Healthcare Trends Hrmano


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This is a presentation I prepared and presented to the HRMA New Orleans in August 2008

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Healthcare Trends Hrmano

  1. 1. Healthcare Trends What You NEED to Know! Presented By: Tom Daly, II Managing Principal Hartwig Moss Benefits
  2. 2. <ul><li>Who are we? </li></ul><ul><li>Hartwig Moss Benefits at a Glance. </li></ul><ul><li>What is going on? </li></ul><ul><li>Latest trends and benchmarking. Consumerism? </li></ul><ul><li>Why is it happening? </li></ul><ul><li>Follow the money. Employer and employee perspective. </li></ul><ul><li>What are my choices? </li></ul><ul><li>HSAs, HRAs, and FSAs? What’s the difference? </li></ul><ul><li>Where are we going from here? </li></ul><ul><li>Side by side comparison of McCain and Obama Healthcare Proposals. </li></ul><ul><li>Questions and (hopefully) Answers </li></ul>Meeting Agenda
  3. 3. Who are we? Hartwig Moss Benefits at a Glance. “ We are who we are, even if we sometimes forget.” Men in Black 2 - 2002
  4. 4. Hartwig Moss Benefits at a Glance 2001 Year founded. 58 Number of group clients. 6,269 Total employees of group clients 108 Average number of employees for each group client 79 % of clients with high deductible plans 83 % of clients with multiple option plans 73 % of clients with both multi-option and high deductible plans.
  5. 5. What is going on? Latest trends and benchmarking. Consumerism? “ If we don't change direction soon, we'll end up where we're going.” Professor Irwin Corey
  6. 6. A Quick Poll: <ul><li>What has been the national average % premium increase over the last 5 years? </li></ul><ul><li>What is the national average monthly premium for: </li></ul><ul><ul><li>Employee-only coverage: </li></ul></ul><ul><ul><li>Family coverage: </li></ul></ul><ul><li>What % of this average premium is the responsibility of the employee: </li></ul><ul><ul><li>Employee-only coverage: </li></ul></ul><ul><ul><li>Family coverage: </li></ul></ul><ul><li>About how much of a premium difference (as a % of total premium) is there between a copay-driven plan and a qualified HDHP? </li></ul><ul><li>What is the average deductible for a: </li></ul><ul><ul><li>Copay Plan: </li></ul></ul><ul><ul><li>HDHP: </li></ul></ul><ul><li>What % of companies offer health insurance? Is that increasing or decreasing? </li></ul><ul><li>What % of companies offering healthcare offer an HDHP? </li></ul><ul><li>What % of companies offering healthcare offer an FSA? </li></ul>
  7. 7. What has been the national average % premium increase over the last 5 years? 9.62%
  8. 8. <ul><li>What is the national average monthly premium for: </li></ul><ul><ul><li>Employee-only coverage: Family coverage: </li></ul></ul><ul><li>About how much premium difference (as a % of total premium) is there between a copay-driven plan and a qualified HDHP? </li></ul>$373.25/mo. $1,008.83/mo. 19.9% ee-only ($769) - 16.4% family ($1,750).
  9. 9. <ul><li>Employees of small firms appear to pay a smaller portion (12.3% vs. 17.1% - $198) of employee-only premium while paying a considerably larger portion of family premium (35.8% vs. 23.1% - $1,405). </li></ul>
  10. 10. <ul><li>What % of this average premium is the responsibility of the employee: </li></ul><ul><ul><li>Employee-only coverage: </li></ul></ul><ul><ul><li>Family coverage: </li></ul></ul>16% (12.1% for small and 17.1% for large) 28% (35.8% for small and 23.1% for large)
  11. 11. <ul><li>What is the average deductible for a: </li></ul><ul><ul><li>Copay Plan: </li></ul></ul><ul><ul><li>HDHP: </li></ul></ul>Let’s say $250 (93% of HMOs , 74% of PPOs and 76% of POS <$500) Let’s say $1,700 (must be in QHDHP range – 61% <$2,000)
  12. 12. What % of companies offer health insurance? Is that increasing or decreasing? 99% large, 59% mid, 45% small Large - same , Mid – down 9% , Small – down 13%
  13. 14. What % of companies offering healthcare offer an HDHP?
  14. 15. What % of companies offering healthcare offer an FSA?
