Keeping Up With The Affordable Care Act and Medicare

Transcription

1 ACWA/Joint Powers Insurance Authority 2014 Spring Conference Keeping Up With The Affordable Care Act and Medicare Presented by: Tom Sher, First Vice President and Partner Alliant Insurance Services, Inc. May 6, 2014 Marriott Hotel Monterey, California

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3 ACA Update and Healing and Coping with Medicare ACWA JPIA Spring Conference May 6, ACA Update START HERE Market Reforms Premium Support Taxes 2013 Guaranteed Issue, pre-existing conditions excluded 2014 Individual Mandate (Exchange/Private) 2014 Cadillac Tax 2018 Premium Support for Mandated Coverage 2014 Employer Mandate (50-99) 2016 Employer Mandate (100+)

4 Healing and Coping with Medicare 3 4 2

5 49M 40M over 65 9M disabled under 65 5 Characteristics of the Medicare Population Percent of total Medicare population: 49 Million in 2013 Income below $22,502 Savings below $77,482 50% 50% 3+ Chronic Conditions 40% Fair/Poor Health Cognitive/Mental Impairment Dually Eligible for Medicare and Medicaid Under 65 Disabled 2+ ADL Limitations Age 85+ Long term Care Facility Resident 5% 27% 23% 20% 17% 15% 13% NOTE: ADL is activity of daily living. SOURCE: Urban Institute and Kaiser Family Foundation analysis, 2012; Kaiser Family Foundation analysis of the Centers for Medicare & Medicaid Services Medicare Current Beneficiary 2009 Cost and Use file. 6 3

6 Distribution of Medicare Beneficiaries by Income Level, % had incomes above $88,900 50% had incomes below $22,500 25% had incomes below $14,000 NOTE: Total household income for couples is split equally between husbands and wives to estimate income for married beneficiaries. SOURCE: Urban Institute analysis of DYNASIM for the Kaiser Family Foundation. 7 What Are Medicare Benefits? Part A Hospital 1966 Part B MD and O/P 1966 Part C Part D Medicare Advantage Prescription Drugs

7 Who Manages Medicare? 37M fee for service 12M Medicare Advantage 9 Medicare as a Share of the Federal Budget, 2012 Defense 19% Social Security 22% Nondefense Discretionary 17% Other 2 13% Net Interest 6% Medicare 1 16% Medicaid 7% Total Federal Spending, FY2012 = $3.5 Trillion Federal Spending on Medicare, FY2012 = $551 Billion NOTE: FY is fiscal year. 1 Amount for Medicare excludes offsetting premium receipts (premiums paid by beneficiaries, amount paid to providers and later recovered, and state contribution (clawback) payments to Medicare Part D). 2 Other category includes other mandatory outlays, offsetting receipts, and negative outlays for Troubled Asset Relief Program (TARP). SOURCE: Congressional Budget Office (CBO) Medicare Baseline, May

8 Medicare Benefit Payments By Type of Service, 2012 Medicare Advantage 23% Outpatient Prescription Drugs 10% Hospital Inpatient Services 26% Part A Part B Part A and B Part C Part D Other Services 13% 4% Home Health 6% Physician Payments 13% 5% Hospital Outpatient Services Total Benefit Payments = $536 billion Skilled Nursing Facility NOTE: Excludes administrative expenses and is net of recoveries. *Includes hospice, durable medical equipment, Part B drugs, outpatient dialysis, ambulance, lab services, and other services. SOURCE: Congressional Budget Office (CBO) Medicare Baseline, May Hospital Medicare Cost Shifting Shifts Costs to Private Insurance Aggregate Hospital Payment to Cost Ratios, Cost shift 12 6

9 Medicare Enrollment, In millions: Historical Projected SOURCE: 2013 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. 13 Reforming Medicare Demographic Challenges Trends in Expenditures Impact of the ACA Legislative or Market Remedy? Public Opinion Change is Inevitable The Big Questions 14 7

