Transcript Document
1 HEALTH CARE REFORM: KEY CONCEPTS FOR EMPLOYERS NOVEMBER, 2010 7/7/2015 Greg Dattilo, CEBS Freemarkethealthcare.com Team 2 Greg Dattilo, CEBS Dave Racer, MLitt 35 years experience as employee benefit consultant Master of Letters from Oxford Grad School President of Dattilo Consulting, Inc. Thesis: Comprehensive Health Care Reform Wharton School of Business President of DGRCommunications, Inc. Incoming President MN AHU - Chair of Legislative Committee Publisher, Speaker Author, Teacher Lectured in 28 states – Dozens of articles – National Surveys 7/7/2015 Four books since 2004 3 Your Health Matters: What You Need to Know About U.S. Health Care Development of government and private insurance plans in the United States Report on nationalized health care systems of: Canada United Kingdom Germany France Japan 336 pages – Hardcover Released April, 2006 7/7/2015 Four books since 2004 4 FACTS: Not Fiction – What really ails the U.S. health care system Common myths, misconceptions, and deceptions Infant mortality, life expectancy, uninsured rate, admin cost Socialized health care – Discriminating against the most vulnerable Americanized U.S. health care 64 pages – paperback Released January, 2008 Nearly 100,000 Distributed 7/7/2015 Four books since 2004 5 Why Health Care Costs So Much: Six Book Series The Solution: Consumers - 2009 Governments’ Real Role - 2010 Employers Providers Payers Faith community 7/7/2015 Today’s discussion 6 Part 1: Why health care costs so much Part 2: Will the new health care law reduce costs? Part 3: Alternate solutions to the new law Part 4: 2011- Strategies to control insurance cost 7/7/2015 7 How people with health insurance bought health care pre-1966 Paid the first dollars for their own health care 42% Out of Pocket Patient Driven Health Care Doctors & hospitals Payers Decided what to buy and from whom – Options for low-income Provided care: In home and clinic Paid catastrophic claims: They were insurance companies 7/7/2015 U.S. Health Care Prior to 1966 8 Individuals paid 42 cents out of each $1.00 themselves. Someone else paid 58 cents. (1965) Hospital daily room rate of $17-$19 Health care inflation about the same as other consumer prices Government delivered care based on need, at government facilities Everyone had access to care 7/7/2015 U.S. Health Care 1965-1973 9 Expansion of government entitlements Medicare and Medicaid Medicare: Qualified by age, not financial or even physical need Medicare changed delivery from government facilities to private facilities Medicare tax started at .7% of first $5,480. Maximum annual tax of $39.20 Medicaid benefits were not catastrophic, but broad and rich (even richer than private plans) 7/7/2015 U.S. Health Care 1973-2002 10 Congress passed HMO Act – 1973 Prepaid health care One price, all services included Added maternity, preventive, and elective surgery coverage Copied government health benefits to private health insurance Congressional Justification: Short term cost would increase, but long term cost would be less “Catch the illness before it became too costly.” 7/7/2015 Prior to HMOs, Ala Carte Health Care 11 Like ordering off a menu You are more likely to clean your plate. Or, you ask for a doggy bag. You do not throw away the extra food. You eliminate waste. 7/7/2015 HMO is like a buffet dinner 12 How do you measure a buffet’s value? By how many plates of food you consume. Three plates of food is “three times the value” of one plate. 7/7/2015 Waste is accepted at a buffet 13 You may throw away food, but it’s okay. You paid for it. As others throw away food, the price for everyone will eventually increase. 7/7/2015 U.S. Health Care 1973-2002 14 Behavior changed from: Prudence to waste Healthy behavior to unhealthy behavior 7/7/2015 15 7/7/2015 1965 – 2009 Price Trends 16 Since 1965: Military spending has increased 1,177% Federal and state public education spending has increased 2,950% Spending on health care has increased 6,000% 28 cents $16.80 gal aagal 1965 2009 7/7/2015 Hospital Price Spikes 17 1965: University of Virginia Hospital Daily Rate $17 to $19 “spiked” to $22 a day 2007: According to the American Hospital Association: Average daily room charge is $1,696 7,700 percent increase over 1965 What has contributed to this spending increase? Demand - Entitlement 7/7/2015 U.S. Health Care 2003-2009 18 Congress endorses consumer managed insurance plans (consumer-directed health plans) Congress allows individuals to set up Health Savings Accounts, with very few regulations An attempt to reverse the entitlement mentality and wasteful behavior caused by prepaid health care and government-subsidized health plans 7/7/2015 US Population- 3:30 pm 9/9/10: 310,207,152 Covered, by category* Medicare, aged 65 and over Medicare, under age 65 Medicaid, CHIP, Military, VHA, and other government programs 2009 CHIP Added Total Covered - Gov 34 million 7 million 58 million 4 million 103 million * Congressional Budget Office-12/2008 7/7/2015 19 Entitlement 2010 20 Today, three of every 10 are in the wagon 7/7/2015 Part 2: 21 Will the new health care law reduce cost? 7/7/2015 U.S. Health Care – 2010 to 2013 22 Congress passed and Pres. Obama signed the Affordable Care Act of 2010 on March 23, amended on March 30, 2010. 2,800 pages of new laws Tens of thousands of pages of new regulations Government transition period 7/7/2015 Meet the new CEOs of health care 23 Her title appears more than 3,000 times in the ACA. Kathleen Sebelius 159 New commissions, boards, study groups, and grant makers 7/7/2015 Policymakers drive policy Secretary and presidential appointments are critical 24 Dr. Donald Berwick Pres. Obama just appointed as CMS chief “I cannot believe that the individual health care consumer can enforce through choice the proper configurations of a system as massive and complex as health care. That is for leaders to do.” 7/7/2015 25 How Americans will buy health care after passage of ACA of 2010 The Federal Government will set foundational health care policy, and design basic health plans. Payers Providers Patients 7/7/2015 Federal subsidies for you and/or your neighbors 26 The 2009 Poverty Guidelines Qualified for Subsidy At $400% of FPG Persons in Family Poverty Guideline 400 Percent of FPG 1 $10,830 $43,320 2 $14,570 $58,280 3 $18,310 $73,240 4 $22,050 $88,200 “Modified” Adjusted Gross Income 7/7/2015 Federal subsidies for you and/or your neighbors 27 The 2009 Poverty Guidelines Qualified for Subsidy At $400% of FPG Persons in Family Poverty Guideline 400 Percent of FPG 1 $10,830 $43,320 2 $14,570 $58,280 3 $18,310 $73,240 4 $22,050 $88,200 5 $25,790 $103,160 6 $29,530 $118,120 7 33,270 $133,080 “Modified” Adjusted Gross Income 7/7/2015 Making insurance affordable 28 “For most families, the cost of health insurance will go down.” How? Shifting Cost to someone else. Consider: Family of 4, with family income of $80,000 Policyholder’s Age Low Cost Area Annual Subsidy Med. Cost Area Annual Subsidy High Cost Area Annual Subsidy 35 $0 $1,036 $2,763 45 $1,264 $3,480 $5,695 55 $4,689 $7,761 $10,834 60 $7,360 $11,100 $14,840 Kaiser Family Foundation: Health Reform Subsidy Calculator 7/7/2015 Making insurance affordable 29 “For most families, the cost of health insurance will go down.” Consider: Family of 4, with family income of $40,000 Policyholder’s Age Low Cost Area Annual Subsidy Med. Cost Area Annual Subsidy High Cost Area Annual Subsidy 35 $4,731 $6,458 $8,186 45 $6,686 $8,902 $11,118 55 $10,111 $13,183 $16,256 60 $12,782 $16,522 $20,262 Kaiser Family Foundation: Health Reform Subsidy Calculator 7/7/2015 Based on family of 4 Subsidies for upper middle income employees Poverty level-Family of 4 $22,050 Two times FPL 82.3 million (31%) $44,100 Three times FPL With 65 & Over 127 million (48%)68% of $66,150 Modified Adjusted Gross Income $88,200 Four times FPL the 163.5 million (62%) population Five time FPL 192 million (73%) $110,250 7/7/2015 30 New Federal Law: Entitlement - 2014 31 Seven of every ten will be in the wagon 7/7/2015 Herding Us Into Health Insurance Delivery Models The Exchange – 1/1/2014 32 Could be state, or could be federal, but “must be” Internal Revenue Service Assess penalties for uninsured Verification of financial data Collection of penalties CMS Secretary of HHS State Government Analyze health data Create practice guidelines Health Data from insurance companies One Exchange for both Individual Insurance Individuals Comparative Effectiveness Small Groups Small Group Insurance All Subsidized Plans Gov’t Plans 7/7/2015 Exchange Health Plan Selection Question for Individuals 33 Basic health