Update on the ACA & Developing Public & Private Exchangesautohaulersamerica.com/wp-content/uploads/2013/12/... · Health’Reform’ Phases! Summary! Legislation! PPACA and changes

Ronald E. Bachman President & CEO Healthcare Visions, Inc. 404-697-7376 [email protected]

Update on the ACA & Developing Public & Private Exchanges

Health Reform Phases

Summary

Legislation

PPACA and changes have already passed, but technical corrections and follow up legislation is likely to continue.

Regulation

Departments of Labor and Health & Human Services (HHS) have hired over 700 new staff to write the regulations for the 2700+ page law.

Compliance

Consultants and lawyers will find an expanded need for their services. All stakeholders need to determine if they are in compliance with the products, pricing, and coverages.

Litigation

In the end, courts will decide what the language of the law’s 2700+ pages mean. New laws require a period of adjustment that can take decades to sort out the meanings and conflicts of legal interpretations.

2014 PPACA Changes • Insurance Exchanges: Gov’t HIXs & plans with essen;al benefits. • Essen9al benefits package: For individual and small-‐grp markets • Rate Reviews: Gov ‘t reviews and jus;fica;on of premium rates • Exchange Navigators: Insurance purchasing assistance • Premium subsidies: Exchange Prem. & cost assist. to 4 ;me FPL • Increased Wellness Incen9ves: Health Status rewards to 30-‐50% • New rules for insurers: Guaranteed issue. • Single Risk Pool: Community Ra;ng • Individual Mandate: Required insurance for all or penalty • Insurance industry fee: Insurers pay a market share annual fee.

2014 PPACA Changes •  HSA 2014 Limits: Annual Increased for Infla;on •  PPACA & Self-‐Insurance: Response to single risk pool •  Private Health Insurance Exchanges: More coming on line •  Medicaid expansion: Op;onal Medicaid eligibility to 133% of FPL. •  Independent payment advisory board: Iden;fy Medicare savings.

•  Medicare managed care plans: HEDIS 4 & 5 star 5% reward for providing beXer clinical quality and pa;ent experiences.

2015 PPACA Changes •  Er Shared responsibility (“Er Mandate”-‐DELAYED from 2014)

1. Ers with 50 or more, not offering coverage -‐ subject to $2,000 per EE for all FTEs (30 EE exclusion) if any worker receives exchange subsidies. 2. Er with 50 or more, offering coverage -‐ subject to $3000 per employee if worker goes to exchange and receives a subsidy.

•  Defining & Repor9ng FTE (DELAYED from 2014): rules

2018 PPACA Changes •  High-‐cost insurance plans: A 40 percent excise tax will be

levied at the insurer level on policies with premiums over $10,200 for individuals or $27,500 for family coverage.

PPACA Health Insurance Exchanges (Overview)

The Pa9ent Protec9on & Affordable Care Act (PPACA) established government (public) health insurance exchanges.

Who: Government Health Insurance Exchanges are for: 1. individual purchasers of health insurance, and 2. small groups (small group exchanges are defined by states and can be up to 50 employees or 100 employees).

When: Effec;ve January 1, 2014 1. American Health Benefit Exchange (AHBE for individuals), and 2. Small Business Op;on Program (SHOP for groups).

The word “Exchange” can be confusing. PPACA defines gov’t health insurance exchanges (both federal and state-‐based). However, “Exchange” can refer to a “Health InformaCon Exchange” (HIE), a “Health Insurance Exchange” (HIX).

Because of the confusion “Marketplace” has generally replaced the original use for Insurance Exchanges. There are both government (public) and private forms of InformaCon Exchanges and Insurance Exchanges (Marketplaces).

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Employer Mandate for Large Group Employers (50 or more)

Employer Shared Responsibility Payments •  A penalty of $2,000 ;mes the number of full-‐;me employees

minus 30 employees if the employer does not offer qualified health insurance coverage and at least one employee receives a tax credit for the purchase of insurance through an Exchange.

•  If the employer offers qualified health insurance coverage but at least one employee declines the insurance coverage, and gets a tax credit subsidy to buy insurance through an Exchange, then the annual penalty is the lesser of (a) the penalty for the employer mandate, or (b) $3,000 ;mes the number of full-‐;me employees who received a tax credit to buy insurance through the Exchange.

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Employer & Individual Mandate (Fewer than 50 employees)

Employers with fewer than 50 employees are exempt from the employer mandate to provide insurance.

