Emily EhrsteinMarch 20, 2012

STATE OF THE HEALTH INSURANCE INDUSTRY

State Of…Uncertainty

• How does healthcare reform affect me?• What’s this I hear about

grandfathered plans? What does this really mean?• How is healthcare reform

going to affect the employee benefits provided by my employer?• I have pre-existing

conditions. How will healthcare reform affect me?

• How will healthcare reform affect our industry?• Are our plans grandfathered? If

so, how does this limit our ability to make product/benefit changes?• How will the Medical Loss Ratio

requirements affect our products?• How will our profitability change

in a guaranteed issue market?• Are there any new product

opportunities that will result due to healthcare reform?

Consumers Insurance Companies

Agenda• Health Care Reform

• Opening Discussion

• Short Video

• What is it?

• Need for Reform

• Key Provisions of the Affordable Care Act

• Important Implications

• What’s Coming Next?

Poll:• As you may know, a health reform bill was signed into law in 2010. Given

what you know about the health reform law, do you have a generally favorable or generally unfavorable opinion of it?

43%

15%

42%40

44

41

35

45

40

44

40 41

5048

46

4144

4643 44 43

51

44 43 44

14 1410

1412 11

1518 18

9 8

13

1814

1215

17 16 1519

1719

46

41

4850

43

49

42

42 42

4143 42 41 42 42 42

3941

3437

4137

0%

20%

40%

60%

80%

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Public Remains Largely Split On ACA

ACA signed into law on March

23, 2010

Source: Kaiser Family Foundation Health Tracking Polls

20

10

20

11

20

12

Don’t know/Refused

Unfavorable

Favorable

• As you may know, a health reform bill was signed into law in 2010. Given what you know about the health reform law, do you have a generally favorable or generally unfavorable opinion of it?

Quiz Time—What Do You Know About Healthcare Reform?

Movie Time!• : http://healthreform.kff.org/the-animation.aspx

Health Care Reform: What Is It?• Affordable Care Act (ACA)

• Aims to improve the current health care system in the US by increasing access to health coverage for Americans and introducing new protections for people who have health insurance

• Puts into place the framework for reform of the deliverance and financing of health care

• Applies to typical comprehensive medical care (HMO’s, PPO’s, etc.)

• Two Pieces of Legislation• Patient Protection and Affordable Care Act (PPACA): March 23, 2010• Health Care and Education Reconciliation Act of 2010: March 30, 2010

• Amended Some PPACA Provisions

• Trivia Question 1

Why the ACA?• As stated on healthreform.gov, the legislation will:

• Rein in the worst excesses and abuses of the insurance industry with some of the toughest consumer protections this country has ever known.

• Hold insurance companies accountable to keep premiums down and prevent denials of care and coverage, including for pre-existing conditions.

• Make health insurance affordable for middle class families and small businesses with one of largest tax cuts for health care in history – reducing premiums and out-of-pocket costs.

• Provide the security of knowing that if you lose your job, change your job, or start that new business, you’ll always be able to purchase quality, affordable care in a new competitive health insurance market that keeps costs down.

• Strengthen Medicare benefits with lower prescription drug costs for those in the ‘donut hole,’ chronic care, free preventive care, and nearly a decade more of solvency for Medicare.

• Improve our nation’s fiscal health by reducing our deficit by more than $100 billion over the next decade, and more than $1 trillion in the decade after that.

Source: http://www.healthreform.gov/about/index.html

Pre-Reform Markets• Individual Market• Small Non-Elderly

Population with Private Coverage• Voluntary Coverage• Health Status Underwriting

(most states)• Premium Differences by

Age

• Small Group Market• No Requirement to Offer

Coverage• Guaranteed Issue• Premium Variations

(group experience, average age, geographic location, industry, et.)

