Ppaca presentation

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PPACAPatient Protection and Affordable Care Act

AKA Healthcare ReformAKA Obama Care

Presented By:Christine Price, CEO, CHRS

CHRS Certified Healthcare Reform Specialist

Being a Certified Healthcare Reform Specialist does NOT mean that I know everything there is to know about Healthcare Reform. That would be like saying I know the speed limit between here and Georgia - it changes every few miles. But... If you have questions that I can’t answer, I will get the answers for you.

© 2012 Creative Management Resources, Inc.

Disclaimer

This presentation is intended for informational and educational purposes. It is not intended to be a partisan look at the legislation nor is it intended to project the presenter’s agreement or disagreement with such legislation.


Who will PPACA

affect?EVERYONE! In one way or another, everyone in the United States will be affected by PPACA – business people, individuals, families and healthcare providers.


Christine Price, CEO, CHRS

Christine has been in the healthcare industry for over two decades. Her positions have included Managed Care Director for the largest internal medicine group in south Georgia, Marketing Analyst for a proprietary claims adjudication software, COO of a Third Party Administrator in south Georgia and now serves as President and CEO of Creative Management Resources, a Third Party Administrator and Consulting firm based in Las Vegas.

Christine holds a Bachelor’s of Business Administration Degree, has extreme industry experience and is a Certified Healthcare Reform Specialist (CHRS). Her passion is assisting clients in making informed decisions about their healthcare benefits plan as well as assisting them in controlling the costs of those plans.


Preparing for 2014 What is

on the Horizon?Thus far, only minor regulations have been implemented including:

1. Children under 19 can no longer be subjected to pre-existing clauses.

2. Dependents must be covered to age 26 if they do not have employer sponsored coverage.

3. Annual maximum coverage increased to $2M

4. Coverage for preventive medicine with no cost sharing.

The more significant changes will begin in 2014. Let’s look at some frequently asked questions.


Common Questions


Are Health Insurance Costs Going to Increase Because of PPACA?

According to most experts, health insurance costs will increase by 2-3% more than they would have if the legislation had not passed. Only time will tell but we must put plans of action in place to minimize these increases.


What Tax Credits are Available?

Small businesses are eligible for a tax credit for up to six years. Before 2014, the maximum credit equals 35% of the business’s contribution to employee health insurance premiums. After 2014, the maximum is 50%, but only on policies purchased in SHOP exchanges. The percentages phase out as the number of employees and FTEs rises from 10 to 25 and as the average wage rises from $25,000 to $50,000.

The above is only a summary of the Small Business Tax Credits. A tax credit calculator is available at

http://www.smallbusinessmajority.org/tax-credit-calculator© 2012 Creative Management

Resources, Inc.

What are SHOP Exchanges?(Small Business

Health Option Programs)

Some businesses may not be “small” enough to receive tax credits or “small” enough to be excluded from the employer mandate of the PPACA but it may be “small” enough to purchase coverage through SHOP Exchanges. SHOP Exchanges that will allow small businesses to buy insurance at a “presumably” lower cost will be required starting in 2014.

In order for a “small employer” to qualify for the small group market, it must have between 1 and 100 employees in both a calendar year and a plan year. Here’s the catch. Until 2016, the state SHOP Exchanges can define a “small group” as having 50 employees or less which disqualifies an employer having 51-100 employees from purchasing insurance through the exchange.

Nevada’s Exchange HAS defined a “small group” as having 50 employees or less until 2016 at which time it will open up to groups having up to 100 employees.


What are Essential Health Benefits (EHB)?

The PPACA identifies 10 (ten) categories of Essential Health Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health

treatment Prescription drugs Rehabilitative and habilitative (see note below) services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care

NOTE: While rehabilitative services help people recover lost skills, habilitative services help them acquire new ones. Habilitative services can help autistic children improve language skills, or those with cerebral palsy learn to walk. They can also help a person with schizophrenia improve his social skills. © 2012 Creative Management

Resources, Inc.

Essential Health Benefits (con’t)

The Affordable Care Act requires that all individual and small-group plans sold in a state, including those offered through the Exchange, cover certain defined health benefits. States must decide whether to benchmark their EHB plan to one of ten plans operating in the state or default to the largest small-group plan in the state. States were encouraged to select the benchmark EHB plan by the end of September 2012. The Exchange Board analyzed all plan options and the top scoring plans, in order, were the Health Plan of Nevada POS C-XV small group, State of Nevada Public Employee Benefits Program High Deductible PPO Plan and Hometown Health Plan 25 HMO Public Employees Benefits.



The Nevada Health Plan small group plan is basically a $500 deductible, office visit, diagnostic testing and prescription co-pays with the majority of the remaining plan having an 80/20% coinsurance for in-network and 60/40% coinsurance for out-of-network with a $2000 out-of-pocket maximums.

As of September 19, 2012, the NHP Plan was ranked #1 as the choice for a benchmark plan but a final decision had not been made. If that plan is chosen, it will have to be supplemented with the Nevada CHIP dental plan.



