees need to know - What is the PPACA? - Why is it important to me? - What action must I take? - What s in it for me if I act or don t act? - Where do I go for more info? 24

25 Decision to Keep Coverage Will employers keep coverage after 2015? Recent surveys have shown that only 10-15% of employers plan to drop coverage Why employers choose to keep coverage? If employers wish to maintain the same level of employee compensation they will need to increase employee salaries to account for the cost of coverage elsewhere Remain competitive in the marketplace for recruiting talent and reducing turnover Allows employer to have control over the employee population s overall health and productivity What Employers Are Considering 20% 19% Employers Likely To Drop Coverage Within Next Five Years* 22% Employer s Likely Actions Regarding Employees Working 30+ Hours/Week** Make all employees working 30+ hours/week eligible for full-time employee plan(s) 6% 9% 7% 3% 4% 5% Change workforce strategy so that fewer employees work 30+ hours/ week 32% Add a lower-cost plan for employees that work fewer than 40 hours/ week 18% 45% employees 500+ employees employees Make no change and pay penalty as necessary 6% Source: * Mercer Survey of Employer-Sponsored Health Plans 2012, ** Mercer Survey of Employer-Sponsored Health Plans

26 FEES AND TAXES 26

27 Tax and Fee Provisions of ACA A Trio of New Fees Patient-Centered Outcomes Research Fee What is it? Annual fee on insured and self insured plans beginning on/ after 10/2/2011 Health Insurance Industry Fee Annual fee on all insured plans beginning in 2014 Reinsurance Assessment Annual fee on insured and self-insured plans, Excludes Dental/Vision Includes Dental/Vision Excludes Dental/Vision How Much? Annual fee of $1, then $2; indexed to medical inflation until 2019 First payable July 2013 Who Pays? FI: carrier pays, most likely built into rates SF: employer must calculate and pay own fee Estimated costs: 2 to 2.5% for to 4% for later years Carrier pays Applies to all insured plans and will be based on each insurer s share (among all U.S. insurers) Estimated costs: $63 PMPY in 2014 $44 PMPY in 2015 $25 to $35 PMPY in 2016 FI: full amount built into rates for 1/1/2014 plus partial load in 2013 SF: client is liable but carrier will submit payment on behalf of client 27

28 Tax and Fee Provisions of ACA What s the Projected Rate Impact? RENEWAL PROJECTION - ABC COMPANY Renewal Date: January 1, 2015 Experience Period 7/1/ /30/2014 Experience Period Average Monthly Membership 325 Factor Total PMPM Paid Premium $1,300,000 $ Paid Claims $950,000 $ Minus Pooled Claims ($100,000) ($45,000) ($11.54) Net Paid Claims $905,000 $ Trend (Blended Medical and RX) 11% / 18 Months Trended Claims $1,058,398 $ Retention 16.00% $169,344 $43.42 Pooling Charge 9.00% $117,000 $30.00 Needed Premium $1,344,741 $ Projected Increase: Pre-ACA 3.0% Estimated ACA Fees PCORI Fee $2.14 $696 $0.18 Reinsurance $44.00 $14,300 $3.67 Health Insurer Excise Tax 3.00% $40,342 $10.34 Total ACA Fees $55,338 $14.19 Total Premium Required $1,400,079 $ Projected Increase: Post-ACA 7.7% 28

29 High Value ( Cadillac ) Plan Excise Tax Summary Includes medical/rx and individual reimbursement accounts thresholds are $10,200 for single coverage and $27,500 for family coverage will be indexed annually thereafter based on CPI 40% excise tax on the coverage value that exceeds these thresholds Threshold adjustments permitted for pre-65 retirees, high-risk professions, significant age/ gender factors, and multi-employer plans Most Likely Employer Actions Regarding Excise Tax 39% 4% 21% 36% Will do whatever is necessary to bring plan cost below threshold amounts Will attempt to bring cost below threshold amounts, but may not be possible Will take no special steps to reduce cost below threshold amounts Believe plan(s) are unlikely to ever trigger excise tax Source: Mercer Survey of Employer-Sponsored Health Plans

30 SUMMARY 30

31 MMA Pay or Play Benchmark Data General Impact & Cost Impact by Industry Employers Impacted By Pay Penalty Cost Impact Of Compliance 20% Impacted Not Impacted Hospitality Staffing Energy/Transportation/Utility 80% Construction College/University Employers Impacted By Affordability & Sufficiency Penalties Manufacturing Municipality/Non-Profit Hospital/Healthcare 58% 42% Impacted Not Impacted Financial Biotech/Rx 0% 10% 20% 30% 40% 50% 60% 70% Compliant Strategy Current Strategy Source: MMA National Benchmark Database of over 600 Employers, data as of 12/31/13 31

32 New Obligations for Employers Cost Coverage requirements Pay or Play Provisions Auto enrollment = more people on employer plan Fees Administrative and Compliance Reporting requirements Payroll requirements Increased questions from employees New SBC requirements Exchange notices Rebate notices Infrastructure 32

33 What s Next? Pay or Play Strategy Determine whether additional modeling is required e.g., alternative plan design, contribution or eligibility strategies Evaluate potential workforce management strategies and vendors Consider private exchange) options Review fiscal year transition relief status Establish the use of safe harbors for the eligibility and affordability requirements select measurement, stability and administrative periods and establish processes 33

34 Q&A Visit for more information 34

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