Health Care Reform: What to Expect
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An in-depth look at Healthcare Reform and how businesses should be preparing for the upcoming changes.
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Health Care Reform: What to Expect
- 1. Proprietary and Confidential ©Copyright 2012 Spring Consulting Group, LLC. All rights reserved Health Care Reform – What now? December 5, 2012 Presenters: George Gonser Gary Gustafson
- 2. 2 Contents Strategy Considerations Election Impact Fiscal Cliff Court Cases Exchanges Tactical Checklist Taxes and Fees Implementation Timeline Q&A
- 4. 4 The Election Results Create a Clear Path Forward States 30 Republican Governors 20 Democratic Governors House 233 Republicans 195 Democrats Senate 45 Republicans 53 Democrats 2 Independents Democrat
- 5. 5 The Post-Election Environment is Fraught with Significant Challenges Political stagnation and lack of consensus may continue despite rhetoric professing bipartisanship Fiscal Cliff pending creating fear in the markets Deficit spending and fiscal issues will impact policy and spending decisions Profound lack of confidence in the political process will pervade the next term unless bipartisanship becomes reality Regulation will continue on the healthcare, employers and the benefits industry Companies able to access money, but investing only in very safe bets if at all Decline in middle class spending power an ongoing issue Consumers continue to feel vulnerable about employment, retirement, and healthcare coverage CFOs expressed overwhelming support for three government actions to address current economic conditions: 1. Simplify the business tax code (97%) 2. Balance the U.S. budget (92%) 3. Reduce regulations (90%) Merrill Lynch CFO Forum Oct 2012 Source: (Carolyn Kaster / AP Photo)
- 6. 6 The Fiscal Cliff – Why it matters? $1.2 trillion in spending cuts over 10 years Half from defense spending Half from discretionary spending $500 billion (3-4% of GDP) in tax hikes and spending reductions in 2013 Result: 20% of population would pay AMT Medicare payments to providers reduced 27% Sequester: $65 billion in spending cuts to all federal programs through 9/30/2013 Harry Reid (D-Nev.) Senate Majority Leader "This isn't something we're going to wait until the last day of December to get it done. We have a plan. We're going to move forward on it." Source: CNN
- 7. 7 Health Care Issues Play a Major Role in the U.S. Economy Source: Leavitt Partners Analysis October 2012 Exchange Enrollment •Only half of the states that choose to establish their own exchange will be ready for plan enrollment by fall 2013 Medicare Changes •Congress remains divided and Medicare will be modified through costs-sharing, benefits and/or age. Economic pressures will force entitlement reforms Medicaid Expansion •At least 8 or more states will not expand their Medicaid programs. This will have a significant impact on insurance coverage Health Care Reform’s Future •Employers, providers, and carriers will face additional taxes, administrative requirements, and regulation
- 8. 8 Door Remains Open for Additional Litigation Approximately, a dozen cases are making their way through the court system challenging portions of the ACA Liberty University et al v. Geithner et al (Sent back to 4th Circuit by SCOTUS) Questions the constitutionality of the employer mandate Asserts that the law unfairly compels taxpayers and employers to subsidize abortions and contraception
- 9. 9 Exchanges will be a Big Deal “With incomplete regulations and unrealistic deadlines, states and the federal government will struggle to have a health insurance exchange ready for open enrollment on Oct. 1, 2013, that is not beset with major complications for the insurance market and the respective residents of the states.” - Letter to HHS Secretary Kathleen Sebelius Bruce Greenstein Secretary of the Louisiana DHH Source: American Medical News 11/26/2012
- 10. 10 Exchanges: Red vs Blue Source: Kaiser Family Foundation; Current as of 11/19/12 18 Declared State-based Exchange 6 Planning for Partnership Exchange 11 Undecided 16 Default to Federal Exchange
- 12. 12 Medicare Tax: High Income Earners will Pay More • Impacts: Individuals $200k+; Couples $250k+ • How much: 0.9% Additional Medicare Tax • How much: 3.8% Investment Income Tax Medicare Tax • Must withhold the 0.9% Medicare Tax • May want to communicate the tax to effected employees • No employer requirement for the Investment Income Tax Employer Impact
- 13. 13 Pending Taxes and Fees: No Small Deal Comparative Effectiveness Research Fee • Payable July 2013 • $1 PMPY in year one;$2 in year two • Indexed to 2019 • Insured: Built in (most likely) • ASO: Employers are responsible Health Insurance Industry Fee • Begins 2014 • Fee on all insured plans • Includes dental/ vision • 2-2.5% initially • 3-4% of premium increasing in future years Transitional Reinsurance Tax • Payable 2014 – 2016 • EST Per participant Fee: • 2014: $60 - $90 • 2015: $40 - $60 • 2016: $25 - $35 • Insured: Built in • ASO: Employers are responsible
