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Health Reform Policy and Information Update


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  • 1. Trends in Coverage and Insurance Regulations By Michael Bertaut Healthcare Economist May 18, 2012 1
  • 2.  The opinions expressed in this presentation by the presenter, and in the slides, do not represent the stated positions of the Louisiana Health Services Indemnity Company, Blue Cross and Blue Shield of Louisiana, HMO Louisiana, Southern National Life, Benefit Management Services, Blue Benefit Services, or any associated entities. 2
  • 3. The Issues:1. Is the Individual Mandate within Congress’ enumerated powers?2. Is the Individual Mandate severable?3. If yes to (2), what must be severed?4. Does the Anti-Injunction Act apply?5. Is the Medicaid Expansion a “commandeering” of the states authority? 3
  • 4.  Has argued 57 cases before the Supreme Court prior to this one Was Solicitor General in 2007 under GW Bush “He is the Lebron James of appellate court attorneys” (Mayer-Brown) Continued his SCOTUS defense of DOMA even when his firm “One should never stop fired him because of defending the Constitution of gay-rights activist the United States simply because complaints. it causes him financial hardship or because it is not popular” 4
  • 5.  Solicitor General since June 9, 2011 Succeeded Elena Kagan Hollywood connections, Lead Counsel for RIAA against file-sharing sites. Has argued 12 cases in front of SCOTUS Lead Counsel in the case of “Very low key, better with RIAA vs Thomas, where the paperwork and rule recording industry made an making” example of a single mom with a teenage son who downloaded music illegally. 5
  • 6. Goal: Expand “Meaningful” Health Insurance Coverage in a Revenue Neutral way:1. Medicaid Expansion2. Health Insurance Exchanges3. Individual Mandates to buy coverage4. Employer mandate to offer coverage5. Define what health coverage is “essential”.Create federal mandates.6. Redirect future spending from Medicare to1,2.7. Redirect Health Insurance, Pharma, DeviceManufacturing revenue to 1, 2.8. New Taxes on Individuals 6
  • 7. Adult Medicaid Eligibility. Today: 15% of FPL, About $3,300 for Fam of 4 Means Testing, signficant assets disqualifies Typically, 40 million enrolled at end of 2010 employees paid $8- $10/hour will be Medicaid eligible, 1/1/2014: Up to 138% of FPL, About $30,000 for on depending Family of 4 family status. NO means testing, everybody qualifies Estimate is 17 million new eligible adults eligible with up to 11 million signing up Year 1 2008 Inflation Adjusted Dollars, 2009/2010 FPL guidelines 7
  • 8.  May be State Run or Federally Controlled Income ranges from a low of $31,000 per year up to a maximum level of $92,000 per year (family of 4). Advanced tax credit to purchase coverage is generated based on FPL level. Many carriers may be listed, along with Co- Ops and national OPM plan run from DC Final Reg on STATE-RUN Exchanges issued (644 pages). Federal Fall Back Exchanges still pending. 8
  • 9. Family Adult 1 Adult 2 Child 1 Child 2 Ages 40 36 6 4 Issuer B B(Benchmark) B B Metal Level Bronze Silver Gold Platinum Premium $9,393 $10,963 $12,524 $15,350Family Income $35,000/year (149% of FPL) Premium Tax Subsidy $9,393 $9,577 $9,577 $9,577 Family pays: $0 $1,386 $2,947 $5,773 Payment % of Income 0.0% 4.0% 8.4% 16.5%Family Income $88,000/year (375% of FPL) Premium Tax Subsidy $2,603 $2,603 $2,603 $2,603 Family pays: $6,790 $8,360 $9,921 $12,747 Payment % of Income 7.7% 9.5% 11.3% 14.5% 9