10 Reforming Medicare Historical and Projected Number of Medicare Beneficiaries and Number of Workers Per Beneficiary SOURCE: 2010 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Number of Beneficiaries (in millions) Number of Workers Per Beneficiary 15 Reforming Medicare ACA ACA ACA 16 8

11 Reforming Medicare Projected Spending on Health Care as a Percentage of Gross Domestic Product, (Congressional Budget Office, November 13, 2007) If nothing changes, growth in health care expenditures would consume 100% of GDP 2009: 17.3%, up from ~5% in Reforming Medicare ACA 18 9

12 Reforming Medicare The Status Quo is Not Sustainable 65% of increase in cost is new technology: build it and they will pay for it Demographic bubble: fewer workers to pay for more retirees End of life (last 6 months) costs are 25% of total Medicare expenditures with no meaningful mechanism for considering alternatives or creating incentives for more cost effective care 19 Reforming Medicare The Status Quo is Not Sustainable Incentives for providers in ACA are not enough: adjust payments for expected productivity improvements, reward reduction of hospital acquired infections and avoidable hospital admissions, reduce re admissions No meaningful changes proposed to restrain total health care spending; cutting amount paid per unit of service does not change patterns of treatment 20 10

13 Reforming Medicare Reform via Legislative Mandate or the Market? Extremely complex, very politicized issue: not understood by voters Affordable Care Act reduces increase in Medicare spending by $523B over next ten years Will bring Medicare payments below Medicaid within ten years; some hospitals expected to start refusing Medicare patients Exacerbates cost shift to private payers Probably politically unsustainable 21 Reforming Medicare Reform via Legislative Mandate or the Market? Defined benefit (Mr. Obama) or Traditional Medicare is defined benefit, 37M covered, 76% of total Defined contribution (Mr. Ryan)? Medicare Advantage is defined contribution, 12M covered, 24% of total 22 11

14 Seven in Ten Say Medicare Needs Changes To Stay Sustainable Do you think changes need to be made to the Medicare program to keep it sustainable for the future, or do you think the Medicare program will basically be fine if we leave it as is? Asked of those who say Medicare needs to be changed: Do you think we need to make major changes or minor changes to Medicare to keep it sustainable for the future? Dk/Ref. 6% Medicare is fine if we leave it as is 21% Medicare needs to be changed to keep it sustainable 72% Major changes Minor changes 36% 32% NOTE: Don t know/refused answers not show for follow up question. SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted September 13 19, 2012) 23 Majority Want No Spending Cuts to Education, Medicare or Social Security If the president and Congress decide to reduce the deficit by reducing spending on federal programs and services, I d like to know in which programs you would be willing to see spending reduced. For each program I name, please tell me if you would support major spending reductions, minor spending reductions or no reductions at all as a way to reduce the federal deficit. NO reductions MINOR reductions MAJOR reductions Public education Medicare Social Security Medicaid Health insurance subsidies Aid to farmers National defense Food stamps Unemployment insurance Salaries and benefits for federal government workers The conflict in Afghanistan Foreign aid 61% 58% 58% 46% 40% 32% 31% 29% 27% 15% 39% 13% 27% 9% 34% 23% 31% 29% 37% 34% 47% 40% 41% 50% 43% 54% 52% 14% 10% 12% 16% 24% 18% 26% 28% 21% NOTE: Some items asked of separate half samples. Don t know/refused answers not shown. SOURCE: Kaiser Family Foundation/Robert Wood Johnson Foundation/Harvard School of Public Health, The Public s Health Care Agenda for the 113th Congress (conducted January 3 9, 2013) 24 12

15 Majority Of Voters Oppose Changing Medicare To Premium Support System Which of these two descriptions comes closer to your view of what Medicare should look like in the future? AMONG LIKELY VOTERS Medicare should continue as it is today, with the government guaranteeing all seniors the same set of health insurance benefits Medicare should be changed to a system in which the government guarantees each senior a fixed amount of money to help them purchase coverage either from traditional Medicare or from a list of private health plans Total 61% 31% Democrats 78% 19% Independents 58% 31% Republicans 45% 46% NOTE: Other (vol.) and Don t know/refused answers not shown. SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted October 18 23, 2012) 25 Reforming Medicare Change is Inevitable Demographic trends Social Mood, Economy and Politics Technology Legislative and Regulatory: Affordable Care Act Traditional group and individual insurance Medicare Medicaid 26 13