- 14. 14 Implementation Timeline - 2012 Provision Women’s Preventive Care Comparative Effectiveness Research Fees Medical Loss Ratio Rebates Summary of Benefits Summary of Material Modification Action Check plan designs to confirm plans covers each required benefit Ensure payments are made for 2012 starting in 2013 Contact your fully-insured health plans to confirm any rebates that may be due Work with carriers to define which party will produce and fulfill the SBCs Communicate changes to plan designs 60 days prior to the effective date of the change
- 15. 15 Implementation Timeline - 2013 Provision Report health care costs on W-2 Forms Cap Flexible spending accounts $2,500 Medicare Part A Tax Increase Notice of Exchanges Action Confirm payroll / W-2 vendor is prepared to report health care costs Revise plan documents and educate employees Work with payroll vendor to ensure the proper withholding for high income earners January 1, 2013 Send out notice of Exchanges to Employees March 1, 2013
- 16. 16 Implementation Timeline - 2014 Provision Essential Health Benefit Limits Transitional Reinsurance Program Pre-existing Conditions Auto Enrollment Action Ensure plans cover essential health benefits with no annual limit or lifetime maximum Work with health plans and TPAs to understand the cost of this tax (additional regulation pending) Confirm all plan have eliminated pre- existing condition exclusions Educate employees and confirm administrative systems can accommodate auto enrollment
- 17. 17 Implementation Timeline - 2018 Provision Excise “Cadillac” Tax Action Understand your health care costs in 2018 Develop a strategy now
- 18. 18 What do I do now? • Plan for the future now – think 2018 and beyond • Ensure compliance – the waiting is over! • Understand cost drivers today – supply-side and demand-side • Supply: Networks – Examine highly efficient networks • Demand: Plan Design – Consider alternatives such as value-based designs, consumer directed health plans, and wellness incentives Short-term • Create a roadmap that will allow you to be in the driver seat • Examine the impact of the Excise tax and prepare now • Educate employees and management constantly about the new reality • Ensure you have the right partners in place • Evaluate alternative funding strategies to avoid unnecessary cost Long-term
- 19. 19 Questions Gary Gustafson, CEBS Consultant Spring Consulting Company, LLC gary.gustafson@springgroup.com Phone: 617-589-0930; ext 124 George W. Gonser Jr. MBA CDHC Chief Executive Officer Spring Insurance Group, LLC george.gonser@springgroup.com Phone: 617-589-0930; ext 106
Editor's Notes
- Gary:Things are changing. We can’t do things the way we have done it in the past.Benefits – specifically health care is the second highest cost to business.
- Gary: Supreme court justices may retire in the next four year and be replaced by Obama further 113 CongressRepublicans lost 3 seats in the house, and picked-up 2 in the SenateVirginia and Ohio were the keyState LegislaturesDemos more an Republic15 legislatures under Demo28 Republicans55% controlled by RepublicansState – lowest number of divided stateMost states have either Demo or Rep controlling both housesWhat does this mean? More regulations (exchanges and essential benefits) Nov 16th Exchange deadline extended; Dec 14th for blue prints; Fed/state partnership states have until Feb to submitBoehner – no other vote to appeal the lawSome provision need to be improvedConversation on going
- George: Biggest ChallengesFiscal Cliff – need to deal with it in December
- Gary: Too large of cuts all at once for weak economyPressures on business and individuals
- GaryGeorge: Exchange Enrollment – huge IT spend to verify status, income, citizenMedicaid ExpansionReform addressed access to health care, but did little to control health care costs. Additional focus on controlling costs needs to be the next topic of policy conversation, even as reform continues implementationThe increase in medical costs creates:Pressure on all benefitsIncreased demand for servicesAlternatives to traditional benefit offeringsHealth care exchangesVoluntary benefitsDefined contribution (DC) health care optionsNarrow provider networks“Pay or Play” (pay the penalty for not offering medical coverage, or offer medical to all employees)Most employers will playEmployers looking to attract and retain
- GaryLiberty University Inc. v. Geithner: In this case in the 4th Circuit, Liberty University argued that two provisions of the ACA were unconstitutional: the individual mandate and the employer “shared responsibility” provisions, under which employers may be assessed a penalty if their employees receive subsidized premiums for coverage by a plan in a state Exchange. The University challenged both mandates on a number of grounds, including the Constitution’s Commerce Clause, Necessary and Proper Clause, the Free Exercise Clause, the Establishment Clause, and the Equal Protection Clause. The 4th Circuit Court found that, due to the AIA, they had no jurisdiction over the case because the Liberty suit constituted a “pre-enforcement action seeking to restrain the assessment of a tax.” The 4th Circuit Court thus sent the case back to the district court to be dismissed. Liberty University appealed this decision to the SCOTUS. Here’s the rub: The SCOTUS ACA decision on June 28 addressed the constitutionality of the individual mandate, but it did not address the constitutionality of the employer mandate. Further, while the Court addressed the constitutionality