  15. 16. noun 1: the theory that an increasing consumption of goods is economically beneficial. 2: a movement advocating greater protection of the interests of consumers. for us 3: using choice of high deductible plans and tax advantaged accounts to engage employees in the healthcare purchasing process – with the goal to curb escalating health costs! con·sum·er·ism con·sum·er·ism
  16. 17. <ul><li>“ A billion here, a billion there, pretty soon it adds up to real money.” </li></ul><ul><ul><li>Senator Everett Dirksen </li></ul></ul>Why is it Happening? Follow the Money
  17. 19. Sample HDHP Analysis Plan PPO HDHP Coverage In Network In Network Office Visit Copay (PC/SP): $25 Deductible Annual Deductible: $250 $1,700 Coinsurance: 80% 100% Maximum Out of Pocket: $1,500 $1,700 Prescription Drugs: $10 / $30 / $50/ 50% Deductible Fixed Costs   Monthly Premium EE Monthly Monthly Premium EE Monthly Employee Only: 70 $386.50 $59.75 $322.42 $43.50 Employee + Spouse: 5 $773.00 $200.98 $644.84 $167.66 Employee + Child: 5 $715.03 $185.91 $596.48 $155.08 Full Family: 20 $1,036.92 $269.67 $891.08 $238.00 100         HRA Administration Annual   $0.00 $12,000.00 HRA Annual Setup   $0.00 $1,000.00 Monthly Total by Plan: $55,233.53 $47,680.92 Monthly Total for ABC Company by Plan: $43,723.26 $38,262.21 Variable Costs   Employer Annual Funding Employer Annual Funding Employee Only: 70 $0.00 $500.00 Employee + Spouse: 5 $0.00 $1,000.00 Employee + Child: 5 $0.00 $1,000.00 Full Family: 20 $0.00 $1,000.00 100         Totals by Plan: $0.00 $65,000.00 Annual Costs Total Costs Total Costs @ 100% utilization $524,679.11 $524,146.47 @ 75% utilization $524,679.11 $507,896.47 @ 50% utilization $524,679.11 $491,646.47 Current Costs Proposed Costs Annual Total (Assuming 75% utilization): $524,679.11 $507,896.47 Percentage Change ABC Company:   -3.30%
  18. 20. What Does Medical Care Cost?
  19. 21. What Does Medical Care Cost?
  20. 22. What Does Medical Care Cost?
  21. 23. What Does Medical Care Cost?
  22. 24. What Does Medical Care Cost?
  23. 25. <ul><li>“ The avoidance of taxes is the only intellectual pursuit that carries any reward.” </li></ul><ul><ul><li>John Maynard Keynes </li></ul></ul><ul><li>“ It is thrifty to prepare today for the wants of tomorrow.” </li></ul><ul><ul><li>Aesop </li></ul></ul>
  24. 26. An HDHP Example - Employee
  25. 27. An HDHP Example - Employee
  26. 28. An HDHP Example - Employee A Low to Mid-Range User
  27. 29. An HDHP Example - Employee A Low to Mid-Range User
  28. 30. An HDHP Example - Employee A Fairly High User
  29. 31. An HDHP Example - Employee A Fairly High User
  30. 32. What Are My Choices? HSAs, HRAs, and FSAs? What’s the Difference? <ul><li>“ If you choose not to decide -- you still have made a choice!” </li></ul><ul><ul><li>Neil Peart </li></ul></ul>
  31. 33. What are My Choices? HSAs HRAs FSAs Who owns the account? Individual/Employee Employer Individual/Employee Employee contributes from his/her own paycheck, but unused portion reverts back to employer at end of year. Employers can also contribute. New rule allows expenses to be claims until March 15 of the following year, provided employer participates in change. Eligible Individual Individuals and families covered by a qualified HDHP and no other health plan that covers the same benefits. Individuals are not eligible if they can be claimed as a dependent on another person’s tax return. Current and former employees whose employer offers such a plan. Current and former employees whose employer offers such a plan.
