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Your Presenter
Brent Heurter, CBWA
President,
Healthy Halo Insurance Services
brent@healthyhalo.com
323.319.6626
2
Agenda
• History of Health Insurance and Costs
• Individual Mandated Health Insurance
• Tax Credits and Subsidy Programs
•...
A Brief History of Health Insurance
• Employer-sponsored health insurance was born during World War II
• Medicare and Medi...
Cumulative Premium Increases Compared to Inflation
Family Coverage, California, 2002 to 2012
• California Employer Hearth
...
How Much Will Premiums Increase?
• One state report shows that premiums will go up
30% in 2014
• Age-banded rates cannot v...
Essential Benefits8
Taxes and Fees9
Other Employer Cost Considerations
• Must offer benefits to those working 30 hours or more per week
• Maximum waiting peri...
Individual Mandate
• Jan. 1, 2014 all individuals are required to have health insurance
• Exceptions:
o Family income is b...
Individual/Family Penalties for Not Having
Health Insurance13
Year Percentage of
Income
Set Dollar Amount per
Adult
Set Do...
Covered California
• Public, state-run Exchange
• Guaranteed Issue for ALL Individuals/Families
• Provides online “apples ...
Levels of Coverage15
Category
Percentage of expenses
paid by health plan
Percentage of expenses paid
by individual
Platinu...
Individual Plan Rates16
Plan Bronze Silver Gold Platinum
Health Net
HMO
__ $242 $276 $311
Anthem
HMO
__ $259 $327 $374
Mol...
2014 Individual Plan Rates to Comparable Small Group
Rates
17
Area Avg. Cost of Silver Plan
Average cost of 2013 Comparabl...
FINANCIAL ASSISTANCE PROGRAMS
AVAILABLE ONLY IN
COVERED CALIFORNIA EXCHANGE
18
Federal Poverty Level (FPL)19
Persons in Household FPL 138% FPL 200% FPL 250% FPL 400% FPL
1 $11,490 $15,856 $22,980 $28,7...
Medi-Cal
• Free coverage for qualified individuals and children
• In 2014, Medi-Cal eligibility increases from 100% FPL to...
1) Cost-Sharing Subsidies
• Eligibility: 138% to 250% FPL
• Sliding scale based on FPL
• 138% - 150% FPL covers 94% of cos...
1) Cost-Sharing Subsidies22
Coverage Category
94% Silver
Covers 94% avg.
annual cost
87% Silver
Covers 87% avg. annual cos...
2) Premium Subsidies (aka Tax Credits)
• Eligibility 138% to 400% FPL
• Amount of subsidy is based on a sliding scale
• Ap...
2) Premium Subsidy Examples24
Plan 150 FPL 200 FPL 250 FPL 400 FPL
Health Net
HMO
$40 $103 $175 $242
$202 $138 $66 $0
Anth...
Covered California : Cost-Estimate Calculator25
Groups of Employees26
Medi-Cal Eligible
Individual with income lower
than $15,856
Or
Family of 2 with income lower
than $2...
Groups of Employees27
Premium Subsidy Eligible
Individual with income of
$22,980 - $45,960
Or
Family of 2 with income of
$...
Groups of Employees28
Group 5
Waives Coverage and Opts to Pay Penalty
Year % of Income Adult Child
2014 1% $95 $47.50
2015...
Group Health Benefit Changes
Effective Already:
1. Dependents covered until age 26
2. No cost for preventative care
3. No ...
Small Employers
• No mandate to provide group health insurance
• Defined as 1 – 50 full-time employees
• Small employer ex...
Small Business Health Options Program (SHOP)
• Public Exchange run by Covered California
• Side-by-side comparison of plan...
Large Employers
• Pay or Play!
• 50 or more full-time equivalent (FTE) employees in the prior year.
• Employees working 30...
Large Employer Penalties
• No health insurance = $2,000 per year/per employee
o The first 30 employees are not counted:
o ...
Minimum Value and Affordability Test
1) Minimum Value Test: health plan must pay a minimum of 60% of expenses
2) Affordabi...
Penalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014
35
Penalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014
36
Employer Survey on Health Reform
McKinsey & Company, a leading global management consulting firm, conducted
a survey of 1,...
Research and Consumer Surveys
• At least 30% of employers would gain economically from dropping
coverage even if they make...
Key Concepts and Plan Design Strategies
39
Defined Contribution
Employer provides fixed dollar amount and the
employee can choose how to allocate it among a
variety ...
Defined Contribution & Private Exchanges
A benefits exchange is an online store where employees purchase benefit
to suit t...
Health Reimbursement Arrangements (HRAs)42
What is an HRA?
