the changing landscape of employer-sponsored healthcare · (which is $9,350 for an individual in...
TRANSCRIPT
The Changing Landscape of
Employer-Sponsored Healthcare
Presented to attendees of the
What’s IN OUT Back Economic Summit and Golf Tournament
September 7, 2012 Midway, UT
1. How Awesome is the Utah Health Exchange, Really?
2. Alternate Endings a. What’s Up with Federal Health Care Reform?
— Definition, Timelines, Functions, and States’ Progress
b. How Might Employers Be Affected By Federal Health Care Reform?
— Individual and Employer Mandates (including calculation) — Small Business Tax Credits
c. The Future of Health Care Reform • Review and Implications of the SCOTUS Decision • Remaining Uncertainties
AGENDA
IMPETUS FOR REFORM
• Why Utah?
– Strong leadership in Executive and Legislative branches
– Strong encouragement from Washington, DC
– Strong support from the business community
• Why health system reform?
– Cycle of growing uninsured population, increase in uncompensated care, rising premiums, employers dropping coverage
– Increasing consumer detachment
– Skyrocketing costs for businesses; threat to the state’s economic health
3
ESCALATING PREMIUM COSTS
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: GOPB analysis of data from the Agency for Healthcare Research and Quality Medical
Expenditure Survey and Kaiser Family Foundation Annual Employer Benefits Survey
CONSUMER DETACHMENT
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Private Health Insurance Payments
Source: GOPB Analysis of Centers for Medicare & Medicaid Services, National Health Expenditure Accounts
Consumer Out-of-Pocket Payments
FEWER FIRMS OFFERING COVERAGE
Percent of US Firms Offering Health Benefits
54%
56%
58%
60%
62%
64%
66%
68%
70%
2000 2001 2002 2003 2004 2005 2006 2007
Source: Kaiser Family Foundation
FEWER FIRMS OFFERING COVERAGE
Percent of Utah Firms Offering Health Benefits
40%
42%
44%
46%
48%
50%
52%
54%
56%
58%
2000 2001 2002 2003 2004 2005
Source: Agency for Healthcare Research and Quality Medical Expenditure Survey
IDENTIFYING THE UNINSURED
Utah’s Uninsured Population in 2007
• 12% (roughly 310,000 individuals)
• 1/3-1/2 were income eligible for a public coverage program • Medicaid
• CHIP
• Utah Premium Partnership
• Majority were employed
• Many were part-time workers w/multiple jobs
• Most worked for small firms • Small business state
• Less than 50% of small firms offering health insurance
• Many were “young immortals” (age 18-34)
8
9
CREATION OF THE DEFINED CONTRIBUTION MARKET
What are Defined Contribution arrangements?
• Employer-sponsored health plans that allow individual employees full control over their plan choice
• Rather than promising or providing a certain level of health benefit, the employer offers a pre-determined level of funding that the employee then controls and uses to purchase their choice of health insurance
10
ESTABLISHMENT OF THE UTAH HEALTH EXCHANGE
• Created within the Governor’s Office of Economic Development (GOED)
• Serves as a market organizer; does not contract with select carriers
• On-line comparison, application, enrollment, and premium aggregation
• Regulatory authority limited to establishment of electronic data standards
• Small Group
• Limited Launch, August 2009
• Full launch, September 2010
The Utah Model
11
Portal / Web site
Enrollment Interface
Carrier 1
Carrier 2
Carrier 3
Health Plan #1
Plan Comparison Interface
Health Plan #2
Health Plan #3
Health Plan #4
Administration Interface
Carrier 4
Communication Interface
Employee or
Consumer
True Exchange
Premium Aggregation
Admin, Life Events, etc.
