It Takes A Team to Understand: Healthcare Reform on the Horizon, What s Next?

Transcription

1 ACWA/Joint Powers Insurance Authority 2012 Fall Conference It Takes A Team to Understand: Healthcare Reform on the Horizon, What s Next? Presented by: Tom Sher, Alliant Insurance Services, Inc. December 4, 2012 Manchester Grand Hyatt San Diego, California

2 It Takes a Team To Understand: Healthcare Reform on the Horizon, What s Next? Tom Sher, First Vice President Alliant Insurance Services, Inc. December 4, 2012 Don t Ignore the Larger Trend 2 AGENDA Overview of ACA Requirements and Changes 2. Play Requirements (Penalty Avoidance) I. Full-Time Equivalent (FTE) Employee II. Minimum Essential Coverage III. Affordability 3. Planning for the Future Cost Containment Strategies 3 1

3 Overview of Changes 2011 Preventive Care covered at 100% Children covered to age 26 4 Overview of Changes 2012 New uniform Summary of Benefits and Coverage (SBC) 5 Overview of Changes 2013 W-2 reporting Employers filing 250 (or more) W-2s Report total cost of health plan coverage provided to all family members 6 2

4 Overview of Changes 2013 Lower Flexible Savings Account Limits 7 Overview of Changes 2013 IRS increased Medicare Payroll Tax for highly compensated 8 Overview of Changes 2014 Individual Mandate: all must buy or pay penalty Employer Mandate: large employers must offer minimum essential coverage (play) or pay a penalty (tax) Health Benefit Exchanges will offer coverage to individuals and small employers Subsidies for those who cannot afford insurance 9 3

5 Overview of Changes 2018 Cadillac Tax 10 Will you play orpay? 11 Three Things You Must Determine 1. Full time equivalent employees 2. Minimum Essential Coverage 3. Affordability of Coverage 12 4

6 Step 1 Does your district have at least 50 full time employees (including FTE s)? Full time = 30 hours per week or more 13 Important to Listen Most JPIA Members Less than 50 employees Still To Come Health Care Cost Containment Ideas Which apply to all districts 5

7 Who is an FTE and how do I determine if we have any? NOTE: this is to determine if Play or Pay applies; employers are not required to offer coverage to P/T employees 16 Rule for Part-Time employees Calculate aggregate number of hours for all P/T employees for 1 month Divide by 120 = FTE s per calendar month 17 Example: Client Co. has 48 full-time employees and three parttime employees, B, C and D. For each month in 2014, B worked 80 hours; C worked 100 hours; and D worked 120 hours. (1) Aggregate hours = = 300 (2) Divide 300 by 120 = 2.5 FTEs Note: Fractions are taken into account on a singlemonth basis, but dropped after all months added together and averaged 18 6

8 Also Ask Does our organization employ extra hire or permanent part time time employees who are un benefited and who work more than 30 hrs/week for some period of time during the year? 19 Then Determine who is a full time employee to whom you must offer coverage; further guidance forthcoming 20 Step 2 Determine whether you offer minimum essential coverage 21 7

9 Minimum Essential Coverage Governmental plan, i.e. Medicare Employer sponsored plans Plans in the individual market Other plans recognized by HHS All plans offered by JPIA 22 Don t confuse Minimum Essential Coverage Essential Health Benefits All fully insured plans must cover Essential Health Benefits 23 Don t confuse Minimum Essential Coverage Essential Health Benefits Equivalent to Kaiser HMO 30 Plan 24 8

10 Affordability Test Step 3 Household income must be less than 400% of federal poverty level AND 25 Affordability Test If the plan costs the single employee too much employee portion > 9.5% 5%of income or I Is a Low Value Plan Plan pays < 60% of total benefits 26 Overview of Possible Taxes If employer does not offer minimum essential coverage to all full-time employees: $2,000 tax per full-time employee, if at least one full-time employee obtains federally- subsidized Exchange coverage Calculated after first 30 employees 27 9

