Consulting Health and Benefits Presentation to Southern Company IABA Health Care Reform Overview August 2012
Jan 15, 2016
Consulting Health and Benefits
Presentation to Southern Company
IABA Health Care Reform OverviewAugust 2012
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Judicial and Legislative Activity
U.S. Supreme Court has ruled on the Accountable Care Act (ACA) Oral arguments were heard at the end of March 2012 over three days Arguments were heard separately on four issues
– Does the Anti-Injunction Act bar some or all of the challenges to the individual mandate?• Ruled that this did not apply
– Is the individual mandate constitutional?• Upheld by determination that the mandate can be construed as a tax and not a penalty
– Should other provisions law fail if the individual mandate is struck down?– Is the expansion of Medicaid for the poor and disabled constitutional?
• Under PPACA, states that choose not to, lose ALL federal Medicaid funds• Court said the penalty is too severe; Congress can withhold new Medicaid funds but not
existing funds
Congressional Action There is practically no chance that Health Reform will be repealed in 2012
– Senate has twice rejected the House-passed repeal of health reform and health reform funding– Similar fate awaits other recent House-passed bills
Opponents do not want to improve or fix Health Reform Law– Their goal is repeal, viewing it also as a powerful campaign issue for 2012– Targeted repeals of specific provisions have succeeded
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Health Care Reform after 2012 Election
Provisions likely to remain, even if Republicans sweep 2012 election– No lifetime or annual dollar limits – No pre-existing condition exclusions– Cover children to age 26
Provisions likely to go if Republicans win: – Individual and employer mandates– Premium and cost-sharing subsidies– Medicaid expansion – Minimum medical loss ratio– CLASS Act – New high income and unearned income
Medicare tax – Independent Payment Advisory Board– Grandfathering rules
Repeal or significant changes raise practical, technical and political difficulties– Potential cost of repeal estimated to increase
budget deficit– How to address areas where implementation
underway• Plan sponsors that received ERRP
distributions• Grants to states• Beneficiaries that received Medicare Part D
rebates• Beneficiaries receiving coverage for which
they no longer qualify (children younger than age 26, beneficiaries who previously hit lifetime limits)
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Health Reform Overview—Coverage vs. Cost
Health InsuranceExchanges with Reformed Rules
Expanding/Improving Coverage Paying for Expanded Coverage
Expansion of Medicaid
EmployerMandate
IndividualMandate
Federal Coverage Subsidies
Medicare/MedicaidPayment Changes
High-Cost EmployerCoverage Taxation
IncreaseOther Taxes
= Direct impact to employers = Indirect impact to employers = Direct and indirect impact to employers
Taxation of HighIncome Individuals
Free Rider Penalty
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CBO Estimate—New Savings, New Revenue Will Offset Higher Costs
$32
ExciseTaxes
System Savings
$517 billion
New Revenue
$564 billion
Total Cost of Expanded Coverage: $938 BillionImpact: $143 billion reduction to the federal deficit
$65
PenaltyPayments
MedicareAdvantage Cuts
$136
Reduction in Medicare
growth rate
$196
Other Net
Savings
$115
CLASSProgram
$70 $107
IndustryFees
$210
Medicare Taxes
$150
Other Net Revenues
Health Reform Overview—The Original Price Tag
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*Source: NCSL.org
States Are Slow to Set Up Health Insurance ExchangesLegislation Summary – July 2012*
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States Are Limited on Implementation TimeState Timeline – 2012 and 2013
State Legislative Sessions—
Typically Run First Half of Year
HHS Indicates States Must Select EHB
Benchmark Plan by Q3 of 2012
State Applications for
Exchange Certification due
to HHS November 16,
2012
States Must Demonstrate to HHS by End of Year 2012 that
they are Positioned to Operate an Exchange in 2014 to Avoid
Federal Fallback
States Must Decide Whether
to Expand Medicaid Programs
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Establishing the Exchanges - The 3 R’s
Program Reinsurance Risk Corridors Risk Adjustment
What? Provides funding to issuers that incur high claims costs for enrollees
Limits issuer losses (and gains)
Transfers funds from lower risk plans to higher risk plans
Who Participates? All issuers and third party administrators on behalf of group health plans contribute funding; non-grandfathered individual market plans (inside and outside the Exchange) are eligible for payments
Qualified health plans Non-grandfathered individual and small group market plans, inside and outside the Exchange
When? Throughout the year After reinsurance and risk adjustment
Before June 30 of the calendar year following the benefit year
Timeframe 2014-2016 2014-2016 Permanent
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The Individual Mandate – Coverage Requirements
Who Is Exempt from Coverage Requirement? You are part of a religion opposed to acceptance of benefits from a health insurance policy You are an undocumented immigrant. You are incarcerated. You are a member of an Indian tribe. Your family income is below the threshold requiring you to file a tax return ($9,350 for an individual,
$18,700 for a family in 2010). You have to pay more than 8% of your income for health insurance, after taking into account any employer
contributions or tax credits.
