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Health Care Reform Happened …Now What?

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International Association of Black Actuaries | August 2010. Health Care Reform Happened …Now What?. Aspects of Health Care Reform. Paying for Expanded Coverage. Expanding/Improving Coverage. Administrative Simplification. Medicare/Medicaid Payment Changes.

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aspects of health care reform
Aspects of Health Care Reform

Paying for Expanded Coverage

Expanding/Improving Coverage



Medicare/MedicaidPayment Changes

Medicaid and Affordability Credits

Health InsuranceExchanges with Reformed Rules



High-Cost EmployerCoverage Taxation

IncreaseOther Taxes

= direct impact to employers

= indirect impact to employers

= direct and indirect impact to employers

timing of key reform provisions
Timing of Key Reform Provisions
  • Early Retiree Reinsurance (2010)
  • Lifetime Limits Prohibited
  • Extension of Dependent Coverage to Age 26
  • Preexisting Conditions Exclusions Prohibited for Children under 19
  • Only Reasonable Annual Limits Permitted
  • Effective Appeals Process
  • Over-the-Counter Medicines Not Reimbursable Under FSA
  • HSA Excise Tax Increase
  • Employer Reporting of Health Coverage on Form W-2
  • Phase-out of Part D Donut Hole
  • Medicare Advantage payments lower
  • Coverage for Preventive Health Services*
  • 105(h) Non-discrimination rules apply to insured plans*
  • Employer Distribution of Uniform Summary of Benefits to Participants
  • Quality of Care Report
  • Limit of Health Care FSA Contributions
  • Notice to Inform Employees of Coverage Options in Exchange
  • Automatic Enrollment for 2014**
  • Medicare Tax on High-Income Individuals
  • Medicare Part D Subsidy No Longer Tax-Free
  • Employer Responsibility to Provide Minimum Health Coverage
  • Free Choice Vouchers
  • Individual Responsibility to Purchase Insurance or Pay Penalty
  • State Insurance Exchanges
  • Preexisting Condition Exclusions Prohibited
  • Annual Limits Prohibited
  • Automatic Enrollment**
  • Limit of 90-Day Waiting Period for Coverage in Plan
  • Increased Rewards Cap for in Wellness Participation
  • Employer Reporting of Health Insurance Information to Participants and the Government
  • Excise Tax on High-Cost Coverage (2018)



2014 and beyond


*Grandfathered**Effective date unclear

the price tag

$196 billion



$136 billion

The Price Tag
  • CBO Estimate of Combined H.R. 3590 and H.R. 4872, 2010–2019

MedicareAdvantage Cuts

Excise Taxes

Medicare Taxes

Reduction in Medicare Growth Rate



Other Net Revenues

Industry Fees

Other Net Savings

$32 billion




$210 billion

System Savings

$517 billion

New Revenue

$564 billion

Total Cost of Expanded Coverage: $938 BillionNet Budget Impact: $143 billion reduction to the deficit (without “doc fix”)

potential impact on employers

Must create design structure that meets minimum coverage criteria

Potential Impact on Employers



  • Must change design to meet expanded coverage requirements
  • Need to develop appropriate communication, reporting, and administrative infrastructure
  • Administration/Communication
  • Likely to increase depending on organization’s characteristics
  • Will continue to increase given absence of true delivery system reforms
  • Active Plan Costs
  • Immediate and long-term cost impact
  • FAS Liability
  • May be more compliance focused
  • Should address broader health and productivity as well as benefit philosophy
  • Strategy
plan design requirements
Plan Design Requirements
  • Increased Benefits for Participants
    • Lifetime limits must be removed
    • “Unreasonable” annual limits not permitted
      • Annual limits will be phased out by 2014
    • Preventive benefits must be covered at 100%
    • Children must remain eligible for the plan until they turn age 26
    • Financial barriers to out-of-network emergency care are limited
    • Barriers to PCPs, pediatricians and OB/GYNs are not permitted
    • Deductibles and out of pocket maximums will be limited beginning in 2014
    • Plans must meet 60% minimum actuarial value beginning in 2014
other requirements
Other Requirements
  • Increased Protection for Individuals
    • Minimum loss ratios for insured plans
    • Prohibition of rescissions in most cases
    • Guaranteed issue and renewal rules
    • Waiting periods limited to 90 days
    • No discrimination based on health status
    • Limited age and tobacco rating
    • Expanded communication and documentation requirements
    • Expanded appeals policies and procedures
    • Affordability and nondiscrimination rules for employer-sponsored plans
    • Excise tax on high cost employer-sponsored insurance
compliance strategy
Compliance Strategy
  • Compliance will increase the cost of health insurance
    • …but does it have to?
  • Employers and insurance companies will be searching for ways to mitigate cost increases and limit new risks
    • Grandfathering delays some new costs, but limits flexibility
    • Losing grandfathering forces bigger strategic decisions…and vice versa
  • Step out of the silo
    • Long term strategic thinking must guide all decisions
    • Opportunities abound and can influence strategy as much as risks
      • New retiree programs and funding
      • Changing market dynamics
something about opportunities
Something about opportunities?


  • ERRP
  • New Medicare Part D funding
  • New competitive landscape
  • Changing market dynamics
  • Changing employer perceptions
  • Changing public expectations
health care reform s impact


Regulation and taxation

Insurance Industry

Competition based on volume and innovation


Refine and redefine commitments


Increased responsibility with the power of knowledge

Health Care Reform’s Impact

New 2020 Realities


Federal Subsidies

Insurance Reform

Employer Responsibility

Individual Mandate

Delivery Reform

The employer-sponsored system will endure…the federal budget depends on it

five employer realities by 2015
Five Employer Realities by 2015
  • Employer health care cost will rise over 60% on a “stand still” basis; employer actions will mitigate this increase to 40%
  • Very few, if any, large employers will exit health care benefits, but the market trend to move from DB to DC will have begun
  • Plan designs will be leaner and meaner
  • The explosion of technology-enabled information will (finally) trickle down to our world, but will not lower employer cost
  • Employer-sponsored retiree medical benefits will cease to exist, except for collectively bargained and some grandfathered plans
employer costs will rise 60 on a stand still basis
Employer costs will rise 60% on a “stand still” basis
  • Annual gross trend of 10% per year; net trend of 7% per year
  • Upward Pressures
  • Demographics
  • Obesity-related chronic illness—including children
  • New therapies
  • Cost shift from Medicare
  • Industry fee pass-throughs
  • New coverage provisions
  • Individual mandate
  • Downward Pressures
  • Plan design value
  • Discretionary purchasing
  • Uncompensated care
  • Brand drug patent expirations
  • Focused care management programs

These rates of increase are unsustainable; there needs to be a “new normal”

what needs to change
What Needs to Change

Reset and Prioritize


Embrace IT and P4P



Liability, Payment, and Delivery System Reform (via Medicare)


Pay Attention and Take Action