Billing & Invoices
Employer
Consumer Decision Support Tools
ADVANTAGES OF THE NEW SYSTEM
EMPLOYERS
• Simplified Benefits
Management
• Predictable costs
• Expanded Coverage Choices
• Preserve Tax Benefits
EMPLOYEES
• Individual Control and
Choice
• Pay with Pre-tax dollars
• Greater Potential for Plan
Portability
• Premium Aggregation
• >100 plan choices available
• 296 employers participating
• ~6924 covered lives
• 93.3% employer renewal rate
• Employer contributions
– Lowest: $0
– Average: $438
– Highest: $2000
UTAH HEALTH EXCHANGE STATUS REPORT (AUG 2012)
UTAH HEALTH EXCHANGE STATUS REPORT (AUG 2012)
• 789 brokers trained to use the Exchange
• 33.5% of employers currently participating previously offered no coverage
• 24% of the business groups participating in the Exchange previously offered coverage with an insurance carrier not participating in the exchange
• 92% of the businesses participating in the Exchange use a broker
RESULTING SHIFTS
• Seller’s Market Buyer’s Market – Insurance carriers compete for business
• Employer Dollars Employee Dollars – Consumerism is reintroduced to the market
• Opaque Benefit Clear Value – Employees see insurance as a benefit rather than a cost
What’s Up with Federal Health Care Reform?
• Patient Protection and Affordable Care Act PPACA, Affordable Care Act, ObamaCare, federal health care
reform
Passed March 26, 2010
• Medicaid Expansion Up to 138% FPL*
• Insurance Market Reforms Individual and Employer Mandates
Guarantee Issue and Community Rating
Essential Health Benefits (EHB)
Federal premium subsidies up to 400% FPL**
Health Insurance Exchanges *$31,809 2012 Federal Poverty Guidelines
*$92,200 2012 Federal Poverty Guidelines
Brief Overview of PPACA
• Purpose Online marketplace that enables individuals to shop, compare,
and enroll in a health insurance plan
• Operator State-Based Exchange (SBE)
State-Federal Partnership/Hybrid
Federally Facilitated Exchange (FFE)
• Models Open Marketplace
Selective Contractor
Active Purchaser
What is an Insurance Exchange?
Two Types of Exchanges Under PPACA
Small Business Health Options Program (SHOP)
• Small businesses with up to 100 employees may purchase qualified coverage
• Premium subsidies are not available through the SHOP exchange (tax credits are available for qualified employers)
American Health Benefit Exchange (AHBE)
• Individuals and families may purchase qualified coverage through Qualified Health Plans
• Purchaser may be eligible for premium subsides—based on income level
States may choose to operate two separate exchanges or combine into a single mechanism
2010 2014 2013 2012 2011 2017 2016 2015 2018
Jan 1, 2013 HHS must determine if states have made sufficient progress in developing exchanges; will deem states as “Approved”, “Conditionally Approved”, or subject to FFE
Jan 1, 2014 Premium tax credits available for enrollees (100%-400% FPL)
March 23, 2011 Deadline for HHS Secretary to award Exchange grants
Jan 1, 2015 Exchange must be financially self-sustaining Jan 1, 2017
Large group Exchange to go live
Jan 1, 2014 State Exchanges required to go live
July 1, 2010 Healthcare.gov goes live, simulating first Exchange
Preliminary insurance regulations take affect
Jan 1, 2014 Employer & Individual mandates in effect
Jan 1, 2016 States must choose to engage in Health Care Choice Compacts
PPACA Exchange Timelines
Nov 16, 2012 States must submit Exchange Blueprint to HHS
The Utah Model
21
Portal / Web site
Enrollment Interface
Carrier 1
Carrier 2
Carrier 3
Health Plan #1
Plan Comparison Interface
Health Plan #2
Health Plan #3
Health Plan #4
Administration Interface
Carrier 4
Communication Interface
Employee or
Consumer
True Exchange
Premium Aggregation
Admin, Life Events, etc.
Billing & Invoices
Employer
Consumer Decision Support Tools
Mandated State Exchange Functions Portal / Web site
Enrollment and
Eligibility Interface
Carrier 1
Carrier 2
Carrier 3
Health Plan #1
Plan Comparison Interface
Health Plan #2
Health Plan #3
Administration Interface
Communication Interface
TREASURY
HOME LAND SECURITY
IRS
HHS
SOCIAL SECURITY
Verify Citizenship
Verify Income
Tax Credits
Verify Residency
STATE Medicaid
Eligibility
Reporting
Subsidies
Cost Reduction
TPA Customer Service Financials Risk Adjustment
Notifications
Pay Premiums
Employee or
Consumer
Billing or Invoices
Employee or
Consumer
Admin, Life Events, etc.
