Presented by: Daniel J. Prescott Regional Senior Vice President

Transcription

1 The Affordable Care Act: Who Wins and Who Loses? Presented by: Daniel J. Prescott Regional Senior Vice President

2 Large Market Winners & Losers in the Affordable Care Act Employers Individuals Insurance Companies As we will discuss, in some cases the winners and losers from an Affordable Care Act provision were clearly intended by the Act. In other cases, the intent or eventual outcome as to who would benefit or be harmed is not as clear. We will also discuss which persons or entities in the categories above will potentially win or potentially lose. 1

3 2014 INSURANCE MARKET REFORMS 2

4 Small Group & Large Group Definition Small Group Small group definition is <50 until 2016, unless the state defines differently. Texas defines as <50; other states might define small groups and large groups differently. Large Group <100 beginning in 2016 * For determination of the 50 or 100 employee threshold for large group, part-time employees are counted the same as full-time employees. For other purposes discussed today, the Affordable Care Act defines fulltime employees as working at least 30 hours per week (130 hours per month). 3

5 Expanded Benefits Large Group Coverage Mandates Out-of-Pocket Maximum Metallic Coverage Levels Employer Mandate Guaranteed Coverage $6,350 Single* $12,700 Family* New accumulation rules Bronze- 60% Silver- 70% Gold- 80% Platinum- 90% Minimum Value Standard 60%** No pre-existing condition exclusions; guaranteed issue *In 2014 ** Minimum Value means that for a standard population the plan will cover at least 60% on average of a person s medical expenses eligible for coverage under the plan meaning at least a bronze plan. 4

6 High Value ( Cadillac ) Plan Excise Tax Summary Includes medical/rx, individual reimbursement accounts, EAP, and onsite medical clinics 2018 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 39% Most Likely Employer Actions Regarding Excise Tax 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 Staffing Municipality/Non-Profit Biotech/Rx Manufacturing Hospitality Financial Construction Hospital/Healthcare College/University Energy/Transportation/Utility Cadillac Tax Cost Benchmarks (Tax Cost as % of Total Plan Costs) 0% 2% 4% 6% 8% 10% Source: Mercer Survey of Employer-Sponsored Health Plans 2011 Source: MMA National Benchmark Database of over 600 Employers, data as of 12/31/13 5

7 Winners with Insurance Market Reforms Employer Winners Large Group with poor participation percentage Large Group due to Medical Loss Ratio limits on carriers (80% of premium goes to claims) Individual Winners Employees with high claims Uninsured individuals Persons in states such as New York, Colorado, Ohio, Massachusetts, New Jersey, and New Hampshire that are projected to have double digit percentage premium decreases on average 6

8 Losers with Insurance Market Reforms Employer Losers Large Group with high claim workforce (no pre-existing exclusions) Employers in Nevada, New Mexico, Arkansas, North Carolina, Vermont, Georgia, South Dakota and Nebraska that are projected to have premium increases on average of more than 70% Employers with High Value Plans (due to Cadillac Tax ) Individual Losers Younger, healthier employees Persons in states such as Nevada, New Mexico, Arkansas, North Carolina, Vermont, Georgia, South Dakota, and Nebraska, that are projected to have premium increases on average of more than 70%. Premium increases in Texas are projected to be in the 20-25% range 7

9 Losers with Insurance Market Reforms Insurance Companies Generally are losers from the insurance market reforms due to loss of pre-existing condition exclusions, guaranteed issue, and increased administrative complexity and costs Also, insurance companies profit margins were reduced by medical loss ratio requirements first effective in

10 INSURANCE EXCHANGES & INDIVIDUAL MANDATE 9

11 Insurance Exchanges Summary Public (State/Federal) Insurance Exchanges Exchanges are to be set up by each state to provide a platform for individuals to purchase health coverage If a state did not set up an exchange, a federal exchange has been set up in place of the state exchange Small employers (1-100) will have access to purchase coverage through Small Business Health Options Program (SHOP) exchanges (states can restrict this to 1-50 until 2016). Beginning in 2014, small employer health insurance premium tax credits available only through SHOP exchanges. In 2014, maximum tax credit increased from 35% of employer-paid health insurance premiums to 50% Private Insurance Exchange Marketplace with health only or core and supplemental product offerings across many benefits and services Exchange sponsor stocks products and manages end-to-end consumer experience 10

12 State Exchange Decision WA OR ID MT WY ND SD MN WI MI NY VT NH MA CT ME RI CA NV UT CO NE KS IA MO IL IN OH KY WV PA MD VA NJ DE DC AZ NM OK AR TN NC SC MS AL GA AK TX LA FL Default to Federal Exchange (28) State- Federal Partnership Exchange (7) HI State-based Exchange (16) Source: Kaiser Family Foundation accessed 7/9/

