History and Future of Small Business Health Insurance
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History and Future of Small Business Health Insurance

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Small business health insurance 101 webinar - past, present, and future: http://offers.zanebenefits.com/the-history-and-future-of-small-business-health-insurance ...

Small business health insurance 101 webinar - past, present, and future: http://offers.zanebenefits.com/the-history-and-future-of-small-business-health-insurance

Small business health insurance has evolved. It's no longer just a simple annual renewal. Now, it's consumer-directed approaches, defined contribution health plans and private health insurance exchanges.

Health care reform has brought significant change to an industry that has seen little change since World War II. In this webinar, Zane Benefits' CEO and founder Paul Zane Pilzer discusses the future of small business health insurance.

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    History and Future of Small Business Health Insurance History and Future of Small Business Health Insurance Presentation Transcript

    • The History & Future of SmallBusiness Health InsuranceWith Paul Zane Pilzer
    • The current U.S. employment crisis, coupled with the Affordable Care Act, has given employers the courage to go where few employers dared to go before – WITHOUT employer-provided health insurance. The 2012 renewal market for employer-provided health benefits may be the harbinger of what’s to come regardless of what the U.S. Supreme Court rules on the legality of ACA.Paul Zane PilzerCEO & Founder of Zane Benefits, author of The New HealthInsurance Solution, world-renowned economist, highlysuccessful social entrepreneur, adjunct professor, and the authorof nine best-selling books.
    • Agenda How Americans Get Health Insurance Today (2012) History of U.S. Health Insurance – WWII – 1965 Pre-ACA Legislation – Medicare, Medicaid, ERISA, COBRA, HIPAA Affordable Care Act (ACA) – 2010-2014 Defined Contribution Health Benefits (1999-2014) How ACA/Economy/Deficit is Affecting 2012 Renewals CLASS (Federal Long Term Care Program) Defunding New Private Health Exchanges and Defined Contribution The United States Supreme Court - Four Potential Options Summary and Q & A
    • How Americans Get Health Insurance Today
    • How Americans Get Health Insurance (2012) (overlapping numbers) a. Group Employer - 145 million (incl. dependents) b. Personal Policies - 40 million (up from 12 million 2002) c. Medicare - 47 million (incl. 12 million MA) d. Medicaid - 45 million (incl. 8 million over 65 or disabled) e. Uninsured - 40 million (politically correct #, probably closer to 10 million)
    • How Americans Get Health Insurance (2012)(overlapping numbers) a. Group Employer - 145 million (incl. dependents) b. Personal Policies - 40 million (up from 12 million 2002) c. Medicare - 47 million (incl. 12 million MA) d. Medicaid - 45 million (incl. 8 million over 65 or disabled) e. Uninsured - 40 million (politically correct #, probably closer to 10 million)
    • History of U.S. Health Insurance
    • History of U.S. Health Insurance Creation of “Modern” U.S. Health Care Occurred Post WWII ● Limited employerinvolvement Government-imposed ● Wage & Price Controls ● Catastrophic health 1941-1947insurance ●Employer healthcare benefits exempted from ●Local Blue Cross / Blue World income taxes & Wage &Shield War II Price controls ●Individual / family driven ●HUGE cost advantage to employer driven, third- party payer system - 94% -70% personal income tax rate from 1944-1981
    • History of U.S. Health Insurance Health Insurance Today is Mostly NOT Insurance Health Insurance Today is a Bundled Combination of: (1) ACCESS (10%) - Access to a private network of physicians,hospitals, and other medical providers who provide services at greatlydiscounted rates, or conversely, charge you 150% to 1000% more for thesame service if you are outside of their network; (2) PREPAID SERVICES (50%) - Prepaid amounts of services fromthese private in-network providers—prepaid amounts that expire and do notcarry forward if you are healthy and don’t use them; and (3) INSURANCE (40%) - Financial protection (insurance) against medicalexpenses if you have a major illness or accident.
