Central Susquehanna Intermediate Unit Professional Leadership Day

Transcription

1 Central Susquehanna Intermediate Unit Professional Leadership Day 1 Healthcare Benefit Trends & Practices Jon Sapochak, Consulting Actuary, F.S.A., M.A.A.A. Society of Actuaries Motto 2 The work of science is to substitute facts for appearances and demonstrations for impressions. -Ruskin 1

2 Overview 3 Agenda Background healthcare history Where are we today? Healthcare trend and influences Benchmarking Benefit trends and practices What is the healthcare crisis? Where do we go from here? Background 4 Why employer-sponsored insurance? 1920s First health plans began to appear 1943 War Labor Board ruled that wage controls under the 1942 Stabilization Act did not apply to fringe benefits (ex: health insurance) 1954 IRS clarifies that employer-sponsored health benefits are tax-exempt 2

3 Background: How Health Plans Have Changed 5 Early Plans 1970s 1990s 1990s Traditional Plans PPO Plans Point of Service (POS) Plans HMO Plans No network Fee for Service No cost controls Provider Network Fee for Service Limited cost controls Provider Network Fee for Service Capitation Gatekeeper Required referrals Restrictive Network Fee for Service Capitation Gatekeeper Required referrals In-network only Managed care Background: How Health Plans Have Not Changed s 2014 Traditional Plans PPO Plans Point of Service (POS) Plans HMO Plans No network Fee for Service No cost controls Provider Network Fee for Service Limited cost controls Provider Network Fee for Service Capitation Gatekeeper Required referrals Restrictive Network Fee for Service Capitation Gatekeeper Required referrals In-network only Managed care 3

4 Background: What s Next? Future PPO Plans Payment Reform? Provider network Fee for service Limited cost controls Deductibles Coinsurance Office visit copayments Employee costsharing Limited/Tiered Networks Accountable Care Organizations (ACOs) Patient-Centered Medical Homes (PCMHs) Concierge Medicine Direct Primary Care (DPC) Medical Cost Trends and Premium Increases 8 Understanding Medical Cost Trends Medical Cost Trend is a projection of the increase in healthcare costs over the next policy year. Trend is primarily affected by: Price inflation Utilization Government mandated benefits New technology, treatments and therapies Deductible leveraging 4

5 Medical Cost Trend and Premium Increases 9 National and Local Medical Trends Source PricewaterhouseCoopers 9.0% 9.0% 8.5% 7.5% 6.5% Towers Watson 8.0% 8.0% 6.8% 6.0% 7.0% The Segal Group, Inc. (PPO) 10.8% 11.0% 10.0% 8.8% 7.9% Capital BlueCross (PPO) 11.75% 11.75% 11.0% 11.0% 11.0% LOCAL HealthAmerica (PPO) 13.0% 10.4% 11.9% 10.9% 10.9% Highmark Blue Shield (PPO) 12.0% 10.0% 9.5% 10.0% 10.0% United Healthcare (PPO) 12.0% 8.3% 10.1% 10.0% 10.3% Sources: 3, 6, 7, 14 Medical Cost Trend and Premium Increases 10 Medical Trends Actual vs. Expected 12% 10% 10.8% 11.0% 10.0% 8% 6% 4% 2% 0% 7.6% 7.5% 7.3% PPO Projected (without Rx) PPO Actual (without Rx) Sources: 3 5

6 Medical Cost Trend and Premium Increases 11 National and Local Prescription Drug Trends LOCAL Source The Segal Group, Inc. 9.1% 9.2% 7.2% 6.4% 6.3% Capital BlueCross 10.0% 10.0% 10.0% 10.0% 10.0% HealthAmerica 10.5% 9.5% 10.5% 10.5% 10.5% Highmark Blue Shield 11.0% 9.0% 9.0% 11.0% 11.0% United Healthcare 12.6% 12.0% 13.2% 12.7% 10.5% Sources: 3, 14 Medical Cost Trend and Premium Increases 12 Prescription Drug Trends Actual vs. Expected 14% 12% 10% 9.1% 9.0% 8% 6% 4% 6.4% 5.0% 7.2% 5.5% Rx Retail Projected Rx Retail Actual 2% 0% Sources: 3 6

7 Medical Cost Trends and Premium Increases 13 Cost Deflators Care moves to more cost-efficient site of care (i.e. inpatient to outpatient, ER to Urgent Care) Employers moving to high-performance networks Drop in hospital readmissions Increase in high deductible plans Cost Inflators Rise of expensive high cost biologics (specialty drugs) Health industry consolidation Sources: 6 Background: Medical Cost Trend and Premium Increases % 180% Cumulative Changes in Health Insurance Premiums, Inflation, and Workers Earnings, % 160% 140% 120% 100% Health Insurance Workers Earnings Overall InflaNon 80% 60% 40% 20% 0% 50% 40% Sources: 1 7