• Created under Section 105 of the IRS Code and further
clarifi...
Healthcare Reform & Defined Contribution HRA43
• Medical Underwriting
• No Federal Subsidies for
Individual Policies
• No ...
Advantages to HRAs & Defined Contribution44
• Control & predict costs
• No min. contribution or
participation
• Establish ...
Pay or Play Spectrum of Strategies45
Continue as plan
sponsor for all
employees
(plan provides
minimum value is
affordable...
Play and Redirect
• Calculate potential penalties
• Establish defined contribution plan and HRA
• Restructure contribution...
Pay and Redeploy Strategies
• Employer discontinues group coverage and completely subsidizes employee participation in the...
ACA Compliance Checklist
2013:
 Summary of Benefits Coverage (SBC)
 Include in Open Enrollment Packets
 Include in New ...
What Are You Doing with Your Plan?
• 90% of employers have moved beyond a “wait and see” approach
• Only 10% of companies ...
Action Steps
 Talk to other companies in your industry. What are they doing?
 Take advantage of our free whitepapers, re...
Employer Tools and Resources
Free White Papers and EBooks
51
End.
Thank you !
Healthcare Reform Strategies - Rethinking Your Benefits Strategy
Healthcare Reform Strategies - Rethinking Your Benefits Strategy
Healthcare Reform Strategies - Rethinking Your Benefits Strategy
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Healthcare Reform Strategies - Rethinking Your Benefits Strategy

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This presentation by Brent Heurter, president of Healthy Halo Insurance Services, explains healthcare reform strategies for employers.

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Transcript of "Healthcare Reform Strategies - Rethinking Your Benefits Strategy"

  1. 1. Your Presenter Brent Heurter, CBWA President, Healthy Halo Insurance Services brent@healthyhalo.com 323.319.6626 2
  2. 2. Agenda • History of Health Insurance and Costs • Individual Mandated Health Insurance • Tax Credits and Subsidy Programs • The Exchange: Covered California • Pay or Play for Large Employers • ACA Compliance Checklist • Strategies for Containing Costs • Resources & Tools Available 3
  3. 3. A Brief History of Health Insurance • Employer-sponsored health insurance was born during World War II • Medicare and Medicaid passed in 1965 • ACA signed into law on March 23, 2010 • Supreme Court upheld the ACA on June 28, 2012 World War II 1965 2010 2012 5
  4. 4. Cumulative Premium Increases Compared to Inflation Family Coverage, California, 2002 to 2012 • California Employer Hearth Benefits Cost of Health Insurance • Since 2002, health insurance premiums in California have increased by 169%, more than five times the 31.5% increase in the state's overall inflation rate. 6
  5. 5. How Much Will Premiums Increase? • One state report shows that premiums will go up 30% in 2014 • Age-banded rates cannot vary more than 3:1 for adults for individual and small group • Eliminates “Risk Adjustment Factor” for small groups (2-50 ees) • Essential Benefits • New health insurance taxes 7
  6. 6. Essential Benefits8
  7. 7. Taxes and Fees9
  8. 8. Other Employer Cost Considerations • Must offer benefits to those working 30 hours or more per week • Maximum waiting period 60 days in CA • Adjusting contributions to avoid penalties • Individual mandate may cause employees to join the plan • Automatic enrollment for companies with 200 plus employees • More administration for reporting and eligibility mandates 11
  9. 9. Individual Mandate • Jan. 1, 2014 all individuals are required to have health insurance • Exceptions: o Family income is below threshold of having to file a tax return o Currently enrolled in Medicare or Medicaid o Enrolled in a plan offered by an employer 12
  10. 10. Individual/Family Penalties for Not Having Health Insurance13 Year Percentage of Income Set Dollar Amount per Adult Set Dollar Amount per Child Year 2014 1% $95 $47.50 2014 2015 2% $325 $162.50 2015 2016 2.5% $695 $347.50 2016 Health Insurance Penalty Phase-In Schedule Pay the greater of the two amounts
  11. 11. Covered California • Public, state-run Exchange • Guaranteed Issue for ALL Individuals/Families • Provides online “apples to apples” comparison • Begins open enrollment 10/1/13 for coverage effective 1/1/14 • Must have coverage before 3/1/14 or wait until next open enrollment • 13 carriers state-wide with 7 carriers in LA County • Rates based on age and 19 territories 14
  12. 12. Levels of Coverage15 Category Percentage of expenses paid by health plan Percentage of expenses paid by individual Platinum 90% 10% Gold 80% 20% Silver 70% 30% Bronze 60% 40% Higher percentage of expenses paid by plan Lower monthly premium payment