  • 10.  Incarcerated Income above 400% of FPL Offered qualified coverage at work (affordable and essential benefit coverage) Accept non-qualified coverage at work Medicaid or CHIP eligible (income <138% fpl) Claimed as a dependant on someone’s taxes In the country unlawfully (but you do get 90 days of Medicaid coverage while your citizenship is being verified) Unable to attest to residency in a single state. 10
  • 11.  Law that requires all Americans to have health insurance policy Starts 1/1/2014 Exemptions for unaffordable coverage (above 8.5% of income), certain religious groups, native Americans. Failure to comply means confiscation of tax refund starting at $95 for first year and rising to $695 or 2.5% of income by 2017. 11
  • 12.  Applies to all firms or control groups that regularly use more than 50 FTE’s of labor. 3 options: 1. Must offer “affordable”, “essential” health coverage to employees. 2. If “no” to 1, may offer “sub-standard” non-QHP coverage. Employer is fined $250 per month per employee who “leaks” to the Exchange 3. May choose not to offer coverage at all, employer must pay $2,000 per year per uncovered employee minus first 30 lives. 12
  • 13. Goal: Expand “Meaningful” Health Insurance Coverage in a Revenue Neutral way:1. Medicaid Expansion2. Health Insurance Exchanges3. Individual Mandates to buy coverage4. Employer mandate to offer coverage5. Define what health coverage is “essential”.Create federal mandates.6. Redirect future spending from Medicare to1,2.7. Redirect Health Insurance, Pharma, DeviceManufacturing revenue to 1, 2.8. New Taxes on Individuals 13
  • 14.  Cover “essential benefits” Not be priced on medical/health status Be guaranteed issue Be age rated only 3:1 Be priced to be gender neutral May rate up to 50% higher for tobacco use May alter rates for family status Have at least 60% Actuarial Value (Bronze, 70% Silver, 80% Gold, 90% Platinum) Are never grandfathered 14
  • 15.  PPACA lists 10 specific areas of coverage that ALL health plans must include: ◦ Ambulatory patient services ◦ Emergency services ◦ Hospitalization ◦ Maternity and newborn care ◦ Mental health, substance abuse, behavioral health ◦ Prescription drugs ◦ Rehabilitative and habilitative services and devices ◦ Laboratory services ◦ Preventive, wellness services, chronic disease mgt. ◦ Pediatric services including oral and vision care 15
  • 16.  STATES will select essential benefits benchmark from following options: ◦ 1 of the 3 largest, by enrollment, small group (<100 lives) products sold in the state. ◦ 1 of the 3 largest, by enrollment, products offered to state government employees ◦ The largest FEHBP offering in the state ◦ The largest commercial HMO offering in the state. 16
  • 17. ITEM Individual Group ASONo Lifetime Limits on Coverage/MLR Existing, E, N E, NRestrictions NewNo Annual Limits on “essential New E,N E,Nbenefits” (except 1400 waiver groups)Dependents to Age 26 (married is ok) E, N E,N E,NRescission (intentional fraud, fact), E,N E,N E,NExternal ReviewGuarantee issue For <19 year olds. New E, N E, NSchedule A & B, immunizations at 1st New New NewDollar (45 Tests & Screenings)Emergency Room Equal Payment New New NewNo discrimination based on salary N/A New New “Existing” = Grandfathered; “New” = Non-Grandfathered 17
  • 18. ITEM Individual Group ASOW-2 Reporting of all health benefits N/A All All(pushed back to 2012, 13, or 14depending on group size)Uniform Benefit Summaries E,N E,N E,NEssential Health Benefits New New ??(Punted to States)105h Discrimination Update N/A E,N E,N(GF Safe Harbor)New External Review Processes New New NewNew Women’s Coverages New New NewMLR Requirements E,N E,N N/ARate Review (reasonable?) E,N E,N N/A “Existing” = Grandfathered; “New” = Non-Grandfathered 18