  32. 34. * Self-employed individuals, including partners, and more than 2% shareholders in a subchapter S-corporation cannot contribute. ** For 2009 calendar year. What are My Choices? Who may fund the account? Employer or employee; can both be in the same year. Employee can contribute pre-tax dollars through Section 125 plan. Employer * Employer/Employee * Typically the employee contributes pre-tax dollars through a Section 125 plan. What plans may be offered with the Tax-Advantage Account? An HDHP as follows: Minimum Deductible $1,100/$1,150** Individual $2,200/$2,300** Family Out-of-Pocket Maximum $5,600/$5,800** Individual $11,200/$11,600** Family Any or no health plan. Any or no health plan. Is there a limit on the amount that can be contributed per year? Yes $2,900/$3,000** – Individual $5,800/$5,950** – Family Catch-up contributions: $900 ($1,000**)/year – age 55 by end of tax year. No, there is no IRS prescribed limit. No, there is no IRS prescribed limit. Can unused funds be rolled over from year to year? Yes Yes, subject to COBRA No, but in some cases employee may elect COBRA through end of plan year. HSAs HRAs FSAs
  33. 35. What are My Choices? What expenses are eligible for reimbursement? Section 213(d) medical expenses - COBRA premiums - QLTC premiums - Health premiums while receiving unemployment benefits - If Medicare eligible due to age, health insurance premiums except medical supplement policies Section 213(d) medical expenses Health insurance premiums for current employees, retirees, and qualified beneficiaries, and QLTC premiums Employer can define “eligible medical expenses” Section 213(d) medical expenses Expenses for insurance premiums are not reimbursable Employer can define “eligible medical expenses” Must claims submitted for reimbursement be substantiated? No – however, required in event of audit. Yes Yes May account reimburse non-medical expenses? Yes, but taxed as income and 10% penalty (no penalty if distributed after death, disability, or eligible for Medicare) No No Is interest earned on the tax-advantaged account? Yes, accrues tax-free. Yes, paid to the employer. No HSAs HRAs FSAs
  34. 36. HSA’s from Employer Perspective <ul><li>Almost like paying cash compensation to employees (less matching FICA contribution). </li></ul><ul><li>Employees maintain COMPLETE control over and responsibility for Health Savings Accounts – including tax filing and direction of investments. </li></ul><ul><li>Account access cannot be limited in any way. </li></ul><ul><li>In order to be eligible to establish an HSA, an employee’s FSA and HRA benefits must be limited to Dental, Vision and Hearing until aggregate deductible is satisfied. Over the counter drugs – though not applied to deductible – can only be eligible to be paid from HSA funds until deductible is satisfied. </li></ul><ul><li>Employees only have access to the funds that are actually deposited into their account. </li></ul><ul><li>There will be some confusion from employees who are high utilizers of traditional FSA plans. </li></ul><ul><li>Owners from any business entity (LLC, S-Corp, etc.) can participate. </li></ul>
  35. 37. HRA’s from Employer Perspective <ul><li>HRA fund “contributions” are actually unfunded liabilities of the company – until the charges are actually incurred. </li></ul><ul><li>Priority of fund distributions (FSA v. HRA) as well as eligible expenses can be determined and controlled by the employer. </li></ul><ul><li>Should lead to an improved cash flow in early months of plan. </li></ul><ul><li>Employer determines rollover provisions (if any) for the plan. </li></ul><ul><li>No investment options for employees. Account is employer’s. </li></ul><ul><li>No “cash out” provision for employees. </li></ul><ul><li>Does not limit eligible expenses from FSA plans. </li></ul>
  36. 38. FSA’s from Employer Perspective <ul><li>Uniform Coverage Rule represents the biggest impediment to an employer offering FSA’s. </li></ul><ul><li>Recent rulings extending the eligibility for expenses should improve participation by addressing employee’s biggest concern about FSA’s- the “use it or lose it” provision. </li></ul><ul><li>Excellent, cost neutral (many times) benefit which could create significant immediate tax savings to your employees. </li></ul><ul><li>Over the counter medication eligibility and debit card fund access have contributed to increased utilization over the last few years. </li></ul>
  37. 39. Where are We Going from Here? Side by Side Comparison of McCain and Obama Healthcare Proposals. “ One word sums up probably the responsibility of any vice president, and that one word is 'to be prepared'. “ Dan Quayle