  13. 13. Individual Plan Rates16 Plan Bronze Silver Gold Platinum Health Net HMO __ $242 $276 $311 Anthem HMO __ $259 $327 $374 Molina Healthcare HMO $204 $259 $285 $342 L.A. Care HMO $196 $265 $301 $332 Blue Shield PPO $240 $287 $342 $392 Anthem EPO $225 $299 $363 $420 Kaiser HMO $245 $325 $399 $429 Health Net PPO $301 __ __ __ South Los Angeles County – 40 Year Old
  14. 14. 2014 Individual Plan Rates to Comparable Small Group Rates 17 Area Avg. Cost of Silver Plan Average cost of 2013 Comparable Small Group Plans Difference Los Angeles (North) $242 $311 -22% Los Angeles (South) $253 $362 -29%
  15. 15. FINANCIAL ASSISTANCE PROGRAMS AVAILABLE ONLY IN COVERED CALIFORNIA EXCHANGE 18
  16. 16. Federal Poverty Level (FPL)19 Persons in Household FPL 138% FPL 200% FPL 250% FPL 400% FPL 1 $11,490 $15,856 $22,980 $28,725 $45,960 2 $15,510 $21,404 $31,020 $38,774 $62,400 3 $19,530 $26,951 $39,060 $48,825 $78,120 4 $23,550 $32,499 $47,100 $58,875 $94,200 Medi-Cal Cost-Sharing Subsidies Premium Subsidies
  17. 17. Medi-Cal • Free coverage for qualified individuals and children • In 2014, Medi-Cal eligibility increases from 100% FPL to 138% FPL for adults and includes adults without children • Eligibility for children is up to 250% FPL, however differs in other states • Estimates range from 1.7 million to more than 3 million Californians will become eligible 20
  18. 18. 1) Cost-Sharing Subsidies • Eligibility: 138% to 250% FPL • Sliding scale based on FPL • 138% - 150% FPL covers 94% of costs • 150% -200% FPL covers 87% of costs • 200-250% of FPL covers 73% of costs 21 What is the benefit? Allows the purchase of a Silver Plan (which covers the cost of medical services at 70%) to a HIGHER percentage of coverage (which means lower deductibles and copayments)
  19. 19. 1) Cost-Sharing Subsidies22 Coverage Category 94% Silver Covers 94% avg. annual cost 87% Silver Covers 87% avg. annual cost 73% Silver Covers 73% avg. annual cost 70% Silver Covers 70% avg. annual cost Income Ranges 138% - 150% FPL 150% - 200% FPL 200% - 250% FPL 250% - 400% FPL Office Visit $3 $15 $40 $45 Lab Diagnostics $3 $5 $15 $20 $40 $50 $45 $65 Generic Drugs $3 $5 $20 $25 Annual Out of Pocket Max. Individual/ Family $2,250 $4,500 $2,500 $4,500 $5,200 $4,500 $6,350 $12,700 Examples based on FPL
  20. 20. 2) Premium Subsidies (aka Tax Credits) • Eligibility 138% to 400% FPL • Amount of subsidy is based on a sliding scale • Applied to the monthly premium • Individual can earn up to $45,960 • Family of four can earn up to $94,200 • Available only in the Exchange • Must be Silver plan or higher 23
  21. 21. 2) Premium Subsidy Examples24 Plan 150 FPL 200 FPL 250 FPL 400 FPL Health Net HMO $40 $103 $175 $242 $202 $138 $66 $0 Anthem HMO $57 $121 $193 $259 $202 $138 $66 $0 Molina Healthcare HMO $58 $121 $193 $259 $202 $138 $66 $0 L.A. Care HMO $64 $127 $199 $265 $202 $138 $66 $0 Blue Shield PPO $86 $149 $221 $287 $202 $138 $66 $0 Anthem EPO $97 $160 $232 $299 $202 $138 $66 $0 Kaiser Permanente HMO $123 $186 $258 $325 $202 $138 $66 $0 40 Year Old Single/ South LA County/Silver Plan Subsidies shown in green premium after subsidy and monthly premium after subsidy is shown in black
  22. 22. Covered California : Cost-Estimate Calculator25
  23. 23. Groups of Employees26 Medi-Cal Eligible Individual with income lower than $15,856 Or Family of 2 with income lower than $21,404 Or Family of 3 with income lower than $26,951 Or Family of 4 with income lower than $32,499 Group 1 Less than 138% FPL Group 2 138 to 250% FPL Cost-Sharing & Premium Subsidy Eligible Individual with income between $15,856 - $28,725 Or Family of 2 with income between $21,404 - $38,774 Or Family of 3 with income between $26,951 - $48,825 Or Family of 4 with income between $32,499 - $58,876 Must purchase on the Exchange to receive subsidies
  24. 24. Groups of Employees27 Premium Subsidy Eligible Individual with income of $22,980 - $45,960 Or Family of 2 with income of $31,020 - $62,400 Or Family of 3 with income of $39,060 - $78,120 Or Family of 4 with income of $47,100 - $94,200 Group 3 138% to 400% FPL Group 4 Higher than 400% FPL No Subsidies Individual with income higher than $45,960 Or Family of 2 with income higher than $62,400 Or Family of 3 with income higher than $78,120 Or Family of 4 with income higher than $94,200 Must purchase on the Exchange to receive subsidies
  25. 25. Groups of Employees28 Group 5 Waives Coverage and Opts to Pay Penalty Year % of Income Adult Child 2014 1% $95 $47.50 2015 2% $325 $162.50 2016 2.5% $695 $347.50
