Wellpoint impact of health care reform
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Wellpoint impact of health care reform

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Impact of Health Care Reform on Health Insurance Carrier

Impact of Health Care Reform on Health Insurance Carrier

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  • Temporary early retiree reinsurance program - Help to make health coverage available to people ages 55 to 65 who are not yet retired (before they can use Medicare. Medicare, a Federal government program that provides health care insurance to people aged 65 years or older, a... more ») through the temporary Early Retirement Reinsurance Program Small group tax credit, effective for tax years beginning after December 31, 2009 - To qualify for the credit, a group must employ not more than 25 employees, and the average annual compensation of those employees cannot exceed $50,000. $250.00 rebate for Medicare members who reached the donut hole Small group employers that establish wellness programs can receive grants for up to five years. This is effective for Fiscal Years 2011 to 2015, so it technically starts in 2010.
  • Medicare beneficiaries who reach the donut hole to get a 50% discount on brand-name drugs .
  • Individuals making $200,000 or couples making $250,000 would have higher Medicare payroll tax of 2.35% earned income, up form 1.45% Employee contributions for FSAs will be capped at $2,500 annually, with the cap adjusted annually to the Consumer Price Index Medical device manufacturers have 2.9% sales tax on medical devices; with some exemptions like eyeglasses, contact lenses, hearing aids Employers will need to start telling employees about exchanges, premium subsidies and free choice vouchers No more deductions for expenses allocated to Medicare part D subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees
  • Employers with 50 or more full-time employees will be required to offer minimum essential coverage. This coverage must have a 60% actuarial value minimum. (Basically, this means the plan covers at least 60% of covered health care costs.) Employers will be subject to penalties if they provide no health coverage to full-time employees or provide coverage that is not "affordable." These penalties will range from $2,000 to $3,000 per employee. There will be separate state-based exchanges for individuals (American Health Benefit Exchanges) and for small groups (Small Business Health Options Program or SHOP). At this time, small group employer tax credits will only be available through the exchange A new fee will be built into the cost of fully insured coverage Guaranteed issue, guaranteed renewability, modified community rating and minimum benefit standards (“essential benefits” plan) effective. A new fee will be built into the cost of fully insured coverage
  • There will be a 40% excise tax on high-cost plans -- also known as "Cadillac" plans -- that cost more than $10,200 for single coverage or $27,500 for family coverage.
  • Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual market. Currently, many individual and small market plans are not meeting the new required MLR, which governs the amount of premiums allocated to paying medical expenses. • Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019. Over the next 10 years, growth in the Medicaid coverage will also increase substantially. • Health insurers will have to differentiate themselves on price, service, quality, and provider network in the insurance exchanges. With regulations requiring four standard benefit packages, essential health benefits, and limits on cost sharing, insurers will have to compete on factors other than benefit design.
  • WellPoint is third in the nation in Medicaid enrollment. United is #1 and AmeriGroup is #2. WellPoint has 1.752 million members, 4.7% of the market share.
  • The CBO estimates that exchange enrollment, not including employer coverage, will be 24 million in 2019. Figure 11 shows the percentage change in enrollment due to health reform in each year from 2010 to 2019. Enrollment in individual and exchange plans will increase by 190% counting both individual and business exchange enrollment; Medicaid and CHIP increases by more than 40%. During the same period enrollment in employer plans is projected to fall by 8%. This trend will shift business from payers that do well with large employers to those that know how to sell and administer individual insurance.12 The availability of exchange-based insurance options in addition to current employmentbased approaches will generate new opportunities and challenges for payers. To capitalize on these changes, payers will not only want to make sure their product benefits align with the required essential health benefits in the exchanges, but will also need to hone their sales and marketing focus increasingly toward individual and small-group purchasers.
  • Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual market. Currently, many individual and small market plans are not meeting the new required MLR, which governs the amount of premiums allocated to paying medical expenses. • Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019. Over the next 10 years, growth in the Medicaid coverage will also increase substantially. • Health insurers will have to differentiate themselves on price, service, quality, and provider network in the insurance exchanges. With regulations requiring four standard benefit packages, essential health benefits, and limits on cost sharing, insurers will have to compete on factors other than benefit design.
  • Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual market. Currently, many individual and small market plans are not meeting the new required MLR, which governs the amount of premiums allocated to paying medical expenses. • Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019. Over the next 10 years, growth in the Medicaid coverage will also increase substantially. • Health insurers will have to differentiate themselves on price, service, quality, and provider network in the insurance exchanges. With regulations requiring four standard benefit packages, essential health benefits, and limits on cost sharing, insurers will have to compete on factors other than benefit design.

Wellpoint impact of health care reform Presentation Transcript

  • 1. The Impact of 2010 Health Care Reform on Health Carriers WellPoint, Inc. February 6, 2011
  • 2. Agenda
    • WellPoint, Inc. Basics
    • Health Care Reform Requirements Summary
    • Brief Review of the Select Key Issues
    • Review of Select WellPoint Financials
    • Review of Select WellPoint Actuarials
    • WellPoint Marketing & Advertising Options
  • 3. WellPoint, Inc. Basics
  • 4.
    • Key People: Angela Braly-President & CEO
    • A publicly traded company (NYSE: WLP)
    • Founded: Anthem Insurance and WellPoint Health Networks merger in 2004
    • Headquartered in Indianapolis, Indiana
    • Products:Blue Cross Blue Shield
    • 42,000+ Employees
    WellPoint, Inc.
  • 5. WellPoint, Inc.
    • WellPoint is the leading health plan in the U.S. with more than 33 million medical members.
    • One in nine Americans receives coverage for their medical care through WellPoint's affiliated health plans.
    • WellPoint is a Blue Cross or Blue Cross Blue Shield licensee in 14 states: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin.
    • WellPoint offers a broad range of medical and specialty products.
  • 6. WellPoint, Inc.
  • 7. Performance Trend
  • 8. Stock Performance Trend
  • 9. WellPoint, Inc. Competitors
    • Aetna, Inc.
    • CIGNA Corporation
    • United Health Group Inc.
  • 10. WellPoint SWOT Analysis
  • 11. Mission
    • WellPoint's mission is to improve the health of the people they serve. The WellPoint Companies provide health security by offering a choice of quality branded health and related financial services designed to meet the changing expectations of individuals, families and their sponsors throughout a lifelong relationship.
  • 12. Vision
    • WellPoint’s vision is to transform the industry, becoming the most valued health plan through a new generation of consumer-friendly products that put individuals back in control of their health and financial future.
  • 13. Business Strategy
    • Create the best health care value in industry.
    • Make health care fundamentally more affordable for their customers
    • Provide access and guidance to the right care
    • Advocate healthy living
    • Excel at day-to-day execution.
    • Deliver reliable, caring service
    • Make our work processes more efficient and effective
    • Integrate our systems to simplify operations
  • 14. Business Strategy
    • Capitalize on new opportunities to drive growth.
    • Win in the changing marketplace
    • Target expansion of existing businesses
    • Invest in complementary new businesses
  • 15. Health Care Reform Requirements Summary
  • 16. Heath Care Reform
    • Overview of Health Care Reform
    • The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010, followed by the Health Care and Educational Reconciliation Act (HCERA) signed on March 30, 2010. Together, this legislation makes up the federal health care reform law which mandates many changes to our health care system over the next several years.
  • 17. Health Care Reform Timeline 2010 – 2020
    • Dependent coverage for adult children up to age 26
    • No lifetime dollar limits on essential benefits
    • 100% coverage for preventive services in network
    • No pre-existing condition exclusions for children (under 19 yrs of age)
    • Most carriers were already offering the first three benefits prior to HCR .
