Affordable Care Act Part 2: Impact on Self-Funded Employers December 12, 2013 1
Webinar Recording and Evaluation Survey This webinar is being recorded and will be made available online to view later. Recording will also be available at www.naco.org/webinars Copies of the slides will be located at http://www.naco.org/programs/csd/pages/heal th-reform-resources.aspx After the webinar, you will receive a notice asking you to complete a webinar evaluation survey. Thank you in advance for completing the webinar evaluation survey. Your feedback is important to us. 2
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Today s Speakers: Lisa Buerkley Assistant County Administrator Boone County, Kentucky Lisa Stamm, Esq. Vice President, Consulting Services Sherrill Morgan Consultant to Boone County, Kentucky Scott Stevens, RHU, CDHC Employee Benefits Consultant S.M. Stevens and Associates, LLC Douglas County, Nebraska 4
How many people are attending this webinar from your computer? a. 1 b. 2 c. 3 d. 4 e. 5 or more 5
Is your county self-insured? a. Yes b. No c. Considering becoming self-insured d. Not sure 6
Do you know which provisions of the ACA do not apply to self-insured employers? a. Yes b. No c. Not Sure 7
Disclaimer The information provided during this webinar is for informational purposes only and does not constitute legal advice. Counties should consult legal counsel for detailed information about how certain provisions and related regulations should be interpreted and applied to their plans specifically. 8
Self Funding Impact on Employers Presented to: Scott M. Stevens, RHU, CDHC Employee Benefits Broker/Consultant sms@thehsatoolkit.com Sstevenshealthcare.blogspot.com S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
What is funding? Funding is the means by which employers pay for health insurance coverage Fully insured contracts require the insured to pay premiums in advance (Note: sometimes fully insured plans with high deductibles are referred to as partial or split funded plans. These are NOT self insured plans!) Partially self insured contracts only require fixed costs plus actual claims incurred. Today, many employers elect to pay for their health insurance using a self-insured option S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding helps employers save money 16.00% 14.00% 12.00% 10.00% 12.4% 13.5% 15.6% 12.3% 12.4% 1998 1999 2000 8.00% 6.00% 4.00% 9.4% 6.1% 9.7% 6.7% 9.3% 2001 2002 2003 2.00% 4.5% 4.5% 0.00% Premium Fully insured Self-funded *Source: the Kaiser family foundation employer health benefits survey, 2003 S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Benefits of Partial Self Funding Escape the fully insured risk pool Pay the right price Preclude state mandates; lower costs Participate in good claims experience Improve cash flow Full disclosure of claims data through advanced reporting Manageable and budgetary Litigation in Federal rather than State court A comprehensive solution to rising health care costs S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Premium Dollar Shrinkage Fully Insured 70 Medical Claims 28 Reserves, Risk, Inflation, Premium Taxes, Overhead, Margin 2 Profits S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Premium Dollar Maximization With Partial Self Funding 80 Medical Claims S.M. Stevens and Associates, LLC. 2013, Use With Permission Only 20 Administrative Fees & Reinsurance
Fully insured Insurance carrier assumes claims risk in excess of premium; retains savings below premium Claims costs do not fluctuate based on actual claims incurred by plan members Fixed premiums include reserves, fixed costs, claims and administrative fees S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding Claims costs based on actual claims incurred by plan members Employer pays insurance carrier a fixed fee to administer its claims Stop-loss insurance is provided to limit employer s potential loss to a specified amount Partial Self Funding is budgetary, year in and year out S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Components of fully insured premium Fixed costs Basic operating expenses incurred by the insurance company Claims Dollars collected by the fully insured carrier to pay claims during the plan year Claims Fixed costs Reserves Reserves Money set aside for payment of claims incurred prior to plan termination, but submitted for payment after plan termination S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding Fixed costs The minimum amount an employer pays each month for administrative services Claims Whatever amount isn t used here, the employer keeps. Not the insurance company. Claims Fixed costs Reserves Reserves Employers hold the reserves until termination. This money stays in your account earning interest for you, not the insurance company. S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Claims liability example Partial Self Funding High Stop loss protection Employer savings Fully insured premium Incurred claims Low Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Employer health plan With Partial Self Funding, employers only pay for claims each month, not a premium, which allows them to participate in plan savings S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding Better Control of YOUR Destiny! Rewards for favorable claims experience Reduce administrative plan related expenses Control your own claim reserves, improve cash flow! Customize your own plan design/benefits Predictable costs fixed + claims maximum Reports for plan management S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding Protection Specific Coverage protects against large, individual catastrophic claims Aggregate Coverage protects against catastrophes and an increase in claim frequency or excessive plan utilization Aggregate Accommodation limits an employers exposure to year to date aggregate amount Specific Advance limits the employers exposure to the actual amount of the specific deductible