The wellness path not taken
Original article: https://ebn.benefitnews.com
By Kathleen Koster
With full implementation of health care reform marching along, the landscape of employer-sponsored health benefits will never be the same. As employers turn to private and public exchanges beginning in 2014 as allowed under the Patient Protection and Affordable Care Act, the purpose for and implementation of worksite wellness programs also are likely to change.
Dr. Matthew Liss, East Coast medical director of NBCUniversal Health Services, fears that employers may not see wellness as their responsibility or employees will be less engaged in wellness initiatives because employers won't work as closely with vendors in the exchange.
Employers may not have access to health data as in the past, which could influence their investment in wellness programs, as well as impact incentives for healthy behavior. Liss points to premium reductions for nonsmokers or incentives for going to the gym that are currently offered by working hand in hand with health care providers. Employers may lose this ability to work with vendors while developing wellness incentives if employees receive coverage through a public or private exchange.
Certain populations could lose out
Bryce Williams, the president and CEO of Extend Health, Inc., which operates the nation's largest private exchange recently acquired by Towers Watson, believes that the most likely demographic to move employees into public exchanges would be small employers with 500 or fewer employees. Employers in this situation would be more likely to stop providing or lessen wellness services to workers than those entering private exchanges, he says.
In general, small employers don't have data to show them the best practices in wellness programs, explains Dave Ratcliffe, a principal at Buck Consulting. This could remain the case for small employers whose workers enter the public marketplaces. Ratcliffe adds that the more employers measure their initiatives, the more investment they make into wellness.
In the retail industry, where part-time workers outnumber full-time workers, some employers will reframe their total reward strategy for a post-2014 health care reform world. Some of Ratcliffe's clients in this sector are considering restructuring jobs and recalibrating total remuneration in order to attract, retain and motivate the workforce. For example, he says an employer may limit part-time workers to clock fewer than 30 hours each week, while rewarding top talent with over 30 hours of scheduled work so they can receive the best health benefits as defined under PPACA. While such a workforce restructuring may require more part-time employees who work under 30 hours per week, this framework could be a motivational carrot to drive talent.
Instead of developing wellness programs exclusively to drive down the health cost curve, employers will use wellness to improve population health and the overall productivity.
"Even if your employees are getting coverage through the exchange now, you want to make sure that they are healthy because a healthier employee is a more productive employee," says Julie Stich, research director at the International Foundation of Employee Benefit Plans.
Williams adds that large employers could leverage any savings they absorb through an exchange setup by reinvesting them into employees, especially into their wellness component.
Giving up a global edge?
According to a recent report from Buck Consultants, 87% of global employers recognize managing employee health as their responsibility in 2012, up from 75% in 2010. Further, 49% of multinational employers now have global health promotion strategies, up from 34% in 2004.
Based on these results, employers believe they need a healthy and productive workforce to have an edge in a global economy.
"If you look globally, the universal responses from all of the countries that productivity and reducing presenteeism was the No. 1 goal for their wellness program, [whereas] for U.S. companies, the No. 1 goal is reducing health care costs," Ratcliffe says. For most employers outside the U.S., employees receive coverage from a government-sponsored system, yet they continue to view wellness initiatives as paramount to driving a profit.
Further, the 2014 reinsurance tax (which could increase employers' health insurance costs by 1-2%), a looming 2018 excise tax, mandated benefits and auto-enrollment could all cause employers to consider shifting cost downward and investing more into wellness. In recent years, plan sponsors have managed a 5% trend rate by predominantly cutting benefits or cost-shifting. "From an attraction and retention standpoint, how much more can we afford to continue to cut benefits? So we're left with wellness to manage costs instead of shifting costs," says Ratcliffe.
In the new health care reform environment, Ratcliffe believes incentives and disincentives will play an even larger role in motivating employees to participate and succeed in wellness. PPACA permits an increase of allowable incentive dollars from 20% to 30%, and more employers are using outcomes-based incentives to drive results.
Overall, the U.S. spends roughly 18% of their total GDP on health care, while the rest of the world spends 9.5% on average. However the U.S.'s average rate of obesity is nearly double the rest of the world's (28% compared to 15%), according to 2012 OECD health data.
"Regardless of health care reform, we're not going to be able to compete in the future without making a change," says Ratcliffe.