information Identify doctor and hospital of choice Concern: Cost, provider, overall quality (quality in a particular area) Choose plan level (bronze, silver, gold, platinum) Exchange calculator example: Part D Medicare 7/7/2015 Exchange data management 34 Secretary (HHS) will develop rating system of qualified health plans Dashboard: Performance of insurance company customer service and claim accuracy Chosen plans with data from preferred physicians and hospitals Identify high cost chronically ill members whom insurance companies will be required to contract after enrollment 7/7/2015 Exchange Employer (ER) Enrollment 35 Employer registers – secure login – exchange verifies small ER eligibility – unemployment tax filings ER chooses health plan tier – amount EE contributes for individual or family per benchmark plan ER signs electronic agreement regarding equal treatment of employees 7/7/2015 Exchange Employer (ER) Enrollment 36 ER discloses name, date of birth, SSN of each eligible EE Exchange must verify ER requirement of minimum payment to EE insurance, both in and out of the exchange 7/7/2015 Exchange Employee (EE) Enrollment 37 EE goes to Internet or calls call center or insurance agent EE gives information to match with ER. May undergo screening for Medicaid eligibility EE selects plan, pays required premium. For benchmark plan, plus any buy up plan difference 7/7/2015 Exchange Premium Payment Options 38 All premium paid to the exchange – exchange pays insurance company, accurately tracks those breaking or not breaking the law First payment to exchange then to insurance company (multiple ER payments to insurance company) All payments to insurance company (does not allow accurate tracking and multiple ER payments to insurance companies) 7/7/2015 Individual tax credits for premium 39 Tax credit to pay for second lowest silver plan Tax credit amount equals the excess premium based on percent of your income Income Level Percent Allowed to Pay Below 133% of FPL 2% 134%-150% 3%-4% 151%-200% 4%-6.3% 201%-250% 6.3%-8.05% 251%-300% 8.05%-9.5% 301%-400% 9.5% 7/7/2015 Cost Sharing Subsidies 40 Out of pocket cost is limited to individual between 100%-250% Subsidy pays up to the following actuarial values: Percent of FPL Actuarial Value 100%-150% FPL 94% value 150%-200% FPL 87% value 200%-250% FPL 73% value 7/7/2015 Small Employer Health Plan - Tax Credit 41 No more than 25 full time equivalent employees Less than $50,000 average annual wages Employer pays 50 percent or more of employee coverage Excludes owners and family members 7/7/2015 Tax Credit For-Profit Organization: Best Scenario 42 Assumption: 13 employees earning minimum wage of $7.25 per hour Single coverage - $4,704 average annual premium in MN 35 percent tax credit of $21,403 received only if credit equals tax from profitable year Cost to profit: $39,749, $1.76 per hour: 24.3 percent of additional compensation 7/7/2015 Tax Credit Non-Profit Organization: Best Scenario 43 Assumption: 13 employees earning minimum wage of $7.25 per hour Single coverage - $4,704 average annual premium in MN 25 percent tax credit - $15,288 received only if payroll tax equals or exceeds Cost to non-profit: $45,864, $2.03 per hour, 28 percent of additional compensation 7/7/2015 New Laws in 2010 44 Unlimited health care benefits for all fully-insured and selfinsured groups and individual plans that begin or renew on or after October 1, 2010. (No more $1 million/$2 million maximums.) Annual benefit limits will be allowed only through plan years beginning prior to January 1, 2014, and only on DHHSdefined, non-essential benefits. Example: 2010 Rx Maximum $ 7,500 2011 Rx Maximum $ 750,000 2012 Rx Maximum $1,250,000 2013 Rx Maximum $2,000,000 7/7/2015 2014 Rx Maximum Unlimited New Laws in 2010 45 All health insurance plans, including self-insured plans, renewing on or after October 1, 2010, will have to cover dependents up to age 26. Extended to grandfathered plans. Dependents could be married and would be eligible for the group health insurance income tax exclusion. Through 2014, grandfathered group plans would only have to cover dependents that do not have another source of employer-sponsored coverage. 