Level-funded plan uptake trickling down market

What are level-funded plans, and why are they becoming so popular? Allow this article to break down the facts for you.


A brighter light is being cast on level-funded group health plans as benefits decision-makers tackle open-enrollment season. Several industry observers say the trend is more pronounced given that the Affordable Care Act remains largely intact — for now.

There has been an ebb and flow to these self-insured underwritten plans over the past 18 months, says Michael Levin, CEO and co-founder of the healthcare data services firm Vericred. But with a fixed monthly rate for more predictability, he says they can drive 25% to 35% savings relative to fully-insured ACA plans that must comply with the medical loss ratio for a certain segment of the market.

Level funding typically leverages an aggregate and/or specific stop-loss product to cap exposure to catastrophic claims. These plans are offered by an independent third-party administrator or health insurance carrier through an administrative-services-only contract.

It’s best suited for companies with a very low risk profile comprised of young or healthy populations, according to Levin. And with low attachment, stop-loss coverage in most states, he explains that the plans have “very little downside risk from the group’s perspective.” Two exceptions are California and New York whose constraints on the stop-loss attachment point “essentially preclude level-funded plans from being offered” there, he adds.

The arrangement is trickling down market. “We’ve heard from carriers that will go down to seven employees, plus dependents, while others cut it off at 20 or 25,” he says.

David Reid, CEO of EaseCentral, sees a “resurgence of level funding” across more than 38,000 employers with less than 500 lives that his SaaS platform targets through about 6,000 health insurance brokers and 1,000 agencies. His average group is about 30 employees.

He’s also seeing more customers using individual-market plans rather than group coverage through Hixme’s digital healthcare benefits consulting platform. Under this approach, health plans are bundled with other specific types of insurance and financing as a line of credit to fill coverage gaps. Employer contributions are earmarked for individual-market plans, which are purchased through payroll deduction.

Read further.

Source:
Shutan B. (17 November 2017). "Level-funded plan uptake trickling down market" [Web Blog Post]. Retrieved from address https://www.employeebenefitadviser.com/news/level-funded-plan-uptake-trickling-down-market?feed=00000152-175e-d933-a573-ff5ef1df0000

DOL Proposes Rule to Expand Association Health Plans for Small Employers

What are the pros and cons of the proposed rule by the DOL allowing small business to purchase health insurance without some of the restraints imposed on smaller employers by the ACA and individual states? Let's take a look.


A proposed rule by the U.S. Department of Labor (DOL) would allow small businesses to band together and purchase health insurance without some of the regulatory requirements that the individual states and the Affordable Care Act (ACA) impose on smaller employers.

Advocates of the proposal say that it will make it easier for small businesses to afford better coverage for their employees. Critics contend that it's a way to get around the ACA requirement that plans cover essential health benefits.

The proposal, published in the Federal Register on Jan. 5, expands access to what the rule calls "small business health plans," which are more commonly known as association health plans.

The proposed rule attempts to achieve many of the objectives of the Small Business Health Fairness Act introduced in Congress last year, which also sought to allow small businesses to offer employees health coverage through association health plans.

The rule modifies the definition of "employer" under the Employee Retirement Income Security Act (ERISA) regarding entities—such as associations—that could sponsor group health coverage. An association can be formed for the sole purpose of offering the health plan.

A broader interpretation of ERISA could potentially allow employers anywhere in the country that can pass a "commonality of interest" test to join together to offer health care coverage to their employees. For instance, an association could show a commonality of interest among its members on the basis of geography or industry, if the members are either:

  • In the same trade, industry or profession throughout the United States.
  • In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.

Sole proprietors also could join small business health plans to provide coverage for themselves as well as their spouses and children.

"Many small employers struggle to offer insurance because it is currently too expensive and cumbersome," the DOL said in a press release. "Up to 11 million Americans working for small businesses/sole proprietors and their families lack employer-sponsored insurance. … These employees—and their families—would have an additional alternative through Small Business Health Plans (Association Health Plans)."

"With the passage of the tax bill, which includes a reduction of the individual mandate penalty, it's very likely that many people will drop their health care coverage in the individual marketplace," said Chatrane Birbal, the Society for Human Resource Management's senior advisor for government relations. Association health plans "could provide an option for small employers to offer competitive and affordable health benefits to their employees, thereby increasing the number of Americans who receive coverage through their employer," she noted.

For most midsize-to-large employers and their employees, however, the proposed rule will likely result in no change in health coverage, Birbal said.

Large Group Treatment for Small Employers

The ACA requires that nongrandfathered insured health plans offered in the individual and small group markets provide a core package of health care services, known as essential health benefits. Large employer group plans and self-funded plans are not required to comply with the essential benefit requirements.

Last October, President Donald Trump signed an executive order directing the DOL and other agencies to issue regulations that would allow more employers to band together and purchase health care plans, including across state lines. The DOL's proposed rule would do this by allowing employers that currently can only purchase group coverage in their state's small group market to join together to purchase insurance in the less-regulated large group market. The 50 states most often limit the large group market to employers with 50 or more employees, while a handful of states limit this market to employers with 100 or more employees.

