Transcript Test of New Master

Massachusetts Health Care Reform
September 26, 2006
Why healthcare reform in Massachusetts?
Double-digit, annual increases in insurance premiums and the
highest per capita healthcare spending in the nation
460,000 uninsured in 2004 state survey
Small businesses and individuals facing significant barriers to entry
for coverage
Limited availability of information to consumers and businesses
precludes informed health insurance purchase decisions
Potential loss of at least $385 million in federal government
Medicaid funding
Two “universal” healthcare ballot initiatives
$1 billion and growing of “free-care” forcing all stakeholders to
deal with costs for uninsured and under-insured
2
The Uninsured in Massachusetts
Total Commonwealth Population:
6,400,000
Currently insured (93%)
5,940,000
-Employer, individual, Medicare or Medicaid
Currently uninsured (7%)
460,000
-<100% FPL
Medicaid Eligible but unenrolled
106,000
-~100-300% FPL
Commonwealth Care
150,000
->300 FPL
Affordable Private Insurance
204,000
Note: Based on August 2004 Division of Health Care Finance statewide survey, 2006 survey 372,000
3
Broad consensus that healthcare reform must
be a “system”, not a “product” approach
Efficiencies/Cost
Containment
A Culture
of Insurance
Eliminate Cost
Shifting
Subsidies for
Low Income
Ease of Offer,
Ease of Purchase
Affordable
Products
4
Insurance market reforms: A good start
Existing Market
Reformed Market
Dysfunctional individual market
Individual/small market merger
Limited take-up of HSAs
More products with HSAs
“Any willing provider”
Value-driven networks
Bad value for younger adults
19-26 year-old market
No consequence for lifestyle choices
Tobacco usage is a rating factor
Hard cut-offs for dependent status
More flexible up to 25 years-old
Growing list of mandatory benefits
Two year moratorium
Optional, smaller risk pools
Mandatory, larger risk pools
5
Insurance reforms will provide better value
for consumers
Existing Market
Reformed Market
Primary care
Yes
Yes
Hospitalization
Yes
Yes
Mental Health
Yes
Yes
Prescription Drugs
Yes
Yes
Provider network
“Open Access”
“Value-Driven”
Annual deductible
“First Dollar Coverage”
$250-$1,000
Low ($0,10,20)
Moderate ($0,20,40)
$350+
$154 - $280
Co-pays
Monthly Premium
6
The Connector is a breakthrough concept
Increasing adoption of pre-tax premium payment options for
businesses (e.g. Section 125 plans)
Providing small businesses, sole-proprietors, and individuals with
more affordable product choices
Shifting the employer/employee health insurance relationship from
design, benefits, product offering, and contribution to just a
discussion regarding financial contribution
Posting “good value” products to facilitate the purchase of this
complex product
Reaching non-traditional workers through innovative means
Allowing portability for the consumer
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The Connector makes it work
Non-offered
Individuals
Non-working
Individuals
Small
Businesses
Sole
Proprietors
Insurance Connector
Blue Cross
Blue Shield
Harvard Pilgrim
MMCOs
Tufts
NHP
Fallon
New Entrants
8
The Uninsured in Massachusetts
Total Commonwealth Population:
6,400,000
Currently insured (93%)
5,940,000
-Employer, individual, Medicare or Medicaid
Currently uninsured (7%)
460,000
-<100% FPL
Medicaid Eligible but unenrolled
106,000
-~100-300% FPL
Commonwealth Care
150,000
->300 FPL
Affordable Private Insurance
204,000
Note: Based on August 2004 Division of Health Care Finance statewide survey
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“Commonwealth Care” makes private
insurance affordable for eligible individuals
Redirects existing spending on the uninsured away from opaque
bulk payments to providers to direct assistance to the individual
Premium assistance up to 300% of the Federal Poverty Level (FPL)
-Zero premium for individuals under 100% FPL
-Premiums increase with ability to pay up to 300% FPL
-No cliff; glide-path to self-sufficiency
-No deductibles permitted for low-income individuals
Private insurance plans offered exclusively through Medicaid
Managed Care Organizations (MMCOs) for first three years
The Connector will serve as the exclusive administrator of
Commonwealth Care premium assistance program
-Works closely with Medicaid program to determine eligibility
SCHIP and Insurance Partnership programs expand to achieve the
same objective
10
Commonwealth Care: Key assumptions
Approximately 200,000 individuals will be eligible
Estimated health insurance monthly premium is $300/individual
Average state subsidy will between 80-85% of the monthly premium
Over a transition period, over $1 billion in funding can be available
for premium assistance
-Medicaid demonstration project monies
-Existing provider and payer assessments
-DSH funding
Funds not used for premium assistance will remain available to
compensate for “free-care” services
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Commonwealth Care: Premium assistance
schedule
FPL
Single Person
Income
Monthly
% of
Premium* Income**
<100%
$9,800
Free
NA
150%
$14,700
$18
1.8-2.1%
200%
$19,600
$40
2.8-3.8%
250%
$24,500
$70
3.8-5.4%
300%
$29,400
$106
4.7-6.3%
*Rates for single individuals
** Range as a percent of mid-point income for individuals and two adults with one child
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Redeploying existing funding makes the
program financially sustainable
Ratio of Premium Assistance to “Free Care” – FY06-09
100%
Premium
Assistance
80
Premium
Assistance
Premium
Assistance
60
Free Care
Free Care
40
Free Care
20
0
Free Care
FY06
FY07
FY08
FY09
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Connector funding
Connector received an up-front block appropriation of $25M
-Start-up/build costs, outreach and marketing, on-going operations
-Portion of Connector operations related to Commonwealth Care
expected to qualify for federal Medicaid reimbursement
Law empowers the Connector to assess fees on premiums written
for future funding needs
-Silent on need for future appropriations
Premium assistance payments funded without further
appropriation from the Commonwealth Care Trust Fund
-50% Federal reimbursement
Transferability between the Health Safety Net Fund (UCP) and the
Commonwealth Care Trust Fund
14
Employers will remain the cornerstone for
the provision of health insurance
Existing IRS/ERISA provisions
Existing and new state non-discrimination provisions
