Healthcare Reform: Where are We Now? An update from the 2013 presentation
Our Background • Saucon Mutual Insurance Company • Founded in 1832 as Farmers Fire Insurance Company of Upper and Lower Saucon Townships. Changed to current name in 1960 • Today, SMIC is a highly capitalized, A (Excellent) rated, mutual insurance company with policyholders throughout the region. • Our business operates on a premise of service to our policyholders and to our community • Saucon Insurance Agency • Offers both Property & Casualty and Employee Benefits Insurance • Focus is the Eastern Pennsylvania region • Provides full transparency in our HR and Benefits Consulting Practice
A brief review • Passed in March 2010 with the purpose to decrease the number of uninsured individuals in the US, estimated at 7 million. • This is a tax law, and includes a number of revenue enhancements (fees, penalties, etc.) • Phased in over a number of years • Changes both to the group insurance and individual insurance market (rating, underwriting, essential benefits, etc.) • A number of delays and/or cancellation of parts of the law • Updates include anything that has changed since we last met in September
Individual Insurance • What happened in 2013 for the exchanges? • Employer sponsored insurance vs exchange • Payroll issues • 2015 enrollment
Individual exchanges - History • Each state had until mid-December 2012 to determine if they were going to run their own exchange, or default to the federal exchange • PA is one of 37 states deciding to default to the federal exchange. • Federal exchange testing for enrollment was not working prior to 10/1 and carriers could not send data back and forth to the test environment of the exchange.
A website that kind of works • Federal Exchange website rolled out on 10/1/2013 • Massive technical failures • Government “did not expect the number of applicants that showed up to enroll” • Made a decision prior to the exchange launch to require individuals to create an account prior to seeing costs of coverage • Government continues to roll out changes and upgrades to the site as issues/problems are discovered.
Exchange coverage - example • For a real life example… • 63 year old woman • Recently retired due to time needed to treat cancer • Paying $406 a month on COBRA • $2500 total max out of pocket expense annually on COBRA plan (medical and drug) • Makes $35,000 annually on SSDI and LTD • Married – Spouse on workers comp – 8 years - $30k annual earnings
Exchange coverage - example • Exchange experience • 45 minutes to put all of her information in • Required spouse’s SSN and income, although he was not applying for coverage • Plans available were $605 minimum monthly cost, with a $4500 annual out of pocket. • Received a ruling at the end that under PPACA states could expand medicare, and since she was out on disability she might qualify – SHE DOES NOT • Was told to buy a plan, and that her subsidy determination would come within 45 days after Medicare determined if she could get coverage in PA. • Decided to continue COBRA coverage for 7 months
By the numbers (as of 5/1/14) • Federal Exchange Roll Out • 6 people purchased on October 1st • 26,000 purchased in the month of October • 100,000 purchased as of 11/30/13 • 6.7 Million have been determined to be eligible for Medicaid/CHIP through the exchange • 8 million total members enrolled in a market place plan. • A number of insurance companies are reporting that 25-35% of those who enrolled are not paying for their coverage and have been terminated by the end of June. • Unknown how many of the 8 million had coverage prior to the roll out of the exchange, and lost the coverage as insurance companies terminated policies last fall (13-18% estimated)
Not all things equal • Carriers are doing a number of things to limit their risk and cost inside of the exchange: • Limited networks – Many carriers are creating limited networks for their exchange based plans. • New co-pays – a long list of items have co-pays associated with them that were previously covered • Plan offerings different inside and outside the exchange • Some carriers only offering Bronze and Silver level coverage in the exchange • Others have limited plans inside of the exchange • Carriers are struggling to meet the pricing requirements in the exchange.
You can keep your coverage, maybe • Millions of individuals received notices that their coverage would be cancelled on 1/1/2014. • Due to the current plans not meeting the minimum requirements under PPACA • A lot of blame being passed around between the House, Senate, President and insurance companies. • After a large amount of political pressure, both congress and the President have come up with plans to allow for people to keep the coverage they had. • Some people kept their existing plans, others already had moved to the new PPACA plans
Some things to note… • IRS announced that there are no mechanisms inside of PPACA that allows it to enforce the individual mandate. While it will be part of IRS filings going forward, they cannot garnish wages, impose fines, or use any other means of enforcement. • If an individual is offered medical insurance through his/her employer, and it is affordable and meets quality standards, they are ineligible for subsidies inside of the exchange. • Employees are accessing the exchange and shopping on price alone • Not paying attention to the benefits they are electing • Accepting much higher individual risk for “less money” • Not employer sponsored, no section 125 benefits
2015 Enrollment • To avoid the issues surrounding last year’s open enrollment, HHS announced that they will not open the January 1, 2015 open enrollment until November 1, 2014 • The Department of Health and Human Services wants to give insurers, consumers and engineers more time to avoid the first go-round's site crashes, coverage train wrecks and cost surprises.
2015 Enrollment Concerns • The 8 million people who signed up in 2014 will auto-renew for 2014 may: • May miss out on lower-premium options. • get stuck with an outdated and possibly incorrect government subsidy. • To confirm 2015 subsidy, consumers must resubmit information through the exchange. • Tens of millions of people who remained uninsured this year face tax penalties for the first time, unless they can secure an exemption.
Small Group (under 50 lives) • Plan Changes • Renewal rates – what are they looking like? • Keep it if you like it - Grandmothering • Small group ASO • SHOP Exchange
PPACA 2014 – Plan Changes • Exchange notice • Continues to be “optional”. HHS would like all companies to distribute this notice, but there is no penalty for not doing it. • Many groups opting not to distribute • Groups are being required by some carriers to attest to the smoking status of every member over the age of 18 in their group. • Big changes in the way rates are presented in the under 50 (small group) market. • Carriers are reducing the number of options in the small group market. This is to conform to the metal level definitions of plans.
