Intercare university2013 benefitslegalupdate

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  • 2/3 majority in both houses!!!!Jerry Brown now the voice of sanity…. Scary…
  • According to the state, 7.6 million people are on Medi-Cal, of which 3.8 million are children. Healthy Families is California's version of the federal Children's Health Insurance Program, which was created in 1997 under the Clinton administration to expand health care coverage for uninsured children whose families do not qualify for MedicaidFor example, a family of three that earns up to $47,725 annually can qualify for the low-cost insurance program. According to the Legislative Analyst's Office, the two programs are similar in that they offer medical, dental and vision coverage. While Healthy Families offers more comprehensive vision care, Medi-Cal offers additional services, such as non-emergency medical transportation. Medicaid is an ongoing entitlement program, but the Children's Health Insurance Program is scheduled to expire in 2015.Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
  • According to the state, 7.6 million people are on Medi-Cal, of which 3.8 million are children. Healthy Families is California's version of the federal Children's Health Insurance Program, which was created in 1997 under the Clinton administration to expand health care coverage for uninsured children whose families do not qualify for MedicaidFor example, a family of three that earns up to $47,725 annually can qualify for the low-cost insurance program. According to the Legislative Analyst's Office, the two programs are similar in that they offer medical, dental and vision coverage. While Healthy Families offers more comprehensive vision care, Medi-Cal offers additional services, such as non-emergency medical transportation. Medicaid is an ongoing entitlement program, but the Children's Health Insurance Program is scheduled to expire in 2015.Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
  • According to the state, 7.6 million people are on Medi-Cal, of which 3.8 million are children. Healthy Families is California's version of the federal Children's Health Insurance Program, which was created in 1997 under the Clinton administration to expand health care coverage for uninsured children whose families do not qualify for MedicaidFor example, a family of three that earns up to $47,725 annually can qualify for the low-cost insurance program. According to the Legislative Analyst's Office, the two programs are similar in that they offer medical, dental and vision coverage. While Healthy Families offers more comprehensive vision care, Medi-Cal offers additional services, such as non-emergency medical transportation. Medicaid is an ongoing entitlement program, but the Children's Health Insurance Program is scheduled to expire in 2015.Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
  • Familiar with basics of health system reformInsurance market changes individual mandateExchange may be one of the foundational structures of which you are less familiarI will talk about Exchange, the related EHB and QHPKey Issues for physiciansWhat lies ahead.
  • All 5 members have been appointed. Many will be familiar - Kim Belshe (former Sec CHHS) - Susan Kennedy (former chief of staff Davis and Schwarzenegger) - Dr. Bob Ross (Ca Endowment) - Diana Dooley (Sec CHHS and former CEO of children’s hospitals) - Paul Fearer (Business. PBGH) While the Exchange is considered independent in California, it does appear that the Legislature will have a role in their major decisions (such as EHB).Active Purchaser: States had a choice to follow an active purchaser or an open market approach to running the Exchange. An active purchaser model means it will selectively contract with plans it deems to further the goals of the Exchange. An open market Exchange is like a farmer’s market of options, without many rules imposed on participating plans.
  • Exchanges are one of the federal administration’s central elements in achieving the coverage and affordability goals of the affordable Care Act.QHP: To be offered on the Exchange, a plan must be certified as a qualified health plan by the Exchange.These are only federal baseline requirements. California is likely to impose significantly higher requirements for becoming a QHP.Individuals between 133-400% receive subsidy when purchasing through Exchange. Subsidy depends on what level plan they chose. Subsidy could range anywhere from a few dollars to $6,000+ for an individual. More for a family. May not buy insurance through Exchange if … - offered affordable coverage through employer - undocumented - eligible for public pgms
  • 4 plan levels will offer the same benefits (EHB) but different premium and cost sharing arrangements. The cost share is pegged to full value of the state’s chosen essential health benefit benchmark.Subsidy only covers premium, not cost-sharing, however, at lower incomes, there will be a cost-sharing subsidy (reduction) if the silver plan is purchased. (Ranging from 94 percent for those below 150 percent FPL to 73 percent for those between 200-250% FPL.)Deductibles for plans in the small group market are limited to $2,000 individual/$4,000 family, indexed to average premium growth. The cost-sharing under a health plan may not exceed the cost-sharing for high-deductible health plans in 2014 (currently $5,950 individual/$11,900 family). In following years, the limitation on cost-sharing is indexed to the rate or average premium growth.
  • 4 plan levels will offer the same benefits (EHB) but different premium and cost sharing arrangements. The cost share is pegged to full value of the state’s chosen essential health benefit benchmark.Subsidy only covers premium, not cost-sharing, however, at lower incomes, there will be a cost-sharing subsidy (reduction) if the silver plan is purchased. (Ranging from 94 percent for those below 150 percent FPL to 73 percent for those between 200-250% FPL.)Deductibles for plans in the small group market are limited to $2,000 individual/$4,000 family, indexed to average premium growth. The cost-sharing under a health plan may not exceed the cost-sharing for high-deductible health plans in 2014 (currently $5,950 individual/$11,900 family). In following years, the limitation on cost-sharing is indexed to the rate or average premium growth.