Need For Reform• US Health Costs Too High• Quality of Healthcare Too Low• Access to Healthcare Insufficient (Especially for Uninsured)

ACA: Key Provisions (not an exhaustive list)

• Elimination of Lifetime Limits (all plans)• Extension of Dependent

Coverage to Age 26 (all plans)• Prohibits Pre-Existing Condition

Exclusions For Kids• Guaranteed Issue• Allowable Rating Factors:

• Age (limits imposed)

• Geography

• Family Size

• Tobacco (limits)

• Short Video: http://www.youtube.com/watch?v=4wlSZKIdaTk&feature=BFa&list=PL31A2EF2179B97E26&lf=plpp_video

• Individual Mandate• Premium/Cost-Sharing

Subsidies for Individuals• Premium Review Process• Medical Loss Ratio Reporting

& Rebate Requirements• Creation of Health Insurance

Exchanges• CLASS Act

Grandfathered Plans• Plans in place or purchased on or before when PPACA was signed into law.• Exempt from some aspects of ACA• Can lose status if certain changes are made

• Financial Penalty for Those Without Coverage• Penalty Phased In:

• 2014: $95/person or 1% of family income• 2015: $325/person or 2%

of family income• 2016+: $695/person (&

indexed) or 2.5% of family income

• Currently Before the Supreme Court• Important due to guaranteed

issue & community rating

• Premium Subsidies Offered up to 400% of Federal Poverty Level• Trivia Question 2

• Cost-Sharing Subsidies up to 250% of Federal Poverty Level• Short Video: http://

www.youtube.com/watch?v=WHwoVvxsAZ0&feature=BFa&list=PL31A2EF2179B97E26&lf=plpp_video

Individual MandatePremium Subsidies/Cost-Sharing

Premium Review Process• Annual Review of “Unreasonable” Rate Increases by Health & Human Services (HHS)

• Not Applicable to Grandfathered Plans

• 2011 Threshold: 10%

• “Unreasonable” if Excessive, Unjustified, or Unfairly Discriminatory

• HHS Does Not Have Rate Approval Authority

• States With an “Effective Rate Review Program” Will Still Retain Authority to Review Rate Changes

• 6 States Do Not Have an “Effective Rate Review Program”

Medical Loss Ratio Requirements• If Medical Loss Ratio is Below Threshold, Then Rebates Must be Paid• Threshold

• 80%: Individual & Small Group

• 85%: Large Group

• States Were Able to Apply for Downward Adjustment on Ind. Threshold

• 18 States Applied (10 Denied, 6 Modified, 2 Pending)

• Includes Grandfathered Plans

Health Insurance Exchanges (HIX)• PPACA Requires the Establishment of Public HIX in All States by 2014•Will Allow Individuals to:

• Compare Health Plans

• Get Answers to Questions

• Determine Insurance Tax Credit Eligibility

• Determine Eligibility for Public Health Plans (ex. Medicaid, CHIP)

• Enroll in a Health Plan that Meets Their Needs

• State Are Currently Working to Establish These Exchanges• Short Video: http://www.youtube.com/watch?v=sCustemxpIE&feature=BFa&list=PL31A2EF2179B97E26&lf=plpp_video

CLASS Act• CLASS: Community Living Assistance Services & Support• Government Run Long-Term Care Program• Financed Through Voluntary Payroll Deductions• No Underwriting• Funding withheld and program “on hold” due to concerns with severe adverse selection• Actuarially Unsustainable

Expansion of Medicaid Program• Short Video: http://www.youtube.com/watch?v=D31Xr_1Scxg&list=PL31A2EF2179B97E26&index=4&feature=plpp_video

NAIC Video• http://www.youtube.com/watch?v=gZfuHkT9m-g

Important Implications• Size vs Health Status of Insured Lives•Will the Mandate Be Effective?•Winners vs Losers

What’s Coming Next?• Opportunities Stemming from Health Care Reform

• Potential shift from Defined Benefit to Defined Contribution Health Plans for Employees

• Increased Demand for Supplemental Health Products

• Potential Growth of Health Savings Accounts

Questions?