What Coverage Meets the Requirements to Avoid the Tax? Medicare Medicaid or the Children’s Health Insurance Program (CHIP) TRICARE (for service members, retirees, and their families) The veteran’s health program A plan offered by an employer Insurance bought on your own that is at least at the Bronze level A grandfathered health plan in existence before the health reform law was enacted.
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Family is eligible for subsidy in Exchange
Family Income less than 133% of
Poverty
Family is eligible for Medicaid
If employer coverage is available
Family may choose the employer plan or
Medicaid
Family Income less than 400% of Poverty
If employer coverage is available, but either inadequate (<60% benefit) or unaffordable
(premiums >9.5%)
Family may choose the employer plan or subsidized coverage in Exchange
If employer coverage is available and adequate and premiums are affordable
Family may choose the employer plan or unsubsidized coverage in Exchange
Family Income greater than 400% of Poverty
Family may purchase unsubsidized coverage
in Exchange
If employer coverage is available
Family may choose the employer plan or
unsubsidized coverage in Exchange
How Will a Person Get Coverage in 2014?
2011 FPL Single Individual Family of 4
100% $10,890 $22,350
133% $14,484 $29,726
400% $43,560 $89,400
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The Individual Mandate
2014 2015 2016
GreaterOf
$95/adult; $47.50/child;
Up to $285 per family
$325/adult; $162.50/child;Up to $975 per
family
$695/adult; $347.50/child;
Up to $2,085 per family
1.0% of family income
2.0% of family income
2.5% of family income
Up To National average premium in an Exchange for coverage at the Bronze Level
Notes• Premiums for health insurance bought in Exchange would be adjusted for
age.• The Congressional Budget Office estimates that Bronze level coverage in
2016 will be $4,500-5,000 for individuals and $12,000-12,500 for families.• After 2016, penalty amounts will increase by cost of living.
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The Individual Mandate
1 2 3 4 5 6 7 8 9 10$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Individual Mandate TaxFamily of Four *
2014
2015
2016
Federal Poverty Level
Ind
ivid
ual
Man
dat
e T
ax
* Based on Calendar Year CPI-U from CBO Budget and Economic Outlook: Fiscal Years 2011 to 2021, www.cbo.gov/publication/21999
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Health Reform Overview—Timing Of Major ProvisionsPlan Years on/after
9/23/2010 2011 2012 2013 2014 2018
Restrictions on Lifetime
Dollar Limits* Preexisting Condition
Exclusions Prohibited for
Children under 19* Only Restricted Annual
Limits Permitted (HHS
Guidance Needed)* Extension of Adult Child
Coverage to Age 26* Prohibition on
Rescissions* No Cost Sharing and
Coverage for Certain
Preventive Health
Services** Effective Appeals
Process**—NEW
INTERNAL APPEALS
GRACE PERIOD Nondiscrimination
Requirements Applicable
to Fully Insured Plans**—
DELAYED Certain Retiree Medical
Claims Reimbursable
(ERRP) Retiree Drug Plan Tax
Accounting Recognition
Over-the-Counter
Medicines Not
Reimbursable Under
Health FSA or From
HSA Without a
Prescription, Except
Insulin HSA Penalty Tax
Increase Employer Reporting
of Health Coverage
on Form W-2—
DELAYED Public Long-Term
Care Option
(CLASS Act)—
OFFICIALLY
JETTISONED Medicare Part D
Discounts for Certain
Drugs in “Donut Hole”
Employer Distribution
of Uniform Summary
of Benefits to
Participants* Comparative
Effectiveness Fee Employer Quality of
Care Report**
Form W-2 Reporting
of the Value of Health
Coverage New Women’ s
Preventive Services** Notice to Inform
Employees of
Coverage Options in
Exchange Limit of Health Care
FSA Contributions to
$2,500 (Indexed) Elimination of Tax
Deduction for
Expenses Allocable
to Retiree Drug
Subsidy (RDS) Medicare Tax on High
Income
Individual Mandate to
Purchase Insurance or
Pay Penalty State Insurance
Exchanges Employer Responsibility
to Provide Affordable
Minimum Essential
Health Coverage Free Choice Vouchers—
REPEALED Preexisting Conditions
Exclusions Prohibited* Annual Limits Prohibited* Automatic Enrollment—
DELAYED Limit of 90-Day Waiting
Period for Coverage in
Plan* Employer Reporting of
Health Insurance
Information to
Government and
Participants Increased Cap on
Rewards for Participation
in Wellness Program
Excise Tax on
High-Cost
Coverage