The Healthcare Exchanges will have four levels of coverage that they can offer, which vary depending on how much the insurer pays, include:

1. Bronze: benefits equivalent to 60% of the full actuarial value of plan benefits, 2. Silver: benefits actuarially equivalent to 70% of full value3. Gold: benefits actuarially equivalent to 80% full value, and4. Platinum: benefits actuarially equivalent to 90% of full value.

Qualified health insurers must offer at least one plan at the Silver level and one plan at the Gold level in each Exchange in which their plans are offered.

NOTE: SELF-FUNDED PLANS ARE NOT SUBJECT TO THE EHB PORTION OF THE PPACA © 2012 Creative Management

Resources, Inc.

What is the Health Insurance Tax (HIT)?

PPACA assesses a tax on all health insurance companies based on their “net premiums” written. This tax will raise $8 billion in 2014, rise to $14.3 billion in 2018, and the amount will continue to increase by the rate of premium growth for subsequent years. The amount of the tax that the insurance company is responsible for is equal to the percent of the market that the insurance company covers. The larger the insurance company’s market-share, the higher their annual HIT. One thing insurers have made clear throughout the healthcare debate: new taxes will result in new costs passed along to customers. The group that experiences the most cost-shifting is the fully insured market.

NOTE: THE HEALTH INSURANCE TAX DOES NOT APPLY TO SELF-FUNDED PLANS


What is the Individual Mandate?

Individual taxes for failure to obtain health insurance begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three.

2014: $95 per person (up to 3 people, or $285) OR 1.0% of taxable income, whichever is greater.

2015: $325 per person (up to 3 people, or $975) OR 2.0% of taxable income, whichever is greater

2016: $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income, whichever is greater.

After 2016: The same as 2016, but adjusted annually for cost-of-living increases.


My company has less than 50 employees – Will PPACA affect me?

Yes and No. The number of full time employees is determined by the number of full time “equivalent” employees. This is calculated by totaling the number of hours of “regular time” your employees have worked in the past 12 months (in 2013). The new federal definition of “full-time” is 30 hour per week. PPACA regulations require that part time employees’ hours be used in the calculation of full time “equivalents”. For example: a company employs 35 full-time workers (working on average of more than 30 hours per week) and 20 part-timers (working on average 24 hours per week, or 96 hours per month). These 20 PTE are the equivalent of 16 FTE. (20 x 96 / 120 = 16). So for calculation purposes, this employer has 35 + 16= 51 full-time equivalents. In this case, the employer must provide insurance coverage to its employees or pay a penalty of $2000 per employee for 21 employees. (the first 30 employees are not subject to a penalty).

NOTE: These rules do not apply to seasonal workers that worked less than 120 days during the prior year.


My company has less than 50 employees – Will PPACA affect me?

(con’t)

As stated before, some small employers may qualify for tax credits if they provide their employees with insurance coverage; however, they are not required to do so by the PPACA.

CAUTION: Many employers with more than 50 employees have had an initial reaction to “lay off full time employees and bring them back as part time, thereby avoiding the impact of PPACA. Because of the way the number of full time employee equivalents is calculated, this is not a feasible option. In addition, the current penalty for failing to provide coverage is $2000. That amount can, and will likely, be increased as we move forward.


What is Pay or Play?

The Pay or Play mandate refers to the requirement of the PPACA to either “pay” a penalty tax for either dropping or not offering health insurance to its employees or “play” by continuing or beginning to offer health insurance to its employees.

If an employer chooses not to provide group health coverage in 2014, and at least one full-time employee obtains federally subsidized coverage through a Health Exchange, the employer will have to pay a $2,000 “free rider” penalty for each full-time employee. The employer’s first 30 employees are excluded from this calculation. The penalty is assessed on a monthly basis. This is the so-called Pay scenario.

In addition, the coverage offered must meeting minimum coverage levels or face other penalties. © 2012 Creative Management Resources,

Inc.

What is Pay or Play (con’t)

If an employer offers group health coverage in 2014 and at least one full-time employee obtains subsidized coverage through an Exchange, the employer will incur a monthly penalty.

An employee is eligible for the tax credit (subsidy) if at least one of the following is met:1. The employer offers group health plan coverage that meets EHB

(Essential Health Benefits) requirements but the plan premium for single coverage is greater than 9.5% of the employee’s household income.

2. The employer’s contribution is less than 60% of the actuarial plan value.

The employer penalty will be the lesser of $3000 times the number of full-time employees receiving subsidized coverage OR $2000 times the number of full-time employees (again, the employer will not be penalized for the first 30 employees).


What is the “Cadillac Tax”?

The “Cadillac Tax” is a nondeductible tax that will be levied on health plan costs for employees that exceed $10,200 for single coverage or $27,500 for family coverage beginning in 2018.

Because of this new tax, it is imperative that employers start controlling their healthcare costs NOW so that the costs of their plans do not increase to a point that will trigger this tax.


Options

The options of dealing with the PPACA are:

1. “PAY” the penalties and drop coverage2. “PLAY” and continue to offer same coverage as

normal or change benefits to meet new guidelines

3. “PLAY” and look at other coverage options (Self-Funding)


Be careful not to Pay AND Play

Before making a decision to pay, think about the following. Deciding to “Pay” could mean you’re “Playing with Fire” Don’t get burned.

