20100922 nccbh avalere employer webinar final

Healthcare Reform:Healthcare Reform: Implications for Community Behavioral Health Organizations as EmployersHealth Organizations as Employers

www.TheNationalCouncil.org

Agenda> Audience poll> Introduction> Current Status of Employer Healthcare Coverage> Current Status of Employer Healthcare Coverage> Health Insurance Provisions in the Affordable Care Act> Health Reform Impact on Employers> Retiree Health Benefits> Implications> Opportunities and Threats> Opportunities and Threats

www.TheNationalCouncil.org 2

Audience Poll Question #1

• How many employees does your organization have?a) Fewer than 20a) Fewer than 20b) Between 20 and 50c) Between 50 and 200d) M th 200d) More than 200



• Do you currently offer your retirees company-sponsored health insurance?health insurance?a) Yesb) No



• Are you considering dropping health insurance as a benefit for your employees?benefit for your employees?a) Yes, the costs are too highb) Yes, they will have access to health insurance from the

government due to reformgovernment due to reformc) No, I consider it a core benefitd) Unsure/haven’t considered it) ’ ffe) Don’t currently offer employees health insurance


Avalere Health, LLC> Avalere Health delivers research, analysis, insight & strategy to leaders in

healthcare policy and business> 130+ policy and industry experts with backgrounds in government, academia

and research organizations managed care industry and healthcare deliveryand research organizations, managed care, industry and healthcare delivery, financial services and professional societies

> Capabilities in policy analysis, modeling & scoring, evidence reviews, data analytics, due diligence, qualitative research and market strategyR h bli h d b l di f d ti d j l> Research published by leading foundations and journals


Bonnie Washington> Bonnie Washington, Senior Vice President, provides clients with strategic policy advice on a wide

range of issues including Medicare policy development, health reform, and commercial strategy. Bonnie has particular expertise in the Medicare prescription drug benefit, Medicare Advantage, and pharmaceutical and health plan issues.

> Prior to joining Avalere Bonnie led health policy development efforts for Novartis Pharmaceuticals> Prior to joining Avalere, Bonnie led health policy development efforts for Novartis Pharmaceuticals Corporation and Ovations, a UnitedHealth Group Company. Prior to her industry experience, Bonnie led the Office of Legislation at the Centers for Medicare & Medicaid Services, formerly known as the Health Care Financing Administration. Specifically, Bonnie advised and represented the CMS administrator on legislation and policy related to Medicare, Medicaid, and the State Children's Health Insurance Program (SCHIP) She also represented the administration beforeChildren s Health Insurance Program (SCHIP). She also represented the administration before members of Congress and congressional staff. Previously, Bonnie served as an analyst with the Office of Management and Budget (OMB), advising OMB and White House policy officials on Medicaid and SCHIP policy options.

> Bonnie holds a B.A. from Loyola College in Maryland and a M.Sc. from the London School of Economics.


Eric Hammelman> Eric Hammelman, Director, provides data-driven analysis of the impact of various legislative and

policy changes on the healthcare industry, with a specific focus on reimbursement for providers. > Prior to joining Avalere, Eric was an Associate Analyst with JPMorgan, where he analyzed

healthcare service companies and provided investment advice to institutional investors. He built financial and industry models for hospitals nursing homes dialysis hospice ambulatory surgeryfinancial and industry models for hospitals, nursing homes, dialysis, hospice, ambulatory surgery centers, clinical labs, inpatient rehab, long-term acute care, and physician groups. He also analyzed payment policies for each of these areas, including Medicare, Medicaid, and private payers.

> Eric has a Bachelors of Music Performance from the University of Illinois at Urbana-Champaign. H l d M B A f th M h ll S h l f B i (U i it f S th C lif i )He also earned an M.B.A. from the Marshall School of Business (University of Southern California), as well as a Masters of Music Performance from the Mannes College of Music in New York, N.Y. Eric is also a CFA charterholder.


C t St t f E lCurrent Status of Employer Healthcare Coverage


9

Percent of Employers Offering Health Benefits Has Declined Slightly Overall In the Last Decade

66%69% 68% 66% 66% 63% 63%

70%

80%

Percent of Employers Offering Health Benefits, 1999-2009

66% 66% 66% 63%60% 61% 60%

63%60%

40%

50%

60%

10%

20%

30%

40%

0%

10%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009


10

Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009

Small Employers Are Less Likely To Offer Health Benefits Than Large Employers

Percent of Employers Offering Health Benefits by Size 2009

72%

87%95% 98%

80%

100%

Percent of Employers Offering Health Benefits by Size, 2009

46%

%

40%

60%

0%

20%

3 - 9 Employees 10 - 24 25 - 49 50+ 200+ Employees3 - 9 Employees 10 - 24 Employees

25 - 49 Employees

50+ Employees

200+ Employees

In 2009, 64 percent of employers with a small number of low-wage workers offered health benefits, compared to 39 percent of employers with a large number of low-wage workers.