16 Reforming Medicare: The Big Questions Raise the Age for Coverage? Pay Everyone Less? Hospitals, MD s, labs, etc. Drug manufacturers Lawyers Switch to Defined Contribution? Ration Care? NICE (UK): Quality Adjusted Life Year vs. IPAB (US) Some other solution(s)?

17 Date* Over 50 Under 50 JPIA District 01/01/11 01/01/11 01/01/11 01/01/11 08/01/12 10/01/12 01/01/13 Update handbooks Continue to distribute when needed Payroll function 01/01/13 Medicare tax increased by 0.09% on income over $200,000. Payroll f Women's preventive care covered at no cost was expanded. The most notable 01/01/13 addition was birth control and surgical sterilization at no cost. 01/31/13 07/31/13 10/01/13 ACWA/Joint Powers Insurance Authority Affordable Care Act mandated changes, highlights by employer size Preventive care was required to be covered at no cost. This included mammograms, pap smears, colonoscopies, some lab tests, annual physicals. Adult children became eligible for medical under their parents' plans until their 26th birthday, regardless of student, marital or dependent status. Pre-existing conditions can no longer be used to deny coverage to children. Lifetime maximums on benefits were eliminated. Limits on insurance company profits were set, stating that a Medical Loss Ratio Rebate would be issued if the plan did not spend 85% of funds on claims and quality (or 80% if small group). JPIA plans are considered large group. Calculations began 1/1/11. Rebates are announced in August. Self insured plans are exempt. To date, no rebates have been due to the insured JPIA plans. Distribution of plan summaries, called the Summary of Benefits and Coverage (SBC), in a new format had to occur for all available plans. This is true any time a participant can change benefits: at hire, when eligible to make a mid-year change to benefits due to a life event and at Open Enrollment. (JPIA provided SBCs with instructions.) Medical Flexible Spending Account (FSA) annual limits were reduced from $5,000 to $2,500. For XL employers: Employers who issued 250+ W-2s in 2011 must report the cost of benefits on 2012 W-2s, and subsequent years. "Transitional relief" has been provided indefinitely for those issuing less than 250 W-2s. N/A if under 50 The Patient Centered Outcomes Research (PCOR) Fee of $1 per person insured (including dependents) in 2012 was due. This will be $2 the following year. The fee may be collected through the 2018 plan year, adjusted for inflation. The Notice of Exchange had to be distributed to all employees, regardless of benefits eligibility. The purpose of the notice was to make everyone aware of the existence of the Exchange. The notice must be distributed to new hires within 14 days of hire. (JPIA provided the notice with instructions.) Responsible: XL only: Payroll function Continue to distribute to new hires 01/01/14 Individual mandate took effect, meaning all individuals must be covered by medical plans that meet minimum standards. (Does not apply to employers.) N/A N/A Premiums now include the Insurer Tax, which helps to fund the Exchanges. 01/01/14 Approximate calculations are as follows: for-profit plans 4%, non-profit plans 2.5%, self-funded plans 1% Pays (JPIA paid from reserves, rather than passed on in 2014 rates.) 01/01/14 Pre-existing conditions can no longer be used to deny coverage to adults. S. Smith 4/30/2014 Page 1 of 3