7/7/2015 New Laws in 2010 46 All group and individual health plans, including self-insured plans, will have to cover preexisting conditions for children 19 and under for plan years beginning on or after October 1, 2010. Grandfathered status applies for group health plans 7/7/2015 New Laws in 2011 47 The tax penalty on distributions from a health savings account that are not used for qualified medical expenses increases from 10% to 20%. Cost of over the counter drugs will no longer be an eligible expense under HSAs, FSAs, HRAs and Archer MSAs (unless prescribed by a doctor). Creates the CLASS Act, a new public long-term care program and requires all employers to enroll employees: The employee may elect to opt out. 7/7/2015 New Laws in 2012 48 • All employers must include on each employee’s W2 the aggregate cost of employer-sponsored health benefits. Applies to benefits provided during taxable years after December 31, 2010. If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage, but exclude all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs. 7/7/2015 New Laws in 2012 49 All employers, including those with self-funded plans, must provide a summary of benefits and a coverage explanation to all enrollees, in addition to the current Summary Plan Description (SPD), that meets the following criteria (notices must be provided 60 days in advance): when they apply for coverage, when they enroll or reenroll in coverage, when the policy is delivered, and identify any material modification made to their coverage. The summary and explanation can be provided electronically or in written form, and there is a $1,000 per enrollee fine for willful failure to provide the information. 7/7/2015 New Laws in 2013 50 The threshold for the personal itemized deduction for unreimbursed medical expenses increases from 7.5% of AGI to 10% of AGI. The increase would be waived for individuals age 65 and older for tax years 2013 through 2016. $2,500 Cap on Medical FSA contributions, annually indexed for inflation begins. 7/7/2015 New Laws in 2014 51 Guarantee issue coverage, with no pre-existing condition exclusion, for all health insurance policies (wait until you’re sick, and then buy insurance). 7/7/2015 New Laws in 2014 52 Strict modified community rating standards All individual health insurance policies and all fully insured group policies 100 lives and under (and larger groups purchasing coverage through the exchanges) must abide by with premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic regions to be defined by the states and experience rating would be prohibited. 7/7/2015 New Laws in 2014 53 The current workplace wellness incentives has a maximum of 20 percent of employee premium. This maximum increases to 30 percent, and possibly to 50 percent (if the federal government agency approves). Redefines small group coverage as 1-100 employees. States may apply for a waiver to reduce this number to 50 for plan years prior to January 1, 2016. 7/7/2015 New Laws in 2014 54 An employer with more than 50 employees that offers coverage, but has at least one FTE receiving the premium assistance tax credit, will pay the lesser of $3,000 for each of those employees receiving a tax credit, or $750 for each of their full-time employees total. (Breakeven is 13 employees receiving the tax credit.) An individual with family income up to 400% of FPL is eligible for a premium assistance tax credit if the actuarial value of the employer’s coverage is less than 60%, or the employer requires the employee to contribute more than 9.5% of the employee’s family income toward the cost of coverage. 7/7/2015 New Laws in 2014 55 Requires employers to give a voucher to use in the individual market or exchange instead of participating in the employerprovided plan. Employees must be ineligible for subsidies The value of vouchers the employer contribution adjusted for age Employee can also keep amounts of the voucher in excess of the cost of coverage elected in an exchange without being taxed on the excess amount. Establishes standards for qualified coverage, including mandated benefits, cost-sharing requirements, out-of-pocket limits and a minimum actuarial value of 60%. Allows catastrophic-only policies for those 30 and younger. 