Cost of the Future Newly Insured Under the Affordable Care Act (ACA)
www.decosimo.comCost of the Future Newly Insuredunder the Affordable Care Act (ACA)Ken Conner, CPA, Principal, – Healthcare Practice Leader, Decosimo, CPAsBobby Huffaker, American Exchange, LLCDisclaimer: These materials are designed to provide general information. Although prepared by professionals, these materials should not beutilized as a substitute for professional legal or accounting advice in specific situations. If legal or accounting advice or other expert assistanceis required, please consult with an attorney or certified public accountant.
Purpose - to review and reflect the nature and impactof the newly insured patient and the impact of non-group exchanges on the healthcare market Ken Conner, Decosimo, CPAs – From the old world of providers and the TennCarewars Looking from the Top down Bobby Huffaker and David Yoder – AmericanExchange Embarking on a new world of individual enrollment Looking from the bottom upIntroduction – déjà vu or all new
American Exchange is a marketplace for healthinsurance that creates an effective one-stop-shop forprice comparison and enrollment options (online,telephone) for individuals wanting to participate inthe cost savings and subsidies through the Stateand Federal Health Insurance Exchanges.Introduction – déjà vu or all new
Time is running short before the implementation ofACA and the exchanges. Uninsured and those who may lose their employerinsurance lack the information, motivation andconnectivity to choose to enter exchanges. Hospitals and physicians will become the frontline topatient questions and options, as they seek careunder the new system – after all, wasn’t it supposeto insure everyone?Overview
Do you as a hospital want to capture these patients? Who are these patients? How much will the hospital be paid? How will the patient select a plan that includes aparticular hospital? Or physician? A patient has already been treated withoutinsurance. How does the hospital get them to anexchange for the next episode of care? In limited networks, out-of-network managementneeds to be proactive.From the Hospital View
Five reasons that Healthcare Reform will fail1. Health insurers will keep most of their leverage.2. Premiums will continue to rise.3. It will encourage job and R&D outsourcing, aswell as domestic hourly cutbacks.4. Hospitals and physicians will be overwhelmedwith the influx of millions of newly insuredpeople.5. The middle class will pay, pay, and pay somemore.
Five Reasons that Healthcare reform will succeed1. It will reduce hospitals exposure to doubtfulaccounts.2. It will bring 16 million previously uninsuredAmericans under the Medicaid umbrella.3. It will cap insurers profits and require them tospend 80% of premium costs on health-careservices.4. It will expand the benefits of the average healthplan.5. It will promote preventive health-care visits andshould therefore reduce long-term care costs.
Who are the Uninsured?CMS, Audience Segmentation for the Emerging Health Insurance Marketplace
1. Individual Health Agent- Contracted by the HealthInsurance Companies2. Navigator- Federal Government Employee1. Navigator is a federally funded employee to helpeducate individuals on how the exchanges work.2. Navigators will not make eligibility determinationsand will not select Qualified Health Plans (QHP) forconsumers or enroll applicants into a QHP.How do the uninsured find coverage?
Key Findings - What is the anticipated enrollment forthe currently uninsured under the ACA?% Uninsured Pre-ACA % Uninsured Post-ACATN 15.0% 5.3%*US 16.6% 6.8%*TN 15.0% 8.6%US 16.6% 9.5%*Represents an average oftwo models.Assuming All StatesExpand MedicaidAssuming No StatesExpand Medicaid The percentage of uninsured individuals in the U.S.are projected to decrease from 16.6% to 6.8% or 9.5%without Medicaid expansion, after three years ofexchanges and insurance restrictions. This compares to a decline from 15% to 5.3% or 8.6%without Medicaid expansion in TN.