  • 19.  Applies to all Non-GF Groups save Churches Begins with renewals 8/1/2012 Services are Free to Insured Includes: ◦ FDA Approved Contraceptive Methods:  “Morning After” Pill  Tubal Ligation  All (generic) pills, IUD’s, other methods ◦ Screening for gestational diabetes ◦ HPV DNA Testing (women over 30) ◦ STD counseling ◦ HIV screening and counseling ◦ Breastfeeding “support”, supplies, counseling ◦ Domestic violence screening and counseling 19
  • 20.  Auto-enrollment for groups >200 lives delayed beyond 2014 Under employer mandate, all employees 30 hrs/week or above must be offered coverage (up to 12 month look-back period allowed) No waiting periods >90 days long W-2 Wages will be used to determine “affordability”, not household income SBC/UBS in effect 9/23/2012 GRANDFATHERING AUDITS CURRENTLY UNDERWAY!!!! Small self-funded plans, reinsurance with low attachment points, under attack from CMS. 20
  • 21.  Created to honor President’s promise “if you like the insurance you have, you can keep it” Provides a safe harbor against some changes in PPACA, delays others Impact varies by size of Group and type of coverage Over 75% of fully insured groups and 60% of ASO groups are still grandfathered (EOY 2011) 21
  • 22.  Avoid the claims cost of new first dollar coverages (See Women’s Coverage slide). Avoid coming fully insured rate compression. Avoid paying for USPTF Schedule “A” and “B” testing at first dollar. Avoid paying for experimental treatments. Avoid higher payments to ER Docs without protection from balance billing. 22
  • 23.  Change Carriers or certain plan changes (fully insured groups). Any change in coinsurance that increases employee share of medical payments (like going from 80/20 to 70/30). Any increase in a fixed payment amount (except co-payments) of more than medical inflation plus 15%. Any increase in a co-payment that exceeds the greater of medical inflation since 3/23/2010 plus 15%, OR $5 plus medical inflation. Decrease of employer contribution to premiums by more than 5% below the level on March 23, 2010. (Ex. If employer lowers contribution on family coverage from 80% to 70% this violates grandfathering) Eliminating any benefit for diagnosis or treatment or any part of treatment for any particular condition that was covered by the plan on 3/23/2010. 23
  • 24. Goal: Expand “Meaningful” Health Insurance Coverage in a Revenue Neutral way:1. Medicaid Expansion2. Health Insurance Exchanges3. Individual Mandates to buy coverage4. Employer mandate to offer coverage5. Define what health coverage is “essential”.Create federal mandates.6. Redirect future spending from Medicare to1,2.7. Redirect Health Insurance, Pharma, DeviceManufacturing revenue to 1, 2.8. New Taxes on Individuals 24
  • 25. PAYING FOR PPACA: THE FIRST 10 YEARS 2011-2019 Source Type Amount ($B)Medicare Reimbursements I.P.A.B. Changes, F,W,A. Changes $285Medicare Premiums Increased for higher income individuals $210Medicare Advantage Subsidies Reduction in Subsidy to MA Plans $136CLASS ACT Mandatory long term insurance program $76 $942B in REVENUEHealth Insurance ProvidersMedicare Part D Claims Annual Fee to Sell Insurance in U.S. Increased rebate requirements to Pharma $60 $43 FOR FIRST 10 YEARSHealth Insurance Tax on Premiums Tax on high value health insurance $32Drug Manufacturers Annual Fee to Sell drugs in U.S. $27Medical Device Manufacturers Impose 2.3% VAT on sales $20Taxpayers with medical expenses Medical expense deduction to 10% (fr. 7.5%) $15Individuals, Businesses Fines for Non-Compliance $15 Limit contributions to FSAs to $2,500Employees annually $13Medicare Part D Premiums Reduction in Subsidy $10 25