  26. 26. Group Health Benefit Changes Effective Already: 1. Dependents covered until age 26 2. No cost for preventative care 3. No cost for contraceptives 4. No lifetime or annual benefit limits Effective Jan. 1, 2014: 1. No pre-existing exclusions 2. Maximum OOP $6,350 / $12,700 29
  27. 27. Small Employers • No mandate to provide group health insurance • Defined as 1 – 50 full-time employees • Small employer expands to 100 employees in 2017 but penalty still applies over 50 FTEs • Community rating • Max. plan deductible of $2,000/$4,000 • In the Exchange: min. participation and contribution requirements may no longer apply (must enroll during special open enrollment period Nov. 15 – December 15) 30
  28. 28. Small Business Health Options Program (SHOP) • Public Exchange run by Covered California • Side-by-side comparison of plans • Choice of health plans, dental and carriers • Can provide defined contribution amount towards Bronze, Silver, Gold or Platinum plans • One consolidated bill for all plans • Tax credits are available for 2 years from 2014 to 2020 • On a sliding scale up to a maximum of 50%: o 25 or fewer FTEs with average payroll less than $50,000 per year and contribute 50% are eligible for minimal tax credit o 10 or fewer FTEs with average payroll less than $25,000 are eligible for maximum tax credit 31
  29. 29. Large Employers • Pay or Play! • 50 or more full-time equivalent (FTE) employees in the prior year. • Employees working 30 hours per week are deemed full-time. • Part-time employees: add up hours worked for the month and divide by 120 • 10 employees @ 15 hours per week = 600 hours divided by 120 = 5 FTEs 32
  30. 30. Large Employer Penalties • No health insurance = $2,000 per year/per employee o The first 30 employees are not counted: o Example: 60 employees – 30 = 30 x $2,000 = $60,000 annual penalty • Unaffordable Coverage = $3,000 per year/per employee that purchases health insurance through the Exchange and receives a subsidy. 33
  31. 31. Minimum Value and Affordability Test 1) Minimum Value Test: health plan must pay a minimum of 60% of expenses 2) Affordability Test: employees’ contribution cannot exceed 9.5% of their W- 2 wages • Penalty does not apply: • If employee has coverage through spouse • Employee buys health insurance through the Exchange but does not qualify for a subsidy • Employee is enrolled in Medicaid/Medicare 34
  32. 32. Penalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act Beginning in 2014 35
  33. 33. Penalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act Beginning in 2014 36
  34. 34. Employer Survey on Health Reform McKinsey & Company, a leading global management consulting firm, conducted a survey of 1,329 employers to measure their attitudes about healthcare reform: • 30% of employers will “definitely or probably” stop providing employer sponsored insurance in the years following 2014 • Among employers with a “high awareness of reform, this proportion increases to more than 50%” • 45 to 50% of employers will “pursue some alternative to traditional” group health coverage 37
  35. 35. Research and Consumer Surveys • At least 30% of employers would gain economically from dropping coverage even if they make employees 100% whole • Contrary to what other employers assume, more than 85% of employees would remain at their jobs even if their employer stopped offering employer sponsored insurance “Most employers, however will find value-creating options between the extremes of completely dropping coverage and making no changes to the current offering” Source: McKinsey & Company 38
  36. 36. Key Concepts and Plan Design Strategies 39
  37. 37. Defined Contribution Employer provides fixed dollar amount and the employee can choose how to allocate it among a variety of benefit options. 40
  38. 38. Defined Contribution & Private Exchanges A benefits exchange is an online store where employees purchase benefit to suit their individual and family needs. 41 What is a private exchange? A benefits model that: • Allows employees to select health plans and other benefits from a menu of products and services • Employees shop for the products that best fit them personally using defined contribution dollars from their employer, and their own money if they choose
  39. 39. Health Reimbursement Arrangements (HRAs)42 What is an HRA? • Created under Section 105 of the IRS Code and further clarified by the IRS in 2002 • HRAs are an employer-funded plan to reimburse employees for medical expenses including individual and family premiums • HRAs are notional arrangements; no funds are expensed until reimbursements are paid • HRAs are tax-deductible for the employer and tax-free to the employee • HRAs can be restricted for the purchase of individual and family health and other specified benefit plans and medical expenses