www.TheNationalCouncil.org Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009

11

Higher Healthcare Costs Are Driving Increases in Employer-Sponsored Insurance Premiums

Average Annual Premium for Single and Family Coverage, 1999-2009

$4,479

$4,704

$4,824

$11 480

$12,106

$12,680

$13,375

2006

2007

2008

2009

rem

ium

s

Drivers of Increasing Healthcare Costs

General Inflation

Average Annual Premium for Single and Family Coverage, 1999 2009

$3,383

$3,695

$4,024

$4,242

$8,003

$9,068

$9,950

$10,880

$11,480

2002

2003

2004

2005

2006

th In

sura

nce

Pr

Improvements in Technology

Increased Utilization

$2,196

$2,471

$2,689

$3,083

$5,791

$6,438

$7,061

$8,003

$ $ $ $ $ $ $ $ $

1999

2000

2001

2002

Hea

lt

Cost-Shifting

Lifestyle Choices

$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000

Family Coverage Single Coverage

The average annual family premium in 2009 is 34 percent higher than in 2004, and 131 percent higher than in 1999.

www.TheNationalCouncil.org Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009

12

H lth I P i i i thHealth Insurance Provisions in the Affordable Care Act


13

While Some Employer Requirements Begin in 2010, Major Requirements and Penalties Begin in 2014

MLR requirements

Exchanges Begin Operations

Insurance Market Reforms

Coverage of Preventive Services

Eliminate Deduction of Part D Retiree Subsidy

q

Wellness Program Incentives

Increase Tax on HSA Withdrawal

Employer Penalties

Annual Reporting

Auto-Enrollment

Elimination of Lifetime and Certain Annual Limits

Services

Notice of Coverage Options

Limit Contributions

Eliminate Reimbursement on OTCs for S di

S t d a afor Nonqualified Expenses

Retiree Reinsurance

Dependent Coverage Under Age 26

Annual Reporting Requirement

Free Choice Vouchers

Annual Fee on

Tax on High-cost Insurance Plans

2010 2011 2012 2013 2014 2015 2016 2017 2018

to FSAsSpending Accounts

Reinsurance Program

Annual Fee on Health Plans

www.TheNationalCouncil.org FPL= Federal Poverty Level OTC= Over-the-counter (medication)

14

A Number of Insurance Reforms Take Effect in 2010: Most Significant Reforms Effective in 2014

2010 Provisions 2014 Provisions

Prohibits pre-existing condition exclusions for children under 19 years old

Requires all plans to issue and renew coverage to those seeking it, regardless of for children under 19 years old pre-existing conditions.

Prohibits health plans from placing lifetime limits on the dollar value of coverage Requires modified community ratingg

Prior to 2014, allows plans to only impose annual limits on the dollar value of coverage as determined by the Health and

Prohibits plans from placing annual limits on the dollar value of coverage

Human Services Secretary

Fully insured plans will also be required to maintain a Medical Loss Ratio of 85 percent in large group and 80 percent in small group markets, starting in 2011

www.TheNationalCouncil.org Medical Loss Ratio: the ratio of total losses paid out in claims plusadjustment expenses divided by the total earned premiums.

15

Legislation “Grandfathers” Existing Plans• Allows existing employer-sponsored and other insurance plans that were in effect on theAllows existing employer sponsored and other insurance plans that were in effect on the

date of enactment to remain essentially the same.• Exempts these plans from complying with many of the insurance rules included in

the legislation“G df th d” l ill h t l ith i t b t t ll h lth• “Grandfathered” plans will have to comply with some new requirements but not all health reform provisions will apply.

• Family members and new employees are permitted to enroll in grandfathered plans• A plan must continue to provide the same treatment for mental health conditions and p p

substance use disorder that it currently offers. • Dropping any portion of the treatment currently offered would result in the plan

being treated as having eliminated all or substantially all benefits for that condition.


16

A Number of Insurance Reforms Take Effect in 2010; Most Apply to Grandfathered Plans

2010 ProvisionsApplies to Grandfathered Plans

Prohibits pre-existing condition exclusions for children under 19 years old. * Prohibits health plans from rescinding coverage except in the case of fraud.p g g p

Prohibits health plans from placing lifetime limits on the dollar value of coverage. Prior to 2014, allows plans to only impose annual limits on the dollar value of coverage as determined by the Secretary. *

R i f d d t t 26 *Requires coverage of dependents up to age 26. * Eliminates cost-sharing for covered preventive services. Services include those with a USPSTF A or B rating; immunizations recommended by ACIP, children’s services in the HRSA guidelines, and women’s preventive services in the HRSA guidelinesguidelines. Prohibits limitations on waiting periods.Prohibits employers from limiting coverage eligibility based on employee salary.

www.TheNationalCouncil.org*Only applies to grandfathered group plans.