Key Findings - Non-group participants will have to rise from281,000 to 654,000 (or 132 percent).Size of Non-Group Pre-ACASize of Non-Group Post-ACA% of Non- Groupin ExchangeTN 281,421 $532,091 81.7%US 11,931,125 $25,618,984 80.4%TN 281,421 $654,610 85.0%US 11,931,125 $30,149,705 83.4%Assuming All StatesExpand MedicaidAssuming No StatesExpand Medicaid
TN $260 $380 46.4%US $314 $413 31.5%TN $260 $372 43.4%US $314 $405 28.9%Assuming All StatesExpand MedicaidAssuming No StatesExpand MedicaidAverage Non-GroupPMPM Pre-ACAAverage Non-GroupPMPM Post-ACA% Change in Non-GroupPMPM The non-group cost per member per month are projectedto increase 31.5% in the U.S. and 46.4% in TN. Value in the State of Tennessee – $2.0 billion less theamount lost from those losing employer coverage. High risk pool members. Increased morbidity from selection by those currentlyuninsured who now purchase group coverage.Key Findings - what is their relative morbidity, andwhat could reasonably be expected for relative costs
How the Exchange Works The four levels of coverage available are based on“actuarial value.” Actuarial value is a measure of thelevel of protection a health insurance policy offersand indicates the percentage of health costs that foran average population, would be covered by thehealth plan. The four levels provided in PPACA are:Bronze Silver Gold Platinum60% 70% 80% 90%
How the Tax Credit Work The government will proved a tax credit forthose between 133-399% of the FPL based ona percentage of income. The amount of the credit that a person canreceive is based on the premium for the lowestcost silver plan in the exchange. The amount of the tax credit varies withincome such that the premium a person wouldhave to pay for the silver plan would notexceed a percentage of their income.
Amount of Premium Limited by IncomeIncome Level Premium as % of Income133-150% 3-4% of income150-200% 4-6.3% of income200-250% 6.03-8.05% of income250-300% 8.05-9.5% of income300-400% 9.5% of income
Penalties $95 in 2014 (1%), $325 in 2015 (2%) and $695 (2.5%)of household income in 2016. For those who do not pay taxes, the penalty willcome off of the refund.Forced from Employers Dropping Coverage Only way to have access to the subsidy is throughindividual Market - Employers will give employeesstipend to enter the exchanges.Incentives to Enter the Exchange
How the Tax Credit Works Pat has a family of four and he is 45 years old and has an incomein 2014 that is $35,657 (149% of the federal poverty level). The cost of the second lowest cost silver plan in the exchange inPat’s area is projected at $10,500. Under PPACA, Pat would not be required to pay more than 4% ofincome or 1,426. amdCoverage Bronze Silver Gold PlatinumPremium $9,450/787.50 $10,500/875 $11,550/962.50$12,705/1058.7CreditAvailable$9,074 $9,074 $9,074 $9,074Cost of Plan $376/31.33 $1426/118.83 $2,476/206.33 $3,631/302.58The tax credit available to pat would be 9,074 (premium minus limit Patmust pay).The Bronze plan will only cost Pat 31.33 per month for a family of four.Figures come from KFF
So What Does It Look Like to an IndividualCoverage Bronze Silver Gold PlatinumPremium $9,450/787.50 $10,500/875 $11,550/962.50$12,705/1058.7CreditAvailable$9,074 $9,074 $9,074 $9,074Cost of Plan $376/31.33 $1426/118.83 $2,476/206.33 $3,631/302.58
Notes Urgent Care Copays are 35% or $20 for the platinum plan and D&C for the other medal plans Emergency Room Copays are $100 for the platinum plan and D&C for the other medal plans Actuarial Value has been calculated using the value calculator put out by HHSPatient Copays
How the Cost Sharing Subsidies Work Cost-Sharing subsidies protect lower income peoplewith health insurance from high out of pocket costsat the point of service. These subsidies are available for families at or below250% FPL, making them eligible to enroll in healthplans with higher actuarial values.Income Level ExchangeCoinsuranceActuarial Value100-150% FPL 70% 94%150-200% FPL 70% 87%200-250% FPL 70% 73%
No single state’s projections were considered a“typical” scenario. Wisconsin was chosen becauseof its familiarity to several member of the oversightcommittee. The following analysis is based on an example state(Wisconsin).Example State
What is the anticipated enrollment for the currentlyuninsured under the ACA?Question 1AgeUnder 19 59.6%19-24 26.9%25-34 44.7%35-44 44.7%45-54 39.8%55 & over 30.2%%RemainUninsured
Projected transitions in coverage: Many individuals previously covered by smallemployers (2-50) will transition into the employer orindividual exchange (31%). Many individuals previously enrolled in other non-group coverage will enroll through the individualexchange (42%) or Medicaid (10%).Question 1