  • 2009 Employer – 45% /17 millionIndividual – 6%/2.2mMedi-Cal – 19%/7 mMedicare – 10%/3.7mUninsured – 19%/7m2016Employer – 35% /14 millionIndividual – 1%/.5mExchange – 21-22%/8.5mMedi-Cal – 22%/9mMedicare – 12%/4.8mUninsured – 7-8%/3mProjections on take-up have varied. Actual take-up will largely depend on affordability of products offered through the Exchange. Estimated 4.4 million by 2019.Source for 2009 data: California Health Care Foundation. California Health Care Almanac: California Health Plans and Insurers. November 2011.Source for 2016: Ken Jacobs, et al. UC Berkeley Center for Labor Research & Education. Eligibility for Medi-Cal and the Health Insurance Exchange in California under the Affordable Care Act. August 2010; Peter Long & Jonathan Gruber, “Projecting the Impact of the Affordable Care Act on California.” Health Affairs 30(1).
  • By 2016, half of all Californians may be getting their insurance through the State.The Exchange will potentially have a huge share of the California market and be a guidepost for plans. The individual market is where the Exchange will have its biggest impact, but the ripple effect may be felt throughout the market. The cited Exchange principle is significant. The Exchange Board and its staff, including ED Peter Lee, have made it clear that they want to change the business of health insurance in California. Peter Lee has been clear that plans can’t expect meeting the federal standards and being in good-standing with the state to be enough to get on the Exchange – they must be willing to play their part in helping the Exchange meet its affordability and quality goals.
  • Intercare university2013 benefitslegalupdate

    1. 1. Intercare University | January 29th-30th, 20132013 Benefit Legal Update
    2. 2. INTERCARE UNIVERSITY: 2013 BENEFIT LEGAL UPDATEAnn Murray | PartnerMcKenna Long & Aldridge LLPSan Diego: 619.595.8040Atlanta : 404.527.4940amurray@mckennalong.com mckennalong.com
    3. 3. WHAT WE’LL COVER TODAY• Health Care Reform Changes Already in Place• Health Care Reform Rules Taking Effect in 2013, 2014, and Later• Other Legal Changes Impacting Health and Welfare Programs 3
    4. 4. HEALTH CARE REFORM CHANGES ALREADY IN PLACE
    5. 5. Health Care Reform Requirements That Took Effect in 2010, 2011, and 2012• No lifetime limits• Phased-in annual limits• No pre-existing condition exclusions under age 19• Dependent coverage to age 26• Preventive care mandates (no co-pays, contraceptives)• Patient protections (OB/GYN, emergency services)• New claims and appeals requirements (IROs)• No reimbursement of OTC meds by FSAs, HRAs, etc… 5
    6. 6. Health Care Reform Requirements That Took Effect in 2010, 2011, and 2012 (cont.)• Employer wellness grants (some)• Small employer health insurance credit• Retiree reinsurance program• 4-Page Summary of Benefits/Glossary of Terms• 60-Day Advance Notice• Form W-2 reporting• No rescission of coverage• Annual comparative effectiveness (PCORI)• Medical loss ratio rules 6
    7. 7. HEALTH CARE REFORM RULES TAKING EFFECT IN 2013, 2014, AND LATER
    8. 8. Changes Continuing from PriorYears – Phase-In of Higher Annual Limits on Coverage Amount – PCORI fees – W-2 Reporting – 4-Page Summary of Benefits/Glossary of Terms mckennalong.com 8
    9. 9. PHASE-IN OF ANNUAL LIMITS Ongoing effective datesDollar Value Annual Limits:Before January 1, 2014, plans may impose restricted annual limits: • $750,000 for PY beginning between 9/23/10 – 9/22/11 • $1,250,000 for PY beginning between 9/23/11 – 9/22/12 • $2,000,000 for PY beginning between 9/23/12 – 01/1/14Effective first plan year beginning on or after January 1, 2014, no annual dollar limitsNote:– Applies to Essential Health Benefits only– Does not apply to most vision plans, dental plans, FSAs/HSAs/HRAs, but be careful!– Remember to coordinate with MHPA 9
    10. 10. COMPARATIVE EFFECTIVENESS (PCORI) ANNUAL FEES First effective for 2012 Applies to fully insured and self-funded coverage (2012-2018) Policy/Plan Years Ending: Fee RateAfter Sept. 30, 2012 $1 per covered life per yearOct. 1, 2013 through Sept. 30, 2014 $2 per covered life per yearOct. 1, 2014 through Sept. 30, 2019 Amount adjusted by the Secretary of Treasury based on the percentage increase in the projected per capita amount of national health expenditures • Does not apply to policy or plan years ending after Sept. 30, 2019Reporting:– Federal excise tax return (Form 720) first due by July 31, 2013 for calendar year plans 10
    11. 11. EMPLOYER REPORTING REQUIREMENTS: IRS Form W-2 Effective for 2012 (Form W-2 due Jan 2013)• Applies to employers filing 250 or more Form W-2s• Aggregate cost of employer-sponsored coverage must be reported on Forms W-2• Must update payroll system and track• Applies to grandfathered plans 11