* Denotes group/insurance market reforms applicable to grandfathered health plans** Denotes group/insurance market reforms not applicable to grandfathered health plans
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Guidance Still ComingEstimated Timeline of 2012 PPACA Rule Issuance and Effective Dates
January - March April - June July- September October -
December
Draft MA/ Part D Regulation for CY 2014
(likely to include MA MLR regs)
Employer Reporting Requirements
Risk-adjustment, Reinsurance and Risk-corridors Final Rule
Individual Mandate/Penalties Proposed RuleEmployer Mandate/Penalties Proposed Rule
Insurance Exchanges and Exchange Eligibility Final Rule
Premium Tax Credit Final Rule
Medicaid Eligibility Final Rule
Essential Health Benefits Proposed Rule
Details on the Federally-Facilitated Exchange
Additional Guidance on External Review
Employer Tax Credits Proposed Rule
Actuarial Value and Cost-Sharing Reductions Bulletin
Guidance on Exchange Blueprint Requirements
Actuarial Value and Cost-Sharing Reductions Proposed Rule Student Health Final
Rule
MLR Reporting Requirements Final Rule
Guaranteed Issue, Rating Renewability, and Prohibition of Existing Conditions
Proposed Rule
Exchange Accreditation
Health Insurer Quality Activity Reporting
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Guidance Still ComingEstimated Timeline of 2013 PPACA Rule Issuance and Effective Dates
January - March April - June July- September October -
December
Interstate Healthcare Choice Compacts Interim Final Rule
Prohibition on 90-day Waiting Periods Proposed RuleModified Community Ratings and Health Status Proposed RuleProhibition of Annual Limits Proposed Rule
Final MA/ Part D Regulation for CY 2014 (likely to include MA MLR regs)
Guidance on OPM Multi-State Plans
Health Insurance Tax Proposed Rule
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A Balancing Act for Carriers
Opportunities Broader insured basis in the exchanges due to the Individual & Employer Mandates Expansion of availability of coverage to Individual, Medicaid, and Employer Group populations Increased focus on cost of care through Accountable Care Organizations and Payment Innovation Preventive Care improving the health of the insured population
– Women’s Benefits– Review by United States Preventive Services Task Force
Administrative efficiencies from more standardized product and rating structuresRisks Pricing It Right in a Changing Marketplace
– Individual Mandate – Not as strong as it could be initially– Guaranteed Issue – movement away from individual underwriting has been a challenge in some states already
Minimum Loss Ratio requirements– Programs that could be good for the health of a population but don’t fall under allowable numerator expenses
could be cut back if MLRs are tight Rate Review
– Funding to states to immediately increase regulatory scrutiny– Increases greater than 10% are flagged by HHS for review
Medicare Reimbursement cuts (worth $271B from 2013 to 2022 according to recent CBO analysis)– Public sector business runs at negative margins already and are supplemented by private payers– If cuts are upheld, will have significant impact on providers
Fully-insured group business may look more at self-insured options to avoid taxes and mandates
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A Balancing Act for Employers
Employer Mandate—Effective 2014 A penalty will apply if the employer
– Fails to offer Minimum Essential Coverage (MEC) to its FTEs (and their eligible dependents)• Penalty is $2,000 per year per FTE
– Offers either unaffordable coverage or does not provide a minimum actuarial value plan• Penalty is $3,000 per year per FTE who enrolls in an Exchange and is eligible for a federal subsidy
Affordability Test– The contribution for single coverage can not exceed 9.5% of the Applicable Taxpayer’s household income
Minimum Actuarial Value– Benefits provided under the plan must equal at least 60% of the total cost of benefits
Excise (Cadillac) Tax—Effective 2018 This is solely a tax on high cost employer-sponsored health plans (for active and inactive/retired employees) The tax is imposed on the cost of coverage that exceeds certain dollar thresholds
– The tax is equal to 40% of the excess cost over the dollar threshold– The tax is determined separately for each insured individual– Thresholds are indexed and vary based on different circumstances
The Big Squeeze60% Minimum Actuarial Value + Excise Tax = Trouble
Questions?
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