Health Care ReformOverviewProviders’ ViewEmployers’ ViewWhat we all need to watch

William Custer, PhDPatricia Ketsche, PhDInstitute of Health Administration, GSU

Agenda

• Overview of reform

• What does it mean for providers?

• What does it mean for employers?

• What we need to watch

Total National Health Expenditures:$’s and as Share of GDP

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Perc

en

t

$

National Health Expenditures Percent of GDP

The Employment-Based Coverage System is Eroding

60%

65%

70%

75%

80%

5%

10%

15%

20%

25%

30%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Uninsured Total Public Total Private

ESI Benefits Limited for Small Firms

Source: Tabulations of the March supplement to the Census Bureau’s Current Population Survey for 2002 and 2010

Percentage of Uninsured by Firm Size of Family Head

Nonworker Under 10 10 to 24 25 to 99 100 to 999 1000+ 0%

5%

10%

15%

20%

25%

30%

35%

40%

2009

2002

Overview of Reform: Major Change Components• Medicaid Expansion

• Changes in Private Coverage

• Improving Health Care Quality

• Focus on Health

Major Change Component: Medicaid Expands Eligibility (2014)• From “Poor AND….” to “Poor”

– Everyone under 133% poverty eligible• In 2010 ~$20,000 for family of 2

– Federal Gov’t pays for the expansion through 2016• Phase in state payments of 10% for newly eligible

Major Change Component Private Coverage Changes 2010-2013• Insurance regulation

– Expansions for children (no pre-existing conditions) & young adults

– Rate reviews– Preventive Care– No lifetime/limited

annual benefit caps– Medical Loss Ratio

• Small Employer Tax Credits– Targeted to low wage,

smaller firms– Offset portion of

premiums paid– Even available to NP

Major Change Component: Private Coverage Changes 2014• Community Rating• Health Insurance Exchanges

– Individuals– Small employers

• Individual Mandate– Subsidies for those without employer coverage

• “Pay or Play” for employers with 50+ workers

Overview of Reform: More Americans with health insurance coverage

Remaining UninsuredOver • Non-citizens (25-35%)• Low income populations (100-250% FPL)

– High income volatility– Frequent moves between Medicaid and

insurance subsidy categories• Remaining uninsured are likely to be younger

and healthier than those currently uninsured

Overview of Reform: Financing

Fees, Taxes and Penalties

Medicaid

Insurance Premium SubsidiesMedicare Savings

+/- 1 trillion +/- 1 trillion

Major Change Component:Improving Health Care Quality• Information

– Focus on collecting, sharing and using• Coordinated Care

– Focus on integration• Pay for provider quality

– Bonuses– Penalties

Major Change Component:Focus on Heath• National health strategy council

– Research & public health innovation– Mandatory preventive care benefits

• Funding for state/community based wellness initiatives

Provider View

• Payer mix changes

• Payment changes

• Regulatory changes

Providers: Payer mix changes More Georgians with health insurance coverage

Source of coverageNow

Fully Implemented Change

Employer 57% 54% -3%

Individual Private 4% 2% -2%

Other 8% 8% None

Medicaid/CHIP 12% 17% +5%

Uninsured 19% 5% -14%

Exchange 0% 14% +14%

Providers: Payment Changes

• Incentives for integration– Accountable Care Organizations– Bundled payments– Incentives for Medical Homes

• Value based purchasing– Reimbursement tied to quality– Expanded beyond inpatient hospitalizations

Providers: Payment Changes

• Rate cuts – Reduced Medicare Advantage payments– Reduction in update formula – Cuts to DSH funding

• Infrastructure for future payment innovation– Center for Medicare and Medicaid Innovation– Independent Medicare Payment Advisory Board

Providers: Regulatory Changes to promote transparency & oversight

Transparency Oversight

Financial Relationships Limits on Physician Ownership of hospitals

Publication of Charges Strong Fraud and Abuse Provisions

Community Needs Assessments

Expansion of RAC audits

Enhanced Data Collection & Reporting Requirements

Employer View

• Why an employer focus

• What does it mean for employers right now?

• Employer implications depend on size

Why an Employer Sponsored System?• Risk pools → stabilize premiums• ↓administrative costs• Purchasing expertise in HR• Tax exclusion of premiums • Over $250 billion in subsidy of private

coverageBUT…….

Affordability

• Declining participation rates• Employers shifting more cost to workers:• Increases since 2005:

– Inflation 12%– Wages 18 % – Overall premiums 27 % – Employee contributions 47%

Source: Kaiser HRET Survey

What Does Reform Mean for Employers Now?• 2010 Changes

– Add in dependents < 27– Eliminate lifetime and

annual benefit limits – Eliminate pre-ex

restrictions for children– Cover preventive case

without cost sharing• Exemption:

Grandfathered plans

• 2011 changes– Limits on use of FSA/HSA

for OTC medications– Report value of health

care benefits on W-2

• 2012 changes– Additional 1099

reporting

<25 Employees

<25 Employees

<50Employees

<50Employees

>50 Employees

>50 Employees

>200 Employees

>200 Employees

Employer Implications Depend upon Number of Workers (FTEs)

<25 Employees

<25 Employees

Tax Credits

• Full Credits– <10 FTEs– Wages < $25,000

• Phased out credits– 10 to 24 FTEs– Wages to $50,000

• Credit as share of premium:– 2010-2014: 35% – 2014-2015: 50%

<25 Employees

<25 Employees

Number of FTEs

Average Annual Wages

($’s)

Employer payments for Health Insurance

Tax Credit % Tax Credit

10 $20,000 $40,000 $14,000 35%

15 $20,000 $60,000 $14,000 23%

24 $20,000 $96,000 $2,240 2%

10 $40,000 $40,000 $5,600 14%

15 $40,000 $60,000 $1,400 2%

24 $40,000 $96,000 0 0

Tax Credits – 2010: Examples

State Decisions on ExchangesChoice Issues

Number of Exchanges American Health Benefit Exchange - IndividualsSmall Business Health Options Program (SHOP) - Small EmployersCombination

Governance State AgencyPrivate Non-profit

Regulatory Authority Insurance plan characteristics in/outside ExchangeRisk AdjustmentRate Review“Aggregator”

American Health Benefit Exchange

• Individual Coverage• Administration of Subsidy• Medicaid Enrollment• Choice of Plans

–Quality Information

American Health Benefit Exchange

• Certify, price and rate plans

• Standardized benefit information

• Administration of Individual Subsidy

IndividualsIndividuals

SHOP Exchange Purchasing• Certify, price and rate

plans • Standardized benefit

information• Administer small business

tax credits

<50Employees

<50Employees

>50Employees

>50Employees

Pay or Play

• Penalties if full time workers obtain coverage in the Exchange– $2,000 per full time worker (exclude first

30) if no coverage offered– $3,000 per worker obtaining the subsidy

if coverage offered that is not sufficiently generous

– High cost sharing– High employee premiums

Employer Must:• Auto enroll new workers

– Employee only – Lowest cost plan

• Employee can still opt out or change selection

>200 Employees

>200 Employees

What we all need to watch

• Federal Regulations– Benefit Package– Exchange regulations– Definitions/regulations

for• ACOs• Bundled payments• Pay for performance

• State Decisions– Exchange structure and

functions– Insurance market

regulation– Medicaid

• Eligibility and Enrollment Processes

• Provider incentives and payments

– Workforce strategy

What we all need to watch…..Political developments

Health Care ReformOverviewProviders’ ViewEmployers’ ViewWhat we all need to watch

William Custer, PhDPatricia Ketsche, PhDInstitute of Health Administration, GSU