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Health Care Reform: What Employers Need to Know
 

Health Care Reform: What Employers Need to Know

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A presentation on the new federal health care law by:

A presentation on the new federal health care law by:

Don McDaniel, Sage Growth Partners, LLC
Ron Wineholt, Maryland Chamber of Commerce

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    Health Care Reform: What Employers Need to Know Health Care Reform: What Employers Need to Know Presentation Transcript

    • HEALTH CARE REFORM: WHAT EMPLOYERS NEED TO KNOW
      Don McDaniel, Sage Growth Partners, LLC
      Ron Wineholt, Maryland Chamber of Commerce
      May 2010
    • Intractable Healthcare Problems
    • PROBLEM #1HEALTH EXPENDITURES AS A PERCENTAGE OF GDP
      * 2009 – 2018 Projected
      Source: Centers for Medicare and Medicaid Services
    • 3.7%
      PROBLEM #2AVERAGE PERCENTAGE INCREASE IN HEALTH INSURANCE PREMIUMS COMPARED TO OTHER INDICATORS, 1988-2007
    • PROBLEM #3GROWTH IN MEDICARE SPENDING VS. PRIVATE HEALTH INSURANCE SPENDING
      Source: American Hospital Association via the Centers for Medicare & Medicaid Services, Office of the Actuary. Data Released January 8, 2008
      5
    • AGGREGATE HOSPITAL PAYMENT-TO-COST RATIOS FOR PRIVATE PAYERS, MEDICARE, AND MEDICAID
      Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
      (1) Includes Medicaid Disproportionate Share payments
    • PROBLEM #4NATIONAL SUPPLY & DEMAND PROJECTIONS FOR FTE RNS
      Source: National Center For Health Workforce Analysis, Bureau of Health Professions, Health Resources and Services Administration. (2004). What Is Behind HRSA’s Projected Supply, Demand, and Shortage of Registered Nurses? Link: ftp://ftp.hrsa.gov/bhpr/workforce/behindshortage.pdf.
    • PROBLEM # 5The demographic Tsunami
      One-quarter of all Medicare recipients
      Have five or more chronic conditions
      See, on average, 13 physicians per year
      Secure 50 prescriptions per year
      Over 13,000 different drugs being sold in the U.S. in 2007 – 16x what was available 50 years ago
      Over 900,000 physicians in the U.S. – 75% are in practices of less than 8 physicians
      Payment system issues – hard to support a “system” of care
    • PROBLEM #6NUMBER OF FULL-TIME AND PART-TIME HOSPITAL EMPLOYEES
      Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2008, for community hospitals.
    • PROBLEM #7ARRESTED DEVELOPMENT: CONSUMER SOVEREIGNTY
      What do things really cost?
      We don’t demand price transparency
      We don’t demand better information to inform our purchase decisions
      Consumer demand should drive supply-side reform
      Source: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group
    • HEALTH REFORM 2010H.R. 3590 THE PATIENT PROTECTION AND AFFORDABLE CARE ACTH.R. 4872 THE HEALTH CARE AND EDUCATION TAX CREDIT RECONCILIATION ACT OF 2010
    • MAJOR EMPLOYER ISSUES
      Impact of coverage expansion to 32 million people
      Benefit mandates
      Employer mandate
      Individual mandate
      Market restructuring
      Health Insurance Exchanges
      Tax provisions
    • HEALTH REFORM - CHRONOLOGY
      2010
      Small business tax credit (through 2013)– sliding scale tax credit for businesses with 25 or fewer employees
      Average wage of $50,000 or less
      35% subsidy of employer costs if under 10 employees and average wage under $25,000
      25% maximum subsidy for non-profits
      FTE = total hrs. /2080; exclude owner & seasonals < 120 days
      Employer must pay at least 50% of premium
      No credit for sole proprietors
      Can count vision and dental plan expenses
      Claim credit on tax return/reduced estimated payments
    • HEALTH REFORM - CHRONOLOGY
      2010 (cont.)
      Up to age 26 – can stay on parent’s policy
      Adult children need not be dependents under IRC
      May provide coverage to end of year child becomes 26
      Employer may allow extension and enrollment now of such adult children, but no later than September 23, 2010
      30-day open enrollment this year
      Many carriers suspending age 25 “age-outs” June 1st
      Temporary reinsurance program for employer’s early retirees
      Insurance reforms
      Eliminates lifetime limits
      No pre-x for children < 19 or cost sharing for prevent. services
      Auto-enrollment for employers with over 200 employees
    • HEALTH REFORM - CHRONOLOGY
      2011
      W-2 reporting – employer-provided health benefits cost (Issued starting with January 2012 W-2s)
      OTC drugs not eligible for reimbursement from FSA/HSA/HRA
      Federally-subsidized long-term care program (CLASS Act)
      Voluntary for employer participation
      Auto-enrollment, but employees may opt out
      5 year vesting
    • HEALTH REFORM - CHRONOLOGY
      2011 (cont.)
      Wellness grants for employers with under 100 employees
      HSA penalty increased to 20% for non-qualified purchases
      Grants for demonstration projects for alternatives to medical liability litigation
    • HEALTH REFORM - CHRONOLOGY
      2012
      Expanded 1099 reporting for businesses
      Currently used for payments to individuals for non-wage income and services by independent contractors
      Will now be required for annual payments over $600:
      Individuals or corporations
      Goods or services