USPSTF = U.S. Preventative Services Task Force; ACIP = Advisory Committee on Immunization Practices; HRSA = Health Resources and Services Administration

17

In Order to Maintain Grandfathered Status, Employer Plans Must Deviate from Current Cost Shifting Trend

• In recent years employer plans have shifted costs to employees• In recent years, employer plans have shifted costs to employees

• However, in order to maintain grandfathered status, employer plans must limit increases in cost-sharing• Permitted increases in cost-sharing are tied to medical inflation • Co-insurance percentages cannot increase

Sample Impact of Grandfather Rules on Tier 2

Grandfathered status exempts

plans from some

Sample Impact of Grandfather Rules on Tier 2 Cost-Sharing for Prescription Drugs

ESI Trend Pre-Reformplans from some

requirements in the ACA. However,

CMS projects that 39-69 percent of all R

x C

ost-

ring

($)

Permitted Growth for Grandfathered Plans

e e o

existing employer plans will loose grandfathered status by 2013.

Tier

2

Sha Grandfathered Plans

ACA Signed into Law March 23

www.TheNationalCouncil.org ESI = Employer-Sponsored Insurance; Sample cost-sharing scenario based on actual average Tier 2 cost-sharing for employer sponsored coverage from 2000-2009 as reported by the KFF and HRET 2009 employer health benefits survey.

Grandfathered plan limits based on historical medical inflation for 2001-2009.

Law, March 23

18

Provision Details

Tax Credits for Small Employers Also Begin in 2010

Provision Details

Tax Credits for Small Employers

Provides sliding scale tax credit to certain small employers with fewer than 25 employees and average annual wages below $50,000 who offer and contribute at least 50% of the cost of their employees’ healthoffer and contribute at least 50% of the cost of their employees health insurance coverage.

Full credit given to employers of ≤10 and average annual wages less than $25,000.

Credit offered to small employers that newly begin offering coverage.

Credit continues through the first two years in which coverage is offered.


19

Insurance ReformsImpactsGrandfathered Plans

MLR Requirements Effective January 1, 2011*

Requires all plans, excluding self-insured, to report the proportion of premium dollars spent on non claims costsRequires 85% MLR in large group market and 80% MLR in the small

d k tgroup and non-group marketRequires plans to give rebates to enrollees for the amount in which the proportion of premium dollars spent on claims costs (minus reimbursement for clinical services; activities that improve quality; and, p q yother non-claims cost) is less than 85% for group plans and 80% for small group and individual plans

www.TheNationalCouncil.org MLR = medical loss ratio; *NAIC is required to give their recommendations by Dec 31, 2010. MLR requirements go into effect for plan years beginning six months after enactment. NAIC is currently aiming to send

recommendations to the HHS Secretary by July 2010.20

Changes to HSAs and FSAs Begin in 2011 and 2013Provision Details

HSA Penalties for Non-Qualified Expenses

Increases the additional tax for HSA withdrawals prior to age 65 that are used for purposes other than qualified medical expenses from 10% to 20% beginning January 1, 2011

The additional tax for Archer Medical Savings Account withdrawals not used for qualified medical expenses would increase from 15% to 20% beginning January 1, 2011

Reimbursement for OTCs

Eliminates reimbursement for over-the-counter medications from HSAs, FSAs, or HRAs beginning in 2011

Limit FSA Limits tax-deductible contributions to health flexible spendingLimit FSA contributions

Limits tax deductible contributions to health flexible spending arrangements to $2,500 per employee, per year beginning in 2013

www.TheNationalCouncil.org HSA = health savings accountFSA = flexible spending account

HRA = health reimbursement account21

Employers Also Face New Notification Reporting Requirements in 2011 and 2013

Provision Details

Reporting Cost of C W 2

Requires employers to report the aggregate value of medical benefits, d t l i i d l t l i th hCoverage on W-2 dental, vision, and supplemental insurance coverage on the each employee’s Form W-2 beginning January 1, 2011

Notice of No later than March 1 2013 requires employers to provide a writtenNotice of Coverage Options

No later than March 1, 2013, requires employers to provide a written notice to all employees informing employees about the new exchanges and related rules


22

P i i D t il

Wellness Program Incentives Begin in 2013

Provision Details

Wellness Program Incentives

Allows employers to reduce premiums by up to 30 percent to reward employee participation in wellness programs

Incentives» The Secretary may increase the available reward to up to 50

percent if deemed appropriate

Some employers already have this kind of program in placey y g

» Alabama State Employees’ Insurance Board


23

I t

Major Insurance Reforms Begin in 2014

Insurance ReformsImpacts Grandfathered Plans

Requires all plans to issue and renew coverage to those seeking it, regardless of pre-existing conditions. * Prohibits insurers from dropping or denying coverage for individuals participating in approved clinical trials.