Small Employers can provide a tax advantaged “Defined Contribu;on” through a state allowed Health Reimbursement Arrangement.

Individuals are mandated to buy insurance (can purchase from public or private exchanges or directly from insurers).

If individuals don’t buy health insurance the minimum tax is $95 per person in 2014 and going to $695 in 2016 (up to 3-‐;mes for a family indexed for infla;on in subsequent years). The maximum penalty is 2.5 percent of taxable income.

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Essen;al Benefits

PPACA defines required essen;al benefits as ten broad categories of coverage:

(1) Ambulatory Services, (2) Emergency Services, (3) Hospitaliza;on, (4) maternity and Newborn Care, (5) Mental Health and Substance Abuse Services, (6) Prescrip;on Drugs,

(7) Rehabilita;ve Services, (8) laboratory Services, (9) Preven;ve and Wellness and Chronic Disease management Services, & (10) Pediatric, including oral and vision care.

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Gov’t (Public) Health Informa;on Exchanges

(GHIEs) &

Gov’t (Public) Health Insurance Marketplaces (GHIXs)

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Government Health InformaCon Exchanges (GHIEs)

Typically transmit healthcare-‐related data among: •  facili;es, •  health informa;on organiza;ons, and •  agencies according to state or federal standards.

The purpose of these Exchanges is to improve healthcare delivery, informa;on gathering, and transparency.

These Exchanges are an integral component of the health informa;on technology infrastructure under development in the United States.

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Government Health Insurance Exchange Marketplaces (GHIXs)

•  GHIXs are the en;;es for PPACA mandated private insurance, mandated coverage, provide premium subsidies, control plan designs, set premium levels (or require approval of rate increases), shii funds among carriers through risk adjusters, and establish state or na;onwide insurance mandates.

•  Subsidies may be available to individuals purchasing insurance thru GHIXs. Small employers may also be eligible for a tax credit to offset the costs of group insurance.

•  Used to iden;fy individuals eligible for gov’t programs such as Medicaid, High Risk Pool coverage, and Children’s Health Insurance Plans. 13

PPACA Insurance Exchanges (GHIXs)

A central provision of PPACA requires the establishment of exchanges in each state—online marketplaces through which eligible individuals and small business employers can compare and select health insurance coverage from par;cipa;ng health plans.

Begin enrollment by October 1, 2013, with coverage to commence January 1, 2014.

States have some flexibility with respect to exchanges by choosing to establish and operate an exchange themselves (i.e., state-‐based), or by ceding this authority to Health & Human Services (HHS) – (i.e. federally facilitated).

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Governance Models of State-‐based GHIXs

States may run one statewide exchange, regional exchanges within the state, or par;cipate in a mul;-‐state exchange.

Can be governed by a state agency (new or exis;ng), a quasi-‐governmental agency, or a non-‐profit en;ty.

GHIX Models Ac9ve purchaser: Exchange uses the market leverage of enrollees to evaluate plan bids and selec;vely offer plans, and/or nego;ate to restrict cost growth of plan offerings. The MassachuseXs Health Connector is an example of an ac;ve purchaser.

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Governance of State-‐based GHIXs (Con;nued)

Market Facilitator or Open Marketplace: Exchange relies solely on qualified health plans mee;ng minimum standards for entrance into the exchange, and allows market forces to set plan premiums.

The Utah Health Exchange is based on the market facilitator

model.

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Percent of FPL (2013) Family Size 100% 133% 150% 200% 300% 400%

1 11,490 15,282 17,235 22,980 34,470 45,960

2 15,510 20,628 23,265 31,020 46,530 62,040

3 19,530 25,975 29,295 39,060 58,590 78,120

4 23,550 31,322 35,325 47,100 70,650 94,200

5 27,570 36,668 41,355 55,140 82,710 110,280

6 31,590 42,015 47,385 63,180 94,770 126,360

7 35,610 47,361 53,415 71,220 106,830 142,440

8 39,630 52,708 59,445 79,260 118,890 158,520

Federal Poverty Line (FPL) Charts 48 Contiguous States and DC

For family units of more than 8 members, add $4,020 per person

Comparison of Public & Private Insurance Exchanges

Public Exchange Private Exchange

Sponsor Gov’l En;ty – either state or fed’l government (the default if no state-‐based exchange)

