2014 Is The "Real" Start of Health Care Reform

2014 IS THE REAL

START OF HEALTH

CARE REFORM Presented by: Jim Wisdom, CFP

James L. Wisdom Insurance Services

Westlake Village, CA

Thursday, Sept. 26, 2013

OVERVIEW

I. HC Reform- The Big Picture

2. What changes in 2014?

3. How will these changes affect you and your business?

4. Who will benefit from HC Reform?

5. Who will be adversely impacted by HC Reform?

6 How will Covered California impact the insurance marketplace?

7. What strategies can you employ to effectively navigate HC Reform?

8. Q & A

HEALTH CARE REFORM- THE BIG PICTURE

HCR = PPACA=ACA=Obamacare

Signed into law on 3/23/10

First came “free benefits”

Now we get to pay for them ( i.e. many of us will subsidize them)

HCR Objective: To insure as much of the uninsured as possible

Estimated 37 Million uninsured in the U.S.

Very complex law- The opposite of the KISS principle

HC REFORM: THE BIG PICTURE ( CONT’D)

2010-2012- Enhanced benefits introduced

2011/2018- Taxes ( Including .9% Medicare Tax, 3.8% Tax on Investment

Income, $8 Billion+Tax on Health Insurers, 2.3% Tax on Medical Device

firm sales, $2.5 Billion+ Tax on Pharmaceutical firms; 40% Health Insurer

Tax on “Cadillac Health Plans”)

2014- Individual Mandate / Penalty

2015 – Employer “Play or Pay” penalty for groups with 50+ employees

Note: Employer “Play or Pay” penalty delayed from 1/1/14 to 1/1/15

WHAT CHANGES IN 2014?

Individual Mandate to buy health insurance

New state-based exchanges ( i.e. “Marketplaces”) begin ( California’s

marketplace = “Covered California”)

Guaranteed Issue requirement (i.e. Insurers must take all applicants)

Renewability and rates based only on age, geographic location and family

tier for individual, small group in/out of Health Care Marketplaces.

Small Group age banded rates reduced from 7 age bands to 3 age bands

New Minimum Value Benefits requirement for all Individual, Small Group

New Essential Health Benefits requirement for Individual, Small Group

WHAT CHANGES IN 2014 ( CONT’D)?

Subsidies for individuals through Covered California for incomes between 133% and 400% of FPL ( Federal Poverty Level)

Also available to employees if employer offers coverage that is either “Unaffordable or does not meet “Minimum Value”

Tax Credits for employers through Covered California with 25 employees or less and average annual salary of $50,000 or less

Medicaid expansion- for those states that select this option

SUBSIDIES: BASED ON INCOME LEVEL

2013 FED POVERTY LEVEL DATA

1 Family Member- $11,490

2 Family Members- $15,510



5 Family Members- 27,570




9+ Family Members- Add $4,020 for each additional person

Note: These figures apply to 48 contiguous states and Wash D.C.

WHAT CHANGES IN 2015?

Individual Mandate Penalty increases ( more on this

later)

Employer “Play or Pay” penalty for groups with 50+

full-time equivalent employees who don’t provide:

Affordable coverage or

Minimum Value and

One or more employees purchase subsidized coverage

through Covered California

2014 MANDATE PENALTY FOR

INDIVIDUALS

2014- greater of $95 or 1% of income (max fee = 3X flat fee = $285)

2015- greater of $325 or 2% of income (max fee = $975)

2016- greater of $695 or 2.5% of income (max fee= $2,085)

2015 PLAY OR PAY PENALTY (FOR EMPLOYERS

WITH 50+ EQUIVALENT EMPLOYEES)

“No Offer” Penalty- $2,000 X the total # of employees minus the first

30 employees

Example -100 employee group: Annual Penalty = ( 100-30) X $2,000=

$140,000 ( not deductible to the Corp.)

