Getting Ready for 2014: The Big Year for Healthcare Reform Anne - - PowerPoint PPT Presentation

Getting Ready for 2014: The Big Year for Healthcare Reform

Anne Arundel County SHRM

David Johnson jdjohnson@rcmd.com November 15, 2012

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Topics for Discussion

• 1. Recap of Supreme Court Decision on Affordable Care Act (ACA)
• 2. Overview of Changes Coming in 2014
• 3. Individual Mandate and Subsidies
• 4. Health Benefit Exchanges
• 5. Employer Pay or Play Provisions
• 6. Projecting Financial Impact of Pay or Play Provisions
• 7. Delivery System Changes including Accountable Care Organizations
• 8. Employer Readiness for 2014

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Recap of Supreme Court Decision

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Issues Supreme Court Agreed to Consider on ACA

• 1. Could the Court decide cases now or must it wait until 2015 after

first penalty (tax) is imposed?

• 2. Is the “individual mandate” constitutional?
• 3. If the individual mandate is unconstitutional, could it be “severed”

from the rest of the law, or must the entire law fall?

• 4. Is the expansion of Medicaid contained in the ACA constitutional?

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Summary of Court’s Decision

• 1. Individual mandate ruled constitutional in 5-4 decision
• 2. Severability question irrelevant and remainder of ACA allowed

to stand

• 3. Federal government cannot require states to expand Medicaid
• 4. Federal government cannot deny all Medicaid funds for a state that

refuses Medicaid expansion contained in ACA

• 5. Creates the possibility that some states will opt out of ACA Medicaid

expansion

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Medicaid Expansion Ruling’s Impact on Employers

• 1. ACA expands Medicaid to any individual with

income of < 138% of FPL

• 2. Federal government pays 100% of cost of new

Medicaid eligibles through 2016 reducing to 90% by 2020

• 3. Medicaid eligibility is based on where individual

lives, not where the employer is located

• 4. A number of states have already adopted expanded

eligibility

138% of FPL by Household Size 1 $15,028 2 $20,300 3 $25,571 4 $30,843 5 $36,115 6 $41,386

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Health Insurance Premium Payment Program (HIPP)

• 1. State can enroll Medicaid recipient in his or her employer plan under

HIPP

• 2. Medicaid expansion will result in more low income active employees

qualifying for Medicaid, increasing possibility that state will enroll those recipients in employer plans

• 3. Impact on employers will vary from state to state

a. Depending on how many low income employees the employer has and current participation rate b. Greatest possible impact = Employer with large number of low income employees eligible for insurance and low participation rate in states with expanded eligibility c. Least impact = Employer with few low income employees or in state with limited Medicaid eligibility

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Overview of Changes Coming in 2014

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Major Changes Coming in 2014

• 1. Individual health coverage mandate
• 2. Federal premium subsidies for low- and middle-income individuals
• 3. Health Benefit Exchanges and insurance market reforms
• 4. Employer “play or pay” penalties
• 5. Employer health coverage reporting
• 6. Automatic enrollment (implementation date unclear)
• 7. Various plan design changes
• Elimination of annual limits
• Cost-Sharing Limitations
• No waiting period > 90 days
• Wellness incentives increasing to 30%
• Coverage for clinical trials

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Individual Mandate and Subsidies

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Individual Mandate

– Beginning in 2014 individuals must have health insurance or pay an excise tax

• Qualified plans must be “minimum essential coverage” and could

be from a variety of sources: – Individual health insurance – Health plan offered by an employer – Medicare or Medicaid – Children’s Health Insurance Program (CHIP) – TRICARE or Veteran’s health plan

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Individual Mandate

– Annual excise tax = greater of:

• 2014: $95/adult, $47.50/child (max $285/family) or 1% of income
• 2015: $325/adult, $162.50/child (max $975/family) or 2% of income
• 2016 and later: $695/adult, $347.50/child (max $2,085/family) or

2.5% of income

• Tax is capped at the national average of the cost of a bronze level

health insurance plan, for the applicable family size

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Subsidies

– Subsidies (premium tax credits & cost sharing reductions) for individuals purchasing health insurance through an exchange

• Premium tax credit available to individuals with household income

up to 400% of Federal Poverty Level (FPL)