Vendor relationships also will morph
The private exchange market, whether insured or self-funded, will function more like a group exchange, where the employer contracts with the exchange instead of sending people individually to a public exchange. For these private exchanges, "employers are not losing access to that data because they are still in a group world in 2014," Ratcliffe explains.
Public exchanges may tell a different story. Employers won't get data for people sent to public exchanges, but Ratcliffe doesn't expect many employers will go this route initially in 2014. Farther down the road when there's a viable individual market similar to Medicare, vendor relationships may change.
Employers' relationships with health vendors, in addition to how they measure and run wellness programs, are sure to change in coming years as employers consider private and public exchanges as options to provide insurance coverage to workers. It remains to be seen how exchanges will change wellness initiatives, but it's clear that wellness programs will always be a business imperative to keep workers healthy, productive and satisfied with their employer.
Many workers aren’t ready for health care reform
Original article https://www.kansascity.com
By Diane Stafford
National health care reform and cost-cutting by employers is changing the way many workers get health insurance, but a majority of employees may not understand what’s ahead.
The Aflac WorkForces Report, the insurer’s third annual employee benefits study, polled 5,299 employees across the country and found that three-fourths said they had never heard the phrase “consumer-driven health care.”
That’s a problem. Consumer-driven health care is the direction the nation is moving. It’s the underlying concept that requires individuals to take more control over their health care spending.
“It may be referred to as ‘consumer-driven health care,’ but in actuality, consumers aren't the ones driving these changes, so it’s no surprise that many feel unprepared,” said Audrey Boone Tillman, executive vice president of corporate services at Aflac.
There’s another problem. The survey found that more than half of the workers polled said they preferred not to have greater control over their health insurance options. Fifty-four percent said they don’t have the time or knowledge to manage the responsibility.
How will workers learn to navigate the world of health care and insurance choices? Seventy-five percent said they expect their employers to educate them about the details of reform.
There’s another problem. Only 13 percent of the 1,884 “benefits decision-makers” in organizations reached in a companion poll said they thought educating employees about health care reform is “important” to their organizations.
At least most employees realize they’re not ready. About half said they fear they will leave their families less protected if they make poor insurance plan choices.
The poll, released Wednesday, emphasized the education challenges as employers shift away from their health care benefits.
One-third of the employees polled said they weren’t knowledgeable about health savings accounts, three-fourths said they weren’t knowledgeable about the impending federal or state health insurance exchanges, half said they weren’t knowledgeable about health reimbursement accounts and one-fourth said they weren’t knowledgeable about flexible spending accounts.
All of those are benefits options for employers to subsidize employee health care in different ways or exit health benefits entirely.
“It’s time for consumers to face reality,” Tillman said. “The responsibility lies in the hands of consumers to educate themselves.”
The Exchanges Really will Open Oct. 1st
Source: https://www.benefitspro.com
By Allison Bell
Photo: United States Mission Geneva / Wikimedia Commons / CC-BY-2.0
U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius on Friday assured yet another congressional panel that the Patient Protection and Affordable Care Act exchanges will be opening on schedule.
"We are moving ahead," Sebelius said at a House Energy and Commerce health subcommittee hearing on the HHS fiscal year 2014 budget request. "We are definitely going to be open for open enrollment starting Oct. 1 of 2013."
Federal fiscal year 2014 will start Oct. 1.
Sebelius has given similar assurances about progress at the HHS PPACA exchange development program at HHS budget hearings organized by the Senate Finance Committee's Health, Education, Labor and Pensions (HELP) Subcommittee and at the House Ways and Means Committee.
PPACA calls for HHS to work with state regulators to start exchanges, or health insurance supermarkets for individuals and small groups.
Senate Finance Committee Chairman Max Baucus, D-Mont., suggested at the HELP hearing Wednesday that it looks as if the exchange program may be headed for a "train wreck."
Congress has provided only $1 billion of the $10 billion that analysts originally said HHS would need to set up the exchange program, Sebelius said.
"We've judiciously used those resources," and efforts to set up the "Hub," the data center and call center to be at the heart of the exchange system, are going well, Sebelius said.
HHS will transfer money from prevention programs to fund exchange education and enrollment efforts, Sebelius said.
Rep. Frank Pallone Jr., D-N.J., said Sebelius should speak more frankly about the funding obstacles that Republicans have put in the way of PPACA implementation.