    12. 12. 4-PAGE SUMMARY OF BENEFITS/ GLOSSARY OF TERMS First effective in 2012– Timing Requirements – calendar year plans and plans with PYs beginning 10/1, 11/1, and 12/1 must provide upon request, to special enrollees and to new hires after 1/1/13 (even if not required for 2012 OE) – all other plans must provide beginning with 2013 OE– Foreign Languages – Based on individual mailing address • Prominent notice in Summary in applicable non-English language • Customer service hotline to answer questions in the foreign language • Translated Summary upon request– Mid-Year Material Modifications • 60 day advance notice to all eligible individuals of any mid-year material modifications affecting the content of the Summary • Exception for insurance policy renewals, provided no material changes 12
    13. 13. Changes Taking Effect for2013 – FSA limit of $2,500 – Notice of Public Exchanges – Increased Medicare payroll taxes mckennalong.com 13
    14. 14. HEALTH FSA LIMIT $2500 Effective 2013– For plan years beginning after December 31, 2012, Health Care Flexible Spending Account contributions are limited to $2,500– Limit does NOT apply to additional employer contributions for which the EE does not have the option to receive cash in lieu of the contribution– Special short plan year rules apply 14
    15. 15. NOTICE OF PUBLIC EXCHANGE Uncertain effective date- delayed until late summer or fall 2013 - Employers must provide written notice to: • Existing EEs annually (originally by March 1st, regardless of plan year end, but this may change) • New EEs upon date of hire - Notice must include certain info about the local State Exchange, possible Exchange subsidies, and ineligibility for employer contributions if purchase is made through Exchange. - DOL is considering issuing a model notice 15
    16. 16. MEDICARE TAX INCREASE Effective after December 31, 2012Additional employee Medicare tax of 0.9% to apply to wages above the following thresholds: Filing Status Threshold Amount Married Filing Jointly $250,000 Married Filing Separately $125,000 Single $200,000 Head of Household $200,000 Qualifying Widow(er) $200,000 16
    17. 17. Changes Taking Effect for 2014• No pre-existing condition exclusions• 90-day max waiting period • State Exchanges• No annual limits • Individual Mandate• Changes to wellness programs • Pay or Play Mandate• Annual plan fees mckennalong.com 17
    18. 18. PRE-EXISTING CONDITIONS Effective January 1, 2014No Pre-Existing Condition Exclusions for Anyone! 18
    19. 19. ANNUAL LIMITS Effective first plan year beginning 1/1/14 or laterNo Annual Limits on Essential Health Benefits 19
    20. 20. MAX 90-DAY WAITING PERIODS Effective January 1, 2014• Waiting periods for enrollment must shorten to maximum 90-days.• Waiting Period = the period that must pass before coverage begins for an EE or dependent who is otherwise eligible to enroll under the terms of a group health plan.• Applies to grandfathered plans 20
    21. 21. MAX 90-DAY WAITING PERIODS, cont… Effective January 1, 2014• Applies only to eligibility conditions that are based solely on the lapse of time• does not preclude a plan from requiring substantive eligibility conditions such as full-time status, job category, completion of not more than 1,200 hours of service, or licensing conditions, so long as the condition is not “designed to avoid compliance with the 90- day waiting period limitation.”• Beware “first of month following 60 days of employment” – may violate 90 day wait! 21
    22. 22. MAX 90-DAY WAITING PERIODS, cont… Effective January 1, 2014• Safe Harbor Available - if plan only covers EEs “regularly working” a specified number of hours per week, and you cannot determine whether a newly-hired EE is reasonably expected to regularly work that number of hours, you may take a reasonable period of time to determine whether the EE meets the eligibility requirement. – can apply 90 days after safe harbor measurement period for determining whether an EE is full-time for purposes of the “play or pay” penalty (see discussion below). – in all events, must cover a variable hour EE who meets the eligibility requirements within 90 days after the measurement period ends or, if earlier, within 13 months following his start date (or, if he started mid-month, the first day of the next calendar month).• the guidance includes several helpful examples and can be viewed at http://www.dol.gov/ebsa/newsroom/tr12-02.html. 22
    23. 23. WELLNESS PROGRAMS Effective January 1, 2014• Max incentive increases from 20% to 30%• Additional 20% (up to 50% total) if to prevent/reduce tobacco use• Alternative standards can be developed after the fact• Failure to meet one alternative standard does not preclude eligibility for other alternative standards• Employer may require completion of an educational program as an alternative standard at employer’s cost 23
    24. 24. WELLNESS PROGRAMS, cont. Effective January 1, 2014• Employers must pay membership or participation fees related to diet programs• Physician recommendations must be taken into account• Medical judgment may be required• If incentive requires certain results of measurement, test or screening, a different, reasonable means of qualifying must be offeredISSUES CONCERNING “REASONABLE ALTERNATIVES” – Prior attempts are not disqualifying – Plans must identify and pay for educational programs 24