Projected transition from uninsured: 26% will enroll in Medicaid 19% will enroll in the individual exchange 14% will enroll in employer coverage through theexchange or privately 40% will remain uninsured Under the age of 19 (60%) Excellent self-reported health status (43%)Question 1
What is the newly insured’s relative morbiditycompared to the currently insured? What couldreasonably be expected for relative costs?Question 2AgeUnder 19 80.6%19-24 97.8%25-34 61.8%35-44 76.5%45-54 254.9%55 & over 92.1%%Change inAverage Costs
If you did not have health insurance during the pasttwo years, what healthcare services would you havedelayed or postponed indefinitely? Prescription drugs Physician visits Outpatient procedures Emergency room visit Would you have been as quick to have a test such asan MRI performed or would you wait to see if theinjury got better? Would you have the same attitude towards yourchildren’s healthcare?Asks yourself
Number of physicians visits per 1,000 individualsunder the age of 65: For the uninsured - approximately 1,366. For the currently insured - 3,282. Hospital stays for the insured are more than doublethat of the uninsured.Part of the difference in utilization rates is due to the fact that theuninsured are on average younger than insured individuals.Question 2
Two anticipated effects of extended coverage: An increase in access to primary care will result insavings due to a reduction in preventable emergencyroom visits and hospitalizations. A general increase in the use of elective servicessuch as primary care, corrective orthopedic surgery,advanced diagnostic tests, and other care that theuninsured either forgo or delay.Question 2
The research on “pent-up” demand for health careservices as individuals become newly insured hasshown mixed results: A study of near-elderly uninsured approachingMedicare eligibility found: Pent-up demand for physician care (30% more physicianvisits in first two years of Medicare enrollment). But not for hospital inpatient care. A study of near-elderly uninsured prior to Medicareeligibility found: Elevated hazard of diagnosis for nearly every chroniccondition and increased utilization after age 65.Pent-Up Demand for Services
A study of children newly enrolled in Medicaid found: No evidence of pent-up demand. A study based on the one-year effects of the OregonMedicaid lottery found: No evidence of a larger initial utilization effect. However the longer run impact could differ from one-yeareffects.Pent-Up Demand for Services
How will premium rates in the non-group market beimpacted by the new population mix? How willhealth care costs be impacted by the presence of thehigh risk pools under the ACA, and how are currentcosts impacted by current state high risk pools?Question 4Age Avg. Monthly Cost Avg. Monthly CostUnder 19 $167 $189 13.0%19-24 $172 $186 8.3%25-34 $219 $322 47.1%35-44 $227 $380 67.5%45-54 $322 $688 113.8%55 & over $384 $896 133.2%Non-Group underACA Change in AverageMonthly CostNon-Group UnderCurrent Law
Influx of 25 million new patients. Cost Sharing Subsidy- now the government ishelping with uninsured out of pocket, the hospitalsshould collect exchange copays upfront at the timeof check in. BCBSTN will allow its consumers to choose thenetwork; P, S, and new E network in the exchange. Will have more details on the reimbursement rate ofthe E network with BCBSTN when the contract isfinalized on 6-1-2013.Why Providers Participate
Be creative in how you reach the uninsured beforethey reach you American Exchange has partnered with Liberty TaxService to identify individuals eligible for tax credit Point of service intervention Easy access via a call center Outbound responses Inbound transfersReaching the Individual
Clearwave has a kiosk based self-serviceregistration solution that:• Reduces provider costs associated with registrationand eligibility verification• Reduces patient wait times• Reduces claims denials• Increases cash collections• Improves patient satisfactionReaching the Patient
Clearwave presents patients with an “Opt-In” screen. If a patient wishes to be contacted about options forhealth insurance, they are provided with a HIPAAAuthorization to allow the provider to share patientcontact information with American Exchange. We are now putting providers in the driver seat foroutreach to the patients. It is in the Provider’s best interest to increase thepercentage of insured patients. Provider will also have access to detailed information onhow many current patients will be entering the insuranceexchanges.Reaching the Patient