"They can't come back and criticize if the outreach doesn't occur if they're not funding it," Pallone said.
Republicans on the subcommittee asked whether Sebelius really has to use prevention fund money to pay for PPACA exchange outreach programs.
Rep. Michael Burgess, R-Texas, a medical doctor, asked Sebelius about the HHS decision to abruptly suspend enrollment in the Pre-existing Condition Insurance Plan (PCIP) program, a health insurance program for uninsured people with health problems that make buying medically underwritten coverage difficult.
He referred to a woman with lymphoma who said she learned HHS had shut down the PCIP program the day before she had been about to submit her application.
"Is it Obamacare or Obamadon'tcare?" Burgess asked. "Rather than spending [prevention fund money] on advertising for a program that may not even work on Oct. 1, or Jan. 1, why should we not transfer money from that fund to actually help the people that you promised to help -- the people with pre-existing conditions?"
Sebelius said Americans like the woman with lymphoma will benefit greatly starting Jan. 1, 2014, because, after that date, "no American will ever again be locked out of a health program because of a pre-existing condition."
PCIP was always supposed to be a temporary program, not a permanent solution, and it would not exist if the Republicans had succeeded with their many efforts to repeal PPACA, Sebelius said.
At another point, an exchange between Sebelius and Rep. Joe Pitts, R-Pa., the chairman of the health subcommittee, hinted at the problems that even members of Congress and their staffers may be having with keeping up with PPACA implementation details.
Pitts asked why the PPACA exchanges would not give small businesses a choice of health plans in 2014.
Sebelius had to explain that HHS has decided to let the Small Business Health Options Program (SHOP) small-group exchanges put off giving employers a chance to offer employees a multi-carrier coverage option.
Each SHOP exchange will still offer the employers themselves a chance to choose from a menu that includes plans from all of the carriers that have agreed to sell plans through that exchange, Sebelius said.
Top Dem Sees 'train wreck' for PPACA
Source: https://www.lifehealthpro.com
By Ricardo Alonso-Zaldivar
A senior Democratic senator who helped write the Patient Protection and Affordable Care Act (PPACA) stunned administration officials last Wednesday, saying openly he thinks it's headed for a "train wreck" because of bumbling implementation.
"I just see a huge train wreck coming down," Senate Finance Committee Chairman Max Baucus, D-Mont., told Obama's health care chief during a routine budget hearing that suddenly turned tense.
Baucus is the first top Democrat to publicly voice fears about the rollout of the new health care law, designed to bring coverage to some 30 million uninsured Americans through a mix of government programs and tax credits for private insurance that start next year. Polls show the public remains confused by the complexity of the law, and even many uninsured people are skeptical that they will be helped.
A six-term Democrat, Baucus expects to face a tough re-election in 2014. He's still trying to recover from approval ratings that nosedived amid displeasure with the health care law in his home state.
Normally low-key and supportive, Baucus challenged Health and Human Services Secretary Kathleen Sebelius at Wednesday's hearing.
He said he's "very concerned" that new health insurance exchanges for consumers and small businesses will not open on time in every state, and that if they do, they might just flop because residents don't have the information they need to make choices.
"The administration's public information campaign on the benefits of the Affordable Care Act deserves a failing grade," he told Sebelius. "You need to fix this."
Responding to Baucus, Sebelius pointedly noted that Republicans in Congress last year blocked funding for carrying out the health care law, and she had to resort to raiding other departmental funds that were legally available to her.
The administration is asking for $1.5 billion in next year's budget, and Republicans don't seem willing to grant that, either.
At one point, as Sebelius tried to answer Baucus' demand for facts and figures, the senator admonished: "You haven't given me any data; you just give me concepts, frankly."
"I don't know what he's looking at," Sebelius told reporters following her out of the room after Baucus adjourned the hearing. "But we are on track to fully implement marketplaces in Jan. 2014, and to be open for open enrollment."
That open-enrollment launch is only months away, Oct. 1. It's when millions of middle-class consumers who don't get coverage through their jobs will be able to start shopping for a private plan in the new exchanges. They'll also be able to find out if they qualify for tax credits that will lower their premiums. At the same time, low-income people will be steered to government programs, mainly an expanded version of Medicaid.
