Health Care Reform & Retirees. Conflict or Convergence?

Transcription

1 Health Care Reform & Retirees Conflict or Convergence?

2 Goals for Today Retiree-Only Plans Defined and Exemptions Impact of Health Reform on Retirees - Timeline California Health Benefit Exchange (HBEX) Early Retiree Challenges and Opportunities Medicare Exchange Close Questions 2

3 Retiree-Only Plan --Defined Less than two active employees participating Who is an active employee? Individuals on long-terms disability? Rehires? Dependents of retiree who are active employees? Independent contractors? Documentation must clearly indicate that the retiree plan is separate from the active plan Retiree plan must clearly operate as a separate plan Multiemployer plan and non-multiemployer plan are never one plan 3

4 Retiree-Only Plans -- Exemptions Retiree-only plans are exempt from Group Market Reform Requirements of Health Care Reform Prohibition on Annual and Lifetime Limits Preventive Health Services New claims and appeals rights Dependent coverage for children up to age 26 Coverage for services related to approved clinical trials Exemptions preserve postretirement benefit obligations and expense 4

5 ACA Selected Timeline Summary 2010 / : Early Retiree Reinsurance Program (ERRP) 2011: Retirees with an HSA - penalty tax increased to 20% OTC Drug Limits - retirees with an HRA or HSA Medicare Part D Premiums - impact highincome retirees Medicare Part B Premiums - frozen to 2019 Medicare ACOs Clinical Effectiveness Research Fee (pay in 2013) Closing the donut hole (Phased in over 10 years) MAPs: OOP maximums, phase out of Medicare overpayments and bonuses to MAPs with 3-star plus ratings HIPAA electronic transaction standards Increase medical deduction floor from 7.5% to 10% (later effective date for persons age 65 or older) Medicare Payroll Tax increase from 1.45% to 2.35% for high earners 3.8% Medicare Contribution Tax on unearned income of high earners 2014: Individual Mandate HBEX 2014 Individual and small employers (50 or less employees) 2016 small employers (100 or less employees) 2017 large employers Government Subsidy 2018: Cadillac Tax Free preventive care and yearly physical for Medicare retirees 5

6 Impact of Cadillac Tax Applies to employer-provided coverage only 40% Excise tax on carriers and self-insured plans for coverage provided in excess of $10,200/individual or $27,500/family Adjusted based on age and gender Add $1,650/individual and $3,450/family for early retirees Intended impact is to make higher-cost plans more expensive for carriers cost will be passed on 6

7 Changes to Medicare Advantage Plans Reduction in reimbursement rates Bring in line with fee-for-service costs of Medicare Bonuses for insurers with higher quality ratings Medical Loss Ratio (MLR) of 85% starting in 2014 Carriers must refund the difference to the U.S. Center for Medicare & Medicaid Services (CMS) Failure to meet MLR for 3 consecutive years means plan cannot accept new enrollees Result fewer Medicare Advantage Plans 7

8 Provider Payment Reform Most of the innovations in provider payments in the Affordable Care Act are within Medicare and Medicaid Greatest impact on retirees Movement away from fee-for-service Accountable Care Organizations (ACOs) Bundled Payments Value-Based Purchasing Hope is to lower costs while raising quality 8

9 Improved Access to Individual Market In 2014, individuals (including early retirees) can purchase coverage on the California Health Benefits Exchange (HBEX) No preexisting condition exclusions No medical underwriting Guaranteed issue Minimal age rating (3:1) three age bands for pricing meaning that the cost of coverage for the oldest age band cannot be more than three times the cost for the youngest age band (result: increased cost for younger individuals) 9

10 California Health Benefit Exchange (HBEX) 10

11 11

12 HBEX Independent public entity within California government First Year Open Enrollment - October 1, 2013 through February 28, 2014 for individuals and small employers Small Business Health Options Program (SHOP) tailored to small employers (less than 100 employees) Coverage begins January 1, 2014 By Law: Must be self-sustaining by January 1, 2015 No State money may be used to support HBEX 12

13 HBEX - Function Sets standards for insurance companies to qualify to their products on the Exchange = Qualified Health Plan (QHP) Negotiates and selects which companies can offer coverage on the Exchange Not all will Administrative powers eligibility, enrollment, call center, website, carrier interface, communications, etc. 13

14 HBEX Health Plans Plan Benefits Bronze: Covers 60% of the benefit costs Silver: Covers 70% of the benefit costs Gold: Covers 80% of the benefit costs Platinum: Covers 90% of the benefit costs Maximum Deductible: $2,000 single/$4,000 family Maximum Out-Of-Pocket Limits: $6,050 single/$12,100 family (estimated for 2014) 14