Private Company

Product/Service Offerings

PPACA qualified medical benefits: Medical, Dental, Vision through mul;ple carriers

Medical, Dental, Vision and other products: Life insurance, disability, supplemental products (e.g. cancer, legal, HO, Auto) through a single or mul;ple carriers

Target Market Individuals and Small Groups up to 50 or 100 Ees (varies by state)

Small & Large Groups: Ac;ve employees and re;rees of companies plus dependents

Financing Individual, small employer, federal gov’t with subsidies up to 400% of FPL

Consumer and employer

19 Mercer’s Private Exchange Pulse Survey, 2013

Private Health Exchanges (PHIXs)

When: Some private exchanges have been opera;ng for many years.

New regional and na;onal private exchanges may start opera;ng in 2013 and 2014.

PPACA increased awareness and the need for a new health insurance purchasing system.

In addi;on, some of the private exchange developers hope to get a share of the PPACA government exchange business.

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Private Health Insurance Marketplaces (PHIXs)

What: Typically are web-‐based portals focusing on consumer guidance and informa;on for the private purchase of health insurance.

These Exchanges serve as marke;ng and lead genera;on sites for brokers/agents.

Individual and group product descrip;ons, premium es;mates, and purchases can be made online or by follow up with an agent.

Private sites may also provide informa;on and guidance for those eligible for government insurance op;ons (Medicaid, CHIP, or Social Security Disability).

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Types of PHIXs by Sponsor

Business group PHIXs: developed from exis;ng employer associa;ons. Typically will ensure portability for ees, but only when the ee moves between par;cipa;ng ers and health plans.

Insurer-‐sponsored PHIXs: developed for insured policyholder, making it easy to move current small es into an exchange and allow individual ees a wider choice of health plan design. The portability (the ability of a consumer to keep the same coverage as they move between jobs) is available to individuals moving companies covered by the same insurer.

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Types of PHIXs (con;nued) by Sponsor

Independent companies: developed with various sponsorships, exis;ng rela;onships, and business models.

These companies include exis;ng informa;on technology vendors, consultants/brokers, and entrepreneurs.

These players seek to meet the needs of exis;ng health industry customers, employer groups, and broker clients. They see the opportunity to expand on exis;ng services and technology to create new businesses in a growing market.

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Types of PHIXs by Carrier Offering

•  Single-‐carrier Exchanges: These exchanges are promoted by a single payor. They target employers that wish to maintain some role in choosing both the insurance carrier and plan design

•  Mul9-‐carrier Exchanges: Promoted by brokers or benefits consultants to provide a broad range of payor and plan design op;ons. Mul;-‐carrier exchanges typically list individual products on a menu of offerings.

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Poten;al for PHIXs

•  The mid-‐ and large-‐group markets that will not be involved in the state-‐based federal PPACA exchanges. •  Er costs: fixed and controllable using HRAs (Defined Contribu;ons). •  Ees: will be able to choose their plan design. •  Coverage will eventually be portable, so employees can keep the same coverage as they change or lose jobs. •  Unlike individual coverage today, the Ee contribu;ons may be made tax free through using a Sec. 125 payroll deduc;on. •  Two-‐income families may be able to use contribu;ons from different Ers to purchase a single plan for the whole family.

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Value of PHIXs

Employers Employees

Cost Reduced Cost &/or Defined

Contribu;on

Cost Efficient, Convenient Purchasing

Convenience Simplified Administra;on

Comprehensive Coverage

Choice Empowered Employees

Personalized Coverage,

Supplemental Products

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Mercer’s Private Exchange Pulse Survey, 2013

PHIX and Voluntary Products

% Employers offering Supplemental Products Accident Insurance 43% Cancer / Cri;cal Illness Policies 38% Auto / Homeowners Insurance 3%

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% Employees wan9ng to Increase Some Benefits and Decrease Others

Group Size 1-‐499 35% 500-‐999 45%

1000-‐4999 42% 5000 or more 39%

Mercer’s Private Exchange Pulse Survey, 2013

Projected Growth of Private Exchanges: Mercer

•  Mercer: The % of US employers considering offering a private exchange for ac;ve and/or re;red employees has tripled in the past year to 56%.

•  Mercer said that 10 major insurance carriers—including Aetna, Cigna, Humana, UnitedHealthcare and a number of Blue Cross and Blue Shield plans—have signed on to the firm’s private exchange for 2014 enrollment.