      Examples: Buying a computer, airline tickets, gas, or supplies.
      Huge additional paperwork burden for employers
    • HEALTH REFORM - CHRONOLOGY
      2013
      New FSA limits of $2,500
      Medical device 2.3% excise tax
      Medicare payroll tax base increase
      +.9% tax on earned income > $200,000/$250,000
      Medicare investment tax – 3.8%
      Medicaid reimbursements to increase to 100% of Medicare
      Eliminate deduction for Medicare Part D employer subsidy
    • HEALTH REFORM - CHRONOLOGY
      2014
      Medicaid eligibility expansion – up to 133% of FPL
      Premium credit subsidies – up to 400% of FPL
      Insurance Exchanges come online – “qualified” plans for individuals and small businesses (up to 100 employees)
      Individual mandate – “carry or penalty” - $695/year to $2,085 or 2.5% of household income
      Federal health insurance premium tax – will raise almost $70 Billion through 2019 - passed on through premiums
      DSH cuts for certain hospitals
      Pre-x and annual limits prohibited
      Small employer tax credits
      50% of employer’s cost (35% for non-profits)
      Limited to 2 years
    • HEALTH REFORM - CHRONOLOGY
      2014 (cont.)
      DHHS sets “Essential Health Benefit Package”
      Employer Mandate
      Employees averaging > 50 employees must provide qualifying insurance or incur penalty – up to $2,000/$3,000 per employee
      Insurance must cover 60% of claim costs and be under 9.5% of employee’s total household income
      No penalty if no employees claim insurance tax subsidy
      No penalty if over 50 employees due to seasonal workers for 120 or fewer days
      Compute 50 employee threshold by:
      Employees > 30 hours/week; and
      Part-time employee hours worked in month/120
    • HEALTH REFORM - CHRONOLOGY
      2015
      Creates Independent Medicare Payment Advisory Board – reductions in Medicare spending?
      2016
      Interstate Health Choice Compacts
      Qualified health plans offered in participating states
      2018
      Cadillac Tax – 40% excise tax for annual health coverage above:
      $10,200 single/$27,500 family
      Higher thresholds for high-risk professions and retirees over 55
      Thresholds indexed at CPI + 1% until 2020, then at CPI
    • How To Pay for it?
      Projected funding sources for health reform – 10 years:
      High earner taxes – Medicare – income and investment - $210B
      Individual penalties - $17B
      Employer penalties - $52B
      Trim health-related tax breaks - $29B
      New Taxes/Assessments on Industry - $107B
      Reimbursement/DSH/Fraud reductions ~ $300B
      Medicare Advantage reductions - $177B
      Cadillac Tax on High Premiums - $32B
      Reductions in Medicare reimbursement - ????
      Source: Congressional Budget Office
    • BELLWETHER? THE MASSACHUSETTS EXPERIENCE
    • MASSACHUSETTS REFORM PLATFORM
      Individual Mandate
      Employer Mandate
      All employers with 10 or more employees. $295 fine per employee if insurance is not offered
      Middle-Class Subsidies
      Commonwealth Care for all families with income up to 300% of the federal poverty level
      The Connector
      Acts as an exchange for individuals and small business
      Very familiar to National legislation
    • ACCESS TO CARE
      Health insurance does not guarantee access to care
      An additional 400,000 people are attempting to access the same number of physicians
      Wait time went from 33 days to ~ 50 days
      75% of non-urgent ED visits are due to physician shortages
    • WAIT TIME ACROSS THE US - 2007
      Source: National Center for Policy Analysis
    • MASSHEALTH: MASSCOST?
      State spending on healthcare has increased by 45% ($595 million) since 2006
      Commonwealth Care was estimated at $725 million annually: 2010 projection is at $880 million
      Health insurance premiums are growing at a rate of 8-10% a year, nearly twice the national average.
    • IMPLICATIONS FOR BUSINESS
      Small business already at a disadvantage
      Highly regulated markets in small group
      Little choice in concentrated insurance markets
      Highest growth in premiums
      Higher cost per benefit – most cost-shifted market
      New mandates, new taxes and expansion of entitlement programs – not good for business
      Industry taxes on medical devices, pharmaceuticals and health insurers will likely be passed on
      Small business credits not meaningful for most
    • IMPLICATIONS FOR BUSINESS
      Incentives point to “Pay vs. Play” for many employers
      Small employers face no coverage mandate and will likely allow employees to take State Health Exchange subsidies
      Little innovation in plan design, benefits and financing
      Employers lose control of minimum plan design
      Significant shift in decision making to feds
      Likely erosion of employer-based health care
      Ongoing debate and evolution of health care coverage during next decade
    • IMPLICATIONS FOR BUSINESS
      State Implementation
      Maryland Health Care Coordinating Council
      Interim report July 15th/ Final Report January 1st
      Expect implementing legislation in 2011 and 2012 sessions
      Individual market
      Small group
      Small employer subsidy program
      MHIP
      Set up Exchanges
      Medicaid
    • For More Information, Visit:
      Sage Growth Partners
      www.sage-growth.com/
      Maryland Chamber of Commerce
      www.mdchamber.org