    2010 Insurance Reforms
  • 18. Health Care Reform Timeline 2010 – 2020
    • Early retiree reinsurance program
    • Small business tax credit for qualifying businesses
    • $250 rebate for Medicare members who reach the ”donut hole”
    • Temporary high-risk pool for individuals with pre-existing conditions
    • Small employer grants for wellness programs for Fiscal Year 2011
    2010 New Programs The impact of these changes on carriers is negligible.
  • 19. Health Care Reform Timeline 2010 – 2020
    • Medicare Advantage plans begin restructure of payments and freezes 2011 payments at 2010 level
    • Provisions for 50% discount on brand-name drugs in the Medicare Part D coverage gap
    • Must have minimum medical loss ratios.
    • Carriers with high exposure in the Medicare market such as Humana will be more impacted.
    2011 Medicare Reforms
  • 20. Health Care Reform Timeline 2010 – 2020
    • Physician payment reforms and incentives to form "accountable care organizations"
    • Hospitals with high rates of preventable readmissions will face reduced Medicare payments
    • Implementation of uniform standards for electronic exchange of health information
    2012 Reforms The will be ACO opportunities for carriers with strong provider relationships.
  • 21. Health Care Reform Timeline 2010 – 2020
    • Higher Medicare payroll tax of 2.35% earned income, up form 1.45%
    • Threshold for deducting medical expenses on taxes goes up from 7.5 % to 10%
    • Medical device manufacturers have 2.9% sales tax on medical devices; with some exemptions
    • Increased Medicaid payment for primary care doctors
    • Employee notification of exchanges, premium subsidies and free choice vouchers
    2013 Reforms Marketing and communications about offerings on the exchange will be big.
  • 22. Health Care Reform Timeline 2010 – 2020
    • No more deductions for expenses allocated to Medicare part D subsidy
    • New Individual Mandate and employer coverage responsibility
    • Health insurance exchange is established for individual and small group markets
    • New Individual affordability tax credit and expanded small business tax credit
    • No more lifetime or annual dollar limits for essential benefits
    2014 Reforms Estimating consumer and small employer behavior will be critical for carriers.
  • 23. Health Care Reform Timeline 2010 – 2020
    • No pre-existing condition exclusions
    • Tax on health insurance imposed
    • 40% excise tax ( “Cadillac tax”) on employer sponsored high-cost health plans that offer policies with generous coverage levels
    •      
    2018 Reforms
  • 24. Health Care Reform Timeline 2010 – 2020
    • And finally…
    • Donut hole coverage gap in Medicare prescription benefit is fully phased out. Seniors continue to pay the standard 25% of their drug costs until they reach the threshold for Medicare catastrophic coverage .
    2020 Reforms
  • 25. Select Issues Affecting Health Insurers
    • Significant margin pressures in risk-based books
      • MLR floors; and later from the competitive nature of exchange-based distribution
    • Membership Mix
      • Employer dropping coverage in the face of rising costs
      • Employees going to the exchanges
      • Newly the newly insured going to the exchanges and Medicaid
    • Unfavorable market shift
      • Employers transition from fully-insured to ASO contracts
    • Distribution
      • The implementation of exchanges in 2014 means that carriers will compete only on price, brand and network
      • Reshaping the broker relationship
  • 26. Select Issues Affecting Health Insurers
    • Key dynamics regarding employer “dumping”
      • Each ASO life lost results in an incremental “headwind” of about $35/member, while each risk-based employer life lost results in an incremental headwind of about $220/member.
      • For each life “won back” via the exchange, the insurer recoups about $123 to $142/member in 2014 – 2017.
      • Nearly 75% of dropped employees are expected to go to the exchanges. The 25% that do not represent a pool of lost earnings power.
  • 27. Select Issues Affecting Health Insurers
    • Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual markets.
    • Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019.