• No subsidy to individuals eligible for “affordable” employer coverage

– Affordable = » Employee’s required contribution for employee only coverage is less than 9.5% of household income

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Health Benefit Exchanges

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Exchange Overview from Healthcare.gov

– Affordable Insurance Exchanges are designed to make buying health coverage easier and more affordable. Starting in 2014, Exchanges will allow individuals and small businesses to compare health plans, get answers to questions, find out if they are eligible for tax credits for private insurance or health programs like the Children’s Health Insurance Program (CHIP), and enroll in a health plan that meets their needs. – An Exchange Can Help Individuals:

• Look for and compare private health plans
• Get answers to questions about health coverage options
• Find out if individuals are eligible for health programs or tax credits that

make coverage more affordable

• Enroll in a health plan

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Overview of Exchange Rules

• If state does not set up an exchange the federal government will operate

an exchange in that state

• Subsidies for low and middle income individuals purchasing individual

health insurance administered by the Exchange – Debate if subsidies will be provided through the federal exchange

• IRS has taken position that subsidies are available through federal

exchange

• Each state Exchange is also required to create a Small Business Health

Options Program (“SHOP”)

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Maryland Health Connection – Maryland’s Benefit Exchange

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Maryland Health Connection - History

• Maryland General Assembly gave initial approval to the Health Benefit

Exchange Act of 2012 on March 26, 2012

• The Exchange will allow individuals and small employers to compare rates,

benefits, and quality among plans to help find an insurance product that best suits their needs

• The Exchange will also be the entity that calculates and provides tax

credits to eligible small employers and advances tax credits for individuals below 400 percent of the federal poverty level

• Private insurers will compete in this open marketplace, with the goals of

creating an even playing field and providing transparent and accurate information

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Expected Enrollment Projections from the State of Maryland

• Enrollment through Maryland Health Connection is scheduled to begin in

October 2013, with insurance coverage beginning January 1, 2014

• As many as 150,000 individuals are expected to enroll in qualified health

plans (QHPs) during the first year, increasing to approximately 275,000 by 2020

• Medicaid enrollment is expected to increase by 101,000 in the first year,

growing to 187,275 by 2020

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Employer Pay or Play Provisions

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Employer Penalties (apply only to employers with 50+ FTE)

#1: ER coverage is “unaffordable”

• If employee contribution for single coverage exceeds 9.5% of

employee’s wages, the employer will be liable for a $250/month penalty for each employee that purchases subsidized individual health insurance through an exchange #2: ER fails to offer minimum essential coverage to all full time EEs

• ER will pay $166.67 per month times all full time employees

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Unaffordable Coverage Penalty

This penalty applies if the employer offers its FTEs (and their dependents) the

• pportunity to enroll in “Minimum Essential Coverage” under an eligible

employer-sponsored plan, and at least one FTE enrolls in health coverage purchased through a state exchange and a premium tax credit or cost sharing reduction is allowed or paid to the employee because the employer’s coverage is considered to be “unaffordable”.

1. Monthly Penalty: # FTEs (who receive premium tax credit or cost sharing reduction) x 1/12th of $3000. 2. However, the penalty is capped and will never be more than the penalty imposed

• n an employer that does not offer coverage.

3. Monthly Penalty: 1/12TH $2,000 X (FTE – 30).

Employer-provided coverage is deemed “unaffordable” if an employee’s contribution for the lowest cost, self-only coverage exceeds 9.5% of the employee’s income.

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No Coverage Penalty

This penalty is imposed if a covered employer fails to offer its FTEs and their dependents the opportunity to enroll in “Minimum Essential Coverage” and at least one of its FTEs enrolls in health coverage purchased through a state exchange with respect to which a premium tax credit or cost sharing reduction is allowed or paid to the employee.

• 1. Monthly Penalty: Employed FTEs during the month x 1/12th of $2000.
• 2. However, the number of FTEs is first reduced by 30.
• 3. Monthly Penalty: 1/12TH $2,000 X (FTE – 30).

In addition, for purpose of the penalty calculation, FTEs include only employees employed on average at least 30 hours per week and does not include any FTE equivalent employees. As a general rule, employees qualify for a premium subsidy or reduced cost sharing if they meet certain income requirements for assistance (generally, they must have household income between 133-400% of the Federal Poverty Level).

