SHOP Advisory Group October 25, 2012 11/5 Agenda Welcome & - - PowerPoint PPT Presentation

SHOP Advisory Group

October 25, 2012

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11/5 Agenda

Welcome & Introductions 5 min Overview of other Advisory Groups 10 min Discussion – Rating Issues, Participation, Contributions 70 min Wrap-up 5 min

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Review of Contribution, Participation & Rating Requirements

Existing Contribution and Participation Requirements

• Carriers require minimum employer contributions and minimum

employee participation to minimize adverse selection.

• Federal guidelines state minimum participation in SHOP must apply

to the group, not the carrier.

• Colorado market today

 Minimum contribution – 50% of premiums or $125/month  Minimum participation – 70% to 75%

Existing Rating Requirements

• Carriers can set a uniform size over which employers can be

composite rated

• An employer can always choose age rating
• The market standard today is that employers over 10 or more

employees may be composite rated **See Appendix for additional background

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Previous Recommendations

Previous Recommendations July 9th Board

Contribution Requirements

• The Exchange should choose a contribution requirement in line with the
• utside market

Participation Rates

• The Exchange should set a participation rate in line with the outside

market

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Defined Contribution and Participation Requirements: What other States are Doing

State Minimum Contribution Minimum Participation CA

Exchange staff recommended to its Board contribution levels consistent with current market underwriting rules Exchange staff recommended to its Board participation levels consistent with current market underwriting rules

CT (CBIA)

ERs must make a contribution towards their EEs’ premiums that at least equals half of the lowest premium that an EE can pay each month from the suite of health plans selected by the ER. At least 75% of the ER’s eligible EEs must participate, unless the ER contributes 100% of the EEs’ premium, in which case 100% of the EEs’ are enrolling in the program.

MA

The Connector requires that ERs select a reference plan and agree to pay at least 50%

• f its premium, and EEs are then allowed to

pick alternative insurers or plans only with the same benefit tier.

• For all ERs, at least one FTE must enroll on the effective

date of coverage.

• For an ER with 1-5 FTEs, 100% of eligibles must enroll in

an applicable Commonwealth Choice Health Plan on the effective date of coverage.

• For an ER with 6-50 FTEs, 75% of eligibles must enroll in

an applicable Commonwealth Choice Health Plan on the effective date of coverage.

UT

ERs choose the level of contribution they make Requires that at least 75% of EEs of a participating ER must join a plan

WA

Exchange staff recommended to its SHOP Technical Advisory Committee a minimum ER contribution of 75% for employee coverage

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Definitions

• 1. Age-based Rating – the process of rating health plans in 5 year age

brackets (20-24, 25-29, 30-34, etc.)

• 2. Composite Rating – the process of compiling rates into a single rate

based on the “composite” (not the average) of all individual rates in the group

• 3. Reference Plan – the selection of a single plan as part of a multi-plan
• ffering, on which an employer will base their contribution. Employees

are then able to elect other plans by electing to pay any premium differential.

• 4. Defined Contribution – the practice of an employer setting their

contribution level at a set dollar amount per employee.

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COHBE Rating vs. Contribution

• COHBE is planning to use age rating for all

groups (e.g., not composite rating)

• COHBE is planning to provide tools for

developing contribution amounts for employers

• Potential options for employers:
• % of premium
• Flat dollar amount
• Composite rate equivalent
• Reference plan
• Other employer-driven models

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Defined Contribution

The concept of Defined Contribution has received lots of attention in recent months…

• Allows employer to set a fixed budget for health plan expenses
• Frees the employer from plan selection responsibilities
• Gives employees a greater sense of control over their benefits

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Defined Contribution

Possible DC Challenges:

• Need for employer to revise contribution as rates rise
• Resistance from older employees
• Adjustment from composite to age-based rates

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Concerns Raised by Employers/Employees

• Today, most employers with 10 or more employees

use composite rating.

• It’s convenient for employers and employees.
• They don’t want to lose that convenience.
• Older employees negatively impacted by age

based rating.

• Need options to mitigate this impact (e.g.,

participation requirements).

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• Small firm – 10 employees

 3 employees, 20 – 24 years old  4 employees, 40 – 49  3 employees, 60 – 64

• As a group, $ 2,600 monthly premiums, $260

employee average

• Within each age band, a different story . . .

