Session 32 OF, Supplemental Health Products: Surviving the ACA Maze. Moderator: Jody Frenette Mistal, FSA, MAAA

Transcription

1 Session 32 OF, Supplemental Health Products: Surviving the ACA Maze Moderator: Jody Frenette Mistal, FSA, MAAA Presenters: David M. Dillon, FSA, MAAA Amanda Rose Hug, FSA, MAAA Jody Frenette Mistal, FSA, MAAA

2 Annual Meeting & Exhibit Session 32 Open Forum: Supplemental Health Products Surviving the ACA Maze October 12, 2015

3 Presenters Amanda Hug, FSA, MAAA Actuary, MassMutual Financial Group David M. Dillon, FSA, MAAA Vice President & Principal, Lewis & Ellis, Inc. Jody Mistal, FSA, MAAA Consultant, Milliman-Tampa 2

4 Disclaimer The information in this presentation is general in nature, is not intended to provide specific rating or product development advice, and is not intended to represent any specific company. The information must be validated by a company to arrive at its own opinion. Milliman is not a law firm, is not authorized to practice law, and does not provide legal advice. 3

5 Overview Excepted Benefits in an ACA world Critical Illness Accident GAP Hospital Indemnity 4

6 Supplemental Products Coverage that is NOT designed to be primary (e.g. not major medical insurance). Designed to pay in addition to and potentially overlapping primary coverage. 5

7 What is Driving the Need for Supplemental Coverage? Health Care Reform Agent Need for Compensation Great advertising by AFLAC 6

8 Supplemental Coverage in the Worksite Market Mix of Sales by Product Source: Eastbridge Consulting through

9 Excepted Benefits - CI Excepted under the Public Health Service Act (PHSA) 42 USC 300gg-91(c) Excepted Benefits (3) Benefits not subject to requirements if offered as independent, non-coordinated benefits (A) Coverage only for a specified disease or illness 8

10 Excepted Benefits - Accident Excepted under the Public Health Service Act (PHSA) 42 USC 300gg-91(c) Excepted Benefits (1) Benefits not subject to requirements (A) Coverage only for an accident 9

11 Excepted Benefits - GAP Excepted under the Public Health Service Act (PHSA) 42 USC 300gg-91(c) Excepted Benefits (4) Benefits not subject to requirements if offered as separate insurance policy.medicare supplemental health insurance... and similar supplemental coverage provided to coverage under a group health plan. 10

12 Excepted Benefits - HIP Excepted under the Public Health Service Act (PHSA) 42 USC 300gg-91(c) Excepted Benefits (3) Benefits not subject to requirements if offered as independent, non-coordinated benefits (B) Hospital indemnity or other fixed indemnity insurance 11

13 Excepted Benefits HIP Issued January 24, Q7: What are the circumstances under which fixed indemnity coverage constitutes excepted benefits? The benefits are provided under a separate policy, certificate, or contract of insurance; There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor. The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred. 12

14 HIP Group vs. Individual Group coverage - The insurance must pay a fixed dollar amount per day (or other period) of hospitalization or illness regardless of the amount of expenses incurred. Individual coverage No longer have the requirement as group, but now has other requirements. Applicants must attest that they have minimum essential health coverage Benefits are paid in a fixed dollar amount per period of hospitalization or illness and/or per service Central United Life v. Burwell (decided on 9/11/2015), the U.S. District Court future of individual uncertain 13

15 Critical Illness (CI) Product Overview Insurance that pays a lump sum upon diagnosis of a critical illness Benefit dollars may be used by recipient as he/she sees fit Core covered conditions account for over 85% of claims: Cancer Stroke Heart Attack Kidney Failure Major Organ Failure Carriers may cover up to 20 additional covered conditions Recurrence benefits are common Additional features may include: Spouse & Child Coverage Wellness Benefit Waiver of Premium Cancer Treatment Benefits 14

16 Federal Regulations to consider Health Insurance Portability & Accountability Act (HIPAA) Portability & Nondiscrimination Privacy Rule Affordable Care Act (ACA) 15

17 HIPAA Portability & Nondiscrimination, ACA HIPAA & ACA regulate health care at the federal level with respect to discrimination, renewability, guaranteed availability of coverage, etc. HIPAA & ACA use many of the same definitions, meaning that CI would be treated the same under both. Critical Illness ( Specified Disease ) is an excepted benefit under HIPAA s general provisions and the ACA, so long as: CI constitutes coverage for a specified disease or illness CI is offered as an independent, non-coordinated benefit 16

18 HIPAA Privacy Rule The HIPAA Privacy Rule does not expressly exempt CI. The HIPAA Privacy Rule defines 3 covered entities to which it applies: Health Care Provider Straightforward No Health Care Information Clearing House Straightforward No Health Plan = directly provides for health insurance or provides/pays the cost of medical care No, because CI pays a lump sum that is not tied to receipt of care or treatment General agreement is that CI is not governed by HIPAA because it is not a covered entity within the HIPAA Privacy Rule. 17

19 To Recap The Good: We ve cleared the ACA hurdle! The Bad: We aren t out of the woods yet The Ugly: 50 state filing 18

20 State Regulations to consider No Interstate Compact 50 State Filing NAIC Model Law states have adopted it Includes: AR, CT, DE, FL, ID, IL, IA, ME, MA, NH, NJ, NY, OK, PA, RI, SC, TX, UT, VT, VA, WA, WV Some state adoptions include additional restrictions Individual State Regulations 19

21 Navigating the States Seek lowest common denominators during product development Pre-existing condition limitation Waiting period Separation period between occurrences and recurrences Considerations along the way Preferred Product Design Risk Mitigation Features Administrative Complexity 20