“Unaffordable Coverage” Penalty- The lesser of $3,000 per subsidized

full-time employee OR $2,000 X the total # of employees minus the

first 30 employees

Note: An employer penalty is only triggered if at least one employee

purchases federally subsidized coverage in the marketplace ( i.e.

Covered California)

Equivalent employee definition: ex. 2 P/T Employee = 1 F/T Employee

HOW IS AFFORDABILITY DEFINED?

If an employee is offered coverage and he/she pays less than 9.5% of

his/her income (for employee-only coverage), that’s deemed affordable.

If the cost to an employee is 9.5% or more of his/her income ( for

employee-only coverage), that’s not deemed to be affordable.

When a group health plan is either 1) Not affordable or not 2)

Minimum Value to an employee, the employee can purchase subsidized

health insurance through Covered California.

HOW ARE ESSENTIAL HEALTH BENEFITS DEFINED?

Starting in 2014, all insured small group and individual plans must include:

Ambulatory patient services

Emergency services

Hospitalization

Maternity and newborn care

Mental health /substance abuse services, and behavioral health treatment

Prescription drugs

Rehabilitative and habilitative services and devices

Laboratory services and devices

Preventive and wellness services and chronic disease management

Pediatric services, including oral and vision care

HOW IS MINIMUM VALUE DEFINED?

Four Metal Tiers of Plans will be offered for

Individual and Small Group in 2014:

Platinum: 90% Actuarial Value ( AV)

Gold: 80% Actuarial Value ( AV)

Silver: 70% Actuarial Value ( AV)

Bronze: 60% Actuarial Value ( AV)

Note: Minimum Value= Bronze Level Plan or greater

HOW WILL THESE CHANGES AFFECT YOU

AND YOUR BUSINESS

Answer: It depends on such factors as the following:

1. Are you in an industry that uses benefits to “A.R.M.” employees?

2. Are you in an industry that historically has never offered benefits?

3. Are you a low wage employee or individual?

4. Are you a high wage employee or individual?

5. For business owners: Do you prefer to offer your employees one

option or many health care options?

6. Do you prefer a large network of providers?

7. Are quality ratings important to you?

WHO IS LIKELY TO BENEFIT FROM HC REFORM?

The uninsured- who may be eligible for subsidies or get care at no charge through Medicaid

The poor- who will be eligible for subsidies or get care at no charge through Medicaid

Some individuals/employees will benefit from added insurance protections

Those with pre-existing conditions( i.e. uninsurable)- will now be covered regardless of health status

Small employers who are eligible for tax credits

WHO MAY BE ADVERSELY AFFECTED BY

HC REFORM?

Employers with greater than 50+ employees- subject to “Play or Pay”

Medicare recipients – Approx. $500B in spending cuts

Employer-Based Plans- Taxed for first time, some may drop coverage

Medicaid/CHIP Recipients-System could be overwhelmed

Employers with rich plans- Will be subject to 40% Cadillac Tax (2018)

Low wage industries such as Restaurant, Construction, Hospitality, etc.

Companies that don’t offer Employee Benefits to “Attract, Retain and Motivate” ( A.R.M.) their employees

Employees who may be forced to buy a richer plan ( i.e. $2,000 Deductible or less)

Those laid off due to HCR Changes in 2014

Those whose hours are reduced to less than 30 hours/week due to HCR

2014 INDIVIDUAL RATE ANALYSIS-- COVERED

CALIFORNIA VS. CURRENT RATES

Assumes Zip Code 91361 ( Westlake Village, CA)

Comparison of individual plans based on Age, Income, Family Size

Individuals

Compared Lowest Priced Covered California Plan ( “Bronze 60”) vs.

Lowest Priced Current Plan

This comparison applies today- Not necessarily after all the 2014

Individual and Small Group rates ( in the exchange and outside the

exchange) are released to the marketplace.