of the individual mandate under the Constitution’s Commerce Clause, it did not address the individual mandate’s constitutionality under the Free Exercise, Establishment, and Equal Protection clauses. In addition, as noted above, the SCOTUS found that the AIA did not bar the Court from deciding the constitutionality of the individual mandate. So what? Liberty University read the SCOTUS decision and put two and two and three and four and seventeen together and decided to ask the SCOTUS to grant its petition for review and send the case back to the 4th Circuit Court for a decision on the merits of the case. (As you’ll recall, the 4th Circuit had punted a decision on the Liberty case by saying that the AIA prevented it from doing so.) The 4th Circuit could, however, rule on the constitutionality of the individual mandate under the other relevant clauses of the Constitution (Free Exercise, Establishment, and Equal Protection). And, of course, the Court would have free rein to rule on the constitutionality of the employer mandate under any provision of the Constitution, including the Commerce Clause. The Court could also, I think, decide that the AIA is applicable to the employer mandate and that no pre-enforcement challenge to the employer mandate is permissible. The bottom line, though, is that this additional avenue of judicial review could re-open what many had assumed was a done deal with respect to the courts examining the constitutionality of some of the fundamental precepts of the ACA.
- George:Are they a citizen?Are they eligible through an employer?What is their income?Real Implementation date is: Oct 1 but need 30-days = Sep 2013; may be extended.MA is struggling with 6 years of experience. Training
- Gary:Facts: Individual and small business up to 100. CBO estimate: 30 million by 2019 Bronze, Silver, Gold, Platinum federal subsidies for people with incomes between 133 percent and 400 percent of federal poverty guidelines in the form of a premium credit Eligibility: If ER plan’s actuarial value is less than 60 percent or if an employee’s share of the employer premium exceeds 9.5 percent of the employee’s income Tax credit for ERs less than 25 Ees Exchanges have to talk with health and human service systems to determine eligibility (Medicaid)Timing Dec 14: State-based Exchange: Blueprint Application Deadline Jan 1: State-based Exchange: Statutory Deadline for HHS Approval or Conditional Approval Feb 15: State Partnership Exchange: Declaration Letter & Blueprint Application Deadline March 1: State Partnership Exchange: HHA Approvals Issued on a Rolling basis until March 1, 2013Generally, a large employer is a company with more than 100 employees. Until 2016, however, states have the option to define a large employer as a company employing more than 50 employees.In general, the government subsidy for health insurance is only available to an individual whose income is 400% or less of the Federal Poverty Level (that is for 2012, $44,650 for an individual and $92,200 for a family of four).
- Proposed rules on wellness programsmaximum permissible reward under a health-contingent wellness program from 20 percent to 30 percent of the cost of health coverage, and that further increase the maximum reward to as much as 50 percent for programs designed to prevent or reduce tobacco use. HHS Releases Proposed Regulations Prohibiting Discrimination Based on Preexisting Conditions or Chronic Conditions HHS issued proposed rules that, beginning in 2014, prohibit health insurance companies from discriminating against individuals because of a pre-existing or chronic condition. Under the rule, insurance companies would be allowed to vary premiums within limits, only based on age, tobacco use, family size, and geography. Health insurance companies would be prohibited from denying coverage to any American because of a pre-existing condition or from charging higher premiums to certain enrollees because of their current or past health problems, gender, occupation, and small employer size or industry. More info...11/20/12 (New) Regulations Proposed on Essential Health Benefit Standards HHS released proposed regulations that outline health insurance issuer standards for the coverage of essential health benefits (EHBs) and the determination of actuarial value (AV), propose a timeline for when issuers offering coverage in a federally-facilitated exchange or state partnership exchange must become accredited and suggest an application process for accrediting entities seeking to be recognized to fulfill the accreditation requirements for issuers offering coverage in any exchange. More info...11/20/12 (New)
- GaryAdditional Withholding Requirements – Medicare TaxesThe ACA will impose an additional Medicare tax on wages over $200,000 ($250,000 household). This additional tax only applies to the employee and there is no employer matching component. This will, however, require employers to withhold 2.35% on an employee's wages over $200,000 in 2013. The 1.45% rate (including the employer's matching portion) that has applied in the past to all wages will continue to apply to an employee's wages under $200,000. If an employee is making $200k, but spouses income does not put the couples over $250k? EE can get it back when they file.Currently 1.45% EE/ER each.
