Re-imagining Benefits Strategies in a Post-ACA World Brent A. - - PowerPoint PPT Presentation

Corporate Benefits Consulting Insurance Planning Services Retirement Plan Consulting

www.ipsadvisors.com

10000 North Central Expressway, Suite 1100 • Dallas, Texas 75231-2313 • (214) 443-2400 Toll-Free: (800) 366-4779

Where Experience and Independence Matter

Re-imagining Benefits Strategies in a Post-ACA World

Brent A. Weegar, MBA Principal – Contact bweegar@ipsadvisors.com, Phone: 214-443-2429 May 4, 2016

Our Company – IPS Advisors

• Established over 35 years ago, IPS Advisors is an independent fee based

brokerage and consulting firm. Our governmental division services over 40 municipalities, counties and State agencies across Texas with their health and welfare benefits planning needs.

• We provide specialized services through our core practice areas:

Corporate Benefits Consulting Long Term Strategic Planning Fully Insured and Self Insured Benefits Programs Health Risk Management Programs Compliance Assistance Benefits Administration Corporate Retirement Consulting 457 Plans Life Insurance Portfolio Management

Overview

Health Care Trends and Strategic Planning Emerging Strategies and Best Practices

• Pharmacy
• Employer Funding
• Health Care Delivery
• Health Improvement
• Engagement and Consumerism

ACA Trends and Updates

• Public Exchanges Trends
• Private Exchange Trends
• Updates

Questions

Health Care Cost Trends: 2001 ‐ 2016

• Although health care trends have reduced to historically low levels they continue

to outpace inflation. Plan design and contribution strategies have contributed significantly to the lower inflation rates.

• There are signs pointing to future escalation ahead including expected double digit

trend rates for pharmacy.

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Health Care Cost Trends – Per Capita Costs

• Total health care costs are expected to reach $12,041 per employee per

year in 2015, up 4.1% from $11,567 from 2014.

• Per Capita Health Care costs vary greatly by industry.

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Strategy Recalibration

Source: Towers Watson / NBGH ‐ The New Health Care Imperative Survey

• A widespread trend in healthcare strategy recalibration is underway across

the country due to rising employer costs, economic factors and the Patient Protection and Affordable Care Act.

Top 10 Strategic Focus Areas from Employers

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Emerging Strategies and Best Practices

• Multiple studies indicate that the emerging strategies and best practices in

the following areas will drive strategic direction over the next three years.

• Pharmacy
• Employer Funding
• Healthcare Delivery
• Health Improvement
• Engagement and Consumerism
• Employers who have implemented the most best practices show a

significant difference in per employee costs than those who have implemented the fewest. Both Mercer and Willis Towers Watson surveys have shown that cost varies from $700 to $2,000 per employee per year.

Pharmacy Benefit ‐ Trends

• According to Segal, health insurance carriers are projecting an 11.5% increases

to prescription drug trend for the 2016 plan year. This trend is largely attributable to the increased cost and use of specialty pharmacy.

• Today 37.7% of drug spend is attributable to specialty medications and is

expected to grow to 50% by 2018 (Express Scripts).

• There are 7,000 potential drugs in development, most aimed at high use

categories including Oncology, Neurologic Disorders and Infectious Diseases.

Specialty Drug Trends

Source: Express Scripts 2015 Drug Trend Report

Pharmacy ‐ Trends

• Brand drugs increased on average 16.2% in 2015 while generics decreased

‐16.2%.

• Except for a few outliers, payers remain confident that, on the whole,

generic medications continue to deliver significant cost savings.

Source: Express Scripts 2015 Drug Trend Report

Pharmacy Benefit Strategies

• Specialty Drug Strategies
• Cost sharing differentials
• Mandatory specialty pharmacies
• Step therapy
• High Performance Formularies
• Limited brand coverage
• Compound Drugs
• Pre‐certification
• 60% expected to exclude by 2018 (Towers Watson)
• Narrow Network
• Exclusion of High Cost Pharmacies
• Patient Adherence
• Human Intervention
• Cost Sharing
• Technology Enabled Devices
• Audits
• Claims and Pricing Validation
• On‐going Audits

Employer Funding Trends

• Employers continue to shoulder the load, contributing on average 77.8% of total

cost or $9,365 in 2015. This subsidy is expected to reduce 77.2% in 2016.