  • 28. WellPoint Health Insurance Enrollment and Financials
  • 29. Review of Select Markets Affected
    • Individual Market
      • Higher wage employees
      • Previously insured under an employer plan
      • Never insured
      • Affect of subsidies and penalties
    • Broker Community
      • MLR minimum requirements adverse impact
      • Reposition
      • Expansion/partnerships
      • New commission structure
  • 30. WellPoint, Inc. Membership Mix
  • 31. Changes in Membership Mix
    • Comparing 2Q09 to 2Q10 enrollment we see enrollment declines in markets that are expected to experience growth under HCR:
      • Individual, down 10.1%
      • Local Group (Small, Midsize, Jumbo), down 4.5%
      • Medicaid, down 1.5%
      • BlueCard, down 0.6%
      • Managing set medical loss ratios (MLRs) are expected to be challenge in the Individual, Medicaid and Small Group segments.
  • 32. Changes in Membership Mix
    • Comparing 2Q09 to 2Q10 enrollment we see enrollment growth in:
      • National Accounts, up 3.0%
      • FEP, up 4.5%
      • Senior Markets, up 1.5%
    National Accounts will see little impact from reform. The Senior markets are expected to do well. Good hedge markets.
  • 33. Specialty Products
    • Specialty products are viewed by industry leaders as a way to shore up revenues under HCR.
    • WellPoint has seen strong growth in specialty products popular with consumers.
      • Dental, 80.5%
      • Vision, 18.1%
    Going global where there are opportunities in the growing Asian middle class market and fewer regulatory hurdles is also an option for WellPoint and other national carriers.
  • 34. WellPoint 4Q2009 PMPM Financials for the Individual Market Segment MLR minimum will be 85% under HCR. WellPoint is well over the new MLR in ME, well under it in NH. Will have to raise it slightly in its best market, VA. It might consider exiting markets where MLR is extremely low or high AND enrollment is very low.
  • 35. WellPoint 2009 PMPM Financials for the Medicaid Segment
  • 36. WellPoint, Inc. on Broker Commissions
    • The role of brokers is being hotly debated. Many carriers are reducing what they pay brokers, changing how they pay brokers or eliminating commissions altogether to meet the new MLR standards.
    • The broker community is absolutely critical and important to health care system. One of the primary reasons many who qualify for Medicaid are not enrolled is because no one is financially incented to get them enrolled.
    • WellPoint, Inc. has not announced what the new broker commission structure will be.
  • 37. WellPoint, Inc. on Broker Commissions
    • The rules are going to vary very dramatically by state. Some states have credibility rules based on the size of the carrier’s market share, and then there are phase-ins. Some states might allow legal entity consolidations. So there's a variety of things to understand further before WellPoint announces the broker commission rates.
    • WellPoint anticipates that it will be aligned with the key competitors in terms of having commission structures that are somewhat similar. There's been huge outliers in the past, but essentially the playing field has been leveled on that by creating an MLR floor.
    .
  • 38. Actuarial Focus
  • 39. Impact of health reform on insurance enrollment (percent change by year 2010-2019)
  • 40. CBO Highlights
    • The largest effects would be seen in the non-group market, which would grow, but would still account for only 17% of the overall insurance market in 2016.
    • The CBO and the JCT estimate that the average premium per person covered for non-group policies would be about 10 – 13% higher than average under current law in 2016.
    • About 50% of enrollees would receive government subsidies that would bring their cost well below the premiums that would be charged for such policies under current lay.
    CBO = Congressional Budget Office; JCT = Joint Committee on Taxation
  • 41. CBO Highlights
    • Additional Information about Employment-Based Coverage
    • The changes in employment-based coverage shown in Table 3 of the cost estimate for the Patient Protection and Affordable Care Act are themselves the net result of several flows, which can be illustrated using the estimates for 2019. For that year, under the proposal, CBO and the JCT staff estimate that about 157 million non-elderly people would have their primary insurance coverage through an employer, or about 5 million fewer than under current law .