    25. 25. ADDITIONAL PLAN FEES Effective 2014-2016• Transitional Reinsurance - Who Does It Apply To? – All health insurers and TPAs on behalf of self-insured group health plans – Intended to stabilize premiums for coverage in the individual market during the first 3 years Exchanges are operational – Paid Quarterly - First payment is due Mid-January 2015 – 2014 Estimate - $5.25 per enrollee per month ($63 per year)• Insurer Fees 25
    26. 26. ADDITIONAL PLAN FEES, cont… California Department of Insurance Letter Ruling (issued to unnamed insurer – 1/4/13)California health insurers may NOT include either the 2014annual fee on health insurance providers or the 2014transitional reinsurance fee in 2013 health insurancepremium rates 26
    27. 27. INSURANCE EXCHANGES Effective January, 2014– All 50 States to have Exchanges established.– Known as the “Health Insurance Marketplace”– Primarily available to individuals– Tax-credits & cost-sharing subsidies available to certain low- earning groups– California received conditional approval in early January 2013 to operate its State Exchange– Small employers may be able to use the SHOP Exchange 27
    28. 28. INSURANCE EXCHANGES, cont.Minimum Essential Health Benefits (MEHB’s) for policies offered onthe Exchange will include the following categories of benefits. -Ambulatory patient services -Rehabilitative and habilitative -Emergency services services and devices -Hospitalization -Laboratory services -Maternity and newborn care -Mental health and substance -Preventive and wellness use disorder services, services and chronic disease including behavioral health mgmt treatment -Pediatric services, including -Prescription drugs oral and vision -HHS can determine othersMEHBs are defined by each state. 28
    29. 29. ESSENTIAL HEALTH BENEFITS (EHB) Effective 2014 Individual and small group market non-grandfatheredinsured plans (both inside and outside Exchanges) must do the following: – Cover all 10 EHB categories with limited deductibles – 2014 deductibles - $2000 individual/$4000 family – Meet annual cost-sharing limits on EHBs – Will be based on high-deductible health plan allowances when coordinated with HSAs – Meet actuarial value limits for EHBs 29
    30. 30. INSURANCE EXCHANGES Where the States Stand – as of January 4, 2013 Source: www.statehealthfacts.org 30
    31. 31. INDIVIDUAL MANDATE Effective 2014Individuals must have insurance or pay a penalty YEAR PENALTY 2014 Greater of $95 per person (cap of $285 per family) or 1% of household income 2015 Greater of $325 per person (cap of $975 per family) or 2% of household income 2016 Greater of $695 per person (cap of $2,085 per family) or 2.5% of household incomeDiscount:– Family members under age 18 get 50% penalty reduction 31
    32. 32. PAY OR PLAY MANDATEWho Does It Apply To?– employers with 50 Full-Time Equivalents on average in prior calendar year– measured by looking at entire controlled group/affiliated service groupWhat is a Full-Time Equivalent?– common law EE who, during the applicable calendar month, was employed on average at least 30 hours of service per week (or 130 hours total)– the number of FTEs determined by adding all part-time EE hours (up to 120 hours per EE) for the applicable calendar month divided by 120– only count U.S. hours– leased EE rules do not apply (look at who is “common law employer”) 32
    33. 33. PAY OR PLAY MANDATE, cont.When Is Penalty Imposed? Employer must pay penalty if either:(1) no coverage or no minimum essential coverage (MEC) is offered to EE (and dependents) and at least one EE receives financial assistance in an Exchange Monthly Penalty = $166.67 x total number of full-time EEs (reduced by 30)(2) coverage is offered but it is not “affordable” or does not provide “minimum value” Monthly Penalty = $250 x total number of full-time EEs who receive assistance for coverage purchased through the Exchange (can not exceed penalty for failure to provide MEC) 33
    34. 34. PAY OR PLAY MANDATE, cont. Minimum Value• does not provide minimum value if coverage pays for less than 60% of all plan benefits, without regard to co-pays, deductibles, co-insurance, and EE premium contributions• Benchmark plans, checklists and other processes have been approved for satisfying this requirement. 34
    35. 35. PAY OR PLAY MANDATE, cont. Affordable• not affordable if premium required to be paid by EE for EE-only coverage under lowest cost option exceeds 9.5% of EE’s household income• Safe harbor allows ER to use W-2 wages to determine, but other safe harbor methods can be relied upon to determine affordability and may work better (e.g. based on hourly rates)OUTSTANDING QUESTION:Does this mean employer can charge unlimitedamount for dependents or spouse? 35