Requires modified community rating allowing insurers to vary premiums based only on geography; family composition; age, variation limited to 3:1; and, tobacco use, variation limited to 1.5:1.

Prohibits individual and group plans from placing annual limits on the dollar value of coverage. Plans may apply annual or lifetime per beneficiary limits to any non-essential health benefits.

Requires plans to meet minimum coverage requirements for the essential benefit package.

Sets out-of-pocket limits on cost sharing at HSA levels ($5,950 in 2010 for individuals).

www.TheNationalCouncil.org *Based on current law

24

Provision Details

State Exchanges Create New Market in 2014

Establishing State Exchanges

Requires each state to establish an exchange for individual market and separately for small group market by 2014

Allows states to form regional or interstate exchanges subject toAllows states to form regional or interstate exchanges, subject to approval by Secretary

Employer Eligibility

Requires states to allow small businesses with up to 100 employees to purchase coverage through the small employer exchangeEligibility purchase coverage through the small employer exchange

» States may allow employers with more than 100 employees into the state exchange in 2017

F l b f J 1 2016 t t li it th ll» For plan years before January 1, 2016, a state may limit the small group market to 50 employees


25

Employer Coverage and Auto-Enrollment Requirements Begin in 2014

Provision Details

Employer Mandate

Sets penalties, effective December 31, 2013, as follows:

F l th t ff f ill b l f» For employers that offer coverage, fee will be lesser of $3,000/employee receiving tax credit or $2,000/full-time worker

» For employers that do not offer coverage, fee will be $2,000/full time workerfull-time worker

» For purposes of calculating total penalty, number of full-time employees is reduced by 30

Auto-Enrollment Requires employers with 200 employees or more to auto-enroll employees in employer coverage, but allows employees to opt out if they can show proof of other coverage


26

New Administrative Requirements and Insurer Fees Take Effect in 2014

Provision Details

Annual Fee on Health Plans

Imposes an annual fee for all U.S. health insurance providers phased in from $8 billion in 2014 to $14.3 in billion per year in 2018,Health Plans in from $8 billion in 2014 to $14.3 in billion per year in 2018, distributed among insurers by relative market share

» Increases fee from the preceding year by the rate of premium growth

» Excludes self-insured plans

» Excludes 50 percent of net premiums for non-profit plans


27

Provision Details

Excise Tax on High Cost Health Plans Begins in 2018

Excise Tax on High Cost Health Plans

Imposes an excise tax on employer health insurance plans that offer policies with generous levels of coverage, effective 2018

» The tax would be levied on group health insurance plans as well as plan d i i t t f lf i d iadministrators for self-insured companies

Tax is equal to 40% of the plan’s value that exceeds $10,200 for an individual and $27,000 for family coverage, beginning in 2018

Threshold will increase beginning in 2019 by the cost-of-living adjustment plus 1%Threshold will increase beginning in 2019 by the cost of living adjustment plus 1%

Imposes a penalty for employers that under-report excise tax liability to insurers

» The penalty is equal to the difference between the actual and reported liability amount, plus interest from the date the tax was due to the date paid by the

lemployer


28

Reform Impacts Employers Differently Depending on Group Size and Current Plan Offerings

Provisions Effective Date

New Plans Grandfathered Plans

Individual 1-100 100+ Self-funded Individual Group Plan

Small employer tax credits 2010 ***

MLR requirements 1/1/2011

Employer penalties 12/31/2013

New benefit requirements 1/1/2014 **New benefit requirements 1/1/2014

Annual fees on health plans 1/1/2014

Employer participation in the exchange 1/1/2014 * **

Wellness prevention program initiatives 1/1/2011 UnclearWellness prevention program initiatives 1/1/2011 Unclear

Guaranteed issue requirements 1/1/2014 Currentlaw

Current law

Tax on high cost plans 1/1/2018

www.TheNationalCouncil.org*Prior to 2016, a state may limit the small group market to 50 employees.

** Beginning in 2017, states may allow employers with more than 100 employees into the state exchange***Applies to employers with 25 or fewer workers

29

Health Reform Impact on EmployersEmployers


30

Primary Impacts of Health Reform on EmployersEmployer MandateRequires certain employers to offer health coverage for 1 equ es ce ta e p oye s to o e ea t co e age oemployees

Health Insurance ExchangesAllows some employers to enroll employees in Exchange plans

2Allows some employers to enroll employees in Exchange plans

Insurance Market ReformsRequires all commercial health plans to comply with new rules

3q p p y

Essential Benefit RequirementsRequires small group health plans to offer minimum requirements

4

Taxes and FeesImposes new taxes and fees on select health plans and employers

5


31

Certain Employers Must Offer Health Coverage for Employees

Employer Mandate Auto-Enrollment

Starting in 2014, most employer groups must offer coverage or face penalties

Requires employers with 200 employees or more to auto-enroll employees in

lPenalties are as follows:• Employers offering coverage but who

have at least one employee receiving a tax credit subsidy to purchase Exchange coverage fee will be lesser

employer coverageAllows employees to opt out if they can show proof of other coverage