    • History of U.S. Health Insurance Group and Personal Policies Post-WWII (1945-1970) NOTE: Individual and Family Policies are called Personal Policies Group & Personal Policies (1945-1970) – Were mostly guaranteed-issue, which meant Carriers made the most money by getting healthyapplicants vs non-healthies to apply for coverage. (more later on “Ahead tothe Past”). Personal vs Group (1945-1970) – Applicants from employers werehealthier (i.e. working) than general population. That’s why Group Coverageused to cost 0.5x (half) Price of Individual Coverage (Pre-1970)—and mostolder people today only know employer group plans. Group Policies (1945-1970) – Enjoyed enormous tax advantages overPersonal Policies, especially among high-taxed decision-makers.
    • History of U.S. Health Insurance Personal Policies (1970-2011) NOTE: Individual and Family Policies are called Personal Policies Medical Underwriting – 45 states dropped Guaranteed-Issue (GI)personal policies in favor of medical underwriting. 5 states remain GI today(NY, NJ, MA, RI and ME). That’s why Personal Coverage in 45 states now cost 0.5x (half) to 0.33x(1/3) Price of Group in 45 states—they only insure the healthy. Personal coverage rose from 12 million (2002) to 40 million. ACA - Allstates GI in 2014 (children became GI in 2010).
    • History of U.S. Health Insurance Group and Personal Policies (1970-2011)Small group (<50 employees) policies became guaranteed-issue withinstate-regulated medical-rating bands.Healthier employees left group market for personal coverage, furtherincreasing premiums for those left behind with no place to go due to medicalunderwriting of personal coverage.Federal tax advantages of group extended (2002-2009) to personalcoverage (see next slide).
    • History of U.S. Health Insurance Tax Advantages - Group vs Personal Coverage (1970-2011)Group policies traditionally enjoyed enormous tax advantages over personalpolicies because: a. Employers could pay for them “off the books”. b. Employees could re-direct pre-tax salary “off the books” (POP Plans) to pay for group coverage. U.S. Treasury (federal) gave tax parity to personal policies2002 HRA– IRS codified Health Reimbursement Arrangements (HRAs) foremployer-funded personal policies.2009 PRA – IRS allowed Premium Reimbursement Arrangements for pre-taxsalary reduction reimbursements for individual health coverage.
    • Pre-ACA Legislation -- Medicare, Medicaid, ERCOBRA, HIPAA
    • Pre-ACA Legislation Medicare, Medicaid, ERISA, COBRA, HIPAAa. Medicare (1965) - 47 million covered today Removed the elderly and very sick from private insuranceb. Medicaid (1965) - 45 million covered today Removed the very poor from private insurancec. ERISA (1974) Primarily retirement/pension reform but covered all employee benefits - Defined Benefits vs Defined Contribution Plansd. COBRA (1986) - Exempts employers <19 employees Allowed employees 18-36 month coverage between “jobs”e. HIPAA (1996) Portability to next employer (63 days), Mandated state coverage of uninsurables post- 2006 #3-5 ASSUMES EVERY AMERICAN HAS A “NEXT JOB” PRE-65
    • Affordable Care Act (ACA)
    • Affordable Care Act (ACA) 2010-2014 Mandated Benefits for All Policies – creating “generic” national healthinsurance Mandated Purchase for all Americans (the “Mandate”) –SupremeCourt to hear arguments March, rule in June Mandated Guaranteed Issue for All Personal Policies NOTE: Individual and Family Policies are called Personal Policies --Children became GI in 2010 --Some Adults become GI 2011-2014 (Federal Risk Pool) --All become GI in 2014 Major Expansion of Medicaid Eligibility (challenged by many States)
    • Affordable Care Act (ACA) 2010-2014 How Health Insurance Reform Affects Employers1. Mandated Benefits for All Policies ■ No lifetime maximums on benefits ■ Preventive Care with no co-pays or deductibles ■ Federal Minimum (effectively maximum) benefits2. >50 FTEs – Penalty if Not Offering “Affordable” #1 ■ ($3,000/employee receiving exchange subsidy. $2,000 max. on all employees)3. <50 FTEs – No Penalty Assume “health insurance” cost $6,000/year - White House wanted $10,000 Employer Penalty ○ - Senate wanted $750 Employer Penalty ○ - House wanted $2,000 Employer Penalty ○
    • Affordable Care Act (ACA) 2010-2014 How Health Insurance Reform Affects Employees1. Mandated Benefits for All Polices ●No lifetime maximums on benefits ●Preventive Care with no co-pays or deductibles ●Federal Minimum (effectively maximum) benefits2. Individual Mandate – Failing to meet the mandate will result in a taxpenalty.3. (Massive) Individual Premium Subsidies Employee w/ Family of 4 (see kff.org) Income Annual Premium Expected Total Cost Gov’t Premium Subsidy $20,000 $0 (Medicaid) $24,000 $24,000 $40,000 $2,178 (5.4%) $24,000 $21,822 $80,000 $8,360 (9.5%) $24,000 $15,640