    36. 36. PAY OR PLAY MANDATE, cont. Example - Variable Hour EE Safe Harbor for Ongoing Employees Standard Measurement Administrative Stability Period #1 Period #1 Period * (1/1-1/1) (11/1-10/31) (10/31-1/1)John Worked an average of Treated as a full-time 36 hours per week employeeMary Worked an average of Not treated as a full- 24 hours per week time employee*could be as long as 90 days 36
    37. 37. PAY OR PLAY MANDATE, cont. Example of Variable Hour EE Safe Harbor for New Employees5/1/13 4/30/14 7/1/14 6/30/16 Initial Measurement Administration Stability Period #1 Period Period #1 11/1/14 10/31/15 1/1/16 12/31/16 Standard Measurement Period Administration Stability Period #2 Period #2Assume calendar year plan. If John works less than 30 hrs/week in Initial MeasurementPeriod – he is offered coverage for Stability Period #1 through June 30. Measured againduring Standard Measurement Period to determine if John would receive entire year ofcoverage (worked greater than 30 hrs/week) or if coverage would end on June 30(dropped to working less than 30 hrs/week during Standard Measurement Period) 37
    38. 38. FORECAST FOR 2014MOST Employers will avoid the • Meet minimum plan design andpenalty and Exchanges in 2014 contribution requirements • Keep EEs in employer risk pool and out of Exchanges • Avoid employer tax penaltiesVariation #1: Enable access to public • Set “affordable” EE premium levels toprograms allow lower wage EEs to qualify for tax credits to purchase coverage through the Exchange Variation #2: Take proactive steps to •Limit scheduled hours for part-timerslimit liabilities • Adopt measurement periods for variable hour EEs • Restructure entities 38
    39. 39. HEALTH CARE REFORM DOES NOT:• Prevent you from covering more people• Mandate spousal or non-child dependent coverage• Limit (currently) the price charged to a spouse, children or other dependents• Require affordable coverage for those below the Medicaid threshold• Require employer plans to cover all essential health benefits (although insurance products may be limited)• Require coverage of non-U.S. workers, independent contractors, leased employees, or part-time employees (but beware how you classify!) 39
    40. 40. Changes Taking Effect inFuture Years – Nondiscrimination rules – Automatic enrollment – 2018 Cadillac tax mckennalong.com 40
    41. 41. NONDISCRIMINATION FOR INSURED PLANS Effective date delayed (likely 2014 or later)Non-Grandfathered plans can NOT discriminate in favor of highly-compensated individuals (HCIs) as to eligibility or availability of benefits• HCI definition = 5 highest paid officers; more than 10% owner, or highest paid 25% of all EEs.• Applies on a controlled group basis **If plan fails, severe penalties apply to Employer** 41
    42. 42. NONDISCRIMINATION FOR INSURED PLANS, cont. Effective date delayed (likely 2014 or later)Employer Action Items• Must identify possible discriminatory arrangements and plan to modify – Executive medical and management carve-out plans are likely a problem – Beware of vendor claims!• Check existing promises of extended health coverage made in separation agreements, executive employment, severance agreements, change in control agreements• Avoid creating additional issues 42
    43. 43. AUTOMATIC ENROLLMENT Effective date unclear - probably 2015 or laterImpact on Employers• Employers with more than 200 full-time EEs must provide automatic enrollment to new EEs – Waiting periods can apply – Existing elections carry over from year to year• Notice regarding automatic enrollment and opportunity to opt out must be provided• Applies to grandfathered plans 43
    44. 44. AUTOMATIC ENROLLMENT, cont.Many Unknowns• All employees or just full-time EEs?• Automatically enroll upon release of guidance or at next plan year or open enrollment?• Can EEs add dependents mid-year if automatically enrolled mid- year?• What if EEs already have coverage through a spouse?• Notice requirements?• 200+ EEs determined by controlled group?• What kind of coverage required? 44
    45. 45. CADILLAC TAX Effective 2018 40% excise tax will apply on health insurance benefits exceeding a certain threshold – known as “high cost” or Cadillac coverageThresholds (indexed to inflation)• $10,200 for individual coverage• $27,500 for family coverage (indexed to inflation)Thresholds increase for:• individuals in high-risk professions• employers that have a disproportionately older population 45
    46. 46. OTHER LEGAL CHANGES IMPACTING HEALTH AND WELFARE PROGRAMS
    47. 47. FEDERAL CHANGES FINAL HIPAA REGULATIONS released January 2013
    48. 48. CALIFORNIA SPECIFIC ITEMS1. 4-Page Summary Of Benefits – foreign language mandates for most CA counties Counties where 10% or more literate in 1 language have foreign language requirement *Different than DOL SPD requirement – 25% of less than 100 or 500Ps or 10% if greater than 100 48
    49. 49. CALIFORNIA SPECIFIC ITEMS2. New San Francisco HCSO ratesRequires medium and large-sized employers to spend aminimum amount of money on health care for their workerswho work in San Francisco. 49