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Projecting Financial Impact of Pay or Play Provisions

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Key Employer Questions

• 1. If health reform were in full effect today what would be the impact on

my current plans?

• 2. What would happen if I changed my plan design or employer

contributions?

• 3. What would be my expected costs if I do not offer employer

sponsored health insurance to all my full time employees?

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Important Variables in Financial Projections

• 1. Impact will vary significantly from employer to employer based on

employee demographics, plan details and employer contributions

• 2. No “one size fits all” answer
• 3. Analysis will need to address four areas:
• Financial impact of newly eligible employees
• Risk of employer penalty due to unaffordable coverage
• Impact of employers’ plan of Medicaid expansion
• Different employer costs involved if employer does not provide benefits

to all fulltime employees (FTEs)

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Case Study One

500 employee company offers coverage to all FTEs

• Premium: Employee only =$550
• Employer contribution: Employee only = $300
• Employee contribution: Employee only = $250
• 25 employees qualify for subsidy & purchase coverage through

exchange (10 were on plan)

Component Calculation Result Employer Monthly Penalty $250 X 25 $6,250 Savings from employees leaving plan $300 x 10 ($3,000) Net monthly cost to employer $3,250

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Case Study Two

Firm with 180 full-time EEs who is considering dropping coverage

• 127 employees with household incomes < 400% FPL
• 3 employees will be Medicaid eligible
• $1200 Deductible, $2400 Max OOP
• Premium Single Coverage = $629
• Employer contribution = $512
• Employee contribution = $117
• Current Eligibility = 35 hours per week

Question: Employer decides to stop providing coverage to all employees; is the cost just the employer penalty?

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Case Study Two (continued)

Cost Impact of Not Offering Coverage to all FTEs Employer Penalty $ 300,000.00 Additional Compensation $ 706,605.21 Employer payroll tax on additional compensation $ 49,462.36 Tax impact of penalty not being tax deductible $ 30,000.60 Current Employer Cost Penalty Additional Compensation

$942,140 $1,056,074

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000

Current Plan Cost Penalty Additional Comp Payroll Tax Employer Tax

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Delivery System Changes

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Accountable Care Organizations – CMS Description

• Accountable Care Organizations (ACOs) are groups of doctors,

hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients

• Medicare offers several ACO programs:

1. Medicare Shared Savings Program — a program that helps a Medicare fee-for-service program providers become an ACO 2. Advance Payment Initiative — a supplementary incentive program for selected participants in the Shared Savings Program. 3. Pioneer ACO Model — a program designed for early adopters of coordinated care. CMS is no longer accepting applications.

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CMS ACO Participants as of April 1, 2012

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Illustrative ACO Movement in Maryland - GBMC

• “In order for GBMC to maintain its status as a provider of the highest

quality medical care to our community, in the context of an evolving national healthcare system, we must transform our philosophy and

• rganizational structure, and develop a model system for delivering

patient-centered care.

• “As part of GBMC Healthcare, the Greater Baltimore Health Alliance is

chartered to integrate the delivery of the full spectrum of clinical services through collaboration of employed and community-based physicians and the hospital with the goal of improving access for patients and providers, maximizing quality and reducing the cost of care”

• “We will… use the principles of an Accountable Care Organization to

assure that we focus on maximizing quality and removing waste from the system.”

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Additional Delivery System Changes Tied to ACA

• The CMS Innovation Center was created by ACA to test new models of

health care delivery and payment. The Center also offers technical support to providers to improve the coordination of care and share lessons learned and best practices throughout the health care system.

• ACA created the Prevention and Public Health Fund to address

emerging health threats and the persistent chronic disease rates. The Fund is intended to ensure a coordinated, comprehensive, sustainable, and accountable approach to improving health outcomes through the most effective prevention and public health programs. The Fund will invest $12.5 billion over the next ten years (FY2013-FY2022).

• In response to ACA, the State of MD has created a Health Care Delivery

Reform Subcommittee and launched Health Care Innovations in Maryland (www.dhmh.maryland.gov/innovations) to identify and share best practices in improving health care quality in the State.