But half the states, most of them Republican-led, have refused to cooperate in setting up the infrastructure of Obama's law. Others, like Montana, are politically divided. The overhaul law provided that the federal government would step in and run the new markets if a state failed to do so. Envisioned as a fallback, federal control now looks like it will be the norm in about half the country, straining resources.
Administration officials say their public outreach campaign will begin in earnest over the summer. They question the wisdom of bombarding consumers with insurance details now, when there's not yet anything to sign up for. Baucus said in his state, that vacuum has mostly been filled by misinformation.
While some other Democratic lawmakers have privately voiced similar frustrations, most have publicly lauded Sebelius for her department's work. Democrats from reliably blue states have less to worry about, since their governors and legislatures have embraced the law and are working to make it succeed.
In Montana, the legislature rejected Democratic Gov. Steve Bullock's bid for a state-run insurance exchange. The governor is now trying to find a compromise on expanding Medicaid.
Republicans are certain to remind Montana voters next year that Baucus' fingerprints are all over the health care law, even though a similar strategy failed to knock off fellow Democratic Sen. Jon Tester last year.
After the hearing, Baucus' office clarified that he still thinks PPACA is a good law, but he questions how it is being carried out.
Sebelius Says We Have Built the Exchange Hub
Source: https://www.lifehealthpro.com
By Allison Bell
Photo: United States Mission Geneva / Wikimedia Commons / CC-BY-2.0
U.S. Health and Human Services (HHS) Secretary Kathleen Sebelius told members of the House Ways and Means Committee that the exchanges are coming.
"We are confident we will launch the health insurance exchanges," Sebelius testified today at a hearing the committee organized on the Obama administration's HHS budget proposal for fiscal year 2014. "We will be open for open enrollment Oct. 1."
The data hub to be at the heart of the exchange system is "basically completed and paid for," Sebelius said.
The Obama administration has asked for $78 billion in discretionary budget authority for HHS for 2014. HHS could be responsible for a total of $967 billion in outlays over the next 10 years.
Much of the spending would be on programs related to the Patient Protection and Affordable Care Act of 2010 (PPACA). PPACA calls for HHS to work with the states and the District of Columbia to set up a system of exchanges, or Web-based health insurance markets, in all 50 states and the District of Columbia by Oct. 1, with the first coverage sold to take effect Jan. 1, 2014.
In response to questions about some states' resistance to participating in the exchange program, Sebelius said that 31 states and the District of Columbia are either setting up their own exchanges or working with HHS to set up "partnership" exchanges.
In some other states, officials are saying that their states might take over exchange services once HHS sets up the exchanges, Sebelius said.
Rep. Charles Rangel, D-New York, asked about the possibility that congressional resistance to funding the exchange program could interfere with efforts to get the exchanges started on time.
"It would be helpful" if Congress responds positively to HHS requests for funding, Sebelius said.
But "I think we are definitely on track to implement the law as it is anticipated," Sebelius said.
In response to reports that employers are worried about what PPACA will do to insured and self-insured group health plans, Sebelius said she is meeting regularly with employers to allay the concerns and hopes that, once the exchanges are open, employers will like them.
For some employers that are now unable to find or afford coverage, the new PPACA system might increase their ability to offer health benefits, Sebelius said.
Commitment to employer-sponsored health plans on the rise
Source: https://www.benefitspro.com
By Kathryn Mayer
What a difference a year can make. A new industry report finds that significantly more employers than last year say they will “definitely” continue to provide health care coverage when health exchanges come online next year.
According to preliminary survey results from the International Foundation of Employee Benefit Plans, 69 percent of employers said they will definitely continue to provide employer-sponsored health care in 2014, while another 25 percent said they are very likely to continue employer-sponsored health care.
That’s a 23 point increase from 2012, when 46 percent reported being certain that they would continue employer-sponsored health care.
Opponents of President Obama’s Patient Protection and Affordable Care Act have argued that employers are likely to drop health coverage as an unintended consequence of the law that will negatively affect employees who want to stick with the coverage they know and like.
Estimates have varied widely on just what reform will do to employer-based health coverage. A Deloitte report last summer estimated that one in 10 employers will drop coverage for their employees, while consulting firm McKinsey & Co. drew fire when it stated 30 percent of respondents will “definitely” or “probably” stop offering employer-sponsored health insurance after 2014.
The IFEBP survey found the vast majority of employers (90 percent) have moved beyond a “wait and see” mode, and more than half are developing tactics to deal with the implications of reform. Organizations maintaining a wait-and-see mode decreased from 31 percent in 2012 to less than 10 percent in 2013.
