2014 Fall Health Care Symposium
Agenda ACA What s Happening Now Group vs. Individual Coverage Alternative Funding Options Why Wellness Matters Transforming HR Through Technology
Understanding Obamacare In order to insure the uninsured, we first have to uninsure the insured. Next, we require the newly uninsured to be re-insured. To re-insure the newly uninsured, they are required to pay extra charges to be re-insured. The extra charges are required so that the original insured, who became uninsured, and then became reinsured, can pay enough extra so that the original uninsured can be insured, which will be free of charge to them.
The ACA Health Care Coverage Landscape - Changes in Effect Prior to 2014 Loss of Medicare Part D retiree subsidy deduction $2500 PY cap on FSA salary reductions (Notice 2012-40) Amendment required by 12/31/2014 Significant Limitations on HRAs Announced in 2013 January 2013 FAQ Guidance Transition (spend down) rule for some pre-existing HRAs September 13, 2013 - Notice 2013-54 Curtails stand-alone HRAs, prohibits pre-tax individual policies Carryover Guidance for FSAs - Notice 2013-71 Up to $500 Cannot be combined with FSA grace period changes
The ACA Health Care Coverage Landscape - Changes in Effect 2014 and Beyond Individual mandate - no penalty imposed due to coverage gap if individual enrolls by end of open enrollment (March 31, 2014) Employer play or pay requirement - NOW DELAYED UNTIL 2016 for employers with less than 100 FTE employees. With some limited Sledgehammer" transition relief for larger employers. Employer Coverage Reporting. DELAYED UNTIL 2015 (Final regs March 2014) Required to report minimum essential coverage and premium costs Applies to insurers and self funded plans
The ACA Health Care Coverage Landscape - Changes in Effect 2014 and Beyond Exchanges - First open enrollment for individual coverage commenced October 2013 October 1 st Exchange Notice Requirement; on-going for new hires Changes Generally Effective First Plan Year On/After January 1, 2014 Employer Quality of Care Coverage Reporting - Delayed pending guidance Will require information on health care outcome, safety, and wellness Must make available to enrollees and on internet
Court Decisions of Interest Hobby Lobby Decision Religious objections to providing contraceptives Supreme Court ruled in favor of for-profit employers under Religious Freedom Restoration Act (RFRA) But state contraceptive equity laws may still apply Other challenges working their way through the courts Halbig and King - Availability of federal tax subsidies in state run exchanges
Reforms Effective Plan Years On/After 2014 (ALL) No pre-existing condition exclusions or limitations are permitted First wave of reforms applied only to persons under age 19 (ALL) Prohibition on excessive waiting periods- i.e. no waiting period in excess of 90 days March 2013 Proposed Regulations substantially retained Final Regulations issued February 2014 New 30 day "orientation period" Eliminates HIPAA Certificates after 12/31/14 (NGF) Fair Health Insurance Premiums (applicable only to health insurers of small group plans) Limitations on premium setting (e.g. limitations on premium setting based on age 3:1. tobacco use 1.5:1, geography) Final Regulations issued in February 2013
Reforms Effective Plan Years On/After 2014 (NGF) No discrimination based on health status is permitted Essentially, the same rules that currently exist under HIPAA The law raises maximum incentive amount for wellness programs that provide the incentive based on achieving a health standard from 20 to 30 percent of the COBRA cost of coverage Also gives the Secretaries of Labor, HHS, and the Treasury leeway to increase the percentage to 50 percent Final regulations published June 3, 2013 Some new requirements for standard based wellness plans (activity only vs. standard based distinction) 50% limited to tobacco cessation (All) Coverage of dependent children to age 26 - end of special rule for GF plans Under transition rule, GF plans could exclude adult children if the adult child is eligible to enroll in an eligible employersponsored health plan other than a group health plan of a parent This special rule for GF plans does not apply to plan years beginning on or after January 1, 2014
Reforms Effective Plan Years On/After 2014 (NGF) Cost limitations ALL PLANS - Out-of-pocket expenses do not exceed the amount applicable to coverage related to health savings accounts (HSAs) ($6350 single, $12700 family 2015 amounts $6600 and $13,200 differs from HSA amounts ($6450,$12900) ACA compliance does not mean HSA eligible Small Fully Insured Plans - Deductibles do not exceed $2,000 for single coverage and $4,000 for family coverage (as indexed) February 2013 final Regulations clarify the deductible requirement only applied to fully insured plans in small group market, but OOP applies to ALL Transition OOP relief allowed where separate PBM administrator only for the 2014 plan year Medicare SGR Fix (Sec 213) Eliminates deductible (but not OOP) limit Reopens door for Integrated HRA arrangements coupled with super high deductible coverage