13 Insurance Exchanges Public vs. Private PUBLIC PRIVATE ACCESS Open Closed PRODUCTS Medical, Rx Dental, Vision, Life, Voluntary, +More SPONSOR State or Federal Government Consultant, Broker, Insurer, Tech Firm CARRIERS Single or Multiple Carrier CONTRACTS Individual Group ELIGIBLES Actives, Retirees FUNDING Subsidies Insured Self-funded 12

14 Who is eligible for Premium Credits on Public Exchanges? Premium tax credits to help people pay for coverage are available to individuals and families: With incomes between % of the federal poverty line (between approximately $23,000 to $94,000 a year for a family of four), and Who purchase coverage in the newly established exchanges, and Who are NOT eligible for Medicare or Medicaid, and Who are NOT offered coverage through their employer, unless that coverage is inadequate (<60% Minimum Value) or costs more than 9.5% of their income to purchase single coverage 13

15 2014 Individual Mandate Summary Individuals must have qualifying minimum coverage or pay tax penalty. Potential annual penalties are: 2014: greater of $95 per individual or 1% of household income* 2015: greater of $325 per individual or 2% of household income* 2016: greater of $695 per individual or 2.5% of household income* Employer Plan State Exchange Medicaid Pay Penalty Individuals with no employer coverage or with insufficient or unaffordable employer coverage are eligible for public Exchange coverage and may receive a federal tax credit subsidy (sliding scale based on income). Employee Choices *Penalty cannot exceed the national average cost for Bronze plans in the exchange 14

16 Winners with Insurance Exchanges & Individual Mandate Employer Winners Subsidies on exchange may induce some lower paid workers to drop employer coverage Individual Winners Persons with family incomes between 100% and 400% of federal poverty level- now qualify for subsidies on the public exchange (Approximately $23,000-$94,000 for a family of four) Employees with group coverage- may have greater choice in health insurance due to the exchanges Persons who already have health insurance coverage Insurance Companies Generally are winners from the subsidies on the exchange and the individual mandate, as both should tend to induce healthier persons to purchase health insurance, many of whom did not have coverage before 15

17 Losers with Insurance Exchanges & Individual Mandate Employer Losers Some employers may have higher employee participation, and thus greater aggregate employer-paid health insurance premiums, due to covering more people All employers because of administrative burden of communications with federal agencies required by the ACA Individual Losers Those now without coverage who will pay the individual mandate penalty Taxpayers, due to the cost of the premium subsidies and Medicaid expansion 16

18 EMPLOYER MANDATE 17

19 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 18

20 Employer Mandate Strategies PLAY Large ERs 2017 State Exchange Options Defined Contribution/ Private Exchanges CDHP/Health Management/ Plan Design/ Contribution Strategy PAY 19

21 Employer Mandate Financial Considerations Migration Assumption How Do I Account For: Auto Enrollment Penalties 2015 Individual Mandate Compensation increases due to loss of benefits? Medicaid Expansion Expanded Eligibility Track Hours of Variable & Seasonal Employees 20

22 Winners with the Employer Mandate Employer Winners Large employers who already satisfy the employer mandate may have a potential competitive advantage, versus those in their industry who have to increase coverage Individual Winners Employees of large employers who are not eligible for the premium subsidies and are not currently eligible for employer-sponsored group health insurance Insurance Companies Generally are winners from the employer mandate due to large employers being forced to offer coverage to an expanded group of employees and at higher levels of employer premium contributionsshould tend to result in increased insurance coverage for healthier persons 21

23 Losers with Employer Mandate Employer Losers Large employers who do not satisfy the employer mandate- i.e. the restaurant and hospitality industry, which are particularly affected by the employer mandate All large employers are losers in a sense, due to the expansive administration and reporting obligations imposed by the employer mandate Individual Losers Employees of large employers who would have been eligible for premium subsidies on a public exchange, except that they are employed by a company forced to offer insurance coverage to satisfy the employer mandate Persons with reduced employment prospects or employees who experience cutbacks in hours, from full-time to part-time Insurance Companies Have greatly expanded federal reporting obligations 22

24 Is every employer ultimately a loser due to the Affordable Care Act? In at least one sense, all employers, large and small, who sponsor group health plans have been harmed by the Affordable Care Act. This is due to massive expenditure of time and financial resources necessary to comply with the law. 23

25 Long Term Strategies to Minimize Losses Strategies: 1. Self Funding / Level Funding 2. Private Exchanges 3. Fully Insured- Particularly if under 100 employees and have older workforce 4. PEO 5. MEC Plans 6. Drop group coverage and let employees purchase coverage through the Exchange- Almost always a bad strategy. Severe penalties that are not tax deductible 24

26 Questions 25