Exchange coverage, fee will be lesser of $3,000/employee receiving tax credit or $2,000/full-time worker

• For employers that do not offer coverage, fee will be $2,000/g , ,full-time worker


32

Employer Mandate Applies to Both Fully-Insured and Self-Funded Employer Plans

ProvisionEmployer Plans

Fully-Insured1-100*

Fully-Insured100+ Self-funded

Imposes a penalty on employers that do not offer coverage and/or have at least one employee receiving a tax credit. *

Requires employers with 200 employees or more to auto-enroll employees in employer coverage, but allows employees to opt out if they can show proof of other coverage

**they can show proof of other coverage

www.TheNationalCouncil.org * Over 50 full-time equivalents (accounts for part-time employees)** Over 200 employees

33

State-level Insurance Exchanges Will Be a Major Vehicle for Expanding Access in 2014, Even for Some Employers

Health Plans Consumers

States must create separate exchanges for individuals and primarily small employers

All U.S. residents are eligible to participateindividuals and primarily small employers

Qualified health benefit plans must cover specified set of services, including prescription drugs, mental health benefits and substance use

Individuals must purchase some form of coverage or face financial penalties

Premium subsidies available for some consumers; limit premiums to a percent of iuse

Establishes four tiers of benefit design based on actuarial value

income

Employers face a penalty if they do not offer coverage to workers


34

Self-Funded Employer Plans Restricted from Participation in Exchanges


Fully-Insured1-100*

Fully-Insured100+** Self-funded

Allows small employers to enroll employees in health plans offered in state-based Exchanges

www.TheNationalCouncil.org *For plan years before January 1, 2016, a state may limit the small group market to 50 employees**Reform only applies to larger groups if state allows into the exchange starting in 2017

35

New Requirements Affect Nearly Every Type of Employer


Effective date Fully-Insured1 100

Fully-Insured100 Self-fundedEffective date 1-100 100+ Self funded

Prohibits pre-existing condition exclusions for children under 19 years old 9/23/2010

Prior to 2014, allows plans to only impose annual limits on the dollar value of coverage as determined 9/23/2010by the Secretary

Prohibits individual and group health plans from placing lifetime limits on the dollar value of coverage

9/23/2010

Requires 85% MLR in large group market and 80% 1/1/2011q g g pMLR in the small group and non-group market 1/1/2011

Requires all plans to issue coverage to those seeking it, regardless of pre-existing conditions 1/1/2014

Requires modified community rating allowing insurers to vary premiums only by age gender 1/1/2014insurers to vary premiums only by age, gender,tobacco use, and geographic area.

1/1/2014

Prohibits individual and group plans from placing annual limits on the dollar value of coverage 1/1/2014

www.TheNationalCouncil.org MLR: Medical loss ratio. The percent of premiums spent on medical costs

36

Most Fully-Insured Health Plans Must Also Cover Essential Benefits Provision Details Effective DateProvision Details Effective Date

Benefit Requirements Ambulatory patient servicesEmergency servicesHospitalization

Prescription drugsLaboratory servicesPreventive and wellness services and h i di t

2014

Mental health and substance abuse servicesRehabilitative and habilitative services and devices

chronic disease managementMaternity and newborn carePediatric services


Fully-Insured1-100


Plans must meet minimum coverage requirements (for essential benefit package) * **

www.TheNationalCouncil.org *For plan years before January 1, 2016, a state may limit the small group market in the Exchange to >50 employees;** Reform only applies to large groups participating in the Exchange (at the discretion of the state starting in 2017)

37

Both Fully-Insured and Self-Funded Plans Must Cover Select Preventive Services


Fully-Insured1-100


Coverage of and elimination of cost sharing for preventive services with an A or B rating by the USPSTF

While the ACA requires coverage of certain services, there is still great uncertaintyWhile the ACA requires coverage of certain services, there is still great uncertainty around how to cover these preventive services.


38

ACA Requires Coverage and Eliminates Copays for Over Twenty Select Preventive Services

Provision USPSTF Recommendations PrioritiesCoverage of and elimination of cost sharing for preventive services recommended b th U S

Screening for: Abdominal aortic aneurysmAnemia BacteriuriaBlood pressure

PhenylketonuriaRh incompatibility (24-28 weeks gestation)SyphilisVisual acuity in children

C li f

Counseling for tobacco use: adults and pregnant womenAspirin to prevent cardiovascular disease

by the U.S. Preventive Services Task Force (USPSTF); requirement depends on

Breast cancer (mammography)Cervical cancerChlamydial infectionCholesterol abnormalitiesColorectal cancer