22 Watch out for Loss Ratio Requirements vary from 50-75% Benefit Reductions prohibited by CT, MA, NJ, NY New York Insured must provide evidence of major medical/basic hospital insurance, CI coverage limited to 7 covered conditions 21

23 Accident & GAP Plans Premium Growth Pattern 70.0% 60.0% 50.0% 54.8% 64.9% 40.0% 30.0% 33.3% 20.0% 10.0% 0.0% -10.0% -20.0% 17.4% 15.4% 12.2% 8.8% 13.6% 12.2% 8.90% 10.1% 3.6% 9.4% 6.2% 6.0% 7.0% 4.7% 1.6% 0.8% 1.60% 2.2% -5.3% % % % -9.0% -7.0% -16.9% -30.0% Accident HIP/ Gap Source: Eastbridge Consulting Group 22

24 Accident Plans Covers loss due to an accident only (no sickness) Disclosures required Benefit Design Expense Incurred (accident-only Major Medical) Indemnity (accident-only Hospital Indemnity) No or Limited Age Bands Unisex No underwriting Low Cost Utilization Perception vs. Reality 23

25 Accident Plan Designs - Indemnity Benefits Common Ranges Accidental Death $25,000 - $100,000 Accidental Dismemberment $2,500 - $50,000 Varies by eye(s), hand(s) etc. Ambulance: Air/Ground $500 - $2,000 / $100 - $500 Burns $50 - $20,000 Varies by degree and size Dislocation / Fracture $1,000 - $10,000 Varies by location and severity Surgery $500 - $2,500 Hospital Admission Benefit $250 - $2,500 (increments of $250) Hospital Confinement Benefit per day $50 - $500 (increments of $50) Physician/PT/Chiro Visit Benefit $25 - $125 (increments of $25) Diagnostic Imaging Benefit X-ray $25 - $125 (increments of $25) MRI/CT $100 - $1,000 (increments of $100) 24

26 Accident Plan Designs Expense Incurred Characteristics Off-the-job vs 24 Hour Maximums: $500 - $50,000 ER Benefit: $0 - $100 deductible applies Follow Up Care: 3 5 max visits Ambulance: 5 15% of overall max Rx: IP only Diagnostic Exams: Within 14 days 10 25% of overall max PT: 5 15 Visits DI Riders: A&S or Acc-only 25

27 Accident Plan Designs Enhancements Dependent coverage equal to insured vs reduced Portability No age reduction at upper ages Ages over 65 Combination of group and insured benefit selections 26

28 GAP Plans Coverage is NOT designed to be primary Pays Deductibles, Co-pays, and Co-insurance only Accident & Sickness, or Accident-only Past CMS bulletin considered these as excepted benefit if: In a completely separate policy from the underlying coverage, and Are priced no higher than 15% of the cost of the underlying coverage. Typically sold by different entity than Major Med Guarantee Issue Typically pays off of the underlying major med EOB Typically pays benefits directly to the provider. 27

29 Key Issues Impacting GAP Market Growth in Deductibles page 15 28

30 Key Issues Impacting GAP Market Growth in Out-of-Pocket Costs page 15 29

31 GAP Plan Designs Supplemental Deductible and Co-Insurance May have separate supplemental deductible and coinsurance per insured Typical Deductible Options $250 to $3,000 Typical Co-Insurance Options 0%, 90/10%, 80/20%, 70/30%, 75/25%, 50/50% From $0 to $10,000 Out-of-Pocket Benefits for Hospital and Outpatient Expenses Typically pays the amount applied to major medical deductible, co-insurance, and co-payments. 30

32 GAP Plan Designs Covers the same expenses as major medical plan, Except: Charges for professional fees in a doctor's office or medical clinic; or Charges for outpatient prescription drugs. Maximum Benefit Amounts Typically range from $1,000 to $9,500 per person per calendar year Enhancements First Dollar Coverage old is new again 31

33 GAP Actuarial Issues Rates depend on the employer s underlying plan: The higher the deductible, copays, OOP limit, the higher the rate for the gap plan. Rates may vary by employer subsidy level, group size, and number of enrolled employees (rates decreasing as each of these increase). The premium limit (15% of cost of underlying employer plan) could pose a significant problem: As the underlying plan s deductible and OOP limit increase, the numerator (Gap benefits) increases but the denominator (underlying plan cost) decreases. 32

34 Hospital Indemnity Plan Design Pays a set daily benefit for each day confined to a hospital. May pay additional benefits for other inpatient care. Newer designs often include outpatient benefits. Modular Design HSA Compatibility for worksite markets Premium Structures 33

35 Hospital Indemnity Risk Selection Practices can vary by target market In worksite, a reasonable spread of risk can be achieved with appropriate participation rates. Guarantee issue is becoming more common in worksite. Relies heavily on value of actively at work requirement and participation. Maternity coverage materially impacts costs. Some underwriting for individual sale or greater range of benefit amounts. 34

36 Hospital Indemnity Rating Aspects Target market Degree of underwriting Group size and participation Risk Mitigation techniques included in the product design Bracketed policy form language Treatment of maternity related claims Waiting periods Pre-existing condition provisions 35

37 Hospital Indemnity State Considerations Minimum Loss Ratio Standards Actuarial Filing Materials Annual Reporting Requirements Benefit Design Requirements 36

38 For questions, contact: Amanda Hug, FSA, MAAA Actuary, MassMutual Financial Group 37

39 For questions, contact: David Dillon, FSA, MAAA Vice President & Principal Lewis & Ellis, Inc. 38

40 For questions, contact: Jody Mistal, FSA, MAAA Consulting Actuary Milliman 39