8 Background: Medical Cost Trend and Premium Increases 15 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 Premium Changes Over Time ($) $5,791 Single Family $16,351 $2,000 $2,196 $ CSIU PPO $0 Premiums: Sources: 1 Single: $7,848 Family: $21,960 $5,884 Healthcare Benefit Trends & Practices 16 How Do Employers Respond to Rising Costs? Funding Arrangement and Benefit Plan Types Employee Claim Cost-Sharing Employee Premium Cost-Sharing Consumer Driven Healthcare Models (QHDHPs w/ HSAs) Defined Contribution Healthcare Models Restrict Employee Healthcare Eligibility (Spousal Eligibility) Audit Dependents Implement Wellness Initiatives 8

9 Healthcare Benefit Trends & Practices 17 How Do Employers Respond to Rising Costs? Funding Arrangement and Benefit Plan Types Employee Claim Cost-Sharing Employee Premium Cost-Sharing Consumer Driven Healthcare Models (QHDHPs w/ HSAs) Defined Contribution Healthcare Models Restrict Employee Healthcare Eligibility (Spousal Eligibility) Audit Dependents Implement Wellness Initiatives 18 The three-legged stool : (an imperfect metaphor) Benefit Plan Design Premium Cost-Sharing Eligibility 9

10 Healthcare Reform: Plan Value 19 Benefit Plan Tiers Bronze Plan Considered minimum value coverage and base coverage in the Marketplace (with exception of catastrophic plan below); covers actuarial value of 60% plan costs OOP Limit equal to HSA limits ($6,350/$12,700 for 2014) Silver Plan Covers actuarial value of 70% plan costs Gold Plan Covers actuarial value of 80% plan costs Platinum Plan - Covers actuarial value of 90% plan costs Catastrophic Plan Available for individuals up to age 30 Coverage Levels set at HSA current limit (except preventive care and 3 PCP visits exempt from deductible) PPACA Metal Tier Examples 20 Benefit Plan Tiers PlaEnum Gold Silver Bronze DeducEble $750/$1,500 $1,000 / $2,000 $2,500 / $5,000 $6,250 / $12,500 Coinsurance 0% 10% 20% N/A Coinsurance OOP Limit $0 $1,500 / $3,000 $3,000 / $6,000 N/A OV Copays $20 $30 $40 N/A Rx Copays $5/$20/$35 $10/$30/$50 $15/$35/$60 N/A Actuarial Value 90% 80% 70% 60% Actuarial Value equivalents shown above are based on esemates from the Actuarial Value calculator provided by HHS. The benefit plans shown above do not include all of the plan details that were included in the calculaeon and are for illustraeve purposes only. 10

11 Benefit Plan Design 21 Employee Claim Cost-Sharing Deductibles Coinsurance Office visit copayments Urgent care and emergency room copayments Prescription drug copayments Employee Claims Cost-Sharing: Deductibles 22 Percentage of PPO Plans with $0 Deductible 50% 45% 43% 40% 35% 30% 33% 25% 20% 19% 15% 10% 5% 0% Kaiser Survey CSAct Survey Sources: 1, 8 11

12 Employee Claims Cost-Sharing: Deductibles 23 Percentage of Plans with Deductible of $1,000 or Greater Single Coverage 40% 35% 30% 38% 34% 25% 20% 15% 10% 5% 10% 6% 0% Kaiser Survey CSAct Survey Sources: 1, 8 Employee Claims Cost-Sharing: Deductibles 24 Local Plans with $0 Deductible and $1,000 + Deductible 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 43% 34% 19% 6% Sources: 8 $0 DeducNble $1,000 + DeducNble 12

13 Focus Area: High Deductible Health Plans 25 High Deduc+ble Health Plans with HSAs Employers Offering Qualified HDHP/HSA 60% 50% 40% 30% 20% 10% 22% 23% 20% 15% 16% 9% 7% 39% 36% 32% 23% 20% 20% 14% 55% 51% 45% 45% 43% 41% 42% 0% Sources: 15 Small (<500) Medium (500-4,999) Large(>5,000) Focus Area: High Deductible Health Plans 26 High Deductible Health Plans Generally PPO plans with a large deductible level (at least $1,000 per individual or higher) IRS Qualified Plans subject to minimum deductibles ($1,300 for a single in 2015) Often paired with an account structure to cover part of the deductible Health Savings Account (HSA) Health Reimbursement Arrangement (HRA) Also referred to as Consumer-Driven Health Plans ; theory being that the more the participants have financial responsibility for healthcare expenses, the more efficiently they will utilize healthcare services. 13