Counseling for:Alcohol misuseBCRA gene screeningBreast feedingDietObesity

Screening for blood pressureScreening for cholesterol abnormalitiesScreening fordepends on

grandfathered status

DepressionDiabetesGonorreha: womenHearing lossHemo-globinopathiesHepatitis B

ObesitySexually transmitted infectionsTobacco use: adults and pregnant woman

Aspirin to prevent cardiovascular diseaseChemoprevention of breast cancer

Screening for depressionScreening for colorectal cancer

Hepatitis BHIVCongenital hypothroidismObesityOsteoporosis

pChemoprevention of dental cariesSupplementation with folic acidProphylactic medication for gonorrhea: newborns Iron supplementation in children


39

Both Fully-Insured and Self-Funded Employer Plans Subject to Excise, or “Cadillac,” Tax in 2018


Fully-Insured1-100


Imposes an excise tax on employer health insurance plans that offer policies with generous levels of coverage

Imposes an annual flat fee (changing in poses a a ua at ee (c a g geach subsequent year) on the health insurance sector

Requires employers to disclose the value of the benefit provided by the employer forthe benefit provided by the employer for each employee’s health insurance coverage on the employee’s annual Form W-2


40

CBO Assumes Employer Coverage After Health Reform Remains Relatively Stable

162 159180

Individuals with Employer Coverage as Primary Source

(in millions) CBO discusses three separate trends in employer coverage:

150162 159

100120140160 Plus 6 - 7 million people due to

individual mandate

Minus 8 - 9 million other people who would lose offer of ESI

20406080

would lose offer of ESI

Minus 1 - 2 million people who would get coverage through the exchanges

02010 2019 w/out

ACA2019 w/

ACA

www.TheNationalCouncil.org Congressional Budget Office, letter to the Honorable Nancy Pelosi, providing a preliminary analysis of the Manager’s Amendment to the reconciliation proposal, March 20, 2010.

http://www.cbo.gov/ftpdocs/113xx/doc11379/Manager'sAmendmenttoReconciliationProposal.pdf41

Retiree Health Benefits


Percent of Large Employers* Offering Coverage to Retirees Has Dropped Significantly in Past 20 Years

80% Percent of Large Employers Offering Retiree Coverage 1988 2009

66%

60%

80% Percent of Large Employers Offering Retiree Coverage, 1988-2009

46%

36%40% 40% 40%

35%37% 36%

38%36%

33% 35% 33% 31%29%

40%

0%

20%

0%1988 1991 1993 1995 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Large employers are much more likely to offer retiree health benefits than small employers. In 2009, only five percent of employers with fewer than 200 workers offered coverage to retirees.

www.TheNationalCouncil.org Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009*Graph shows employers with at least 200 workers that offer health benefits to active workers.

43

Legislation Attempts to Slow Decline in Retiree Coverage by Implementing Reinsurance Program

Provision Details

Reinsurance for R ti

Establishes a $5B temporary reinsurance program to reimburse l b d l f b fit id d t ti 55 64Retirees employer-based plans for benefits provided to retirees ages 55-64

from 2010-2014

Reimbursement provided for 80% of the cost of benefits per enrollee in excess of $15 000 and below $90 000in excess of $15,000 and below $90,000

Could provide funding to offset spending on high-cost retirees

Limit on available funds means companies that apply early will receive p pp y ygreatest benefit


44

Employers Are Eligible To Receive a Tax Subsidy for Providing Prescription Drug Coverage to Retirees

> Under the retiree drug subsidy (RDS), the federal government subsidizes the provision of drug benefits by employers who offer coverage that meets a minimum standard.

> RDS is a tax-free Medicare payment to employer-sponsored plans worth 28 percent of allowable drug costs between $310 and $6,300 .

A li t h d ti t ll d i P t D i 2010• Applies to each covered retiree not enrolled in Part D in 2010

www.TheNationalCouncil.org Source: CMS cost threshold and cost limit announcement: http://rds.cms.hhs.gov/news/announcements/costthreshold11.htm

45

Health Reform Could Reduce the Attractiveness of the RDS

Several reform provisions could further reduce the attractiveness of the RDS

» Coverage of drugs in the coverage gap

• Makes PDP coverage more attractive• Makes PDP coverage more attractive

» Elimination of the tax deduction for the RDS

» Legislation does not enrich RDS payments to balance out these changes

New environment could encourage some employers to drop retiree coverage and lead retirees to obtain coverage through a conventional Part D plan


46

Companies Claim RDS Changes Will Increase Costs

A number of large employers have stated that the elimination of the taxA number of large employers have stated that the elimination of the tax deduction for the RDS will lead to reduced earnings

> Although the RDS change does not take effect until 2013, accounting standards require that a deferred income tax asset be written down in thestandards require that a deferred income tax asset be written down in the period legislation changing the tax law is enacted