• Employee costs are expected to rise 7.7% in 2016 compared to average salary

increases of 3%.

• Since 1999, employer share has risen 30% while the employee share has risen 27%.

Willis Towers Watson Financial Benchmark Survey

$9,365 $2,676

2015 Total plan cost = $12,041

Employer Employee $9,761 $2,882

2016 Proj. Total plan cost = $12,643

Employer Employee

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Employer Funding Strategies

• Defined Contribution Approach
• Flat dollar subsidy regardless of plan chosen
• Spouse and Dependent Subsidy
• Decreasing Subsidies
• Spousal Surcharge
• 27% use Spousal Surcharges
• < 5% use Spousal Carve outs
• Expansion of Optional Benefits
• Dental
• Vision
• Worksite Benefits
• New Market Entrants
• Group Insurance
• Guarantee Issue
• Multiline Discounts
• Funding Assigned to Participation
• Annual Physical
• Tobacco Use

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Decreasing Subsidy to Spouses Decreasing Subsidy to Dependents Use of Spousal Surcharges Eliminate All Spousal Subsidy 56% 46% 27% 3% 81% 61% 56% 13% Implemented in 2015 Considering for 2018

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Health Care Delivery Trends

• Network and provider strategies have become a key focus areas due to ACA

limitations on cost sharing and +85% of plan costs are directly attributable to claims / provider network.

• Where highly discounted and broad PPO networks were once king for

health care delivery, network strategy has shifted to focused health care delivery models where efficiency, quality and outcomes prevail.

• Providers and Hospital systems are introducing new healthcare delivery

models and are positioning both independently and in partnership with major health insurance carriers.

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Health Care Delivery – Focus and Trends

• High Performance Networks
• Narrow – Low Cost / High Quality
• Accountable Care Organizations
• Out of Network Coverage
• EPO Networks Emerging
• % of Medicare Reimbursement
• Telemedicine
• 24/7 Access to Primary Care
• Direct Contracting
• Primary Care
• Musculoskeletal
• Lab and Imaging
• Reference Based Pricing
• Imaging
• In‐patient / Outpatient
• Musculoskeletal / Cardiac / Bariatric

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% High Performance Networks Accountable Care Organizations Direct Contracting Telemedicine 37% 7% 5% 46% 62% 22% 25% 88% Implemented in 2015 Considering for 2018

Engagement and Consumerism Trends

• Employee engagement and consumerism is more important than ever as

employers shift greater responsibility to members for health care purchasing and navigation of the health care continuum.

• The adoption of Account Based Health plans reinforces the importance of

engagement as employers approach near universal use.

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

Engagement and Consumerism Strategies

• Account Based Health Plans
• Continue to be a Core strategy
• Gating strategies
• Pricing and Quality Transparency
• On‐line , Telephonic, and Mobile Access
• Medical, Pharmacy, Dental, Vision Services
• Employee Advocacy
• Benefit Questions
• Bill Audit and Negotiation
• Pre‐Enrollment Support
• Enhanced Care Coordination
• Comprehensive Precertification
• Decision Support
• Continuous Data Mining
• Health Coaching

Health Improvement Trends

• Workplace wellness continues to be identified as top strategic area as 84%
• f employers plan to increase support of these programs.
• Financial incentives tied to premium structures are improving participation

rates in key health management programs.

• Employers are slower to embrace outcomes based incentives as only 23%

reported use in 2014 up from 6% in 2011 (Mercer).

Health Improvement Strategies

• Incentives
• Combination of Rewards and Penalties
• Health, Well‐being and Engagement
• Refresh Annually
• Technology
• Wearable Devices
• Apps – Web Based
• Group / Peer to Peer Challenges
• Tobacco Surcharges
• Over 40% of Employers use today
• Average surcharge $600 Per Year
• Work/Life Balance
• Stress Management
• Financial Well‐Being
• Sleep Disorders
• Reporting
• Prospective vs. Retrospective
• Integration of other cost control efforts
• Focus on outcomes

24% 30% 39% 42% 69% 0% 10% 20% 30% 40% 50% 60% 70% 80% "Wearables" to track physical activity Health engagement mobile apps Sleep disorder programs Stress management Programs Financial well‐ being programs % of Employer Offering

Source: Willis Towers Watson / NBGH ‐ High Performance Insights

ACA Employer Mandate Impact

• For 2016, Employers with 50+ employees must follow employer mandate

standards or face financial penalties:

• Eligibility Standard – Coverage must be offered to employees averaging 30 hours per

week (safeguards apply)

• Affordability Standard – Employee‐only cost of coverage can not exceed 9.66% of

household income

• Minimum Essential Coverage – Plans must cover 60% of health care expenses
• The Kaiser Family Foundations 2015 Annual Survey of Employer Health

Benefits shows that over 96% of large employers (100+) have complied with the employer mandate.