    • Defined Contribution Health Benefits
    • Defined Contribution Health Benefits(1999- 2012) (1970s - Defined Benefit vs Defined Contribution (IRA, 401k)) 1999 - Extend Health (formerly Extend Benefits), retirees 2002 - IRS endorses HRAs for personal policy premiums 2006 - HIPAA mandate for uninsurables starts 2007 - Zane Benefits (front page Wall St. Journal 7/30/07) 2009 - IRS endorses PRAs for personal policy premiums 2014 - Personal Policies become Guaranteed Issue
    • How ACA, the Economy and Deficitis Affecting 2012 Renewals
    • How ACA is Affecting 2012 Renewals 2012 Strategies for Employers with Group Plans ○ Increase employee participation cost (Wal-Mart) ○ Eliminate whole Classes of Eligibles (e.g. part-timers) ○ Increase Deductibles or Reduce Coverage selectively by Employee Class via GroupHRA (by $ or covered items like pregnancy) ○ Move lower value-add Employee Classes to Defined Contribution ○ Move all Employees to Defined Contribution (personal policies)Shift to Defined Contribution is being driven by Guaranteed Issue ofPersonal Policies
    • How the Economy is Affecting 2012 Renewals A Job without Health Benefits is Better than No Job● Unemployment Perception vs Reality (but same effect)● Employees are Accepting Reduced Benefits● Shift to Defined Contribution is Superior to Elimination of Benefits● Economic Pressure - Employers with No Benefits are Adopting Pre-Tax Funding of Personal Policies (HRAs and PRA Plans)
    • How the Federal Deficit is Affecting ACA Implementation● Is Death of CLASS Harbinger of ACA 2014?● Deadlines being missed, Waivers being Granted● What’s more important? Unemployment or ACA Implementation?● Unemployment trumps Deficit trumps ACA Implementation● $21,822 per $40,000-family ACA subsidy = $872 Billion/Year for just 40 million families.
    • Impact of CLASS Defunding
    • Impact of CLASS DefundingLong Term Care Insurance – Aged Care ○ Greatest Un-Met Need in U.S. Health Care ○ Roughly $200 billion funded today by Medicaid ○ Private Carriers Went Broke 1960-1990 ○ Dream of late Senator Ted Kennedy ○ Key Component of ACA 2010Community Living Assistance Services and Supports Act (CLASS Act). ○ Supposed to be self-funding with just federal guarantee ○ 2012 Deadline for HHS to Issue Regulations ○ October 10, 2011 Sec Sebelius Indefinitely Suspends Program for 2012 and beyond Paul Zane Pilzer *
    • New Private Health Exchanges & Defined Contribution
    • New Private Health Exchanges and Defined Contribution SolutionsWhat is a Private Health Care Exchange?● A Private Health Exchange is a euphemism for ehealthinurance.com or any other “branded” multiple quote venue for Personal Policies.● New Technology lets every state, organization, company, or even individual agent offer their own “branded” Private Health Exchange.● All being driven by Defined Contribution Health Plan.● Defined Contribution is the Buzzword of 21st Century Employer- subsidized health benefits.
    • The Supreme Court Ruling: Four Potential Outcomes
    • The United States Supreme Court 26 States and Others are Contesting ACA Insurance Mandate/ Rulings (e.g. ACA, AZ Immigration Law) expected June 21-25. FOUR BASIC ALTERNATIVES FOR SUPREME COURT1) Uphold Entire ACA – 1 of 5 Republican Justices (Roberts, Kennedy) wouldhave to side with President. Then it’s Romney vs Obama in election.2) Invalidate Part of ACA – most likely Insurance Mandate. Both sides agreethat they must then invalidate Guaranteed Issue since only unhealthy wouldpurchase insurance. Medicaid expansion also challenged by states.
    • The United States Supreme Court FOUR BASIC ALTERNATIVES FOR SUPREME COURT (cont)3) Reject Entire ACA – Theory is that Congress wouldn’t have passed thebill without all its major provisions (e.g. Guaranteed Issue + Mandate).4) Postpone Ruling Until 2015 – Logic here is that the bill must have takeneffect (post-2014) to have a valid claim before the U.S. Supreme Court. Ifso, then bill might stand until 2015 or might postpone implementation.
    • Summary
    • Summary1. Current Law is Affordable Care Act & its 2012-2014 Implementation2. Regardless of U.S. Supreme Court decision in 2012, key components(like no lifetime limits, Children GI and Adult 2014 GI) may stay3. Federal Deficit will Drive Most Government Decision-Making 2012-20144. Executive Orders of President Obama driving most Fiscal Programs(e.g. Immigration) with Congressional Gridlock5. Employer Shift to Partial & Full Defined Contribution (2012+)6. Insurance Distribution Shift to Private “branded” Health CareExchanges (2012+)