11 Overview of Possible Taxes If employer offers coverage that is unaffordable or of low value and at least one full-time employee obtains federally-subsidized Exchange coverage: Tax is lesser of $3,000 per subsidized full-time employee, or $2,000 per all full-time employees 28 Affordability Test Avoid Penalty: Ensure plan does not cost too much ~AND~ Ensure plan provides minimum value 29 Summary Employers with 50+ employees are required to offer a health plan to fulltime equivalent employees that Meets minimum essential coverage levels ~AND~ Is affordable 30 10

12 Summary If employer fails to offer coverage: Pay $2,000 annual non deductible tax penalty per employee (excluding first 30) Penalty triggered when one FT employee enrolls in exchange 31 Summary If large employer fails to offer coverage that is affordable or of minimum value: Pay $3,000 annual non deductible tax penalty per qualified employee that enrolls in state insurance exchange

13 Pay or Play Penalty Avoidance Determine if you have 50 FTE employees. Understand how change in eligibility definition may affect the number of covered employees. Will you have to cover more employees? Or will you reduce employees hours? If you decide to cover these additional employees, what will that cost? 34 Pay or Play Penalty Avoidance Verify your plan provides minimum essential coverage Verify that your coverage is affordable 35 Pay or Play Penalty Avoidance Make changes to contributions and plan design as necessary to avoid penalties Consider offering a lower cost plan option that still provides minimum value (HDHP with H.S.A.) CalPERS groups may have limited options 36 12

14 Don t ignore the larger trend by maintaining the status quo! 37 Health Care Cost Comparison If the cost of food items increased at same rate as health care, today s cost: 1 dozen eggs $ roll toilet t paper $ pound butter $ pound coffee $ gallon gas $ pound bacon $ Planning for the future starts with asking the right questions: If costs go up 8% -10% per year for the next 5 years, can our organization maintain our current contributions and benefits? Do we understand what drives cost increases? Do we know what variables are within our sphere of influence? Do employees understand their role in reducing health care cost increases? 39 13

15 Planning for the future starts with asking the right questions: Do we know the risk factors within our employee population today that may lead to stroke, heart disease, cancer and diabetes in future years? What steps can we take to reduce health risks and future chronic disease? 40 Planning for the future starts with asking the right questions: Does our employer premium contribution strategy and plans offered, provide the right incentives to drive the desired behavior from employees? How can we reward employees for making better decisions? 41 Cost of Care costs driven up by factors susceptible to influence by individual choice: Increased Utilization of Services Choice of Prescription drugs Personal lifestyle Lack of employee awareness 42 14

16 What are best practices to address these costs? ~Create incentives for better health~ Reward/penalize enrollment in healthy lifestyle activities Reward/penalize based on smoker, etc. Require employees to complete health risk assessment 44 What are best practices to address these costs? ~ Embrace Wellness Programs ~ Target high risk/high cost issues (obesity, high stress, high blood pressure, etc.) Create incentives for employees to participate 45 15

17 ~Wellness programs make sense (& dollars) ~ Me edical Co osts $3.27 For every $1 spent on wellness programs Ab bsenteeism Co osts $ Why consider a High Deductible Health Plan (HDHP) with a Health Savings Account? An HDHP offers a relatively l low risk environment in which employers can offer incentives for activities promoting better health and for employees to learn the cost of care leading to better health care purchasing decisions. 47 Why consider a High Deductible Health Plan with a Health Savings Account? 1. Lower cost alternative ti for employees 2. Encourages smarter utilization 3. Preventive care covered 100% (no deductible) 4. Pre-tax dollars can fund deductible 48 16

18 Why consider a High Deductible Health Plan with a Health Savings Account? 5. Employee owned account; portable 6. Contribution, earnings and distribution not taxed 7. Unused dollars roll over each year 8. Employer typically pays HSA fees 49 How to offer an HDHP with HSA? 1. Make it an option 2. Think about all of your employees 3. Combine it with a Wellness Program 4. Think long term, reduce trend, not short term employer savings 5. Make an employer contribution; most or all of first year savings 50 How to offer an HDHP with HSA? 6. Educate! about HDHP and wellness 7. Kaiser has HDHP too 8. Some retirees will be interested 9. Consider offering only HDHP within three to five years 51 17

19 There Are Choices to Make Cost of Care Other Considerations Utilization 52 18