    50. 50. CALIFORNIA SPECIFIC ITEMS3. Pregnancy Disability Leave Protection • Effective 2012 • Applies to ERs with 5 or more EEs • Must maintain and pay for health coverage under group health plan for any eligible female EE who takes up to 4 mos of leave due to pregnancy, childbirth or a related medical condition in a 12-month period. • Same level and under the same conditions as coverage would have been provided had the EE continued in employment continuously for the duration of the leave. • This closes a gap that existed for employers with less than 50 EEs (the FMLA threshold). 50
    51. 51. CALIFORNIA SPECIFIC ITEMS4. Additional:• CA left off mandatory DOL CHIP Notice (be sure to check)• Coverage of dependents to age 26 in employer- provided life coverage permitted beginning in 2012• Employers can not demand/request access to CA EE’s social media accounts or content beginning in 2013 (AB 1844)• Employers must comply with new personnel recordkeeping and access requirements (AB 2674)• Increased classification issues and audits. 51
    52. 52. CALIFORNIA SPECIFIC ITEMS4. Additional:• Commission agreements with any CA employee must now be in writing (AB 2675)• Religious dress and grooming practices require reasonable accommodations (AB 1964)• “Sex” protected under FEHA includes breastfeeding and related medical conditions (AB 2386)• Easier definition of “injury” creates higher likelihood of successful wage statement violation claims (SB 1255)• Fixed salary agreements are payment only for regular non-overtime hours (AB 2103). 52
    53. 53. Questions? Ann Murray | Partner McKenna Long & Aldridge LLPThis presentation is for San Diego: 619.595.8040informational purposes only and Atlanta: 404.527.4940does not constitute specific legaladvice or opinions. Advice and amurray@mckennalong.comopinions are provided by the firmonly upon engagement withrespect to specific factual mckennalong.comsituations. 53
    54. 54. Intercare University, January 2013Tom Ghering, CEO
    55. 55. How will things change?
    56. 56. Four important precepts• This is not a good news story – my apologies• I’m politically agnostic• Ask questions in real time• Actionable items are few… I heard this is the scariest part of the ride!
    57. 57. Doom & Gloom vs. Situational Awareness • Pessimist complains about the wind, • Optimist expects it to change, • Realist adjusts the sails ~ William Arthur Ward• Realist has situational awareness to anticipate the future! ~ Tom Gehring
    58. 58. It’s difficult to make predictions -particularly about the future Yogi Berra
    59. 59. A political decisionis one that is made in the absence of,or contravention of, the facts Tom Gehring
    60. 60. Those who do not learn from (or understand) history are doomed to repeat it! Many smart guys, starting with the Romans
    61. 61. TheEnvironmental Scan
    62. 62. Supremes have sung!Three major findings re PPACA:1- Individual mandate a tax, and therefore legal2-Feds cannot force states into “all or nothing” on Medicaid3- Interstate commerce clause not a “catch-all”
    63. 63. Takeaways1. ACA is the law of the land – get over it…
    64. 64. XMAS 12 SGR 27% cut to Medicare Part BFederal debt limit Sequestration 2% must be raised cut to Medicare Part B Chaos @ the Capital Bush & Obama 2012/3 Budget must tax cuts expire be approved Really mad lame ducks
    65. 65. The daredevils of the 112th congress
    66. 66. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…
    67. 67. PPACA goals• Reduce uninsured• Bend the “cost curve”• Increase access to care• Give group purchasing power to individuals• Reform health insurance and many more… But as written,…. • Uninsured => underinsured • Bend the “cost curve” => up… • Increase access to care => ..on paper
    68. 68. PPACA simplified2013 Health Insurance administrative simplification Increased Medicaid to PCPs (2013/2014)2014 Multiple consumer friendly reforms to HI Individual mandate (weak) + Guaranteed issue + Community rating Medi-Cal coverage up to 138% FPL ($11K individual, $22K family of four) State based health insurance exchanges coverage 133% to 400% FPL (w/ subsidies) IPAB
    69. 69. PPACA Problems (1)• IPAB – unelected/unaccountable rate setter @ national level• Non-standard essential health benefits package o State-state variation o California deeper benefits package w/ same $$$ = fewer $$$ for providers• # of new Medicaid/Medi-Cal enrollees underestimated (3 million in California)
    70. 70. PPACA Problems (2)• Employers (and employees) dumped into HIEx• Administrative/technical nightmare w/ HIEx• More HIEx insureds = more subsidies = more $$$• Abysmal Medi-Cal rates in California = no Physician takers…. • Office visit – Medicare - $73 • Office visit - Commercial Payers - $64 to $71 • Office visit - Medi-Cal - $23– Abysmal access to doctors, particularly specialists– Long lines at the ER…..