Customer Service
ONLINE CALCULATOR Display Total
Costs
Health Plan #4
Carrier 4
State Insurance
Agency
Certify, Recertify Decertify
Health Plans
Navigator Guidance
Federal Data
Services Hub
• Lack of timely guidance from HHS 1968 new or expanded powers given to the Secretary of HHS
• Heavy Technology Lift Systems development
Strained public/private sector resources
• Tough statutory timelines Agreement among state officials
Stakeholder buy-in
Barriers to State Exchange Implementation
Study Committee
Legislation Failed
Legislation Tabled/On Hold
Alternative Authority
No Bill
Establishment Legislation
State Exchange Implementation Authority
Hawaii
Alaska
DC
Submitted a letter of intent to establish a an exchange
Updated 07-25-12
• States making significant progress (5-10) Will be certified as “approved”
Will likely still rely on federal processes for some functionality
• States making some progress (30-35) Will be certified as “conditionally approved”
Will be considered a state-federal “hybrid”
• States making little or no progress (5-10) Will have a federally-facilitated exchange
May continue to work toward a state-based exchange
Likely State Scenarios in 2014
How Might Employers Be Affected By Federal Health Care Reform?
THE INDIVIDUAL MANDATE
No individuals will be required to purchase coverage under the law, HOWEVER
Beginning in 2014, most Americans must be enrolled in a health insurance plan that meets basic minimum standards as defined by HHS. Those who are not enrolled, will be subject to a tax. Waivers may be granted for persons for whom coverage is determined to be “unaffordable” (defined as cost sharing for 80 FTEs now exceeds 9.5% of employee household income )or for other reasons such as religious beliefs, hardship, incarceration, undocumented alien, etc.
CALCULATING THE INDIVIDUAL MANDATE TAX (I)
The tax shall be the greater of a flat dollar amount per individual or a percentage of the individual’s taxable income; with dependents under 18 years of age being taxed at half that amount. •The flat dollar amount per individual is $95 in 2014; $325 in 2015 and $695 in 2016. After 2016, the flat dollar amount is indexed to inflation. •The flat dollar penalty is capped at 300% of the flat dollar amount. •For example:
A family of three (two parents and one child under 18) would have a flat dollar penalty of $1737 in 2016; A family of four (two parents and two children over 18) would have a flat dollar penalty of $2,085 in 2016 because the 300 % cap would apply.
CALCULATING THE INDIVIDUAL MANDATE TAX (II)
•The percentage of taxable income is an amount equal to a percentage of a household’s income that is in excess of the tax filing threshold (phased in at 1% in 2014; 2% in 2015; 2.5% in 2016). •For example:
If an individual has a household income of $50,000, the percentage would be 1% of the difference between $50,000 and the tax threshold (which is $9,350 for an individual in 2010). Assuming the tax threshold is $10,000 in 2014, this individual would be subject to a percentage penalty of $400.
o$50,000-$10,000 = $40,000 o$40,000 x 1% = $400
Because this percentage penalty is greater than the flat dollar penalty for 2014 (which is $95), he would pay the percentage penalty.