•  Mercer’s exchange will be available to employers with at least 100 employees

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Projected Growth of Private Exchanges: Aon

•  Aon HewiX said all of the new clients have at least 5,000 employees and represent a range of industries.

•  With the addi;onal clients, Aon HewiX said 330,000 employees will be receiving coverage through its exchange.

•  In total, Aon HewiX an;cipates more than 600,000 U.S. employees and their families will be covered under plans in the Aon HewiX Corporate Health Exchange in 2014.

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Self-‐Insured Plans

PPACA creates significant mandate differences and cost implica;ons between fully insured and self-‐insured plans. Self-‐insured employer plans are explicitly exempted from some PPACA requirements. Self-‐Insured Plans are NOT:

•  Required to provide minimum essen;al benefits (required to meet the cost-‐sharing limits, benefit levels, and “minimum essen;al coverage” but are not required to provide the “minimum essen;al benefits”).

•  Required to par;cipate in a risk-‐adjustment system, •  Subject to single risk pool standards, •  Subject to 3-‐1 age pricing compression and other ra;ng mandates, •  Subject to medical loss ra;o (MLR) mandates, •  Subject to review of premium increases, and •  Subject to the annual insurance fee that starts in 2014 for fully

insured plans. 30


The exis;ng benefits of self-‐insured are retained. They are NOT: •  Subject to state premium taxes, •  Subject to state coverage mandates, and •  Subject to insurance reserve requirements.

Under PPACA, employers will retain the choice of fully insured and self-‐insured arrangements. However, fully insured plans will mostly be offered through health exchanges because federal employee premium subsidies (up to 400% of the federal poverty level) will only be available through exchanges. The size of groups eligible for par;cipa;on in an exchange may vary by state and can increase over ;me based on PPACA requirements.

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Because PPACA exempts self-‐insured plans from some costly requirements, it may be financially beneficial for an employer (regardless of size) to consider self-‐insurance.

As PPACA is implemented, self-‐insuring may become a beXer value than fully insured plans for small firms with good historical experience and a good risk profile.

In 2009, self-‐insured plans were offered to 13.5% of plans with fewer than 100 employees, 25.7% of Plans with 100-‐499 employees, and 82.1% of plans with more than 500 employees (Agency for Healthcare Research and Quality),

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Cost compe;;ve reinsurance arrangements are available. High claims risks can be mi;gated with specific and aggregate stop-‐loss coverage.

Courts have consistently upheld ERISA federal exemp;ons from state insurance laws and the use of reinsurance for small groups, even as states have tried to restrict them. It is uncertain at this ;me if federal laws or regula;ons will change to prohibit this gambit.

Under PPACA, if the health of self-‐insured groups deteriorates they can then join an exchange. In the exchange, their experience is spread over the en;re exchange pool as part of a single risk pool.

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A Cri;cal Review of PPACA Implementa;on Problems

•  The CLASS Act. An aXempt to create long-‐term care insurance, the sec;on was eliminated when the Congressional Budget Office ruled it did not meet financial standards for long-‐term solvency.

•  The 1099 provision. This mandate required businesses to issue a 1099 form to any vendor from which they purchased $600 or more of goods and services in a year. Congress repealed the mandate aier businesses complained of the expense and burden it would impose.

•  Co-‐ops. Congress tried to create compe;;on by funding new non-‐profit insurers iden;fied in ObamaCare as co-‐ops. Billions of dollars were spent on a few state ini;a;ves before Congress eliminated funding in 2013 tax legisla;on.


•  Medicaid expansions. The U.S. Supreme Court ruled the law's mandate to expand government-‐funded insurance for the low-‐income popula;on was uncons9tu9onal but allowed states to voluntarily par;cipate. About half of the states will do it and half will not.

•  Federal high-‐risk pools. Few enrolled in a bridge program for uninsured high-‐risk individuals due to the complexity, cost and lack of compensa;on for insurance agents. The Pre-‐Exis;ng Condi;on Insurance Plan stopped accep9ng applica9ons early, in February 2013, to "help ensure that funds are available through 2013" for the 100,000-‐plus enrollees un;l ObamaCare's guaranteed issue coverage kicked in in 2014.


•  Re9ree health subsidies. This replaced funding for re;rees, which many large companies were already providing. Companies were happy to accept the windfall funding. In the end, the money ran out in about a third of the ;me expected.

