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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
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Audience Poll Question #2
• Do you currently offer your retirees company-sponsored health insurance?health insurance?a) Yesb) No
www.TheNationalCouncil.org 4
Audience Poll Question #3
• 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
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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
www.TheNationalCouncil.org 6
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.
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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.
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C t St t f E lCurrent Status of Employer Healthcare Coverage
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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.
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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.
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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
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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
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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
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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
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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
www.TheNationalCouncil.org
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
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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
www.TheNationalCouncil.org
34
Self-Funded Employer Plans Restricted from Participation in Exchanges
ProvisionEmployer Plans
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
ProvisionEmployer Plans
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
ProvisionEmployer Plans
Fully-Insured1-100
Fully-Insured100+ Self-funded
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
ProvisionEmployer Plans
Fully-Insured1-100
Fully-Insured100+ Self-funded
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.
www.TheNationalCouncil.org
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
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39
Both Fully-Insured and Self-Funded Employer Plans Subject to Excise, or “Cadillac,” Tax in 2018
ProvisionEmployer Plans
Fully-Insured1-100
Fully-Insured100+ Self-funded
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
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org 42
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
www.TheNationalCouncil.org
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
www.TheNationalCouncil.org
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
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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
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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
Workers offered Coverage, before Reform
Workers Offered Coverage, after Reform
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
Workers offered Coverage, before Reform
Workers Offered Coverage, after Reform
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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