  • 26.  On 1/15/2012, we were able to identify 177 different new sets of regulations/bulletins comprising over 30,000 pages spawned specifically by PPACA/HCERA so far. 4 separate university and Congressional analysis show costs may be understated by up to 50%. Former CBO Director Douglas Holtz-Eakin says PPACA will overspend by $560B in first 10 years. 26
  • 27. 6% Salaries/Admin 85% of Premiums Went to Medical in 2011 5% Commissions In 2011, BCBSLA collected 3% Reserves $2.5B in risk premiums, 1% Taxes broken out like this: $925M; $775M; $357M; $425M; 37% 31% 17% 15% 10¢ Admin Cost Including Taxes, Commissions 3¢ Future Claims Reserves/Profits NATIONAL 31¢ 30¢ 6¢ 2¢ 1¢ 2¢ 13¢ Nursing Home Other AVERAGES Hospital Physician Prescription Dental and Clinical Drugs Services Professional Home Health Services Services CareBCBSLA Audited Financial Results FY 2011National Averages From NIHCMF 2010 Update (2011) 27
  • 28. Commercial Uninsured Louisianans (in Thousands) Individual 590 78 13% 2% Medicaid n = 4,574,836 1,126 Government Commerical 24% Insures 39.5% Group 739 16% Medicare Blue Cross 502 Blue Cross Group 11% Individual 1,234 127 Dual Eligibles 27% 3% 179 BC Share 30% 4%Data from Variety of sources including (but not limited to) U.S. Census Bureau, LIMRA, BCBSLA internalmembership counts, DHH, Kaiser StateHealthFacts, CMS 28
  • 29. EXCHANGE Louisianans (in Millions) Uninsured 0.632m 0.106m 14% 2% n = 4.533m Comm. Ind Government 0.035m Medicaid Insures 49% 1% 1.43m Comm. Grp 32% 0.542mBC Share 23% 12% Medicare BC Group 0.64m 0.97m 14% BC Individual 21% 0.052m 1% Dual Eligibles 0.11m 3% 29
  • 30. Hospital Payment-to-cost Ratios for Medicare, Medicaid and Private Payers 1995-2009 “Our research shows 87% of hospitals nationwide either lose money or break even treating Medicare Patients. Of the 13% that don’t lose money the average 140% profit margin is 3%.” John Whittlesey, 131% 133% 131% 132% Healthcare Management Council 2010 129% 129% 124% Paymenr-to-cost Ratio 122% 122% 118% 116% 119% Break Even (Payment = Cost) 120% 115% 116% 117% SGR Limits Enacted 104% 102% 99% 102% 100% 99% 98% 98% 100% 95% 92% 92% 91% 91% 92% 91% 96% 97% 96% 95% 96% 96% 94% 95% 92% 90% 87% 87% 88% 88% 86% 80% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* Private Payers Medicare MedicaidNote: Payment-to-cost ratios indicate the degree to which payments from each payer covers the costs of treating that provider’s patients.Data are for community hospitals and cover all hospital services. Imputed values were used for missing data (about 35% of observations).Most Medicaid managed care patients are included in the private payers’ category.Source: Adapted from the American Hospital Association and Avalere Health TrendWatch Chartbook 2007: Trends Affecting Hospitals and 30Health Systems
  • 31.  $8B (in 2014) to $14.3B (in 2017) in new taxes for carriers (BCBSLA Share $36m in 2014, projection is 2% of trend going forward). $1-2 per head tax for PPACA Patient Centered Outcomes Research Institute (2013). $18-24B in risk adjustment pool funding by 2014. MLR adjustments. Rate Caps (over 10% Health increase “unreasonable”). Insurance Carriers 31
  • 32.  PPACA indicates children must be covered on parent’s policies without regard to Pre-Existing Conditions HHS expanded to “Guaranteed Issue for all Children” before Mandate. Four of Five Individual Carriers have left Louisiana. 32
  • 33.  In an Emergency, PPACA orders carriers to pay out of network Emergency Departments the same as in-network without limiting balance billing. ER’s Docs are leaving networks in droves Patients insurance will provide no protection in the ER, even in an in-network hospitals. Around 1/3rd of Network Hospitals have O.O.N. ER Docs. 33
  • 34. Office: 225-297-2719 Cell: 225-205-4628 34