Transcript Health Care Reform - Keenan and Associates

Health Care Reform
Challenges and Opportunities
Association of Chief Business Officials
2012 Fall Conference
Introduction
Keenan believes that there are six aspects of
Health Care Reform that will impact clients:
1. The California Health Benefit Exchange
2. The new definition of “Full-Time Employee”
3. The requirements for providing employees
“affordable” health coverage of “minimum value” in
2014 and the Cadillac tax in 2018
4. Grandfathering
5. Compliance
6. Ensuring a Healthy Workforce
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What will keep you up at night?
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The Four Principles of ACA
Identifying ACA Full-Time Employees
Predicting Employee Behavior in 2014
Collective Bargaining Issues
Early Retiree Medical Cost
Cadillac Tax
Structural Conflicts of Interest
Health of Your Workforce
Four Principles of the Affordable Care Act
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Principle One
The Individual Mandate
“Every individual must have “Minimum
Essential Coverage” (MEC) starting in 2014 or
pay a tax”
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Example
• Employee’s Household Income (similar to
adjusted gross income) is $50,000
• There are two adults and two children in the
household
• If the employee and family members have no
MEC, the employee will be taxed for 2014:
– Greater of $95 per adult ($47.50) per child or 1% of
HI over the Filing threshold ($19,000 in 2011)
– Greater of $285 or $310 (.01 x ($50,000 - $19,000))
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Principle Two
Employer Shared Responsibility
“An employer is responsible to provide
“affordable” MEC with a “minimum value” to its
ACA Full-Time Employees starting in 2014 or
risk paying a tax”
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ACA Definitions
• Affordable: Lowest cost single-only coverage
offered by the employer must cost the
employee no more than 9.5% of his/her
Household Income
• Minimum Value: The employee cost of a plan
(all in) cannot be greater than 40%
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Example
• Employer has 10 FT employees (30 hours/week)
who will be paying more than 9.5% of HI for
lowest cost single-only coverage. They decline
employer coverage and purchase coverage on
the Exchange and receive government subsidies
• Result (simplified): Employer tax is $30,000
– 10 x $3,000/employee who receives a subsidy
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Principle Three
ACA Full-Time Employee
“An ACA Full-Time Employee is an employee
who works, on average, 30 hours per week or
130 hours in a month”
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ACA FTE
• For salaried employees use actual hours
worked or daily/weekly equivalents (e.g. One
Day = 8 Hours)
• No guidance on other possible definitions of
FTE
• Definition is important because:
– It identifies who should be covered
– It is used to calculate the tax
• Requires monthly tracking unless the IRS SafeHarbor is used
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Principle Four
Government Subsidies to Purchase
Exchange Coverage
“An ACA FTE whose employer does not provide
‘affordable coverage’ or coverage with a
‘minimum value’ may purchase coverage on the
Exchange and receive a subsidy from the
Federal Government which triggers the
employer’s tax obligation.”
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Example
• Employee’s Annual Salary = $45,000
• Household Income = $35,000
• Lowest cost Single-Only coverage = $3,360
– $280/month
• Employer coverage is “unaffordable” = 9.6% HI
• Under ACA, employee will pay no more than
4.3% of HI for Exchange Family Coverage $1,505 ($125.42/month)
• Employer pays $3,000 tax
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Decision
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Employer cost of medical coverage for the low-paid
FTEs may be significantly greater than the tax
penalty
Employee cost of medical coverage on the
Exchange may be significantly less than employer
coverage when subsidies are available
Decision: eliminate the possibility of government
subsidies (and employer tax penalties); embrace
them; ignore them; or something else?
Identifying ACA Full-Time Employees
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ACA Full-Time Employee
No penalty tax is imposed on employers who do
not provide group medical coverage (i.e. MEC),
or affordable coverage or coverage of a
minimum value to:
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Part-Time Employees
Independent Contractors
Leased Employees
Variable (Seasonal/Temporary) Employees (New
definition!)
– Newly Hired ACA Full-Time Employees (New
definition!) for a waiting period up to 90 days
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ACA FTE
• FTE is a misleading definition
• FTE really means eligible for affordable group
health coverage that provides minimum value
• ACA FTE does not impact:
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Overtime
Cost of benefits as compared to a real FTE
Work rules
Other collective bargaining definitions
Other benefits which are not group health plans
Will employees try to leverage this definition?
ACA FTE Month-to-Month
• FTE status is a month-to-month determination
• A PTE who works overtime in a month could be
an FTE for that month
• Tax on employers is calculated on a monthly
basis ($3,000/12 = $250)
• IRS Look-Back Stability Safe Harbor
– Look back for a prior period (e.g. one year)
– Identify FTEs for that Look-Back Period
– Look-Back FTEs will be FTEs for the next year
• Decision: Track employees or Safe Harbor?