  38. 40. John McCain Barack Obama Party Affiliation <ul><li>Republican </li></ul><ul><li>Democrat </li></ul>Stated goal <ul><li>Provide access to affordable health care for all by paying only for quality health care, having insurance choices that are diverse and responsive to individual needs, and encouraging personal responsibility. </li></ul><ul><li>Affordable and high-quality universal coverage through mix of private and expanded public insurance. </li></ul>Date plan announced <ul><li>October 11, 2007 </li></ul><ul><li>May 29, 2007 </li></ul>Overall approach to expanding access to coverage <ul><li>Remove the favorable tax treatment of employer-sponsored insurance and provide a tax credit to all individuals and families to increase incentives for insurance coverage; promote insurance competition; and contain costs through payment changes to providers, tort reform and other measures. </li></ul><ul><li>Require all children to have health insurance, and employers to offer employee health benefits or contribute to the cost of the new public program. Create a new public plan, and expand Medicaid and SCHIP. Create the National health Insurance Exchange through which small businesses and individuals without access to other public programs or employer-based coverage could enroll in the new public plan or in approved private plans. </li></ul>A. Requirement to obtain or offer coverage <ul><li>No provision. Opposes mandates for coverage. </li></ul><ul><li>Require all children to have health insurance. </li></ul><ul><li>Require employers to offer “meaningful” coverage or contribute a percentage of payroll toward the costs of the public plan; small businesses will be exempt from this requirement. </li></ul>
  39. 41. John McCain Barack Obama B. Expansion of public programs <ul><li>Give veterans ability to use their VA benefits to pay for timely high quality care from providers in the best locations. </li></ul><ul><li>Expand Medicaid and SCHIP. </li></ul><ul><li>Create a new public plan so that small businesses and individuals without access to other public programs or employer-based coverage could purchase insurance. Plan coverage would offer comprehensive benefits similar to those available through FEHBP. </li></ul><ul><li>Coverage under the new public plan would be portable. </li></ul>C. Premium subsidies to individuals <ul><li>Provide a refundable tax credit of up to $2,500 (individuals) and $5,000 (families) to all individuals and families for the purchase of insurance. </li></ul><ul><li>Provide income-related premium subsidies, in addition to the tax credit, to individuals enrolled in the Guaranteed Access Plan (see item &quot;F&quot;) </li></ul><ul><li>Make federal income-related subsidies available to help individuals buy the new public plan or other qualified insurance. </li></ul>D. Premium subsidies to employers <ul><li>No provision. </li></ul><ul><li>Provide small businesses with a refundable tax credit of up to 50 percent of premiums paid on behalf of their employees if employer pays a “meaningful share” of the cost of “a quality health plan”. </li></ul><ul><li>Provide federal subsidies to partially reimburse employers for their catastrophic health care costs if the employers guaranteed that premium savings would be used to reduce employee premiums. </li></ul>
  40. 42. John McCain Barack Obama E. Tax changes related to health insurance <ul><li>Reform the tax code to eliminate the exclusion of the value of health insurance plans offered by employers from workers’ taxable income. </li></ul><ul><li>Allow individuals owning “innovative multi-year policies” that cost less than the tax credit to deposit the excess into expanded HSAs. </li></ul><ul><li>No provision. </li></ul>F. Creation of insurance pooling mechanisms <ul><li>Work with states to create a federally-supported Guaranteed Access Plan for people who are denied coverage due to pre-existing conditions. Premiums in the plan would be limited and financial assistance given to those below a certain income level. </li></ul><ul><li>Create a National Health Insurance Exchange through which individuals could purchase the public plan or qualified private insurance plans. </li></ul><ul><li>Require participating insurers to: offer coverage on a guaranteed issue basis; charge a fair and stable premium that is not rated on the basis of health status, and meet standards for quality and efficiency. </li></ul><ul><li>Require plans of participating insurers to offer coverage at least as generous as the new public plan. </li></ul><ul><li>Exchange would evaluate plans and make differences among them transparent. </li></ul>
  41. 43. John McCain Barack Obama G.  Changes to private insurance <ul><li>Promote competition and individual choice of insurance by allowing insurance to be sold across state lines. </li></ul><ul><li>Encourage innovative multi-year insurance products. </li></ul><ul><li>Prohibit insurers from denying coverage based on pre-existing conditions. </li></ul><ul><li>Children up to age 25 could continue family coverage through their parents’ plan. </li></ul><ul><li>In market areas where there is not enough competition, require insurers to pay out a “reasonable share” of premiums on patient care benefits. </li></ul><ul><li>Prevent insurers from abusing monopoly power through unjustified price increases. </li></ul><ul><li>Require health plans to disclose the percentage of their premiums that actually goes to paying for patient care as opposed to administrative costs. </li></ul>H. State flexibility <ul><li>Give states flexibility and encouragement to experiment with: </li></ul><ul><ul><li>Use of private insurance and per episode payments under Medicaid; </li></ul></ul><ul><ul><li>Alternative forms of access, insurance policies and providers and different licensing schemes for providers. </li></ul></ul><ul><li>Maintain existing state health reform plans if they meet minimum standards of the national plan. </li></ul>