Since the foundation’s first survey regarding reform’s impact on employer-sponsored coverage in 2010, employers have most commonly said keeping compliant was their top focus. In 2013, for the first time, most employers said their top focus is developing tactics to deal with implications of the law.
Still, the survey found estimates of cost increases directly associated with the PPACA have increased from 2012 to 2013. Employers with 50 or fewer employees are reporting the largest anticipated cost increase. Conversely, larger employers are the least likely to see significant cost increases.
Reform is expected to have a bigger impact on smaller employers than larger ones. Small businesses are making more employment-based decisions with hiring, firing and reallocating hours than larger employers, and they are more likely to drop coverage due to PPACA.
Despite employers' commitment to employer-sponsored health coverage, Gallup reported earlier this year that 44.5 percent of Americans got employer-based coverage in 2012, the lowest percentage since President Obama took office.
Results are based on survey responses submitted by more than 950 employee benefit professionals and practitioners through March 26.
Important Transition Relief for Non-Calendar Year Plans
Source: United Benefit Advisors
The January 1, 2014 effective date of the Pay-or-Play requirements under health care reform presents special issues for employers with non-calendar year plans. Prior to the release of the proposed regulations under the shared responsibility rules, employers with non-calendar year plans would either need to comply with the Pay-or-Play requirements at the beginning of the 2013 plan year or change the terms and conditions of the plan mid-year in order to comply. Recognizing that compliance as of January 1, 2014 caused a special hardship for non-calendar year plans, the proposed regulations, provide special transition relief. Employers with non-calendar year plans in existence on December 27, 2012 can avoid the Pay-or-Play penalties for months preceding the first day of the 2014 plan year (the plan year beginning in 2014) for any employee who was eligible to participate in the non-calendar year plan as of December 27, 2012 (whether or not they actually enrolled). Under this relief, the employer would not be subject to Pay-or-Play penalties for any such employees until the first day of the plan year beginning in 2014, provided they are offered coverage that is affordable and provides minimum value as of the first day of the 2014 plan year.
A walk-through on full-time vs. part-time for PPACA
Source: https://eba.benefitnews.com
By L. Scott Austin and David Mustone
With a substantial portion of the Patient Protection and Affordable Care Act set to go into effect in 2014, employers are working to determine how the law will impact them, their business and their employees. Because the law will require most employers to provide affordable minimum essential health insurance coverage to full-time employees or face financial penalties, employers must understand how the law defines full-time workers, as well as the penalties that businesses can face for failing to comply or choosing not to provide coverage.
Under provisions called the employer shared responsibility rules, the PPACA requires large employers (generally those with 50 or more full-time employees) to provide affordable group health coverage with sufficient value to full-time employees and their dependents. Full-time employees are generally defined as those who work on average at least 30 hours per week. Employers that fail to comply with these rules can face penalties.
What are the potential penalties?
The failure to offer coverage penalty applies if at least one full-time employee obtains subsidized coverage on an exchange where the employer does not offer coverage to at least 95% of its full-time employees and their dependents. This penalty – which can be up to $2,000 per year for each full-time employee (in excess of 30) – will be based on the total number of full-time employees an employer has, regardless of how many employees have government-subsidized exchange coverage.
The insufficient coverage penalty applies if the employer offers full-time employees coverage, but the coverage is either unaffordable (individual premium cost exceeds 9.5% of the employee’s household income) or does not provide minimum value (plan pays less than 60%of the covered costs). Proposed regulations released by the IRS provide guidance and alternative safe harbors for calculating whether health coverage is unaffordable, including use of an employee’s W-2 earnings. The potential penalty for insufficient coverage is $3,000 per year for each employee who obtains government-subsidized coverage on an exchange.
Employers also should note that in determining whether an employer is subject to these provisions (i.e., is a “large employer”), the IRS controlled group rules are applied – meaning that all affiliated employers for which there is 80% or greater common ownership will be treated as a single employer. However, compliance with the employer shared responsibility rules – and any associated penalties – will generally be assessed on an employer-by-employer basis.
Who is considered a full-time employee?
As an employer, the determination of who is a full-time employee will be crucial in evaluating your options for complying with the employer shared responsibility rules, and equally important, designing your group health plan’s eligibility and participation requirements.