18 ACWA/Joint Powers Insurance Authority Affordable Care Act mandated changes, highlights by employer size Responsible: Date* Over 50 Under 50 JPIA District 01/01/14 01/01/14 early/ mid 2014 Employers with NEAR 50 or NEAR 100 full-time equivalent employees should be keeping track of hours, for use in calculations to determine who is eligible in 2015 or For those near 50 or near 100, this will determine if and when your district is subject to certain ACA requirements. Confirm your payroll department can provide a report of hours worked, paid or on protected leave upon request. New components in bswift will be available to help with these calcuations. As regulations are issued, JPIA will issue detailed guidance. N/A if well under 50 (count if you are close) bswift calculates and applies in compliance The Reinsurance Fee of $63 per person insured (including dependents) in 2014 is due. The (recently announced) proposed 2015 fee will reduce to $44 per person. 01/01/15 This fee is collected to offset the cost of adverse selection in the first few years that insurers must cover those with pre-existing conditions, in individual plans Pays and the Exchange. This is a three year fee, for those covered in 2014, 2015 and /01/15 COBRA Notices must be updated to reference the Exchange as a coverage option. The new model notice is available on the Department of Labor website. The State of California (not the Federal ACA) per AB1083 required that waiting periods for enrollment in medical plans be no longer than 60 days. This meant changing waiting periods to 1st of the month following 30 days for full month medical plans. Applying this waiting period to dental, vision, life, EAP plans is at the discretion of the employer. (JPIA medical plans were changed.) The Employer Mandate goes into effect for employers with 100 or more full-time equivalent employees. Employers will be fined if they do not: 1) "offer" coverage to employees working an average of 30+ hours/week. Counting methods are important. 2) ensure coverage is "affordable," meaning it costs less than 9.5% of income or Federal poverty level for employee-only coverage in the least cost plan. Following JPIA guidelines to pay for employee-only coverage in the least cost plan means you are in compliance with the affordability requirement. 3) ensure "essential benefits" like hospitalization, maternity, prescription and other basic benefits are covered. All JPIA plans cover essential benefits. 4) ensure coverage meets "minimum value," meaning at least 60% of expenses will be covered. All JPIA plans meet minimum value. Action item: Count hours to ensure coverage is offered to those who are eligible. The bswift software may help. N/A if under 50 Will inform districts of responsibilitie s and procedures Download new notice Update handbooks Confirm payroll has these figures for HR use later. Count hours and offer benefits when appropriate. Update handbooks. S. Smith 4/30/2014 Page 2 of 3

19 ACWA/Joint Powers Insurance Authority Affordable Care Act mandated changes, highlights by employer size Responsible: Date* Over 50 Under 50 JPIA District 01/01/16 (new) The Employer Mandate goes into effect for employers with full-time equivalent employees. See Employer Mandate details above. One year delay requires employers maintain current benefits. N/A if under 50 See above Employers and insurers will need to report who was covered, for which months 01/31/16 in Final regulations on sections 6055 and 6056 have recently been released. The details are complex. Further guidance will be issued by JPIA X X regarding specific employer and insurer responsibilities. Delayed Delayed For XL employers: Employers with over 200 employees must auto-enroll new hires in medical benefits. N/A if under 50 Non-discrimination testing will be required, to ensure highly compensated employees are not favored in terms of participation or employer contribution. Guidance is expected soon on this requirement, which was delayed. Will issue guidance See above XL only: change practice Conduct testing 01/01/18 The Excise Tax, or "Cadillac Tax", takes effect. This means a 40% penalty on the balance of medical plan premiums exceeding $10,200/individual or $27,500/family per year. This is being watched closely for developments. Many plans, up to 60%, are expected to hit the threshold. Will keep informed of developments, added lower cost plans Keep an eye on to determine if strategy change is needed *Dates apply to calendar year plans that run 1/1-12/31 of each year. For instance, the changes that took effect 1/1/11 on this list were effective upon the first renewal after 9/23/10. This list includes the most important provisions of the ACA as they relate to JPIA plans as of the date below. Regulations and guidance continue to be issued, meaning details and effective dates are subject to change. The JPIA does not give legal advice. If a legal opinion is required, please consult with an attorney. Contact Sandra Smith, JPIA Employee Benefits Manager, at ext or ssmith@acwajpia.com with any questions. S. Smith 4/30/2014 Page 3 of 3