LOWEST PRICED PLAN- 28 YR. OLD

ANNUAL SALARY = $50,000

Current- Anthem Core Guard 5000 Covered CA- Anthem Bronze 60

Plan Type = PPO

Monthly Premium= $116

Deductible- $5,000

Out-of-Pocket Max- $8,500

Routine Preventive Care- No Charge

Dr. Office Visit- 50% Copay

Rx- $15/$40/$60 Copay

Rx Deductible – $7,500 ( Tier 2 and 3)

Plan Type = PPO

Monthly Premium = $209

Deductible- $5,000


Routine Preventive Care- No

Charge

Dr. Office Visit- $60 Copay ( 3/Yr.)

Rx- $50-$75 Copay

Rx Deductible- $5,000 ( Tier 2 )

LOWEST PRICED PLAN- 35 YR. OLD COUPLE


Current:- Anthem Core Guard 5000 Covered CA- Anthem Bronze 60

Plan Type = PPO


Deductible- $5,000 ( X2 )

Out-of-Pocket Max- $8,500 ( X2)



Rx- $15/$40/$60 Copay

Rx Deductible- $7,500 ( Tier 2 and 3) X 2

Plan Type = PPO



Out-of-Pocket Max- $6,350( X2)


Dr. Office Visit- $60 Copay( 3/Yr.)

Rx- $50-$75 Copay

Rx Deductible- $5,000 ( Tier 2 ) X 2

LOWEST PRICED PLAN- 45 YR. OLD


Current- Core Guard 5000 Covered CA- Anthem Bronze 60

Plan Type = PPO


Deductible- $5,000




Rx- $15/$40/$60 Copay

Rx Deductible- $7,500 ( Tier 2 and 3)

Plan Type = PPO


Deductible- $5,000




Rx- $50-$75 Copay


LOWEST PRICED PLAN- 55 YR. OLD FAMILY



Plan Type = PPO


Deductible:- $5,000 ( X 2)

Out-of-Pocket- $8,500 ( X 2)


Charge

Dr. Office Visit Copay- 50% Copay

Rx- $15/$40/$60 Copay

Rx Deductible $7,500 (Tier 2 and 3

( X 2)

Plan Type = PPO



Out-of-Pocket Max- $6,350( X2)


Charge


Rx- $50-$75 Copay

Rx Deductible-$5,000 ( Tier 2) X2

BEST PLAN COMPARISON- 62 YR. OLD



Plan Type = PPO

Monthly Premium =$582

Deductible- $5,000



Charge


Rx- $15/$40/$60 Copay

Rx Deductible- $7,500 ( Tier 2 and

3)

Plan Type = PPO


Less Subsidy= $530

Equals Net Premium: $23

Deductible- $5,000



Charge


Rx- $50-$75 Copay


BENEFIT PLAN COMPARISON- 35 YR. OLD


Current: Anthem Core Guard 5000 Covered CA: Anthem Bronze 60

Plan Type = PPO

Monthly Premium =$134

Deductible- $5,000



Charge


Rx- $15/$40/$60 Copay

Rx Deductible- $7,500 ( Tier 2 and

3)

Plan Type = PPO


Less Subsidy= $170

Equals Net Premium: $65

Deductible- $5,000



Charge


Rx- $50-$75 Copay


STRATEGIES TO CONSIDER FOR

NAVIGATING 2014 HCR CHANGES

Covered CA vs. Non-Exchange Plans

Alternate Funding vs. Fully Insured

Wellness / Value Based Benefit Plans

Professional Employer Organization ( PEO)

Consumer Driven Health Plans ( H.S.A., H.R.A.)