Because there can be various ways of assessing what constitutes a full-time employee eligible for coverage under the PPACA, the IRS has issued guidance in the form of several notices, as well as temporary regulations. These guidelines set out criteria and standards that can help employers make accurate determinations when hiring new employees, including:
- Initial measurement period – A designated period of not less than three months or more than 12 months used in determining whether a newly hired variable or seasonal employee is full-time.
- Standard measurement period – An annual designated period of not less than three months or more than 12 months used to determine whether an ongoing variable or seasonal employee is full-time.
- Administrative period – A period of up to 90 days for making full-time determinations and offering/implementing full-time employee coverage.
- Stability period – An annual designated period of not less than six months (and not less than the corresponding measurement period) during which the employer must offer affordable minimum essential health coverage to all full-time employees, or face financial penalties for not doing so.
- Full-time employees – If a new employee is reasonably expected to average at least 30 hours per week at the time of hire, the employee must automatically be treated as full-time and offered group health coverage within three months of hire.
- Variable hour and seasonal employees – A variable hour employee is someone whom the employer cannot reasonably determine will average at least 30 hours per week at the time of hire. No definition is provided for a seasonal employee, but presumably it would include anyone who works on a seasonal basis. Employers may use the initial measurement period to determine whether a newly hired variable or seasonal employee actually averages at least 30 hours per week, and the standard measurement period to determine whether an ongoing variable or seasonable employee actually averages at least 30 hours per week. If the employee does average at least 30 hours per week during the initial measurement period or standard measurement period, the employer must offer affordable minimum essential health coverage during the stability period, or face financial penalties for not doing so.
- Transition from new to ongoing employee status – Once a new employee has completed an initial measurement period and has been employed for a full standard measurement period, the employee must be tested for full-time status under the ongoing employee rules for that standard measurement period, regardless of whether the employee was full-time during the initial measurement period.
Understanding Exchanges Still a Struggle for Consumers
Source: https://www.benefitspro.com
By Kathryn Mayer
Yet another poll is out underscoring one of the main concerns over health reform — that consumers just don’t get it.
According to this survey, released Thursday by InsuranceQuotes.com, 90 percent of Americans don’t know when the new health insurance exchanges will open.
A major component of the Patient Protection and Affordable Care Act, the new health insurance exchanges will be available for online and telephone enrollments beginning Oct. 1. Coverage begins on Jan. 1, 2014. Exchanges are intended to give families and small-business owners accurate information to make apples-to-apples comparisons of private insurance plans and get financial help to make coverage more affordable if they’re eligible.
The exchanges are a core component of the individual mandate that will require all Americans to obtain health insurance or pay a fine. As a result, tens of millions of previously uninsured Americans are expected to gain access to health insurance.
The survey of roughly 1,000 U.S. adults found that 40 percent expect health reform to have a major effect on their lives, while 39 percent think the law will have a minor effect and 19 percent expect no effect.
The survey found that Americans were more knowledgeable about other aspects of health reform. For instance, 73 percent correctly answered that health plans cannot deny coverage based on preexisting health conditions. And 66 percent accurately said that health plans must extend coverage to dependent children up to age 26. Those two provisions have been among the most popular.
Still, insurance experts say having only some knowledge isn’t enough.
“A lot of people need to study up on health care reform and what it means to them,” said Laura Adams, senior insurance analyst at InsuranceQuotes.com. “We found a very inconsistent understanding of the Affordable Care Act, and we fear that many people will miss key deadlines and benefits because they don’t adequately understand the new law.”
Uninformed consumers who are unaware of what the exchanges do and what health reform means for them has been a huge hurdle of PPACA. It’s something that government officials are working to alleviate. In January, The Department of Health and Human Services relaunched healthcare.gov, a website aimed at informing consumers about the health reform law while giving them a place to purchase insurance.
In total, 39 percent of Americans said they are somewhat knowledgeable about PPACA, 28 percent said they aren’t too knowledgeable, 21 percent said they aren’t at all knowledgeable and only 10 percent said they are very knowledgeable.
The survey was conducted March 7-10 by telephone by Princeton Survey Research Associates International.
Three PPACA Coverage Terms Explained
Source: United Benefit Advisors
The Patient Protection and Affordable Care Act (PPACA) uses terms that sound alike for three very different things. Here’s a closer look at these terms, and when they’re used.