Composite Rating Example

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Composite Rating Example

Detail

Source – Barry Barack

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• Small firm – 12 employees

 4 employees, 25 years old  4 employees, 40 “  4 employees, 60 “

• As a group, $ 4,800 monthly premiums,

$400/employee average

• A reference plan allows employees to select a

plan that best suits them, while limiting risk for both the employer and the carrier;

Reference Plan Offers a Potential Solution

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Reference Plan Example

A small employer offering 3 plans can present significant risk to carriers if employees within a similar age band select the same plan.

age # premium ER EE premium ER EE premium ER EE

25 4 $ 400 $ 200 $ 200 $ 200 $ 200 — $200 — $ 200 40 4 400 200 200 400 200 200 400 200 200 60 4 400 200 200 600 200 400 600 400 200 Total 12 $ 4,800 $ 2,400 $ 2,400 $ 4,800 $ 2,400 $ 2,400 $ 4,800 $ 2,400 $ 2,400

Composite Rating Age-Based Rating Reference Plan

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Reference Plan Example

• ne member “buys up”

age # premium ER EE premium ER EE premium ER EE

25 4 $ 400 $ 200 $ 200 $ 200 $ 200 — $ 200 — $ 200 40 4 400 200 200 400 200 200 400 200 200 60 4 400 200 200 600 200 400 600 400 200 Total 12 $ 4,800 $ 2,400 $ 2,400 $ 4,800 $ 2,400 $ 2,400 $ 4,800 $ 2,400 $ 2,400

Composite Rating Age-Based Rating Reference Plan

“buy-up” impact $ 300 $ 0 $ 300 New Totals $ 5,100 $ 2,400 $ 2,700

A member in the 60 year age group elects to “buy-up” into a plan with a $900 premium ($300 increase). With the reference plan model, the employer (nor the carrier) bears no additional risk—the employee pays 100% of the extra cost.

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Reference Plan Example Part. 2: What Happens if an Employee Buys Up

age

premium

ER EE

premium

ER EE

premium

ER EE 25 $ 400 $ 200 $ 200 $ 200 $ 200 — $ 200 — $ 200 25 $ 400 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 25 $ 400 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 25 $ 400 $ 200 $ 200 $ 200 $ 200 $ 200 $ 200 40 $ 400 $ 200 $ 200 $400 $ 200 $ 200 $ 400 $ 200 $ 200 40 $ 400 $ 200 $ 200 $400 $ 200 $ 200 $ 400 $ 200 $ 200 40 $ 400 $ 200 $ 200 $400 $ 200 $ 200 $ 400 $ 200 $ 200 40 $ 400 $ 200 $ 200 $ 400 $ 200 $ 200 $ 400 $ 200 $ 200 60 $ 400 $ 200 $ 200 $ 600 $ 200 $ 400 $ 600 $ 400 $ 200 60 $ 400 $ 200 $ 200 $ 600 $ 200 $ 400 $ 600 $ 400 $ 200 60 $ 400 $ 200 $ 200 $ 600 $ 200 $ 400 $ 600 $ 400 $ 200 60 $ 400 $ 200 $200 $ 600 $ 200 $ 400 $ 900 $ 400 $ 500 Total $ 4,800 $ 2,400 $ 2,400 $ 4,800 $ 2,400 $ 2,400 $ 5,100 $ 2,400 $ 2,700

Composite Rating Age-Based Rating Reference Plan

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COHBE and Reference Plans

• COHBE is exploring ways to illustrate reference

plans within the constraints of our system.

• Broker tools are being created to assist employers in

exploring their contribution options.

• Tools for employees are being created to assist them

in understanding their options and selecting the best plan/contribution combinations.

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Appendix: Employer Contribution and Participation Rules

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Contributions & Participation

• Should COHBE require a minimum contribution level

for employers or mirror the outside market? July 9th 2012: COHBE recommended to Board adopting contribution requirements that are in line with the outside market. July 9th 2012: COHBE recommended to Board adopting participation requirements that are in line with the outside market.

• Should COHBE require a minimum participation level

for employers or mirror the outside market?

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Colorado

Colorado law does not require a minimum employer contribution towards employees’ premiums, but it does allow the carrier of a small employer insurance plan to mandate a certain contribution. CRS 10-16-105(7.4) requires that minimum participation and minimum employer contributions be applied uniformly among all small employers with the same number of eligible employees applying for or receiving coverage from the carrier. A carrier may vary the minimum participation and contribution rates by the size of a small employer group and by product, but cannot increase the participation or contribution rate after the employer has been accepted for coverage.

Federal

The final Exchange Rule holds that the SHOP must collect the employer contributions and deliver them to the issuers of the health plan(s). The final Exchange Rule also holds that the SHOP must provide qualified employers with at least 30 days before the plan year ends in which they “may change its participation in the SHOP for the next plan year.” Employers may change their contributions level of coverage they offer (along with the QHPs they offer, and/or the method by which they make available QHPs for employees, as discussed earlier in this report). Additionally, under the Age Discrimination in Employment Act, the percentage of the total premium cost paid by employees who are at least 40 years old may not exceed that paid by employees under age 40. (This law applies only to employers with at least 20 employees.)

Employer Minimum Contribution

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Colorado Colorado state law does not require any minimum participation rate in the small group market. Some carriers impose participation rates as high as 60 or 75 percent. However, Ins. Reg. 4-6-8 caps the participation rate a carrier can require at 75 percent of eligible

• employees. The participation rate required of an employer may

vary with employer size underneath the 75 percent cap in the small group market. Federal 45 CFR Section 155.705(b)(6)(ii) allows states to specify a minimum employee participation rate for participation in the SHOP and not on the rate of employee participation in any particular QHP or QHPs of any particular issuer.

Minimum Participation