    • We estimate that about 6 million people would be covered by an employment-based plan who would not be covered by one under current law (largely because the mandate for individuals to be insured would increase workers’ demand for insurance coverage through their employers).
  • 42.  
  • 43. CBO Highlights
    • Additional Information about Employment-Based Coverage
    • We estimate that between 9 million and 10 million other people who would be covered by an employment-based plan under current law would not have an offer of such coverage under the proposal. Firms that would choose not to offer coverage as a result of the proposal would tend to be smaller employers and employers that predominantly employ lower-wage workers—people who would be eligible for subsidies through the exchanges—although some workers who would not have employment-based coverage because of the proposal would not be eligible for such subsidies. Whether those changes in coverage would represent the dropping of existing coverage or a lack of new offers of coverage is difficult to determine.
    • In addition, between 1 million and 2 million people who could be covered by their employer’s plan (or a plan offered to a family member) would instead obtain coverage in the exchanges , either because the employer’s offer would be deemed unaffordable and they would therefore be eligible to receive subsidies in the exchanges, or because the “firewall” for those with an offer of employer coverage would be imperfectly enforced. (Those people are counted as enrollees in the exchanges.)
  • 44.  
  • 45. WellPoint, Inc. Case Study
  • 46. WellPoint, Inc. Case Study (cont’d.)
  • 47.
            • Marketing & Advertising
  • 48. Marketing & Advertising Budget
    • Using Horizon as a benchmark, it is estimated that WellPoint’s budget may be approximately $30 million.
    • (campaign centered around Education )
    • Social Media (FaceBook & Twitter)
    • Print Advertising (Newspapers & Magazines)
    • Billboards (Major Highways)
    • Television
    • Radio
    • eCommerce (blast emails)
    • Retail Stores
  • 49.  
  • 50.  
  • 51.  
  • 52. WellPoint Helping Businesses Navigate Health Care Changes with Online Tools and Social Media
    • New Grandfathering Tool Helps Businesses Determine Best Health Plan Solution
    • H&R Block Tax Calculator Tool Helps Companies Determine Tax Credits and Financial Impacts
  • 53. Tools
  • 54. Websites – Healthychat.com and media – Twitter / Facebook
  • 55. WellPoint, Inc.
    • $195 Grant to Non-profit to run country’s only uninsured help line
    • With the implementation of Health Care Reform Legislation set to roll out over the next three years, current efforts to educate uninsured Americans will continue.
    • The number of health plan outlets is small but is expected to grow as more consumers look to buy individual policies. The Colorado plan is the first among subsidiaries of Indianapolis-based WellPoint to open a retail store. The Anthem store is in the Denver suburb of Littleton, Colo., in the Southwest Plaza mall. Other plans have opened retail outlets, but experts said more might consider stores as a way to reach potential customers -- especially to build a customer base for 2014, when most U.S. residents will be required to have health coverage or pay a tax penalty.
    • Foundation Awards
    • 01/12/11
    • Retail Insurance Store 10/2010
  • 56.
    • Innovate and think like a consumer. Customers in all sectors will have greater access to information for making informed decisions; assisting them in navigating the information will be key.
    • Know your community. Your “community” will grow as new requirements to cover and treat patients are implemented. Re-evaluate your product portfolio or lose out in the new marketplace.
    • Provide value. With the major changes in funds flows, all sectors can take advantage of new sources of monies and mitigate anticipated reductions in funding.
    Recommendations To prosper in this changing environment, PricewaterhouseCoopers believes all sectors should
  • 57. Resource Citations
    • Congressional Budget Office (US employer-based coverage data)
    • Edgar Online (WellPoint stock trend)
    • Forrester Research (Consumer marketing data)
    • J.P. Morgan, Morgan Stanley, Goldman Sachs (affects on HCR on carriers financial performance and membership)
    • Mark Farrah Associates (WellPoint , SWOT analysis, enrollment and financial data)
    • WellPoint quarterly analyst calls
    • www.wellpoint.com
    • www.healthreform.gov