7/7/2015 New Laws in 2014 56 Requires all American citizens and legal residents to purchase qualified health insurance coverage. Exceptions are provided for : religious objectors, individuals not lawfully present incarcerated individuals, those who cannot afford coverage, taxpayers with income under 100 percent of poverty, members of Indian tribes, those who have received a hardship waiver those who were not covered for a period of less than three months during the year People with no income tax liability 7/7/2015 New Laws in 2014 57 Penalty for non compliance to either a flat dollar amount per person or a percentage of the individual’s income, whichever is greater. In 2014 the percentage of income determining the amount of the fine will be 1%, then 2% in 2015, with the maximum fine of 2.5% of taxable (gross) household income capped at the average bronze-level insurance premium (60% actuarial) rate for the person’s family beginning in 2016. The alternative is a fixed dollar amount that phases in beginning with $95 per person in 2014 to $695 in 2016. 7/7/2015 New Laws in 2014 58 All employers must provide coverage documentation to covered individuals and the IRS. Requires employers of 200 or more employees to autoenroll all new employees into any available employersponsored health insurance plan. Waiting periods subject to limits may still apply. (Employer is fined for waiting periods greater than 60 days) Employees may opt out if they have another source of coverage. Implementation date is unclear, may change to earlier via regulation Requires all employers provide notice to their employees informing them of the existence of an Exchange. 7/7/2015 New Laws Beyond 2014 59 CHIP Reauthorized in 2015 Groups 100+ may be allowed into the Exchanges in 2017 if state elects 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for singles and from $27,500 for families takes effect in 2018. Delayed from 2013 by reconciliation bill. Transition relief would be provided for 17 identified high-cost states. Values of health plans include reimbursements from FSAs, HRAs and employer contributions to HSAs. Stand-alone vision and dental are excluded from the calculation. Reconciliation bill reduced the formula for indexing the thresholds even further (to just inflation, not inflation plus 1%) so that more plans will fall under the tax faster, but also allows plans to take into account age, gender and certain other factors that impact premium costs. 7/7/2015 Today: Pieces [sort of] fit together 60 ? ACA Copyright 2010: DGRCommunications, Inc. 7/7/2015 Neat, orderly, rigid, managed top down 61 ? ACA Copyright 2010: DGRCommunications, Inc. 7/7/2015 A look at your future health care system 62 ? ACA Copyright 2010: DGRCommunications, Inc. 7/7/2015 Where this leads 63 ACA Copyright 2010: DGRCommunications, Inc. 7/7/2015 Part 3: 64 Alternative solutions to the new law 7/7/2015 Real Solutions 65 Sensible Redesign of Health Care Delivery Emptying, not loading, the Wagon (GovCare) Common sense, private health care reform 7/7/2015 Emptying, not loading, the Wagon 66 Who should be in the wagon? Where should those in the wagon receive their health care? 7/7/2015 Who should be in the wagon? 67 Category Situation Disabled Unable to work: No financial assets Unable to work: With financial assets Able to work: With financial assets 7/7/2015 Who should be in the wagon? 68 Category Chronically Ill Situation Unable to work: No financial assets Unable to work: With financial assets Able to work: With financial assets 7/7/2015 Who should be in the wagon? 69 Category Healthy, Able Bodied Situation In-between jobs: No financial assets In-between jobs: With financial assets Employed: No financial assets Employed: With financial assets Choose unemployment: No financial assets Choose unemployment: With financial assets 7/7/2015 70 Where should those in the wagon receive their health care? A place with minimal admin cost, but maximum dollars spent on medical care Medicaid services in 2009 spent $180 billion on admin – 26% lost to admin cost: Replace with GovCare As many as 50% of doctors refuse new Medicaid patients today (low reimbursements) creating long wait times, and potential shortage of critical care: Replace with GovCare 7/7/2015 71 Where should those in the wagon receive their health care? The truly poor cannot afford out-of-pocket costs: Replace with GovCare Complicated government forms and procedures discourage the neediest from enrolling in Medicaid: Replace with GovCare Medicaid billing fraud wastes at least $30 billion a year: Replace with GovCare Out of control Medicaid spending threatens state budgets: Replace with GovCare 7/7/2015 72 Where should those in the wagon receive their health care? As much as 30% of medical expense results from defensive medicine: Replace with GovCare Lack of individual medical history at time of medical need results in unnecessary spending: Replace with GovCare Difficulty in managing an individual’s health care needs: Replace with GovCare High cost of emergency room care for routine, minor illness: Replace with GovCare 7/7/2015 Who qualifies for GovCare? 