• In a separate study completed by Towers Watson, 98% of employers have

no plans to exit employer provided coverage and direct members to the public exchanges.

Public Exchange Trends

• Since the ACA Public Exchanges were enacted in 2014, the country’s largest

insurers are reporting significant losses.

• Blue Cross Blue Shield of Texas lost almost $400 million on the exchange in the ACA’s first year or

$360 per member. The company remained in the exchange but dropped access to its PPO plans and will only offer HMO plans in 2016.

• Humana Inc. included in its 2015 results, $176 million in losses expected to incur on public exchange

plans in the 2016 plan year.

• United Health Group Inc. reported approximately $475 million of losses on public exchange plans

and booked $245 million of projected losses for 2016. UHC announced it will be pulling out of Public Exchanges and will only remain in a handful of States in 2017.

• Aetna reported a negative margin of 3% to 4% on ACA business in 2015.
• The average price increase under the Affordable Care Act for 2016 was 12.56%

nationally, which includes plan design changes (Robert Wood Johnson Foundation)

• Public Exchange enrollment has stalled. The CBO has slashed their 2016 estimates

from 21 million to 13 million for 2016 and projects public exchanges to peak at 16 million (original projection – 24 million).

• Nearly 8 out of 10 (79%) employers lack confidence in the public exchanges as a

viable alternative to employer sponsored programs over the next two years (Towers Watson).

Private Exchange Trends

• Although a deceleration in growth exists, it is estimated that current private exchange

enrollment was up 35% over the prior year to 8 million members and is expected to exceed public exchange enrollment by 2020.

• Growth has been fueled by mid‐size employers in defined between 100 and 2,500

employees.

• Employers are considering private exchanges as an option for employer based

coverage. 17% of employers believe they will provide a viable alternative for employer sponsored coverage for active employees in 2016 (Towers Watson).

Private Exchange Growth

Source: Accenture 2016 – Insight Driven Health

Cadillac Tax – What do you own?

Cadillac Tax of 2018 2020

• Permanent Tax to the Employer, under Code section 4980l, is applicable for

plan years beginning on and after January 1, 2020.adjusted each year.

• 2018 thresholds were initially set at $10,200 for employee‐only coverage;

$27,500 for family coverage.

• Higher thresholds of $11,850/$30,950 (individual/family) for pre‐65

retirees and individuals in high risk professions (e.g., firefighters, police, construction, mining, agriculture).

• Official regulations have not yet been issued

In early 2015, the IRS informally indicated that final regulations should be released by late 2016. The delay in the mandate will push guidance out further.

Cadillac Tax of 2018 2020

• Prior studies have shown that approximately 50% of employers expect to hit

the Cadillac Tax by 2018. Even more would be expected with the 2020 effective date delay.

• Both leading Republican and Democratic presidential candidates have

publically sponsored repeal of the Cadillac Tax.

• The Cadillac Tax was expected to provide approximately $91 billion of

funding to the ACA over the next decade. Candidates have indicated they would pursue funding elsewhere.

Additional Updates

• Health Industry Fee, Transitional Reinsurance Fee and Patient

Centered Outcomes Research Fee continue in 2016.

• The transitional reinsurance fee is discontinued in 2017 and fully

insured groups will receive a reprieve for the Health Industry fee in 2017.

• Reporting Requirement ‐ Section 6055 (Minimum Essential Coverage)

and 6056 (Offer of Coverage) are required to be filed in 2016 for 2015 plan year.

• Reporting to members was due March 31st
• Reporting to IRS is due May 31st or June 30th if filing electronically
• CMS released guidance last year confirming that no individual within a

family will be responsible for more than $6,850 of out of pocket costs. This applies to renewals on or after January 1, 2016.

Thank You! Questions?