15 HBEX HBEX participant headcount is critical Drives down pricing Fees per head sustain funding HBEX could become a Regional Exchange (multistate) HBEX competitors Collective Bargaining may impact HBEX coverage HBEX coverage may impact collective bargaining Strategic Planning plan at least two plan years ahead 15

16 HBEX Managing the Cost of Coverage Financing Fees on insurance companies who sell QHPs on HBEX Risk Management Loss mitigation strategies Loss prevention strategies Competition within HBEX U. S. Office of Personnel Management (OPM) to negotiate two plans to compete with insurance carrier HBEX plans 16

17 HBEX Loss Mitigation Strategies Reinsurance Fund: Issuers and every Third Party Administrator will contribute to a fund to ensure that no one carrier is significantly impacted by enrolling high cost individuals Risk Adjustment: Transfers funds from issuers with lowest risk populations to issuers that attract high risk populations Risk Corridors: Limits issuer losses and gains within HBEX. Protects against inaccurate rate setting 17

18 HBEX Loss Prevention Strategies Proposed California legislation to impose limitations on availability and use of stop-loss insurance by small employers. Places road block on small employers who wish to become self-insured. Goal is to maintain a stable HBEX population Proposed California rating rules imposed on all insurance sold within the state (whether or not sold within HBEX) regardless of experience Ensures equal cost of coverage for all individual and small employer insured plans within California to eliminate adverse selection 18

19 HBEX Federal Competitive Pricing Strategy The California Exchange (Qualified Health Plans) (Administration) (Eligibility) CA Commodity Plans (Platinum, Gold, Silver, Bronze) 2 Multi-State Plans OPM Negotiated 19

20 HBEX and Early Retirees HBEX coverage may be less expensive than employer coverage and pricing stable year over year Loss mitigation and loss prevention strategies Competition with two federally negotiated plans Large population of covered lives of all ages and health HBEX coverage may be a better fit for an early retiree (access) Multiple plans to choose from at variable costs and benefits Networks/Hospitals Coverage (less/more) Annual open enrollment to change plans Fixed monthly cost may be less than employer s plan (although potential overall cost may be higher if benefits are used) 20

21 How HBEX may Work Technology + human advocacy + Qualified Health Plans Retiree Navigators/Assistors HBEX Website HBEX Call Center Connectivity with Carriers California Exchange Individual Carriers 21

22 22 Leveraging HBEX

23 Retiree Health Plan Challenges Most public sector employees depend upon their employer to provide access to affordable group health plan coverage As employees approach retirement age, the prospect of losing or keeping group health coverage can affect staffing/succession planning, productivity and the price of coverage for active employees 23

24 Retiree Health Plan Challenges Retiree benefits are an expected element of many public entity benefit plans Existing retirees depend on the benefits Employees in or nearing the retirement zone are making plans based on having them Employee Associations advocate/negotiate on behalf of retirees Result: Retiree health benefit commitment is not going away 24

25 Retiree Health Plan Challenges Public Entity retiree benefits are expensive and the true cost must now be made public GASB 43 & 45 require accrual accounting, resulting in meaningful liabilities shown on balance sheets and audits Once liabilities are defined, progress toward funding must be reported Access to bond markets and ability to negotiate benefits with employee associations may be affected by continued large unfunded liabilities 25

26 The Hidden Subsidy Public Entity employers have traditionally made a distinction between Early Retirees and Age 65+ Retirees Early Retirees are frequently kept in the Active Employee plan at Active Employee Rates Because the claims experience of the Early Retirees is statistically most likely to be higher, they are receiving a hidden rate subsidy Active employees are paying more to subsidize Early Retirees GASB 43/45 requires that the true cost of this group of retirees be accounted for 26

27 Early Retiree Opportunities Challenge Control expense growth Partner with unions to address expense growth Opportunity Partner with unions on common interests Address the delivery of benefits Address the adequacy of benefits Address retiree cost/premiums for coverage Leverage HBEX as the real opportunity and better choice for Early Retirees 27

28 Early Retiree Health Care Strategies Employer pays 100% of premium up to a cap; retiree pays all costs above the cap Employer pays a fixed amount each year towards cost of coverage Account Based Strategies: Pop Up (Lump Sum) Account Based Strategies: Pension Trade 28

29 Early Retiree Health Care Strategies Health Reimbursement Arrangements may reimburse for: Any out-of-pocket qualified medical expense, such as co-pays, deductibles, and medical expenses; Dental, vision, preventive care, prescription drugs, or other specified outof-pocket medical expenses; Health insurance premiums. Funded Health Reimbursement Arrangements Irrevocable trust Potential to lower GASB Early Retirees and Access to HBEX coverage 29