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Predicting Employee Behavior in 2014
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Exchange Facts
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Exchange Coverage:
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Guaranteed Issue
No medical underwriting
Rates: 3:1 ratio based on age
Exchange goal is to have low cost coverage
It has defined “plan” as consisting of Bronze, Silver,
Gold and Platinum (“full metal tier”) levels of
benefits including a catastrophic plan within a
geographic region
A health insurance carrier can bid up to three plans
for each geographic location
– RFPs have been issued in draft form
– Carriers/plans will be selected early 2013
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Exchange Facts
• Exchange is very concerned about:
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Impact of adverse selection on it
Must be self-sustaining by January 1, 2015
Pricing
Offering too many choices in a region
• Marketing and outreach
– 2013 Goal: 3 Billion ad impressions
– 2014 Goal: 4 Billion ad impressions
– GOP unhappy about use of government money
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Employee Behavior
• Will the availability of Exchange coverage
impact employee behavior?
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Availability of Subsidies
Cash-in-lieu
Less expensive
Better access to a variety of plans
More for the money
Working just for health benefits (e.g. near retirement
or part-time) don’t need GHP anymore
Impact of Employee Behavior
• Adverse Selection: A trend of younger, healthier
employees going to the Exchange may
undermine the financial integrity of a plan,
leaving older unhealthier employees to pay
higher premiums…and impact Cadillac Tax
• Employer Tax: If low-paid FTE’s opt-out of
employer coverage, purchase coverage on the
Exchange and receive a government subsidy, a
tax is imposed on the employer
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Collective Bargaining Issues
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Represented Employees
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Definition of FTE in collective bargaining
agreements – is ACA FTE definition required?
2014 requires waiting periods for eligibility of no
more than 90 days
Low-paid FT employees and PT employees may be
better off economically on the Exchange
Unions can be Exchange-trained “Assistors” to
help/encourage them to purchase on Exchange
Will unions become Assistors? Good/Bad?
Represented Employees
• Schedule regular meetings with
representatives:
– ACA Education
– Identification of ACA issues within CBA
– Identification of workforce ACA issues
• Multi-year contracts, or contracts that get into
details about plan designs, can limit the
flexibility needed to respond to changing
legislation
• All parties need to understand that with these
complex issues, flexibility is in their best interest
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Early Retiree Medical Cost
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California Exchange and Early Retirees
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Exchange coverage may be less expensive than
employer coverage and pricing stable year over year
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Due diligence dictates that a review of Exchange
options, costs and availability to early retirees be
conducted
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Loss mitigation and loss prevention strategies
Competition with two federally negotiated plans
Large population of covered lives of all ages and health (2.2
million covered lives by end of 2014) moderate the risk
Union resistance may moderate if Exchange coverage is a
better deal for early retirees
California Exchange and Early Retirees
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Fixed monthly cost may be less than employer’s plan
Exchange coverage may be a better fit for an early
retiree (access)
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Multiple plans to choose from at variable costs and benefits
Networks/Hospitals
Coverage (less/more)
Annual open enrollment to change plans
Active rates may drop if early retirees are moved to
Exchange
Private Exchanges
– Medicare Exchanges are becoming popular for retirees age 65+
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Cadillac Tax
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Cadillac Tax – Example - 2018
• Retired Member & Family – Under Age 65
• Coverage Value Anthem PPO = $2,328.96/mo
• 2018 Monthly Family Coverage Value
Threshold = $2,579.17/month
• Excise Tax
– 40% of the Coverage Value exceeding $2,579.17
(as adjusted)
– Per Family
– Per Month
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Monthly Premium Retired Member & Family Under 65 - 7.9% Annual
Increase
$3,750.00
$3,675.28
$3,500.00
Monthly Premium
$3,406.19
$$ Above Threshold $1,096.12
$3,250.00
$3,156.81
Monthly Cadillac Tax/Family =
$438.45 ($1,096.12 x 40%)
$3,000.00
$2,925.68
$2,750.00
$2,711.47
$2,512.95
$2,500.00
$2,328.96
$2,250.00
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2013
2014
2015
Year
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2016
2017
2018
Cadillac Tax – Commentary
• Tax is regressive – tax allocated equally to
retirees/employees with low incomes and those
with high income pensions
• IRC §4980I states that, for fully-insured plans,
this tax is the liability of the insurance carrier
– Should the carriers allocate the excise tax to
all other plans offered by the carrier within
the state…and not back to you?
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Structural Conflicts of Interest
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Structural Conflicts of Interest
• INBH – YNBH – Let’s make a deal
• How do you encourage hard choices/decisions
when those choices/decisions impact the
decision-makers?
– Make decisions neutral to them?
– Other incentives?