Run out covers claims incurred but not reported/processed at the end of the plan year S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Advantages for Small to Mid-Size Employer Groups Avoidance of minimum loss ratio requirements and other mandates Lower cost increases to accommodate reform mandates compared with fully insured carriers Ability to participate in claims up to a protected limit/spectrum of exposure Enhanced flexibility in plan designs Transparent renewal/plan utilization data Data to drive informed decisions Full reporting for groups, regardless of the no. of enrolled employees Ability to develop strategic wellness plans/strategies Long term perspective, a true strategic approach to managing costs S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Partial Self Funding The Process of Migration Broker/Consultant gathers relevant information and sends RFP s to several markets Rates are negotiated and finalized Vendors are selected Plan is implemented, employees are oriented Plan is monitored on a monthly basis S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Health Care Reform Impact 2014 Self-Funding comes with many traditional advantages over Fully Insured. Specifically, employers avoid premium tax, risk charge, state mandates. They experience best in class data reporting and typically have 30-50% lower fixed costs than a typical Carrier. Provision Fully Insured Self-Funded Community Rating Required Avoided Sector Tax $8 Billion Direct Impact Avoided Administrative Reporting Direct Impact Some Avoided Transitional Reinsurance Tax Direct Impact Direct Impact Patient Centered Outcome Direct Impact Direct Impact Research Tax Minimum Essential Benefits Direct Impact Plan Flexibility Medical Loss Ratio Direct Impact Avoided Prohibition of discrimination based on salary Direct Impact Avoided S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Self Funding and the ACA Anticipated Affects Over the Next 3 Years S.M. Stevens and Associates, LLC. 2013, Use With Permission Only Source: Expert Benefit Solutions; 2013
Questions? Scott M. Stevens, RHU, CDHC Employee Benefits Broker/Consultant 402-699-8873 or sms@thehsatoolkit.com Subscribe to my blog: sstevenshealthcare.blogspot.com S.M. Stevens and Associates, LLC. 2013, Use With Permission Only
Implications of the ACA for Boone County Fiscal Court s Self-Funded Health Plan Lisa Buerkley, Assistant County Administrator/HR Director Lisa Stamm, Esq., VP, Consulting Services, SHERRILL MORGAN
Initial ACA Provisions Coverage of children to age 26 (initially excluded those who had employer-sponsored coverage) Removal of lifetime maximum (was $1 million) and annual maximums on Essential Health Benefits (EHB) (Note: stop loss implications) No pre-ex for children under 19
Provisions in Effect after 1/1/13 Grandfathered status lost 1/1/13 when County changed coinsurance and prescription drug copays Coverage of children to age 26 regardless of whether eligible for employer-sponsored coverage Preventive Care (including Women s Preventive Care) External Appeals Out-of-network emergency services at in-network level ($100 copay instead of ded./50% coinsurance)
2014 Provisions PCORI Fee (est. $873) Transitional Reinsurance Fee (est. $55,000) No pre-ex Elimination of additional annual maximums on Essential Health Benefits New rules regarding wellness programs Out-of-pocket maximums
Elimination of Annual Maximums No annual maximum on EHB, now known to include some specialty drugs in Kentucky County previously had $35K annual max. on prescription drugs and a $35K annual max. on outpatient drugs Specialty drugs can cost hundreds of thousands of dollars per year Alternatives are not attractive Leave plan exposed; stop loss implications Exclude some specialty drugs altogether Per prescription/per treatment limits
New Wellness Regulations County s wellness program will include tobacco surcharge beginning in 2014 Prior to ACA, could have opted out of non-discrimination provisions of HIPAA Now must comply with stringent new rules regarding outcome-based wellness programs County must provide alternative to tobacco users; will be providing reward to those who complete tobacco cessation program, regardless of whether they quit
Out-of-Pocket Maximums $6,350 single; $12,700 family maximum on deductibles, coinsurance, and copays County s out-of-pocket max. is currently $3,000 single; $6,000 family, but does not include copays Alternatives are not attractive Include copays in the existing out-of-pocket maximums Raise out-of-pocket maximum to highest level allowed (lesser benefit for some) Run two concurrent out-of-pocket maximums (lower one for deductibles/coinsurance and maximum allowed for deductibles/coinsurance/copays)
2015: Employer Mandate County employs hundreds of seasonal employees at golf courses, parks, etc. Currently can work 9 months of year with no hourly restrictions without violating Kentucky retirement system rules Hours will need to be reduced for many to avoid exceeding 30 hours per week on average
NACo Resources Health Reform Implementation Site www.naco.org/healthreformimplement Here you can find: Counties as Employers Toolkit (Updated) at www.naco.org/healthreformtoolkit 36
Type your question into the questions box and the moderator will read the question on your behalf during the Q&A session. If we are unable to answer all of the questions during the Q&A session, we will send you the questions and answers in an email. 37
2014 Healthy Counties Forum What: During this forum, counties will learn how they can achieve better health, better care, and lower costs through Accountable Care Communities. Participants will discuss many topics including developing multi-sector partnerships, justice-involved individuals, behavioral health, and wellness. When: January 30-31, 2014 Where: San Diego County, CA www.naco.org/healthycountiesinitiative Please contact Emmanuelle St. Jean, MPH, Program Manager, 202.942.4267 or estjean@naco.org 38