30 HBEX with an HRA - Example HBEX Employer allocates benefit dollars to irrevocable trust Trust Account Administered by Trustee HRA Account Administered by Third Party Claims are paid daily Auto reimbursement Direct pay option Retirees are reimbursed for healthcare expenses. HBEX paid directly by trust 30

31 31 Medicare Exchange

32 Medicare Exchange Structure Private marketplace not a government agency Integrates service, choice, flexibility and value to Medicare Retirees Dedicated service center no employer involvement Provides Retirees enhanced access to Medicare plans Provides useful resources to seniors and their families Useful approach to controlling GASB 43/45 retiree liabilities 32

33 Possible Advantages of Medicare Exchange Annual cash savings and reduced GASB liability Medicare Retirees have more plan choices and security No provider disruption Medicare Retirees have better or similar benefits for lower cost Lifetime retiree advocacy and expert support Guaranteed issue and pricing regardless of health status Objective professional support from benefit advisors Ease of transition through proven change management communications and service support model 33

34 Value Through a Medicare Exchange Key Components of a Successful Medicare Exchange Employer sponsored HRAs = Employer subsidy Guaranteed issue = retiree protection Communications + 1:1 human support + call center & web technology Connectivity with carriers 34

35 How Medicare Exchange Works Technology + human advocacy + carrier relationships Retiree Benefit Advisor Medicare Exchange Individual Carriers 35

36 Plans and Partners Larger Exchanges represent as many as 75 Carriers Over 3,500 plans All Medicare plan types Medicare Advantage Medigap Prescription Drug (Part D) Vision and dental plan types 36

37 Medicare Exchange with an HRA - Example Employer allocates benefit dollars to each retiree s HRA account HRA Account Administered by Exchange Claims are paid daily Auto reimbursement Retirees are reimbursed for healthcare expenses using HRA benefit dollars Direct deposit option 37

38 Individual Market: Retiree Choice MSA Medicare Advantage Medigap (male age 75) Part D Average # of options Average # of options Average # of options Average # of carriers Average # of carriers Average # of carriers Premium range Premium range & Plan F Premium range San Francisco 6 plan options 20 plan options 15 plan options 3 carriers 6 carriers 7 carriers $0-$129 $84 - $255 (Plan F: $175) $15 -$115 Los Angeles 10 plan options 20 plan options 15 plan options 4 carriers 6 carriers 7 carriers $0-$39 $99 - $269 (Plan F: $243) $15 -$115 Sacramento 8 plan options 20 plan options 15 plan options 3 carriers 6 carriers 7 carriers $0-$129 $71 - $217 (Plan F: $175) $15 -$115 Phoenix 11 plan options 20 plan options 13 plan options 4 carriers 5 carriers 6 carriers $0-$150 $77 - $228 (Plan F: $140) $14 -$97 38

39 Sample Plan Details for San Francisco Benefits Freedom Blue Plan I (Regional PPO) AARP Medicare Complete Anthem Plan F + Humana PDP Premium $0 $79 $ ($ $14.80) Deductible $300 $0 $0 Office Visits PCP: $15 co-pay PCP: $10 co-pay 100% covered Specialist: $25 co-pay Specialist: $15 co-pay Hospital $850 co-pay per stay $320 co-pay per day, days 1-5; after 5 days: $0 100% covered Prescription $7/$43/$85/33% Generics covered in the gap Other Some dental, hearing & vision benefits $3,300 OOP Max No Lifetime Max $6/$45/$92/33% No gap coverage Some dental, hearing & vision benefits $6,700 OOP Max No Lifetime Max $2/20%/20%/35% $310 deductible No gap coverage Foreign Travel No Lifetime Max 39

40 Sample Plan Details for Los Angeles Benefits Blue Shield Choice (HMO) Health Net Healthy Heart Plan 1 AARP Plan F + Humana PDP Premium $0 $0 $228 ($185 + $43)) Deductible $0 $0 $0 Office Visits PCP: $0 co-pay PCP: $0 co-pay 100% covered Specialist: $0 co-pay Specialist: $0 co-pay Hospital $0 co-pay per day $0 co-pay per day 100% covered Prescription $0/$35/$70/33% Generics covered in the gap $5/$42/$84/33% Generics covered in the gap $2/20%/20%/35% $310 deductible No gap coverage Other Some dental, hearing & vision benefits $6,700 OOP Max No Lifetime Max Some dental, hearing & vision benefits $3,400 OOP Max No Lifetime Max Foreign Travel No Lifetime Max 40

41 Close Commentary Challenging time for us all Change is inevitable There is no going back to the pre-health Care Reform days This is an excellent time to influence change, embrace change and execute on it 41

42 Questions? Disclaimer Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you. 42