The American Benefits Council, the trade group that represents employer-sponsored health plans is calling for Congress to “fix” this provisionsponsored health plans, is calling for Congress to fix this provision

www.TheNationalCouncil.orgSources: “Boeing will take $150M charge due to health reform” Business Insurance, March 31, 2010 accessed at :

http://www.businessinsurance.com/apps/pbcs.dll/article?AID=2010100339982“American Benefits Council Vows To Fight For Repeal Of Part D Subsidy Provision In Reform Law” Inside Health Policy, March 29, 2010 accessed at:

http://insidehealthpolicy.com/secure/health_docnum.asp?f=health_2001.ask&docnum=3292010_council&DOCID=3292010_council47

Implications


48

New Environment Could Lead Some Employers to Drop Retiree Coverage, Increasing Part D Enrollment

> Under the retiree drug subsidy (RDS) the federal government subsidizes the provision> Under the retiree drug subsidy (RDS), the federal government subsidizes the provision of drug benefits by employers who offer coverage that meets a minimum standard

• Applies to each covered retiree not enrolled in Part D

> Several reform provisions could further reduce the attractiveness of the RDS> Several reform provisions could further reduce the attractiveness of the RDS

• Closing the Part D coverage gap

• Elimination of the tax deduction for the RDS

> These changes could encourage some employers to drop retiree coverage and require retirees to obtain coverage through a conventional Part D plan

> A number of large employers have stated that the elimination of the tax deduction for the RDS will lead to reduced earnings

Increased CMS scrutiny of plans and regulatory oversight may lead to additional market disruption. Specifically, the meaningful differences policy will require some sponsors to eliminate plans.


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As Employers Grapple with Implementation, Industry Stakeholders Recognize the Need for Payment Reform

Aetna CEO Ron Williams on payment reform: “To be certain, the system’s lack of focus on value is easy to see. Today’s health care payment structure rewards the volume, rather than the quality or efficacy, of services

provided – a problem that results in pervasive overuse and misuse of health care resources….Aetna’s efforts to extract greater value for each health care dollar spent for our customers are instructive, and can help shape

our discussion about controlling costs and improving access.”

Former CEO Pacific Business Group on Health, Peter Lee, on payment reform: “Our health care system pays providers for the number of treatments and procedures they provide and pays more for using expensive technology or surgical interventions. It is neither designed to reward better quality, care coordination or gy g g q y,

prevention nor to encourage patients to get the right care at the right time.”

National Partnership for Women and Families President Debra Ness: “Delivery system reform is critical to getting us to where we want to go, which is creating a quality-based affordable health care system for everyone

but we can't get there without transformational changes ”-- but we can't get there without transformational changes.”


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ACA Attempts to Address Employers’ Concerns About Systemic Problems that Drive Cost Growth

Care Delivery

Transparency HIT

Systemvize

s Su

Measurement Evidence (e.g. CER)

System Infrastructure

Ince

ntiv pports

Payment Methods


Payment Methods

HIT: Health Information Technology CER: Comparative Effectiveness Research

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ACA E i t ith C D li d P t S tACA Experiments with Care Delivery and Payment System Models and Lays Groundwork for Future Exploration

Demo / Pilots Requires Secretary to establish a Medicare Shared Saving (i e ACO) programDemo / Pilots Requires Secretary to establish a Medicare Shared Saving (i.e., ACO) programGrants funds to implement multidisciplinary “Health Teams” to support implementation of the PCMH modelDirects Secretary to establish a pilot program for bundling payments for post-acute care and establishes a Medicaid bundled payment demonstrationEstablishes a series of chronic disease management programs

New Entities / Structures

Creates new Center for Medicare and Medicaid Innovation (CMI)Establishes an Independent Payment Advisory Board

New Initiatives/ Authorities

Requires the President to convene an Interagency Working Group on HealthDirects the Secretary to award grants to entities that offer medication therapy management (MTM) services by licensed pharmacistsmanagement (MTM) services by licensed pharmacists

Expansion of Existing Entities / Authorities

Increases MTM requirements for Medicare plansExpands value-based purchasing program across multiple settings

www.TheNationalCouncil.org ACO: Accountable Care OrganizationPCMH: Patient Centered Medical HomeMTM: Medication Therapy Management

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Employer Plans Face Additional Pressures to Limit Premium Growth and Generosity of Coverage

Plans will need to reduce premiums in 2018 to avoid the “Cadillac tax”Plans will need to reduce premiums in 2018 to avoid the Cadillac tax» ACA imposes a tax equal to 40% of the plan’s value that exceeds $10,200 for an

individual and $27,000 for a couple

Likely erosion of high-value high-premium plans due to the taxLikely erosion of high value, high premium plans due to the tax

25,000

Sample Impact of Cadillac Tax on Premium Trend for High-Cost Plans

10,000

15,000

20,000

Prem

ium

($

)

High-Value Plan Pre-Reform

High-Value Plan Post

0

5,000

10,000

2010 2012 2014 2016 2018 2020 2022 2024

P

Cadillac tax level is $10,200 for individuals in 2018

Plan Post-Reform (grows at CPI+1%)

www.TheNationalCouncil.orgSample premium trajectory based on a hypothetical plan with a $7,000 individual premium in 2010. Plan premium

inflated based on average medical inflation (CPI-M) for 2000-2009. Post-reform scenario shows plan with premium of $10,200 for an individual growing at inflation (CPI) plus 1%, based on average CPI for 2000 to 2009.