14 Focus Area: High Deductible Health Plans 27 High Deductible Health Plan Goals Save money Make employees better consumers Avoid the 2018 Excise (Cadillac) Tax Encourage employees to save for future care expenses (Health Savings Account) Medical Cost Trend and Premium Increases 28 Excise Tax in 2018 (Cadillac Tax) What is the tax? All plans having annual premiums or cost values of $10,200 ($850/month) per employee or $27,500 ($2,292/month) per family on an annual basis will face an excise tax of 40% beginning in Are many plans in danger of this tax? Based on Kaiser s current premium averages for Single and Family coverage, an annual increase of 8% between now and 2018 will push the average plan near these limits: NATIONAL: 2018 Estimated Projected Annual Premiums (8% Increase per year) Approximate Annual Single Premium: $8,600 Approximate Annual Family Premium: $24,000 NORTHEAST: 2018 Estimated Projected Annual Premiums (8% Increase per year) Approximate Annual Single Premium: $9,000 Approximate Annual Family Premium: $25,500 14

15 Employee Cost-Sharing 29 Total Cost of Health Coverage per Employee National - Average Family of Four Central Susquehanna Intermediate Unit Total Annual Cost - $22,030 Total Annual Cost - $22,749 Employer ContribuNons Employee ContribuNons Employee Out- of- Pocket Cost $3,600 16% Employer ContribuNons Employee ContribuNons Employee Out- of- Pocket Cost $2,129 9% $2,143 9% 25% 58% $5,544 $12,886 81% $18,477 Sources: 5 Employee Premium-Sharing 30 Average Employee Premium Cost-Sharing Percentage 40% 35% 30% 25% 20% 15% 18% 29% 16% 36% 19% Single Coverage 26% 13% 30% Family Coverage 32% 21% 21% 27% 14% 21% 22% 27% 10% 5% 0% Kaiser- All Kaiser EE's Kaiser EE's Bureau of Labor - State/ Local Gov't Bureau of Labor - Private HHS/AHRQ CSAct Survey & Clients Lancaster Chamber Business Group on Health Sources: 1, 4, 8, 11, 18 15

16 Employee Premium-Sharing 31 Employee Premium Contributions for Individual and Family Coverages 35% 30% 25% 20% 15% 10% 5% [VALUE] [VALUE] 29% 18% 0% Individual Family Sources: 1 The Healthcare Crisis 32 The Iron Triangle of Healthcare Quality Access Cost 16

17 The Healthcare Crisis 33 The Healthcare Crisis Costs are increasing at a rate greater than revenues Employers are unable to afford to maintain the level of coverage previously offered to employees There is a limit to how much cost can be shifted to employees The current system cannot be sustained without sacrificing something else No one is going to volunteer to take less The Healthcare Crisis 34 Who is responsible for the healthcare crisis? A: Health Insurers B: Providers/Hospitals C: Government D: Employers (Plan Sponsors) E: Employees (Consumers) F: All of the above 17

18 The Healthcare Crisis 35 Who is responsible for solving the healthcare crisis? A: Health Insurers B: Providers/Hospitals C: Government D: Employers (Plan Sponsors) E: Employees (Consumers) F: All of the above The Healthcare Crisis 36 Consumers need to become part of the solution The choices we make directly impact the cost of healthcare, both in the short- and long-term Current trend is to move toward models that focus on changing consumer behavior Wellness plans Consumer driven health plans Incentives influence behavior 18

19 In Closing 37 The Tragedy of the Commons Economic theory by Garrett Hardin Sustainability versus over-consumption Acting in self-interest hurts the common good What does it say about healthcare? Solution? External Regulation failed once in healthcare Cooperation everyone agreeing to use resources responsibly Sources 38 Sources 1. Kaiser/HRET Employer Health Benefits, 2013 Annual Survey 2067 Participants 2. SHRM, 2013 Employee Benefits Segal Health Plan Cost Trend Survey 4. Business of Labor Statistics Publication October 17, 2013 National Compensation Survey, March Milliman Medical Index 6. PricewaterhouseCoopers Behind the Numbers Medical Cost Trends for 2014, June Towers Watson 2014 Employee Survey on Purchasing Value in Health Care 8. CSAct Medical & Prescription Drug Survey, CSAct Clients Information, 2013/ Conrad Siegel Actuaries Worksite Wellness Survey, Lancaster County Business Group on Health Ebri.org Issue Brief February Vol 35, No Ebri.org Issue Brief January No Local Carriers Underwriting Departments April Mercer, November 20, Aon Hewitt Publication October 17, Federal Employees Health Benefit Program (FEHBP) 18. US Department of Health and Human Services AHRQ (Agency for Healthcare Research and Quality) Devenir HSA Research Report 20. JP Morgan HSA Snapshot February Ebri.org Issue Brief January 2014 No Drug Trend Report Express Script Lab April

20 39 CSIU Professional Leadership Day Healthcare Benefit Trends & Practices This analysis is for illustrative purposes only, and is not a guarantee of future expenses or claims costs. There are many ways that future health care costs can be affected including utilization patterns, catastrophic claimants, changes in plan design, demographic changes, etc. This analysis does not amend or change the coverage provided by the actual insurance policies and contracts. 20