Drop coverage and direct employees to Covered CA

A combination of the above

COVERED CA VS. NON-EXCHANGE PLANS

Covered CA- Pro: Able to utilize individual subsidies and business tax

credits if eligible;

Covered CA Con: Pricing, Skinny Networks, Quality and Service

(Unknown at this time); Limited number of carriers for SHOP

Marketplace; Plan Design Inflexibility in SHOP ( one Metal Tier only)

Non-Exchange Plans- Pro: Plan Design Flexibility; Full Networks;

Competitive Pricing anticipated for unsubsidized individuals

Non-Exchange Plans- Con: No individual subsidies or business tax

credits available; Pricing may be uncompetitive vs. subsidized plans on

Covered CA

ALTERNATE FUNDING VS. FULLY INSURED

( GENERALLY FOR GROUPS OF 50+)

Fully Insured: Pro- Predictable Monthly Cost

Fully Insured: Con- If claims experience is low, health insurer keeps the

excess as profit

Alternate Funding: Pro- Lower cost if group has a favorable

Claims/Premium Loss Ratio; Lower taxes and fees vs. Fully Insured

Alternate Funding: Con- Costs may vary each month; Costs will be

greater if Claims/Premium Loss Ratio is unfavorable

WELLNESS / VALUE BASED PLANS

Wellness/ VBP: Pro:- Creating a culture of health/productivity; employer

incentives to improve health/lifestyle; Potential cost savings

Wellness/VBP: Con- This concept must receive buy-in from Senior

Management or it will not work well; It’s more difficult to change

employee behaviors as compared with just paying claims

PROFESSIONAL EMPLOYER

ORGANIZATIONS ( PEO’S)

With PEO’s, your employees work for the PEO and they contract with

your firm for services

PEO’s offer Payroll, Admin, Insurance ( Property & Casualty, Benefits)

Pro: Potential to lower costs while maintaining coverage

Con: Employees no longer have an employer/employee relationship

with your firm; There may be hidden fees/expenses

CONSUMER DRIVEN HEALTH PLANS

CDHP’s: Pro: Employees tend to be more careful about consuming

health care services; cost-savings potential; tax benefits to employees

and/or employer; ability to save on tax-favored basis for both current

and future health care expenses.

CDHP’s: Con: These plans are harder to grasp for average employees;

No Copays allowed; Employees must meet an Aggregate ( i.e. Family )

Deductible for coverage to kick in ( other than routine preventive care,

which is covered at 100%)

DROP COVERAGE AND DIRECT

EMPLOYEES TO COVERED CA

Pro: Employers ( who select this option will no longer have to deal with

their own Group Health Insurance Program; Employees who are

subsidy-eligible may choose to utilize their subsidies in Covered CA

Con: Competition may continue group health coverage ( potential

competitive disadvantage); tax-free group coverage may no longer be

available if employees purchase coverage through Covered CA ( Note:

Employer can set up Premium Only Plan to pre-tax premium for

employees).

OTHER THINGS TO CONSIDER

Employer DOL notifications required on or before 10/1/13

Congress given preferential treatment regarding access to Health Care Marketplaces

Small Business ( SHOP ) Marketplace rates to be released by about 10/1/13

Some unions are turning against HC Reform due to cost, 2018 Cadillac Tax

Insurance Companies offering “early renewal” strategy for employers to delay implementation of 2014 changes to late 2014

Loophole – Affordability defined for individuals ( Not Families)

SUMMARY

The 1/1/14 Open Enrollment Period for Covered California ( CA

Health Care Exchange) is from 10/1/13-3/31/14

Overview of Individual rates and benefits have been released

www.hbex.ca.gov

www.coveredca.com

You can follow Covered California on Linked In, Facebook and

Twitter

http://www.hbex.ca.gov/

http://www.coveredca.com/

QUESTIONS?

THANKS FOR YOUR ATTENTION!

Jim Wisdom, CFP

James L. Wisdom Insurance Services

4607 Lakeview Canyon Road-Suite 482

Westlake Village, CA 91361

[email protected]

Work: (805)497-9264

Cell: (818)469-6640

CA License #0699524

Follow my Health Care Reform Blog at www.jimwisdom.wordpress.com

Continue the conversation on Linked In, Twitter and Facebook

Twitter = @Wisdom_InsSvcs

http://www.jimwisdom.wordpress.com/

Date post:	22-Oct-2014
Category:	Health & Medicine
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2014 Is The "Real" Start of Health Care Reform

Health & Medicine