1. What happens if Congress decides to raise the penalty amount?

2. Will you lose quality employees to companies that are offering coverage?

3. Will you have to increase employees’ pay to cover any shortfalls in paying for Exchange coverage?


A Push Toward Self Funding?

An article in Business Insurance Magazine in February, 2012, stated in part:

“The passage of health care reform is likely to further accelerate the growth of middle-market self-funding.

Although self-funded benefits will be subject to many of the same coverage requirements imposed on insured plans,” the cost of self-funded benefit plans will continue to remain lower than that of insured plans because self-funded plans are not subject to state benefit mandates or premium taxes that add to plan costs, experts say.


Fully Insured vs. Self-Funding

Now, more than ever before, employers, including employers with as few as 25 employees, are looking at Self-Funding (partially Self-Funding) for several reasons:

1. More plan flexibility. Self-Funded ERISA plans are not subject to all of the PPACA mandates.

2. Ability to control costs.3. Medical, dental, vision and prescription coverage's can all be self-

funded.4. Elimination of most premium tax5. Lower administration costs6. Profit goes to employer7. Exempt from most State mandates


More Plan Flexibility

Self-Funded plans are NOT subject to Essential Health Benefits Mandate.

Self-Funded plans are NOT subject to the MLR (Medical Loss Ratio) that is imposed on fully insured plans.

Self-Funded plans will NOT be subject to community rating.

Self-Funded plans do NOT have to provide justification of premium increases or benefit decreases.


Ability to Control Costs

Unlike fully insured plans where provision of plan and claims information is scarce, self-funding allows the employer to obtain their plan information, modify the plan (with 60 days notice) when needed to control certain benefits, predict with some degree of certainty what claims and costs will be as well as well as predict to some degree the amount of increase (if any) in premiums annually.

This access to plan data can be invaluable when determining budgets, renewal estimates, cost drivers and the impact of plan changes to costs and to employees.


Profits Go to Employer

Unlike fully-insured plans, any profits (or savings on expenditures) are retained by the employer, not the insurance carrier. An excellent cash flow advantage.

While funds for claims expenses can be accrued, they can also be “pay as you go” which frees up cash flow. Mechanisms are put in place to cap monthly and annual expenses to prevent adverse financial effects for the employer.


Will Self-Funding Work for a Small Employer

A common myth is that Self-Funding is only for very large businesses, unions or trade associations. That is simply not true. Below is a graph showing the trend of “real” costs for an actual client since 2006.

2006 2007 20120

2000

4000

6000

8000

10000

12000

14000

National AvgClient

Note: This client was fully insured in 2006 and became self-funded in 2007


Fully Insured vs. Self Funded under PPACA

Requirement Fully Insure

d

Self-Funde

d

Adherence to State benefit mandates ✔

Payment of premium tax ✔ **

Must provide Essential Health Benefits ✔

Guaranteed Issue ✔

Compliance with Minimum Loss Ratio ✔

Compliance with 90 day maximum waiting period

✔ ✔

Compliance with prohibition of pre-existing conditions

✔ ✔

Summary Benefit Comparison Compliance ✔ ✔

Subject to review of premium increases ✔

Required to participate in risk adjustment system

✔

Subject to Health Insurance Tax (HIT) ✔

Subject to minimum reserve requirements ✔

**Self-Funded plans are subject to premium tax but because the premium is much lower, the tax is also much lower © 2012 Creative Management

Resources, Inc.

Possible Disadvantages of Self-Funding

Self-Funding, while a potential vehicle for huge savings, is not a bed of roses. With savings and control also comes responsibility.

For all intents and purposes, the employer basically becomes the insurer, and must take on the responsibilities and financial risks normally held by the insurance company. These risks can be capped and/or eliminated with appropriate management and stop loss coverage. There are two types of stop loss coverage that are necessary to protect you. Specific coverage and aggregate coverage.

You must have sufficient cash flow to pay larger-than-usual claims when they occur (and, to continue to fund the plan until you receive any reimbursements from your stop-loss carrier). Contractual provisions such as advance reimbursement are put into all policies that Creative Management Resources presents to its clients to mitigate this risk.


Possible Disadvantages of Self-Funding (con’t)

The employer becomes involved in healthcare and insurance issues if you self-fund, which is significantly more responsibility than simply writing the monthly premium check to the insurer. It is very important to retain a professional TPA to manage your plan.

If you decide at any point to return to a fully insured plan, you will still be responsible for "run out" claims plus the new premiums for the fully insured plan (a possible cash flow challenge).

For employers that are comfortable with additional risk and understand the short and long term implications, self-funding is a tool that can be used to save money and better manage the expense of providing their employees with health care.


Conclusion

Thank you for your time today. I hope that I was able to clarify some of the more confusing issues surrounding the PPACA. If you have any further questions or would like assistance in making a decision as to how you will move forward with your employees healthcare coverage, please contact me.

Christine Price, CEO, CHRS888-332-8984

[email protected]


http://www.cmrca.net/

mailto:[email protected]