  42. 44. John McCain Barack Obama Cost containment <ul><li>Adopt malpractice reforms that limit frivolous lawsuits and excessive damages and provide safe harbors for practice within clinical guidelines and safety protocols. </li></ul><ul><li>Promote competition among providers by paying them only for quality and promote use of alternative providers (e.g., nurse practitioners) and treatment settings (e.g., walk-in clinics in retail outlets). </li></ul><ul><li>Invest in prevention and care of chronic illnesses. </li></ul><ul><li>Increase competition and reduce administrative overhead costs of private insurance by permitting sale of nationwide insurance (i.e., not regulated by the states). </li></ul><ul><li>Require drug companies to reveal the price of their drugs; allow re-importation of drugs; and encourage faster introduction of generics and biologics. </li></ul><ul><li>Provide consumers with more information on treatment options and require provider transparency regarding medical outcomes. </li></ul><ul><li>Invest $50 billion toward adoption of electronic medical records and other health information technology. </li></ul><ul><li>Promote insurer competition through the national Health Insurance Exchange and by regulating the portion of health plan premiums that must be paid out in benefits. </li></ul><ul><li>Improve prevention and management of chronic conditions. </li></ul><ul><li>Initiate policies to promote generic drugs, allow drug reimportation, and repeal the ban on direct price negotiation between Medicare and drug companies. </li></ul><ul><li>Pay Medicare Advantage plans the same as regular (traditional) Medicare. </li></ul><ul><li>Require hospitals and providers to publicly report measures of health care costs and quality. </li></ul><ul><li>Promote and strengthen public health and prevention. </li></ul><ul><li>Reform medical malpractice while preserving patient rights by strengthening antitrust laws and promoting new models for addressing physician errors. </li></ul>
  43. 45. John McCain Barack Obama Improving quality/health system performance <ul><li>Change provider payment to encourage coordinated care (eg., pay a single bill for high quality heart care rather than individual services). </li></ul><ul><li>Provide Medicare and Medicaid payments for diagnosis, prevention, and care coordination and bar payments for preventable medical errors or mismanagement. </li></ul><ul><li>Require transparency by providers with regard to medical outcomes, quality of care, costs, and prices. </li></ul><ul><li>Establish national standards for measuring and recording treatments and outcomes and use technology to share information on &quot;best practices&quot;. </li></ul><ul><li>Promote deployment of HIT to improve chronic disease care and to allow doctors to practice across state lines. </li></ul><ul><li>Where cost effective, employ telemedicine and clinics in rural and underserved areas. </li></ul><ul><li>Support an independent institute to guide comparative effectiveness reviews and required reporting of preventable errors and other patient safety efforts. </li></ul><ul><li>Reward provider performance through the National Health Insurance Exchange and other public programs. </li></ul><ul><li>Address health disparities, promote preventive care and chronic disease management, and require quality and price transparency from providers and health plans. </li></ul><ul><li>Require health plans to collect, analyze and report health care quality data for disparity populations, and hold plans accountable. </li></ul>
  44. 46. John McCain Barack Obama Other investments <ul><li>Support federal research related to science-based care and cure of chronic disease. </li></ul><ul><li>Promote education of children about health, nutrition, and exercise. </li></ul><ul><li>Support public health initiatives to stem obesity and diabetes and deter smoking. </li></ul><ul><li>Expand funding to improve the primary care provider and public health practitioner workforce, including loan repayments, improved reimbursement, and training grants. </li></ul><ul><li>Support preventive health strategies including initiatives in the workplace, schools, and communities. </li></ul><ul><li>Support strategies to improve the public health infrastructure and disaster preparedness at the state and local level. </li></ul>Financing <ul><li>Not yet specified although indicates that cost containment measures would make insurance more affordable. </li></ul><ul><li>Campaign estimates cost to be between $50 to $65 billion a year when fully phased in. Expects much of the financing to come from savings within the health care system. Additional revenue to come from discontinuing tax cuts for those with incomes over $250,000. </li></ul>
  45. 47. Any Questions?