New Rates Examples • Family 1 - $1,304.46 • 33 yr old adult - $423.51 • 35 yr old adult - $431.99 • 12 yr old child - $224.48 • 15 yr old child - $224.48 • Family 2 - $1,079.98 • 33 yr old adult - $423.51 • 35 yr old adult - $431.99 • 5yr old child - $224.48 • Two employees with family coverage with two different rates
Small Group Employee Contributions • Employer groups are having to make tough decisions on contributions. If no two employees cost the same due to age and family makeup, how do you charge them for contributions? • Employer provides a flat dollar amount based on tier and employee pays the rest • Some will pay nothing, others will pay hundreds of dollars • Employers pay a percentage of the employee cost • Employees pay a flat amount regardless of the cost to the employer • Group applies overall increase to last year’s contributions
PPACA 2014 – Rates • Rates for small groups are all over the place for 2014 • Those groups that had previously paid more due to significant medical conditions or age risk ratings are seeing decreases. Some as much as -54% • Those groups that benefited from medical underwriting, or had a younger demographic are seeing significant increases. Some as much as 120% • Expect more stabilization of rates in subsequent renewals • Mid market (50-200 enrolled) seeing high single digits to mid teens • Large group – Based on the group’s medical trend
Keep your old plan - Grandmothering • For some carriers, groups renewing between 6/1/2014 and 12/31/2014 may keep the plan they have currently. • Positives: • No age banded rates • Wide range of existing plan designs to choose from • Traditional contribution strategies • Cons: • Can be higher cost than the PPACA plans • Cannot change plan type (PPO to HMO) or change carrier without moving to PPACA compliant plans
Small Group ASO – Self funded • Rates are developed through an underwriting rating on new groups, or the claims history and predictive modeling on current groups. • Groups are billed a monthly premium per person (traditional tiered rates), Ex. set at 110% of expected claims (max liability point) • If the premium exceeds the claims at the end of the year, a refund is returned to the company. Example: • 90% of expected claims – 10% refund • 80% of expected claims – 20% refund • Etc. • If claims exceed the max liability point, the group is not charged any additional premium for that year. • Some carriers return the entire refund, others a portion of the refund
SHOP Exchange • The law stated that states must set up a market place for small groups to pool their risk • This was delayed until at least 2015. • Currently the SHOP marketplace is where small businesses under 25 lives obtain approval for their small business tax credit. • The site directs employer groups to contact carriers, consultants, or brokers for plan and enrollment information. • The availability of the SHOP exchange for 1/1/15 enrollment is unknown.
December 1, 2014 • Many small groups renewed early on December 1, 2013 to avoid all of the 1/1 PPACA changes • Age banded rates • Changes to out of pocket maximums and “metal levels” • Some reports estimate that up to 100 million people will lose their employer sponsored coverage on December 1, 2014 when the early renewals expire. • For those groups that see very large increases to their grandmothered coverage, and cannot take on the administration of the PPACA plans/rates. • We are already seeing this with some of our small group clients.
Large Groups 51+ • No plan changes • Rates are risk/experience based • Lots of reporting requirements • Employer penalty transitional relief
Lots of reporting requirements • Reinsurance Fee - ASO • File by November 14, 2014 – submit an annual enrollment count of the average number of covered lives to HHS • $63 per covered life made in two installments (late 2014 and early 2015) • PCOR Fee – ASO and HRAs • $1 per member first year, $2 per member second year • Multiplied by the average number of lived covered under the plan for the year • First payment was due 7/1/14, second is 7/1/15 • Health Plan Notifier – ASO • Must obtain an HPID by November 5, 2014 (11/5/15 for groups with less than $5 million in annual claims)
Transitional Relief • Employer Penalty delayed for groups 51-100 until 2016 (transitional relief) and rules lessened for groups 100+ • As long as the plan year was not changed after Feb 9, 2014 • No coverage penalty applies if the large employer does not offer coverage to at least 95% of FTEs, $2k per employee per year in excess of 30 employees • 75% for 2015 • 80 employee excess for 2015 • Offer Coverage penalty applies if the large employer does not offer minimum value coverage to at least 95% of the FTEs, $3k penalty per year per employee • 70% for 2015
General Employer Requirements • Subsidy verification – All employers may be contacted by the IRS for any employee that has requested a subsidy through the exchange • Cadillac Plan Tax • 40% excise tax on high-cost health plans starting in 2018 • $10,200 single coverage • $27,500 family coverage
IRS Reporting • Required in 2016, optional in 2015 • Section 6055 • Reporting requirement to determine if an individual is enrolled in minimum essential coverage • Insurance companies will file for fully-insured plans • Self-funded (ASO) plans are required to file directly as the employer (including government agencies) • Excludes HRAs, HSAs, and wellness programs • Section 6056 • Reporting requirement for groups over 50 FTEs (large groups) required to detail all aspects of the group health plan
Subsidy in the Federal Exchange • In July, two different courts issued opposing rulings concerning the issuance of PPACA individual subsidies within the federal exchange • DC Circuit Court found that it was not allowed • Virginia court upheld the law • DC Court asked the Supreme Court to take up the case in August • On Sept 4th, the DC Circuit Court agreed to rehear the case in front of the entire court • December 17th the case will be heard. • It is expected that this hearing will be the final determination and that this will not head to the Supreme Court.