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Quality Improvement Initiatives for Maryland Hospitals

• The Maryland Health Services Cost Review Commission (HSCRC),

which sets hospital rates for all payers, has created several key initiatives linking payment with quality

1. Quality Based Reimbursement (QBR) Initiative 2. Maryland Hospital Acquired Conditions (MHAC) Initiative 3. Admission-Readmission Revenue Hospital Payment Constraint Program 4. Total Patient Revenue Initiative

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Multi-Payor Patient Centered Medical Home Program (PCMH)

• Established during the 2010 legislative session, program is designed to improve

patient health and elevate the role of the primary care provider

• Program features two types of enhanced reimbursement

– Practices will receive a per patient per month (PPPM) payment for attributed patients to offset expenses associated with providing PCMH services – Practices will also be eligible to share in cost savings from reductions in emergency department and hospital utilization each year

• Aetna, CareFirst BlueCross BlueShield, CIGNA, United Healthcare and Coventry

are required to participate

• Program has accepted applications from primary care providers – family

practice, internal medicine, geriatric and pediatric physicians, and nurse practitioners – throughout the State

• Maryland Health Care Commission (MHCC) has worked with participating

providers to design outreach materials for engaging patients in the Program – Letter informs patient of their right to opt-out of Program

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CareFirst Patient-Centered Medical Home Program (PCMH)

• CareFirst’s PCMH program is designed to provide PCPs with a more complete

view of their patients' needs and services they receive from other providers

• Objective is to help PCPs better manage patients’ individual risks, keep them in

better health and produce better outcomes

• PCMH is entirely voluntary and providers who participate can earn

reimbursement increases of three types: – 12 percentage point increase added to current fee schedule – New fees for developing care plans for select patients with certain chronic or multiple conditions that put them at risk and for monitoring progress against those plans – Additional fee schedule increases (including an 80+ % increase) based on:

• providers’ engagement with their patients
• the quality of care delivered to their entire population of patients
• actual aggregate costs of care compared to expected costs

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Employer Readiness for 2014

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Findings from Deloitte Consulting July 2012 Employer Survey

• When asked “How well do you understand the health reform law and its

requirements for health insurance coverage for employees?” what percentage said they had a “excellent to good understanding”

– 58% of employers with 100-999 EEs

• 39% for employers with 50-100 EEs
• 73% for employers with 1,000-2,499 EEs

– 69% among finance companies

• 49% among manufacturing firms
• 46% among service firms

– 75% of executives responsible for managing health care benefits

• 50% of owners and CEOs
• 52% of CFOs
• 60% CHROs
• 30% Office managers or benefits administrators

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Findings from Deloitte Consulting July 2012 Employer Survey

• When asked “How familiar are you with the following elements of the

health reform law that relate to health insurance” respondents reported (where “not knowing” was based on response of < 8 on a 10 pt scale)

– 28% did NOT know ACA includes an individual mandate requiring most people to buy health insurance or pay a penalty – 34% did NOT know the law will include penalties for most employers who do not offer health benefits to their workers – 47% did NOT know ACA requires coverage of “essential benefits” by most employers offering coverage – 55% did NOT know the law will set up health insurance exchanges – 77% did NOT know ACA attempts to increase research-based information

• n the comparative effectiveness of different medical treatments

– 78% did NOT know ACA encourages creation of ACOs and medical homes – 80% did NOT know the law introduces bundled payments/episode-based payments for hospitals and physicians

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Findings from Deloitte Consulting July 2012 Employer Survey

• When asked “how well-prepared is your company to implement or

respond to the 2014 provisions of health reform law” (where “prepared” was based on response of 8, 9 or 10 on a 10 pt scale)

– 24% among employers with 50-100 EEs

• 32% among firms with 101-999 EEs
• 38% among employers with 1,000-2,499 EEs
• 39% among firms with 2,500 of more EEs

– 33% among finance companies

• 24% among manufacturing firms
• 25% among service firms
• 12% among retail firms

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For More Information

For More Details

• J. David Johnson, MBA

Employee Benefits Division Phone 410 583 5457 Toll Free 800 346 4075 jdjohnson@rcmd.com 555 Fairmount Avenue Baltimore, MD 21286 www.rcmd.com