73 Those who do not have private insurance Those who are unable to pay for private health care 7/7/2015 What is GovCare? 74 GovCare is the health care delivery system used prior to 1966 for those who could not afford private health care In GovCare days, health care spending increased at the same rate as CPI In GovCare days, health care was affordable for most, and available for everyone 7/7/2015 What is GovCare? 75 GovCare is what we have now, but for those without private health insurance, delivered at government facilities Community health centers (more than 8,000 today) County hospitals Other government hospitals GovCare is provided by government-employed medical professionals It completely eliminates the issue of individuals who are uninsured 7/7/2015 Common sense, private health care reform 76 Stop paying medical providers who have to correct their own mistakes (gross errors) - Some examples: Hospital-borne infections Repeating procedures to get it right Missed diagnosis “Non-Events” 7/7/2015 Common sense, private health care reform 77 The GAP Plan: Guaranteed, Affordable, Portable coverage Guaranteed issue with no pre-existing condition exclusions Affordable, low-cost catastrophic policy: An alternative to high cost COBRA Portable insurance to take with you in-between employment 7/7/2015 Common sense, private health care reform 78 The APT Plan: Affordable, Price Transparent Affordable, as a result of a scheduled reimbursement Based Doctor charges: $200.00 Medicare allows $100.00 on Medicare reimbursements You choose the reimbursement level, set at a percent above the Medicare schedule (Ex. 130% - 150% -170%) You can go to any doctor you choose in the United States You have a 150% APT plan Plan pays $150 7/7/2015 You pay $50 Common sense, private health care reform 79 PAS Plan: Predictable, Affordable, Stable Pass the claim on to the Pool 2% of the population drives 50% of health care spending in any given year Pools the high cost claims, and pays the cost through a Health Care User Tax (2%) Recycling money: Tax pays the providers Like a gasoline tax Money pays for care, not for insurance premiums 7/7/2015 Part 4: 80 2011 strategies to control insurance cost 7/7/2015 81 STRATEGIES TO CONTROL INSURANCE COST FINDING WASTED DOLLARS IN MEDICAL INSURANCE PREMIUM Spousal surcharge program Defined Contribution Medicare-eligible employees – retirement Health Reimbursement Arrangements (HRA) 7/7/2015 82 STRATEGIES TO CONTROL INSURANCE COST CHANGE EMPLOYEE HEALTH CARE BUYING BEHAVIOR Pay less to insurance companies, and more to your employees Engage your employees in health purchase decisions with their money Teach employees to ask, “How much does this cost?” when they receive medical care 7/7/2015 83 STRATEGIES TO CONTROL INSURANCE COST USING TAX INCENTIVES TO MOTIVATE EMPLOYEES Employer paid disability benefit is 100% taxable to employees at time of disability Make the disability payment 100% tax free at the time of disability 7/7/2015 84 STRATEGIES TO CONTROL INSURANCE COST GIVE CHOICES TO EMPLOYEES TO CAP YOUR COST Dual-option medical plans Use different plan designs or different networks 7/7/2015 85 STRATEGIES TO CONTROL INSURANCE COST STRATEGIES TO COST-EFFECTIVELY RETAIN KEY EMPLOYEES Structure employee classes Executive medical reimbursements insurance 7/7/2015 86 STRATEGIES TO CONTROL INSURANCE COST USE EMPLOYER SIZE TO LEVERAGE LESS COSTLY EMPLOYEE OPTIONS Using your employees as a purchasing group to reduce individual cost No direct employer cost, except payroll expense Voluntary benefits for employees and dependents 7/7/2015 87 HEALTH CARE REFORM: KEY CONCEPTS FOR EMPLOYERS NOVEMBER, 2010 7/7/2015 Greg Dattilo, CEBS