- GaryComparative Effectiveness Research Fee IRS Excise Tax Form 720 On or after Oct 2, 2011 First payable July 2013 Both Insured and FI plan Insured – built in rates and may be paid by insurer SI: Will have to pay this themselvesHealth Insurance Industry Fee Only applies to FI plan – dental and vision plans included Regulations are pending Not tax deductibleTransitional Reinsurance the fee will probably be roughly $63 per participant for 2014, payable towards the end of 2014 Employer with 100 employees, family size of 2.3, = $15,000/year or $150 per employee/year Can be built into FI rates SI clients must pay on their own
- GeorgeWomen’s Preventive Care Effective August 1, 2012: expanded list of women’s preventive services, including well-woman visits, support for breastfeeding equipment, contraception and domestic violence screening On January 20, 2012, the Department of Health and Human Services (HHS) issued a news release stating their intent to modify the August 2011 interim final regulations for preventive care under the Patient Protection and Affordable Care Act (PPACA). This modification will take into consideration non-profit employers who, based on religious beliefs, do not currently provide contraceptive coverage in their insurance plans, but who will not qualify for the full exemption. Religious organizations, explicitly defined by HHS, that offer insurance to their employees are still exempt from the requirement to cover contraceptive services. On August 16, 2012, the Department of Health and Human Services (HHS) clarified its February 10, 2012 bulletin outlining a safe harbor until August 1, 2013 for affected employers affected employers are those who, based on religious beliefs, do not currently provide contraceptive coverage in their health plans, but do not qualify for the full exemption. CERFMedical Loss Ratio Rebates Under the health care reform law, insurers and HMOs have to pay rebates to policyholders if they don’t meet an MLR standard of at least 80 percent (for individuals and small groups) or 85 percent (for large groups). The first rebates based on claims for the 2011 calendar year are due August 1, 2012. Rebates apply only to insured plans. They are not based on a single policy’s claims, but are based on the experience for groups of policies in each state.SBCThe final rule of the Patient Protection and Affordable Care Act, which was issued on February 9, 2012 requires that plan documents include a: Four-page overview of plan benefits, cost sharing and limitations Required set of examples of how the plan works Phone number and internet address for obtaining copies of plan documents A Standard glossary of medical and insurance terms must also be available.The penalty for "willful" non-compliance is $1,000 for each plan enrollee.
- GaryW_2: Total premiumNotice of Exchanges – no guidance or sample language
- GaryEssential Health Benefits. Purposes: Ensures all small group or individuals have consistency of benefits (in 10 categories) effective 1/1/14. States encouraged to define benchmark plans by Oct 2012 (25 completed, 5 started, 13 waiting for guidance, 8 no action). No annual or lifetime limits on EHB for large employers. 12/2011 HHS: States can determine based on three largest: largest plans in enrollment in small group market; state plans; fed plans; largest HMO in commercial market; HHS to reassess in 2016 beyond. What state for SI plans? No sure. May be able to chose a citus state. Could increase costs of 7-15% due to infertility treatment, chiro care, bariatric surgery. No annual or lifetime limits. Small employers will be defined from 50-100 in 2016 thus imposing these requirements on them.Automatic Enrollment. One provision that was originally anticipated to take effect in 2014 is a requirement that certain employers (subject to the Fair Labor Standards Act and with more than 200 full-time employees) automatically enroll new and current employees in a health benefits plan offered by the employer.[24] However, based on IRS Notice 2012-17, the Department of Labor "has concluded that its automatic enrollment guidance will not be ready to take effect by 2014."
- George
- George:Short-term commentsGary: Long-term