    71. 71. PPACA Problems (3)• Guaranteed Issue (you can buy it anytime, even after you get sick)• Community Rating (insurance company severely limited in how it risk modifies the policy)• Weak Mandate (penalty/tax for not having insurance low) “ACA’s penalties are too low to prod the healthy to purchase insurance, even given ACA’s subsidies for purchasers.”… “ … the penalty for refusing to purchase insurance counts as a tax only if it remains so small as to be largely ineffective.”
    72. 72. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…3. Underlying ACA economic assumption flawed => long term ACA financial instability4. Huge influx of new underinsured patients5. Massive downward pressure on federal reimbursements
    73. 73. 2/3 2/3
    74. 74. Medi-Cal• Huge (and growing) expense for California• Rich benefits (compared to other states)• Medi-Cal rates worst in the nation• Gov. Brown proposing an additional 10% cut (perhaps retroactively)• Access to doctors abominable
    75. 75. Kids to Medi-Cal Managed Care• All 863,000 Healthy Families kids to Medi-Cal by Sept. 1, 2013.• Moved in four phases, depending on whether their doctors & health plans already accept Medi-Cal.• State plans to start notifying parents next month.• Eliminating Healthy Families projected to save the state $13M FY-13 and $73M annually once the transition is completed.
    76. 76. Medi-Medi to Medi-Cal Managed Care• San Diego one of several counties in the expanded Dual Eligibles/Mandatory Managed Care “pilot”• CMS sitting on final approval until after election• Effective “start date” moved to March 1st, 2013.• Savings about $663M
    77. 77. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…3. Underlying ACA economic assumption flawed => long term ACA financial instability4. Huge influx of new underinsured patients5. Massive downward pressure on federal reimbursements6. Massive downward pressure on state reimbursements7. Big uptick in Medi-Cal Managed Care8. Be very, very afraid of a 2/3 2/3 majority
    78. 78. California’sHealth Insurance Exchange (HIEx)
    79. 79. HIEx Basics (1)• Independent public entity within state government• Governed by 5 member board appointed by Governor & Legislature• Exchange Board in CA will be an active purchaser, not agnostic marketplace
    80. 80. HIEx Basics (2)• In 2014 (really October 2013), – Individuals: 133 – 400 % FPL ($25K to $74K for a family of 3) & – Small employers: (up to 50 employees*) ( *100 employees in 2016) – May purchase coverage through HIEx from qualified health plans (“QHPs”) – QHPs have 4 plan levels (Bronze, Silver, Gold and Platinum) – 4 “metallic” plan levels offer the same essential health benefits (EHB) but different premium and cost sharing arrangements. – Income adjusted subsidies to purchase insurance and (in some cases) for co-pays – May not participate if … • offered affordable coverage through employer • undocumented • eligible for public programs
    81. 81. Coverage TiersCategory % medical costs % of cost-share coveredBronze 60% 40%Silver 70% 30%Gold 80% 20%Platinum 90% 10%
    82. 82. Premium Support & Cost Sharing AssistanceSingle – max out of pocket = $2.2K (<133%FPL) to $9.9K (>400fpl) Family of 4 – max out of pocket = $4.5K (<133%FPL) to $20.9K (>400fpl)
    83. 83. Enrollment Projections Health Insurance Coverage by Source 2009 2016Employer 45%/17M 35%/14M -3MIndividual 6%/2.2M 1%/0.5M -1.7MMedi-Cal 19%/7M 22%/9M +2MMedicare 10%/3.7M 12%/4.8M +1.1MUninsured 19%/7M 7-8%/3M -4M (approx)HIEx 21-22%/8.5M +8.5M
    84. 84. Potential Impact• Premium subsidies, an individual mandate, and guaranteed issue will significantly expand (and change) the individual market starting in 2014• “The Exchange will be a catalyst for change in California’s health care system, using its market role to stimulate new [care delivery] strategies . . .”• Pathway to single payer (Medi-Cal for all…) in California
    85. 85. Imperfect Competition• Monopoly – one seller – many buyers• Monopsony – one buyer – many sellers• Either – California HIEx will approach a monopsony as market power of Covered California expands, or – Covered California goes broke/becomes broken
    86. 86. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…3. Underlying ACA economic assumption flawed => long term ACA financial instability4. Huge influx of new underinsured patients5. Massive downward pressure on federal reimbursements6. Massive downward pressure on state reimbursements7. Big uptick in Medi-Cal Managed Care8. Be very, very afraid of a 2/3 2/3 majority9. In 2014, HIEx will significantly (and proactively) change the California health insurance market , causing major changes in California’s payer mix10. Focus is on California’s HIEx regulators
    87. 87. The Long Term Prognosis Your prognosis is tiedto the outcome of the election!