Reforms Effective Plan Years On/After 2014 (NGF) Fully insured plans in small group market must provide essential health benefits (EHB) as determined by reference to a State benchmark plan Not applicable to fully insured plans in large group market or self-funded plans For purposes of applying the prohibition on lifetime and annual limits, large group and self-funded plans may use any single permissible benchmark plan Final regulations address Minimum Value for pay/play purposes and IRS issues MV calculator (NGF) Group and individual plans required to cover routine costs of participation in clinical trials by qualified individuals Agency FAQ says good faith compliance standard applies until guidance is issued
Reforms Effective Plan Years On/After 2014 (NGF) Additional preventive care requirements for PY beginning on/after 9/24/14 In accordance with new guidelines Issued by the United States Preventive Services Task Force (USPSTF), nongrandfathered plans will need to cover cancer medication preventive services without charge. The effective date Is based on when the USPSTF added the new requirement. http://www.cms.gov/cciio/resources/fact-sheets-and- FAQs/aca.Implementation.faqs18.html
Cadillac Plan Tax Beginning in 2018, ACA imposes a 40 percent excise tax on: "Coverage providers:" for the sum of months in which the aggregate value of employer sponsored health coverage for the employee exceeds: 1/12 of $10,200 for single coverage and $27,500 for family (i.e., other than single) coverage These amounts are to be adjusted automatically if health costs increase by more than anticipated before 2018 The thresholds are increased by Consumer Price Index + 1 in 2019, and by CPI thereafter An employer may make an adjustment to reduce the cost of plans when calculating the tax if the employer's age and gender demographics are not representative of a national average No adjustment for high cost states The annual limit for retirees between ages 55 and 64, individuals engaged in certain high-risk professions (e.g., law enforcement professionals, EMTs. longshoremen, construction workers, and miners), and those employed to install electrical or telecommunication lines is increased to $11,850 for individual coverage and $30,950 for family coverage
Cadillac Plan Tax Determined by the employer and assessed against "coverage providers "Coverage providers" are defined to include the following: In the case of fully insured plans, the health Insurer In the case of HSA or medical savings account (MSA) contributions. the employer making the contributions In the case of a self-insured plan or flexible spending account (FSA), the person that administers the plan (e.g., the TPA) In many cases, employer-sponsored coverage will include both fully insured and self-insured contributions (it may also include HSA contributions)
Cadillac Plan Tax The coverage subject to the excise tax rule includes: The applicable premium (determined in accordance with COBRA rules) for all accident and health coverage provided by the employer, even if paid for with after-tax dollars by the employee (except vision only insurance, dental insurance, accident and disability insurance, long term care insurance, and after-tax funded hospital indemnity and/or specified disease coverage) Both non-elective and salary reduction contributions to a health FSA Employer contributions (presumably including salary reductions) to an HSA
2014 Fall Health Care Symposium
Group vs. Individual Coverage- Pros & Cons Keep Group Plan Pros Employees can contribute on a pre-tax basis! Pre-tax contributions reduce taxable income to the employee and the employer The net cost of the employees portion is more favorable when paying with pre-tax contributions Group plans typically have lower out-of-pocket costs Most group plans pay 100% after the deductible has been met Co-pays for Office Visits, Prescriptions etc. are typically lower vs. individual coverage Employee retention Employees appreciate a comprehensive benefits package Recruiting Benefits are one of the first things prospective employees will ask about
Group vs. Individual Coverage- Pros & Cons Keep Group Plan (Cont.) Cons Individual Rating *Groups in the 2-50 market that renew 6/1/14 or later have the ability to keep their old plan and composite rating methodology Individual rates are based on age, geographic location (by county) & tobacco use PPACA plans are individually rated which makes cost-sharing more challenging Employers have typically paid a flat percentage or dollar amount towards premiums Individual premiums make this more difficult: Take an average of all the individual rates and create a composite rate? Provide a flat-dollar amount to each person and have them pay the actual difference based on their rate? Provide a flat percentage to each person and have them pay the actual difference based on their rate?