•  Small employer tax credits. This was a heavily promoted program designed to encourage small employers with low-‐wage employees to add health insurance. The reality was that few employers qualified for any subsidy. The complexity and confusion of these credits deterred all but a handful of companies from even applying.


•  Pricing mandates: The Affordable Care Act includes several pricing mandates that distort natural risk rela;onships. These have caused most carriers to increase premiums drama;cally in an;cipa;on of an;-‐selec;on. Some carriers have exited geographic markets while others have eliminated all sales for individual policies.

•  Medical loss ra9o. This complex, arcane requirement sets the percentage of insurance premiums that can be spent on medical care versus plan administra;on. It minimized the value of agent support, health literacy programs, compliance oversight and effec;ve plan administra;on. Many smaller employers have opted instead for more flexible – but less secure – self-‐insured arrangements.


•  Single risk pool. Single risk pools mandate community ra;ng for small insured groups. Essen;ally, providers must offer policies to everyone within a given area at the same price, regardless of health status. Employers who can are avoiding this mandate by going to a self-‐insured contract. Many groups too small for self-‐insurance have taken early renewals and set anniversary dates at December 1, 2014 to avoid this and other ObamaCare pricing mandates as long as possible.

•  Price compression: The law sets the rela;ve rela;onship of premiums between older and younger plan par;cipants at 3:1, ignoring actual claims experience of 5:1. The result is a cost increase of 50-‐100 percent or more for younger people, who historically have been a significant percentage of the uninsured.


•  Guaranteed issue: The law requires that a health plan must allow enrollment without considering health status, age, gender, etc., that predict a par;cipant's use of health services. Combined with other pricing mandates that distort natural risk rela;onships, guaranteed issue is expected to lead to drama;c an;-‐selec;on, limited choice of products and fewer insurers offering products. All of these outcomes will likely increase premiums.

•  Limits on Flexible Spending Accounts (FSAs): Tax-‐advantaged FSAs cover many medical condi;ons not otherwise paid under insurance contracts (i.e. seeing-‐eye dogs). The new $2,500 limit on FSA funding hurts families with known upcoming high-‐cost medical needs, many of them involving special-‐needs children.


•  Reduced tax deduc9on for medical expenses. Beginning in 2013, a taxpayer can deduct only those medical expenses exceeding 10 percent of income. The previous threshold was 7.5 percent. This plus the lower limits for FSAs will most hurt the families with the sickest members.

•  One-‐year waivers. Waivers from ObamaCare were provided seemingly to HHS-‐favored companies and unions. Many complained that there did not seem to be any qualifying standards for issuing these waivers.

Poten;al Problems to Come?

•  Health Insurance Exchanges: 27 states declared they would not establish a state run health insurance exchange. These states have defaulted to a federally-‐facilitated exchange marketplace. Will HHS be ready to implement these exchanges that are required to go live on October 1, 2013.

•  Health Exchange Subsidies: The PPACA law seems to establish that individual subsidies are available only through state-‐based exchanges and not through federally facilitated exchanges. However, HHS has declared by fiat and the Treasury department has pronounced that they will provide subsidies through both exchanges. Can this hold up in court or con;nue with subsequent administra;ons?


•  Individual Subsidies: Individuals are eligible for subsidies if employer’s of 50 or more employees don't offer qualified insurance. With the one year delay in repor;ng requirements, how will the Treasury know who qualifies in 2014 if they lack the informa;on that businesses are supposed to provide? Will systems linking health insurance and tax records be ready and accurate? Will anyone trust the IRS to maintain privacy of health informa;on?

•  Individual Mandate: Ci;zens must pay the individual mandate-‐tax if they decline coverage from their employer. With the employer mandate delayed for one year, can the individual mandate be far behind? How will the Treasury verify these offers?


•  Defini9on of Dependents: In a surprise HHS regula;on, spouses do not have to be provided insurance under the PPACA for an employer to meet the standards of insurance for “essen;ally all” employer and dependents. Many non-‐working spouses (or spouses working for small employers) could lose exis;ng coverage and either become uninsured (and pay a penalty) or seek expensive individual coverage through an exchange.

Ques;ons

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Documents

Update on the ACA & Developing Public & Private Exchangesautohaulersamerica.com/wp-content/uploads/2013/12/... · Health’Reform’ Phases! Summary! Legislation! PPACA and changes