-Fully insured companies are prohibited from varying financial
contribution to employees enrolled in group health plans
Health Insurance Responsibility Disclosure
-A form signed by every employer and employee
-Indicates whether the employer has offered to pay or arrange for
employees’ health insurance
-If an employee declines an employer’s coverage, then sign a disclosure
form that employee understands their responsibility to pay for their
healthcare costs
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Employer implementation issues
The law requires most employer requirements to be implemented
in an expeditious manner
Guiding policy principles
-Be mindful of the potential for ERISA challenges
-Do not create incentive for employers to drop
-Agreement was that everyone will contribute to the UCP assessment
 Offering employers already paying in
Guiding administrative principles
-Keep it simple for smaller employers
-Part-time, seasonal, temporary, and foreign workers are important part
of the workforce
Conducted informational hearings across the state
-Attended mostly by employers
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Employer responsibility provisions: “Free
Rider” surcharge
Surcharges any employer with 11 or more FTEs that does not pay
or arrange for the purchase of their employees’ health insurance
 Includes full-time and part-time employees
The surcharge is based on employee and dependent’s use of the
“free care” health services
 Surcharge applies when an employer’s employees use “free care”
in excess of certain usage and aggregate costs triggers
 Employer assessed 10 – 100% of the state’s costs of “free care”
An employer can avoid the surcharge by:
 Offering a group health insurance plan or
 Establishing a section 125 cafeteria plan for all employees
 Important to note that no employer financial contribution is
required to avoid the “Free Rider” surcharge
Proposed “Free Rider” surcharge regulations proposed on June 30th
17
Employer responsibility provisions: “Fair
Share” assessment
The Commonwealth has assessed insurers, hospitals and certain
businesses to help partially reimburse the costs of “free care”
provided by hospitals and community health centers
-This assessment has been in existence for more than 20 years
-$320 million in annual assessments
An unintended consequence of the existing structure is the
exclusion of employers which do not offer employee health
insurance from the assessment
The “Fair Share” assessment was to extend the existing
assessment to “non-offering” employers
-Maximum assessment is $295/employee/year based on “free care”
usage
-Employees deemed offering a “fair and reasonable” financial
contribution would be exempt from the new assessment
-Regulations were adopted on September 8, 2006
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“Fair Share” test
Two-step test
-Primary Test: Take-up rate must be equal to or greater than 25%
 If the business passes this test, then no assessment
 If the business fails this test, then move to secondary test
-Secondary Test: The business must offer to contribute 33% or more
towards health insurance
The two-step test accomplishes the following objectives:
-The primary test ensures that the employer is covering not just offering
insurance to its employees (thus paying into the UCP)
-It respects free market principles by allowing the employer and
employee to determine a “fair and reasonable” employer contribution
 Employees “vote with their feet” by enrolling in the employer’s
health plan
 The Commonwealth is measuring the result of the employer and
employees’ wage and benefit negotiations
-The secondary test provides employers with a “safe harbor” from
employees who turn down health insurance for reasons that the
employer has no control over
19
The law contributes to market stability by
addressing cost shifting
Medicaid rate increases
-$270 million rate increases for hospitals and physicians over a three
years
 $90 million/year
 85% for hospitals and 15% for physicians
-Increase rates for community health centers
-Beginning in year two rate increases for hospitals must be tied to
“pay-for-performance” measures
Enroll eligible individuals in the Medicaid program
-On-line, streamlined application process
-77K in the last twelve month period
-Lifting of enrollment caps for certain programs
Restoration of certain Medicaid benefits (adult dental, eyeglasses)
Reforms the Uncompensated Care Pool reimbursement
mechanisms
20
Personal responsibility: health insurance is
the law
Statewide open-enrollment period in March 2007
-Both Commonwealth Care and whole insurance market
Beginning on July 1, 2007 all Massachusetts residents will be
required to have health insurance
Enforcement mechanisms
-Indicate insurance policy number on state tax return
-Loss of personal tax exemption for tax year 2007
-Fine for each month without insurance equal to 50% of affordable
insurance product cost for tax year 2008 (approximately
$1,200/person)
21
Encouraging efficiency and cost
containment strategies
Program integrity efforts
-Provider re-credentialing
-Non-custodial parent responsibility
-Increased funding for Medicaid Fraud Control Unit and State Auditor
Cost, Quality and Patient Safety initiatives
-Improving the Commonwealth’s purchaser and consumer website
-Funding for Betsy Lehman Center for Patient Safety
-Statewide infection and prevention control program
-Health Care Quality and Cost Council
Funding for certain public health programs to help raise public
awareness
-Diabetes
-Renal disease
-Cancer screening
“Pay-for-Performance” measures
-Mandated for the Medicaid program
-MassHealth Payment Policy Board
-Working with other payers and providers to ensure consistency
22
The law provides the guidelines, but success
will be measured by its implementation
CMS approval for Medicaid waiver
Creation of affordable, quality health insurance products
Well-functioning Connector that addresses the needs of small
businesses and consumers
Premium assistance program that is financially sustainable and not
rife with adverse selection
True transparency in the cost and quality of healthcare services
All purchasers (large businesses, government, insurance companies)
must demand that the fragmented healthcare supply-chain become
more efficient and coordinated
Acceptance of personal responsibility principle by hospitals and
individuals
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