Group vs. Individual Coverage- Pros & Cons Keep Group Plan (Cont.) Cons Rates have increased significantly for many groups December renewals have average increases of 35% with many groups receiving 50% increases Subsides By offering a group plan you essentially lockout employees from Marketplace subsidies Subsides are income dependent and wont apply to all employees
Group vs. Individual Coverage- Pros & Cons Convert To Individual Plans Pros Employees can pick from a variety of plans Carriers offer multiple plan designs within the 4 metal-levels of Bronze, Silver, Gold & Platinum Some employees may receive subsidies Subsides are based on household income as it relates to the Federal Poverty Level (FPL) Households that are between 100%-400% of FPL will qualify for a subsidy Employer is removed from the decision making process Employees make their own decisions based on individual needs
Group vs. Individual Coverage- Pros & Cons Convert To Individual Plans Cons Employees must pay for premiums with a post-tax dollar A $300 premium may require an employee to gross $400 in order to net $300 Out-of-Pocket Costs Plans range from $1650 per person up to $6350 per person for deductibles, co-insurance and co-pays Out-of-Pocket will increase to $6550 per person for 2015 Employer Contributions Towards Premiums Technically not legal Could be done through a merit raise but should not be explicitly for individual health insurance Additional taxes for the Employer Additional taxes for the employee May eliminate subsidy based on increased compensation
Group vs. Individual Coverage- Pros & Cons Convert To Individual Plans- On or Off Marketplace Plans Are The Same! Plans purchased directly from the insurance carrier (i.e. Highmark, Capital etc.) are the exact same plans you can purchase through the Marketplace (www.healthcare.gov) Pricing for the plans are identical unless you qualify for a subsidy If you qualify for a subsidy & you want to apply that subsidy towards your premium you must purchase your individual plan through the Marketplace (web-site, phone or mail) Subsides are based on household income & household size
Who s Eligible? Tax Credits $11,490 to $45,960 for individuals $15,510 to $62,040 for a family of two $19,530 to $78,120 for a family of three $23,550 to $94,200 for a family of four $27,570 to $110,280 for a family of five Reduced out-of-pocket costs $11,490 to $28,725 for individuals $15,510 to $38,775 for a family of two $19,530 to $48,825 for a family of three $23,550 to $58,875 for a family of four $27,570 to $68,925 for a family of five Income Level Up to 133% FPL 133-150% FPL 150-200% FPL 200-250% FPL 250-300% FPL 300-400% FPL Premium as a Percent of Income 2% of income 3 4% of income 4 6.3% of income 6.3 8.05% of income 8.05 9.5% of income 9.5% of income
What are employers doing? Few Groups Have Dropped Coverage Small group market Most renewing as is in pre-ppaca plans Carriers interpretation of if you like your plan Large group market Carriers providing offers not to shop Carriers concerned about groups moving to self-funded Small & Large Groups QHDHPs & HSAs Self Funding
2014 Fall Health Care Symposium
Self Funding vs. Fully Insured Employer assumes all or a portion of the risk for health benefits. Administrative Services Only (ASO) an arrangement in which an organization funds its own benefit plan Administrative options available to employers choosing self-funding: Payment Arrangements Paying at the maximum funding level Pay claims as you go
Self Funded Terms Administrative Fee: Fee charged for claims adjudication, billing, eligibility, customer service, plan document maintenance, access fees, managed care fees Setup Fee: One-time charge for the input of eligibility and benefits in order for the plan to be administered Expected Claims: Total claims underwriter expects you to have in one policy year, actuarially determined from your past claims experience
Self Funded Terms Laser: A provision within the stop loss contract that excludes a member from the stop-loss insurance. All claims for that individual would be the responsibility of the employer Shock Claim: A shock loss may be defined as an abnormally large and unexpected claim. Could be the result of severe accident or serious illness Stop-Loss Insurance: Insurance purchased to protect the employer from a shock claim and/or unexpectedly high utilization Specific Aggregate
Self Funding Advantages Flexibility in Plan Design Self-funded plan not bound by state mandates Risk Management effectiveness through Stop Loss Insurance Employer may choose the amount of risk to retain and the amount to be covered under stop loss protection. Under an insured arrangement, insurance company sets the pooling level.
Self Funding Advantages Tax Savings No premium tax for the self-funded claim fund Transparency Know what you are paying for Margin Insurance companies typically charge 3-10% for margin (for fluctuations in claims) Under self-funded arrangement, this component is eliminated
Self Funding Disadvantages Risk Assumption Employer assumes risk between the normally anticipated claim level and Stop Loss Coverage level Lasers Under fully insured arrangement, this component is eliminated Fiduciary Responsibility Employer assumes risk
Self Funding Options ASO Plans Potential for lasers Negotiating on a small premium Should have 300 employees or more Carrier Options for Small Groups Down to 20 enrolled (underwriting required) Level premiums No lasers
Self Funding Options Consortium Model Level premiums No lasers Stop Loss Purchasing Power Medical Loss Ratio Captive Model Potential cash advantage Collateral required up-front Commitment to wellness
Questions?