Transcript Health Care Reform Happened …Now What?

International Association of Black Actuaries | August 2010
Health Care Reform Happened
…Now What?
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be disclosed or provided to any third parties without the approval of Hewitt Associates LLC.
Aspects of Health Care Reform
Paying for Expanded Coverage
Expanding/Improving Coverage
Health Insurance
Exchanges with
Reformed Rules
Individual
Responsibility
Medicaid and
Affordability
Credits
Medicare/Medicaid
Payment Changes
Administrative
Simplification
Employer
Responsibility
High-Cost Employer
Coverage Taxation
Increase
Other Taxes
= direct impact to employers
= indirect impact to employers
= direct and indirect impact to employers
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Timing of Key Reform Provisions
Early Retiree Reinsurance (2010)
Lifetime Limits Prohibited
Employer Distribution of Uniform
Summary of Benefits to
Participants
Extension of Dependent Coverage
to Age 26
Quality of Care Report
Limit of Health Care FSA
Contributions
Employer Responsibility to
Provide Minimum Health Coverage
Notice to Inform Employees of
Coverage Options in Exchange
Free Choice Vouchers
Automatic Enrollment for 2014**
Preexisting Conditions Exclusions
Prohibited for Children under 19
Medicare Tax on High-Income
Individuals
Only Reasonable Annual Limits
Permitted
Medicare Part D Subsidy No Longer
Tax-Free
Effective Appeals Process
Individual Responsibility to
Purchase Insurance or Pay
Penalty
State Insurance Exchanges
Preexisting Condition Exclusions
Prohibited
Over-the-Counter Medicines Not
Reimbursable Under FSA
Annual Limits Prohibited
HSA Excise Tax Increase
Limit of 90-Day Waiting Period for
Coverage in Plan
Automatic Enrollment**
Employer Reporting of Health
Coverage on Form W-2
Increased Rewards Cap for in
Wellness Participation
Phase-out of Part D Donut Hole
Employer Reporting of Health
Insurance Information to
Participants and the Government
Medicare Advantage payments
lower
Coverage for Preventive Health
Services*
Excise Tax on High-Cost
Coverage (2018)
105(h) Non-discrimination rules
apply to insured plans*
2011
2012
2013
*Grandfathered
**Effective date unclear
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2014 and beyond
The Price Tag
CBO Estimate of Combined H.R. 3590 and H.R. 4872, 2010–2019
Medicare
Advantage Cuts
Excise Taxes
Reduction in Medicare
CLASS
Growth Rate
Act
Other Net Savings
$136 billion
$196 billion
$70
billion
$32
billion
$115
billion
Medicare
Taxes
Penalty
Payments
Industry Fees Other Net
Revenues
$210 billion
$65
billion
System Savings
New Revenue
$517 billion
$564 billion
$107
billion
Total Cost of Expanded Coverage: $938 Billion
Net Budget Impact: $143 billion reduction to the deficit (without “doc fix”)
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$150
billion
Potential Impact on Employers
Design
Short-Term/Immediate
Long-Term
Must change design to meet
expanded coverage requirements
Must create design structure that
meets minimum coverage criteria
Administration/
Communication
Need to develop appropriate communication, reporting, and administrative
infrastructure
Active Plan Costs
Likely to increase depending on
organization’s characteristics
FAS Liability
Strategy
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Will continue to increase given
absence of true delivery system
reforms
Immediate and long-term cost impact
May be more compliance focused
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Should address broader health and
productivity as well as benefit
philosophy
Compliance –
What am I required to change?
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Plan Design Requirements
Increased Benefits for Participants
Lifetime limits must be removed
“Unreasonable” annual limits not permitted
– Annual limits will be phased out by 2014
Preventive benefits must be covered at 100%
Children must remain eligible for the plan until they turn age 26
Financial barriers to out-of-network emergency care are limited
Barriers to PCPs, pediatricians and OB/GYNs are not permitted
Deductibles and out of pocket maximums will be limited beginning in 2014
Plans must meet 60% minimum actuarial value beginning in 2014
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Other Requirements
Increased Protection for Individuals
Minimum loss ratios for insured plans
Prohibition of rescissions in most cases
Guaranteed issue and renewal rules
Waiting periods limited to 90 days
No discrimination based on health status
Limited age and tobacco rating
Expanded communication and documentation requirements
Expanded appeals policies and procedures
Affordability and nondiscrimination rules for employer-sponsored plans
Excise tax on high cost employer-sponsored insurance
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Compliance Strategy
Compliance will increase the cost of health insurance
– …but does it have to?
Employers and insurance companies will be searching for ways to mitigate
cost increases and limit new risks
– Grandfathering delays some new costs, but limits flexibility
– Losing grandfathering forces bigger strategic decisions…and vice versa
Step out of the silo
– Long term strategic thinking must guide all decisions
– Opportunities abound and can influence strategy as much as risks
> New retiree programs and funding
> Changing market dynamics
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Something about opportunities?
Overview
ERRP
New Medicare Part D funding
New competitive landscape
Changing market dynamics
Changing employer perceptions
Changing public expectations
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Looking Ahead –
What really needs to change?
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Health Care Reform’s Impact
New 2020 Realities
Government
Regulation and
taxation
Insurance
Industry
Competition based on
volume and
innovation
Individuals
Increased
responsibility with the
power of knowledge
Employers
Refine and redefine
commitments
Exchanges
Federal Subsidies
Insurance Reform
Employer Responsibility
Individual Mandate
Delivery Reform
The employer-sponsored system will endure…the federal budget depends on it
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Five Employer Realities by 2015
1.
Employer health care cost will rise over 60% on a “stand still”
basis; employer actions will mitigate this increase to 40%
2.
Very few, if any, large employers will exit health care benefits, but
the market trend to move from DB to DC will have begun
3.
Plan designs will be leaner and meaner
4.
The explosion of technology-enabled information will (finally)
trickle down to our world, but will not lower employer cost
5.
Employer-sponsored retiree medical benefits will cease to exist,
except for collectively bargained and some grandfathered plans
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Employer costs will rise 60% on a “stand still” basis
Annual gross trend of 10% per year; net trend of 7% per year
Upward Pressures
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Downward Pressures
Demographics
Obesity-related chronic
illness—including children
New therapies
↓
↓
↓
↓
Plan design value
↓
Focused care management
programs
Cost shift from Medicare
Industry fee pass-throughs
New coverage provisions
Discretionary purchasing
Uncompensated care
Brand drug patent
expirations
Individual mandate
These rates of increase are unsustainable; there needs to be a “new normal”
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What Needs to Change
Reset and
Prioritize
Employers
Providers
Government
Liability,
Payment, and
Delivery
System
Reform (via
Medicare)
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Embrace IT
and P4P
Consumers
Pay
Attention
and Take
Action
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