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Health of Your Workforce
Three Themes of Health Care Reform
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Health of Your Workforce
• Unhealthy workforce drives up plan cost
– Besides costing more, the higher the cost of a plan,
the greater the likelihood of the Cadillac Tax
• Health of a workforce can be measured by its
productivity
– One measure of productivity is absenteeism
• A healthy workforce is in everyone’s best
interest
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Theme #1: Preventive Care Mandate
• NGF Plans must provide preventive services at
no cost to participants
– Screenings, counseling, immunizations, well-woman
visits, etc.
– Free contraception for women
• You have already paid for these services, why
not promote them?
– Although plan cost increases in the short-term, the
early detection of illness should lower plan costs
long-term
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Theme # 2: Value-Based Health Care Designs
• VBHC is about targeting behavior and using
dollars more efficiently
– Traditional approach to containing cost focused on
cost-shifting to employees or limiting access to more
expensive care
– In contrast, VBHC seeks to deliver the highest
health value relative to the quality/cost ratio of
services, rather than treating disease only after it is
developed
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Theme # 2: Value-Based Health Care Designs
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Value-Based Health Care Designs focus on plan
features that produce more effective and efficient care
delivery
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Should be part of negotiation process
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Financial barriers to essential treatments and certain providers
are removed, “steering” patients toward improved health status
VBHC focuses on lowering the cost of certain treatments to
increase utilization, the opposite of traditional cost containment
strategies
The result should not only be improved health leading to lower
costs, but higher productivity
State of Connecticut Collective Bargaining Agreement
Value-Based Health Care(VBHC)
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Effective VBHC plan incentives are dependent on data
and analysis to guide changes in plan benefits
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Collecting data on plan participants is the best way to target
certain population segments for intervention. Various types
of data can be collected including medical claims,
pharmaceutical claims, health risks, absence days, workers’
compensation and participation in wellness and disease
management programs.
Once the appropriate data are collected, the plan sponsor
must decide what outcome measures are important; for
example, which diseases are most prevalent, which
programs have the highest participation or which diseases
are most costly.
Value-Based Health Care(VBHC)
• Health risk management programs focus on the
health goals of the group. Wellness and disease
management programs are used to accomplish
this:
– The premise behind wellness programs is promoting
and maintaining good health
– Disease management programs assist those who
have certain diseases with specific tools that help
patients keep symptoms from being detrimental to
everyday life
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Theme #3: Wellness
• Wellness programs are divided into two
categories:
– Participatory Wellness Programs offer rewards that
are not contingent on meeting a health standard
– Health-Contingent Wellness Programs require
meeting a health standard in order to obtain a
reward
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Wellness
• Examples of Participatory Wellness Programs:
– Diagnostic testing programs or Health Risk
Assessments that don’t base rewards on test
outcomes but on participation
– Waivers of cost-sharing for prenatal or well-baby visits
– Reimbursement for smoking cessation aids/classes
regardless of whether the employee quits smoking
– Rewards for attending health education classes
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Wellness
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Examples of Health-Contingent Wellness Programs:
– Lower health premium for attaining certain results on
biometric screenings, such as cholesterol below
certain levels
– Reimbursement for smoking cessation classes only if
you stop smoking
– Cash rewards for exercising a certain amount
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These programs will violate non-discrimination rules
unless they conform to allowed exceptions
Wellness
• Health-Contingent Wellness Programs are
allowed under the following conditions:
– Total reward for the program is limited to 20% (30% in
2014) of the total cost of employee-only coverage (or
of dependent coverage if dependents can participate)
– Program must be reasonably designed to promote
health or prevent disease, not be overly burdensome,
not be a subterfuge for discrimination and not be
suspect in method
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Wellness
• In addition, Health-Contingent Wellness Programs
must:
– Allow eligible individuals to qualify at least once per
year
– Make the reward available to all similarly situated
individuals, or a reasonable alternative where it would
be unreasonable or inadvisable to satisfy the standard
due to a medical condition
– Describe the terms of the program and alternative
standards in all plan materials
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Wellness
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Participatory Wellness Programs may give an annual
premium discount greater that 20%(30%) because
they don’t require satisfaction of a standard related to
a health factor in order to qualify for a reward
Employers may offer both a participatory Wellness
Program and a Health Contingent Wellness program
– Allows participant to receive combined rewards
exceeding the 20%(30%) limit
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Your Interest in Workforce Health
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Your interest in the workforce could leverage mandated
preventive services, wellness programs and specific plan
design changes focused on channeling employees into
health improvement
This approach should result in improved cost
containment and increased employee health and
productivity
However, short term results could be higher claim costs
due to increased utilization, data acquisition and analysis
costs, plan change and implementation costs, and
communication costs
What Should You Do?
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Determine whether you want to address employee health,
productivity and health plan costs by:
– Providing a Health-Contingent Wellness Program
– Promoting the plan’s mandated preventive service
coverages
– Using VBHC
If so, you must
– Determine the level of medical premium discount
– Determine how to promote the preventive services
– Identify VBHC opportunities
Questions?
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