Essential Health Benefits
Significantly affects individuals and small employers with a fully insured plan. Has a limited impact on self-funded and large insured plans.
Beginning in 2014, policies in the individual and small group markets* will be required to provide coverage for each of the 10 “essential health benefits” regardless whether the policy is purchased through or outside the exchange. Self-funded plans (regardless of size), large group plans, and grandfathered plans (regardless of size) do not have to cover all 10 essential health benefits, but they will not be allowed to put lifetime or annual dollar limits on an essential health benefit.
Each state will have its own “benchmark” essential health benefits package. The essential health benefit categories are ambulatory/outpatient, emergency, hospitalization, maternity and newborn care, mental health and substance use, prescription drugs, rehabilitative and habilitative services and devices (for example, speech, physical and occupational therapy), laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including pediatric dental and vision care.
Minimum Essential Coverage
Affects most individuals and all employers with 50 or more employees (regardless whether its plan is self-funded or fully insured).
Beginning in 2014, most Americans will be required to have “minimum essential coverage” or pay a penalty with their tax return. (In 2014, the penalty will be the greater of 1 percent of income or $95.) A person will have minimum essential coverage if he or she is covered under an eligible employer-sponsored plan, an individual policy (through or outside the exchange), or a government plan (Medicare, Medicaid, CHIP, TRICARE, VA, etc.).
Also beginning in 2014, employers with 50 or more full-time or full-time equivalent employees will be required to offer minimum essential coverage to nearly all of their employees who work 30 or more hours a week, or pay a penalty. (If minimum essential coverage isn’t offered to at least 95 percent of full-time employees and their dependent children, a penalty of $2,000 per year per full-time employee, excluding 30 full-time employees, will apply.)
A clear definition of “minimum essential coverage” for employer-provided benefits has not been provided yet, but it appears that fairly basic medical coverage will be enough. “Eligible employer-sponsored coverage” includes any plan offered in the small or large group market in a state, as well as self-funded plans, unless the plan only provides “excepted benefits.” Excepted benefits are those that provide very limited medical coverage, like hospital indemnity, long-term care and cancer plans, on-site medical clinics, disability income and accident plans, and dental- and vision-only coverage. Plans with annual dollar limits on essential health benefits will not be allowed after 2014, so it is unlikely that a standalone HRA will provide minimum essential coverage.
Minimum Value Coverage
Affects employers with 50 or more employees (regardless whether its plan is self-funded or fully insured) and individuals who may be eligible for premium tax credits/subsidies.
Beginning in 2014, employers with 50 or more full-time or full-time equivalent employees that offer coverage that is less than “minimum value” will have to pay a penalty. (The penalty for not providing minimum value, affordable coverage is $3,000 for each full-time employee who obtains coverage through a public exchange and receives a premium tax credit/subsidy. Individuals will not be eligible for a subsidy if their employer offers them affordable, minimum value coverage.)
Minimum value coverage is coverage with an actuarial value of at least 60 percent – this means that on average the plan is designed to pay at least 60 percent of covered charges. (The employee would be responsible for the other 40 percent through the deductible, copays and coinsurance.) In the self-funded and large markets, employers will be able to use a calculator provided by the government, and possibly safe harbor plan designs, to make sure their plan meets the 60 percent standard. The proposed calculator can be found here (under the “Plan Management” section, look for Feb. 20, 2013 / Minimum Value Calculator): Regulations and Guidance | cciio.cms.gov. According to HHS, 97 percent of the employer-sponsored plans they surveyed already meet the 60 percent requirement.
In the individual and small group markets, a “bronze” policy will have an actuarial value of 60 percent.
In a nutshell, then:
- Essential health benefits are the kinds of care small plans must cover
- Minimum essential coverage is what individuals must have and large employers must offer if they don’t want to pay tax penalties
- Minimum value coverage is what large employers must offer to avoid a different tax penalty
* It is still unclear what size makes a plan “large” or “small” under the essential health benefits rules. Clearly, a plan with fewer than 50 employees is “small” and a plan with more than 100 employees is “large.” States have the option to consider plans below 100 as “small” until 2016, but it is not clear yet how they make that choice. (It is clear that a plan is “large” under the minimum essential and minimum value requirements if there are 50 or more full-time or full-time equivalent employees in its control group.)