THE EMPLOYER MANDATE
No employer will be required to purchase employee-sponsored coverage under the law, HOWEVER
Beginning in 2014, a penalty of up to $2000 per employee would apply to employers with 50 or more full-time employees that don’t provide employee coverage
50 or more FTEs during the preceding calendar year FTEs are those working 30 or more hours per week OR a combination of part-time employees (i.e. Two employees each working 15 hours a week would count as one FTE for the purpose of applying the penalty) Excludes those full-time seasonal employees who work fewer than 120 days during the year
CALCULATING THE EMPLOYER PENALTY •In 2014, the monthly penalty assessed to the employer for each full-time employee who receives a federal subsidy will be 1/12 of $3,000 (or $250) for any applicable month. •However, the total penalty for an employer would be limited to the total number of the firm’s full-time employees minus 30, multiplied by 1/12 of $2,000 (or $166.67) for any applicable month. •After 2014, the penalty amounts would be indexed by a premium adjustment percentage for the calendar year. •For example:
An employer with 100 FTEs has a mid-year plan renewal. Rates increase such that , beginning in July, cost sharing for 80 FTEs now exceeds 9.5% of employee household income, thus making them each eligible for a federal subsidy
o80 FTEs x $250 x 6 months= $120,000 o100 FTEs – 30 = 70 FTEs (70 FTEs x $167 x 6 months = $70, 140)
SMALL EMPLOYER TAX CREDITS The law makes tax credits to certain small employers to help them purchase coverage for employees Credit is available for a maximum of six years
In the years 2010-2013, the credit will cover up to 35% of the employer’s contribution to employee’s health coverage For two consecutive years beginning in 2014, the maximum credit available for non-profit and for-profit employers is 35% and 50% (respectively) of the employer’s contribution
Employer must be paying at least 50% of the employee’s insurance Employer must have fewer than 25 full-time employees whose average salary is below $50,000
Credit is phased out as the number of FTEs increases from 10 to 25 and as average employee compensation increases from $25,000 to
$50,000.
The Future of the Law
• Anti-Injunction Act The “shared responsibility payment” (SRP) is not a “tax”; rather
it is a “penalty”
• Individual Mandate Congress may not regulate inactivity under the Commerce
Clause Congress may impose a tax as a consequence of inactivity
• Imposing a tax “leaves an individual with a lawful choice to do or not do a certain act, so long as he is willing to pay a tax levied on that choice.”
• Medicaid Expansion Expansion is optional; States choosing not to expand will not be
in danger of losing all Medicaid funding • Roberts concluded, “the financial ‘inducement’ Congress has chosen—
[the withdrawal of existing Medicaid funds]—is much more than “relatively mild encouragement’—it is a gun to the head.”
Review of the SCOTUS Decision
•Exchanges and Premium Subsidies Remain
•Tax Applies to Uninsured Individuals
•Medicaid Expansion Now Optional for States Expansion was supposed to account for approximately half of PPACA coverage expansion – about 15-17 million new enrollees
7 states have already announced opt-out
•Medicaid Doughnut Hole Boycotting states mean 11 million of the would-be newly eligible under the expansion could be left uninsured
Not eligible for Medicaid or premium subsidies through the Exchange
Some will be subject to the individual mandate tax
Implications of the SCOTUS Ruling
• Who controls the House and Senate and to what degree? Is actual repeal possible?
Will statutory timelines remain?
• Who will occupy the White House? Is “effective“ repeal by Executive Order possible?
Repeal and replace with……..?
• What about state elections? Compare with 2010
Remaining Uncertainties: 2012 Elections
• Exchange administrative costs Federal funding opportunities for exchange establishment
through 2014
On-going operational costs are the responsibility of the state
• Costs for current and expanded Medicaid populations Medicaid is 1st or 2nd largest or second largest line item on
every state budget
Crowds out spending on education, public safety, roads, etc.
Remaining Uncertainties: State Budgets
38
EVENT SCOPE ($$$) TIMING
Bush Tax Cuts
-$3.3 trillion over 10 years End 2012
Sequestration
-$1.2 trillion over 10 years End 2012
Payroll Tax Cut
-$804 billion over 10 years End 2012
Debt Ceiling
TBD October 2012
Sustainable Growth Rate
-27% cuts End 2012
Alt. Min. Tax Patch
-$505 billion over 10 years End 2012
Remaining Uncertainties: Federal Budget
39
•Automatic expirations mean About $650 billion would evaporate from the economy in early 2013 An additional $1 trillion automatic budget cuts over the next 10 years also slated to begin in 2013.
•In the absence of Congressional action, CBO projects
US economy will contract by 1.3% in the first half of 2013 US economy will sink back into recession
Remaining Uncertainties: The Fiscal Cliff
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