  40. 40. Healthcare Reform & Defined Contribution HRA43 • Medical Underwriting • No Federal Subsidies for Individual Policies • No Standardized System for Comparing Plans • Employer- Driven • No Medical Underwriting • Federal Subsidies for Individual Policies • Easy comparison of plans • Individual/Family DrivenVs. After 2014Before 2014
  41. 41. Advantages to HRAs & Defined Contribution44 • Control & predict costs • No min. contribution or participation • Establish own rules • No admin. hassle • Allows you to focus on your business • Portable & permanent • Total choice & flexibility • Up to 29% less cost • Allows for premium & cost-sharing subsidies • Better educated consumers EmployeeEmployer
  42. 42. Pay or Play Spectrum of Strategies45 Continue as plan sponsor for all employees (plan provides minimum value is affordable) Restructure contributions to qualify lower-paid employees and their dependents for federal subsidies in the Exchange Limit eligibility to plan and direct ineligibles to the Exchange Exclude classes of full-time employees Reduce weekly hours to 29 or less Discontinue plan and provide tax-free defined contribution for employees to purchase individual plans in the Exchange Discontinue plan with no employee contributions
  43. 43. Play and Redirect • Calculate potential penalties • Establish defined contribution plan and HRA • Restructure contributions so that employee contributions are greater than 9.5% of income for employees earning less than 400% FPL • Redirect eligible employees to receive cost-sharing and premium subsidies through the Exchange • Allow non-eligible employees to continue group health insurance or receive tax-free defined contribution allowance to purchase policies through the Exchange • Provide eligible employees with a tax-free defined contribution HRA allowance to purchase policies through the Exchange 46
  44. 44. Pay and Redeploy Strategies • Employer discontinues group coverage and completely subsidizes employee participation in the Exchange (make employees whole) • Employer discontinues group coverage and keep employee contributions in the exchange at the same level of what continued group coverage would have cost (employer cost-neutral Defined Contribution HRA) • Employer discontinues group coverage and provides contributions for individual exchange at a level to achieve a savings target i.e. 20% (employer cost-savings defined contribution HRA) • Employer discontinues coverage and eliminates entire cost of coverage by not subsidizing any employee exchange participation and pays penalties (pay and exit ) By implementing an HRA, employers avoid using pay increases and paying increased payroll taxes to compensate employees. Employees still maintain tax-free benefits and avoid paying increased income taxes. 47
  45. 45. ACA Compliance Checklist 2013:  Summary of Benefits Coverage (SBC)  Include in Open Enrollment Packets  Include in New Hire Packets  W-2 Reporting Requirements (over 250 ees)  Employee Notice of Exchange Distributed by 10/1  Include in New Hire Packets 2014:  Maximum Waiting Period of 60 days in CA  Automatic Enrollment (200 or more ees) Pending:  Eligibility and Benefits Non-Discrimination Testing 48
  46. 46. What Are You Doing with Your Plan? • 90% of employers have moved beyond a “wait and see” approach • Only 10% of companies are still in the “wait and see” mode • More than 50% of companies are developing tactics to deal with the implications of health reform • About one-third of companies have modeled the financial impact of reform on their organization 49 Which category do you fall into today? Source: International Foundation of Employee Benefit Plans Survey Results: “2013 Employer Sponsored Health Care: ACA’s Impact”
  47. 47. Action Steps  Talk to other companies in your industry. What are they doing?  Take advantage of our free whitepapers, reports, tools and resources  Register for our next monthly webinar: “Beyond the Basics: Advanced Healthcare Reform Strategies” on Thursday, July 18  Evaluate your broker: How well informed are you on the ACA? What strategies have been discussed and developed specifically for your company?  Take advantage of your complimentary one-hour, no-obligation consultation and we’ll develop specific strategies for your company (or to discuss any topic you desire)  Expect my call tomorrow to answer any questions you might have 50
  48. 48. Employer Tools and Resources Free White Papers and EBooks 51
  49. 49. End. Thank you !

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