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Will Employers Drop Coverage?> Nearly 60% of Americans obtain coverage through an employer> Various incentives in legislation aim to prevent “crowd out”Various incentives in legislation aim to prevent crowd out

• Tax credits for small business• Penalties for large business

> Some large companies have reported that the law will “adversely affect” their ability to provide employee health benefits due to increased costs

> Expected trends from employer coverage:• Plus 6 - 7 million people due to individual mandate• Minus 8 - 9 million other people who would lose offer of ESI• Minus 8 - 9 million other people who would lose offer of ESI• Minus 1 - 2 million people who would get coverage through the exchanges

The Massachusetts Experience:The Massachusetts Experience: Despite concerns of “crowd out”, the state has not experienced a drop in employer coverage post-reform.

Employer offer rates have increased since implementation. From 2007 to 2009, employer offer rates increased from 72 percent to 76 percent, while the national employer offer rate remained steady at 60 percent.

www.TheNationalCouncil.org CBO March 20, 2010 Cost Estimate of the combined effect of H.R. 4872, the Reconciliation Act of 2010, and H.R. 3590, the Patient Protection and Affordable Care Act, as passed by the House March 21, 2010.

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Recent Study Suggests Employer Coverage Will Expand> Number of workers offered coverage will

increase from 115 1 million to 128 7 All Firmsincrease from 115.1 million to 128.7 million ( from 84.6% to 94.6% of US workers).

> The probability of being offered coverage increases proportionately

94.8

90.2

87.5 5.9

Total Workers

Workers offered Coverage, before Reform

Workers Offered Coverage, after Reform

coverage increases proportionately for workers at small firms

> Of the 13.6 million workers newly offered coverage, only 3.2 million will be employed by firms that would be subject to employer penalties

41.2

24.9

10 25.4

Total Workers



Firm Size, ≤ 50

subject to employer penalties

> If large employers are allowed to participate in exchanges, both current and new insurance offerers will probably 115.1

97.5 31.2



Firm Size, > 50

do so 136

0 20 40 60 80 100 120 140 160

Total Workers

Total Traditional ExchangesMillions of Workers

www.TheNationalCouncil.org 55Source: The New England Journal of Medicine, “The Effects of the Affordable Care Act on Workers'’ Health Insurance

Coverage,” September 20, 2010. Spotlights data from RAND;s Comprehensive Assessment Reform Efforts (COMPARE) microsimulation model.

Opportunities and ThreatsOpportunities and Threats

For EmployersFor Employers


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Fully-Insured Employer Health Plans

Opportunities Threats

Paying the penalty may be more cost-effective than complying with mandate

Insurance market reforms and new taxes may have downstream impact as health insurers may pass these costs on to employers in theEmployees cannot be denied coverage in non-

employer health plans due to health status

Option to purchase healthcare coverage for employees in Exchanges (for certain

l )

may pass these costs on to employers in the form of higher premiums

Cost of maintaining grandfathered status may be too high

E l f lti f t idiemployers)

Essential benefit requirements likely to enhance access for employees

Avoid MLR and other requirements by

Employers face penalties for not providing coverage

Larger employers must auto-enroll employees, potentially increasing operational burdenq y

becoming self-insured


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Self-Funded Employer Health Plans

Opportunities Threats

Accepting employer mandate penalty may be more cost-effective than complying with mandate

Like fully-insured employers, self-insured employers face penalties for not providing coverage

MLR exemption and avoidance of insurance industry fee provides financial advantage to self-funded plans

Self funded plans also have greater autonomy

g

Self-insured plans must auto-enroll employees, potentially increasing operational burden

Cadillac tax will place de facto limits on coverage for generous self insured employerSelf-funded plans also have greater autonomy

in designing benefits and implementing innovative payment and delivery reforms

coverage for generous self-insured employer plans


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Conclusion> It’s clear that there will be some new direct costs for employers due to health reform> There will also be new opportunities to help employers offer coverage and offset costs> However, much of the impact is unknown at this point

• Definition of grandfathered plans is unclear• Impact of broader insurance reform and benefit design requirements on premiums• Impact of broader insurance reform and benefit design requirements on premiums

and employer offerings• Will penalties be enough to prevent employers from dropping coverage?

> Can payment and delivery reforms help employers and other private payers control underlying healthcare costs?


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20100922 nccbh avalere employer webinar final

Economy & Finance

Transcript of 20100922 nccbh avalere employer webinar final