THE EMPLOYER’S ROLE IN MEDICARE Henry de Vos Lawrie, Jr. Kathryn J. Greenlief McGuire Woods Battle USAA & Boothe LLP
Dec 29, 2015
THE EMPLOYER’S ROLE IN MEDICARE
Henry de Vos Lawrie, Jr. Kathryn J. Greenlief McGuire Woods Battle USAA & Boothe LLP
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TRADITIONAL MEDICARE
Defined Benefit Fee-For-Service Out-of-Pocket
– Part A (Hospital) $768 (1-60)
– Part B (Medical) $100 Deductible 20% Co-Pay
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TRADITIONAL MEDICARE (continued)
Major Coverage Exclusions– Prescription Drugs– Routine Physician Exams– Long Term Care– Dental and Dentures– Hearing Aids– Routine Eye Care
Per Capital Out-of-Pocket est. $2,454
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TRADITIONAL EMPLOYER WRAP PLAN
Coordinates With Parts A and B– Co-insurance and Out-of-Pockets– Additional Benefits (Prescription)– Medicare Primary
Retiree Contribution FAS 106 Liability No Coordination With Medicare HMOs
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HOW EMPLOYER HEALTH BENEFITS HAVE CHANGED
1998 14% 34% 30% 22%
1994 35 25 25 15
1988 71 11 18
0 2'0 4'0 6'0 8'0 10'0%
Fee-for-Service Point-of-Service (POS)Health Maintenance Preferred ProviderOrganization (HMO) Organization (PPO)
Note: Medium and Large CompaniesSource: KPMG
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BALANCED BUDGET ACT OF 1997
Fewer Dollars for Providers More Managed Care Effective 1999 Introduces Medicare Part C
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MEDICARE + CHOICE(Part C of Medicare)
More Coordinated Care Plans (HMO, PPO, PSO or POS)
Private Fee-for-Service Plan MSA Plan Parts A & B Remain Alternatives
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MEDICARE RISK HMOs
Introduced in 1985 Enrollment Quadrupled to 14% Since 12/93 Current Primary Vehicle Under Medicare +
Choice
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HOW MEDICARE RISK HMOs WORK
Contract With Health Care Financing Administration (HCFA)
HMO Assumes Full Risk For Medicare Parts A & B Coverage
HCFA Pays Capitated Rate to HMO Under Medicare + Choice Rules, HCFA
Pays Greater of:– Blend of Local/National Rates– Floor Amount ($367/month)– Minimum Annual Increase (2%)
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HOW MEDICARE RISK HMOs WORK (continued)
Normal HMO Coordinated Care Features– Defined Geographic Area– Gatekeeper– Network Limitations– Possibly POS Option
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ADVANTAGES OF MEDICARE RISK HMOs
Lower Cost or Higher Benefit Level at Same Cost
More Predictable, Budgetable Expense
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THE CURRENT HMO MARKET
Reduced or No Out-of-Pockets Some Zero Premium Plans Offer Additional Benefits Pricing Too Good to Be True?
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VARIATIONS IN SAVINGS
Vendor Network Effectiveness Plan Location Enrollment Employer/Employee Contributions for
Existing Medicare Coverage
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FAS 106 RELIEF
Estimate of Total Liability Driven By Current and Anticipated Expense Impact of Migration to Medicare Managed
Care
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CHOICES FOR THE EMPLOYER
Whether to Embrace or Merely Tolerate Medicare + Choice
Strategy for Encouraging Migration Extent of Plan Redesign
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INITIAL EMPLOYER ISSUES
Coverage Availability in Employer’s Area Benefit and Price Differences Among
Available Options Quality of Service Due Diligence Determine Likelihood of Acceptability of
Managed Care to Current and Future Retiree Population
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DESIGN ISSUES
Medicare + Choice as Alternative or Mandate
Single or Multiple Coordinated Care Options Supply Benefit Enhancement to Encourage
Migration to Managed Care Limitations on Transfers Among Alternative
Choices
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DESIGN ISSUES(continued)
Define the Employer’s Subsidy Develop Communications and Enrollment
Strategies
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ILLUSTRATION OF DEFINED CONTRIBUTION PLAN
Account Balance Feature– $2,500 Annual Credits Beginning Age 40– Ten Year Limit– Interest Credited
Access to Funds– Termination After Age 55/15 Years Services– Forfeiture Upon Early Separation
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ILLUSTRATION OF DEFINED CONTRIBUTION PLAN
(continued)
Use of Funds– Premiums For Range of Plans– Retiree Elects Annual Allocation Amount– Individual Contributions Permitted– Eligible Dependents– Premiums Only; No Cash