    88. 88. Costs will increaseMassachusetts Uninsured to near zero Increased demand => longer lines (initially) Increased cost => Govt mandated cost cutting & revenue increase from providers Decreased indirect cost (uninsured) $1B $1.8B
    89. 89. Insurance rates will increaseNew York Weak mandate + guaranteed issue = unaffordable HI for individuals # paying $/pp
    90. 90. Macroeconomics Unsustainable!% of Mean Family Income for Health Insurance for family of 4 6 yrs ago 7% now 17% 6 yrs in future 33%
    91. 91. Macroeconomics Unsustainable!
    92. 92. What’s next?We are almost out of
    93. 93. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…3. Underlying ACA economic assumption flawed => long term ACA financial instability4. Huge influx of new underinsured patients5. Massive downward pressure on federal reimbursements6. Massive downward pressure on state reimbursements7. Big uptick in Medi-Cal Managed Care8. Be very, very afraid of a 2/3 2/3 majority9. In 2014, HIEx will significantly (and proactively) change the California health insurance market , causing major changes in in California’s payer mix10. Our focus is on California’s HIEx regulators11. Current health care financing system is systemically unsustainable in the long run (6-10 years)
    94. 94. The Medium Term PrognosisWhat’s the second best medicine?
    95. 95. Longer lines• PCP – demand driven• Specialists – reimbursement driven• ER – I-now-have-insurance drivenLONGER WAITS
    96. 96. Greater demand• More underinsured (MediCal ↑ ), but fewer uninsured• Aging population (Medicare ↑ )• Demanding population (pressure to do more)• More gizmos (pressure to do more)• More drugs (pressure to do more)• Everyone trying to make a living (pressure to do more)DEMAND GOES UP
    97. 97. Reduced supply• Fewer docs (per person), plus wrong flavor of docs – But, lifetime employment – And, (theoretically) more economic power• “Scope of practice” expansions by non-Physicians• Not nearly enough PCPs• Urban solo primary care is dead• Urban specialist solo is on life support• Not enough hospital capacity - same number of beds/nurses/etc...SUPPLY GOES DOWN
    98. 98. The Long Term (National)Treatment Plan – or what arewe going to in a five years? We’re going to negotiate first!
    99. 99. Changing reimbursements• Increased (willing or unwilling) integration – share the same or fewer $$$• Reimbursements down to keep total cost down (see Mass. & Ca.)• Reduce differences between specialty and PCP• Premium for innovation• Penalty for re-work/re-admit
    100. 100. Increased macro-economic cost• Demand => cost increase (see MA, CO, WI)• Fatally flawed insurance model => cost increase (see NY)• Consolidation driven market control => cost increase (see MA)INCREASED COST
    101. 101. Increased quality• Because its the right thing to do for the patient• But, understand macro-issue is to reduce cost• Innovate locallyINCREASED QUALITY
    102. 102. Increased innovation• High tech innovation – Gizmos, processes, research• Low tech innovation – Wellness INCREASED INNOVATION & WELLNESS
    103. 103. Takeaways1. ACA is the law of the land – get over it…2. The wild ride in DC continues…3. Underlying ACA economic assumption flawed => long term ACA financial instability4. Huge influx of new underinsured patients5. Massive downward pressure on federal reimbursements6. Massive downward pressure on state reimbursements7. Big uptick in Medi-Cal Managed Care8. Be very, very afraid of a 2/3 2/3 majority9. In 2014, HIEx will significantly (and proactively) change the California health insurance market , causing major changes in in California’s payer mix10. Our focus is on California’s HIEx regulators11. Current health care financing system systemically unsustainable in the long run (6-10 years)12. Longer lines, greater demand, reduced supply, greater cost, reduced reimbursement, greater quality, innovation at both ends of the tech spectrum
    104. 104. Patches, patches, and more patchesCurrent system is unsustainable - we are putting patcheson top of patchesThe cost will (eventually) bring the system to it’s kneesWe will either:• Keep putting patches on top of patches on top of patches, or• Revolutionary change (see 9/11 or FDR - March 1933 or Paris - 1793)2016 (or perhaps 2020) election will be about arevolutionary approach to health care
    105. 105. It’s déjà vu all over again….
    106. 106. Mr. Churchill says…"Americans can always be counted on to do the right thing... ….after they have exhausted all other possibilities” Churchill
    107. 107. Look to Switzerland !Universal mandate & guaranteed issue & national(community) ratingCitizens pay for insurance up to 8% of income – government subsidy if cost >8%Insurance:• Compulsory - standardized national minimum coverage at one price for all w/ no profit• Complimentary (additional) insurance – risk based, competitiveNo first dollar coverage – annual minimumsBad behavior penalized
    108. 108. gehring@sdcms.org 619-206-8282 www.sdcms.org
    109. 109. THANK YOU!

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