By joining together, employers could not only avoid those regulatory restrictions that pertain only to the small group market, but also could reduce administrative costs through economies of scale, strengthen their bargaining position to obtain more favorable deals, enhance their ability to self-insure, and offer a wider array of insurance options, the DOL said.

The rule would maintain current employee protections by:

  • Preserving nondiscrimination provisions under the Health Insurance Portability and Accountability Act (HIPAA) and the ACA. with regard to association health plans.
  • Clarify that an association health plan cannot restrict coverage of an individual based on any health factor.

"Small Business Health Plans (Association Health Plans) cannot charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors," the DOL said. The Employee Benefits Security Administration "will closely monitor these plans to protect consumers."

The DOL will accept comments on the proposed rule during a 60-day period ending on March 6. "There are likely to be a number of changes to the proposed regs before they become final, and there really are a number of issues related to the proposal which need to be answered," said Robert Toth, principal at Toth Law and Toth Consulting in Fort Wayne, Ind.

Differing Reactions

Insurance sold nationwide through associations of small employers "would have to comply with far fewer standards" than current small group market plans, according to a statement by the Commonwealth Fund, a nonprofit foundation that supports expanding health care coverage to low-income and uninsured Americans. "Federal administrative changes that allow some health plans to bypass state and federal rules but not others create an uneven playing field, destabilize insurance markets, and put consumers at risk."

"Allowing the expansion of association health plans could mean the proliferation of coverage that does not provide the essential benefits people with diabetes need to effectively manage their disease and to prevent devastating and costly complications," said a statement from the American Diabetes Association.

The proposal, however, is supported by the National Retail Federation. "Main Street retailers need more affordable health care options and a level playing field with larger companies that are better positioned to negotiate for lower insurance costs," said David French, senior vice president for government relations at the federation, in a statement.

"These changes could be attractive to small employers with relatively healthy employees and who would not need the full range of benefits offered by the ACA's exchange plans" for the small group market, said Beth Halpern, health law partner at Hogan Lovells in Washington, D.C.

Like Trump's executive order, the proposed regulation seeks "to liberalize the rules to build large insurance pools of small employers," said Perry Braun, executive director at Benefit Advisors Network (BAN), a Cleveland-based consortium of health and welfare benefit brokers. "Spreading the risk across large numbers of participants in an insurance pool is thought to bring insurance premium stability," he said, adding, "It will be interesting to see [which brokers] enter the market to aggregate small businesses" into the new plans.

 

Source:

Miller S. (8 January 2018). "DOL Proposes Rule to Expand Association Health Plans for Small Employers" [ web blog post]. Retrieved from address https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/DOL-association-health-plans-rule.aspx


Avoid these 12 Common Open Enrollment Mistakes

Open enrollment season is right around the corner. Check out this great column by Alan Goforth from Benefits Pro and find out the top mistakes employers and HR have made during open enrollment and what you can do to avoid them.

Every employer or human resources professional has made mistakes during open enrollment.

Trying to accommodate the diverse needs of the workforce in a short timeframe against the backdrop of increasing options and often bewildering regulations, can be a challenge even in the best-run companies.

Avoiding mistakes is impossible, but learning from them is not. Although the list may be limitless, here are a dozen of the most common pratfalls during open enrollmentand how to avoid tripping over them.

1. Failing to communicate

"What we've got here… is failure to communicate." – Cool Hand Luke

This mistake likely has topped the list since open enrollment first came into existence, and it will probably continue to do so. That's because enrollment is a complex procedure, and few challenges are greater that making sure employers, employees, brokers and carriers are on the same page.

Employers have both a stick and a carrot to encourage them to communicate as well as possible. The stick is the Affordable Care Act, which requires all employers subject to the Fair Labor Standards Act to communicate with employees about their health-care coverage, regardless of whether they offer benefits.

As a carrot, an Aflac study found that 80 percent of employees agree that a well-communicated benefits package would make them less likely to leave their jobs

2. Neglecting technology

The integration of new technology is arguably the most significant innovation in the enrollment process in recent years.

This is especially important as younger people enter the workforce. Millennials repeatedly express a preference for receiving and analyzing benefits information by computer, phone or other electronic devices.

The challenge is to make the use of technology as seamless as possible, both for employees who are tech-savvy and for those who are not.

Carriers and brokers are making this an emphasis, and employers should lean on them for practical advice.

See the original article Here.

3. Over-reliance on technology

At the other end of the spectrum is the temptation to rely on technology to do things it never was meant to do.

"Technology is so prevalent in the enrollment space today, but watch out for relying on technology as the one thing that will make or break enrollment," says Kathy O'Brien, vice president of voluntary benefits and nation client group services for Unum in Chattanooga, Tennessee. "Technology is great for capturing data, but it won't solve every problem and doesn't change the importance of the other work you need to do."

4. Succumbing to inertia

It can be frustrating to invest substantial time and effort into employee benefit education, only to have most of the staff do nothing.

Yet that is what happens most of the time. Just 36 percent of workers make any changes from the previous enrollment, and 53 percent spend less than one hour making their selections, according to a LIMRA study.

One reason may be that employees don’t feel assured they are making the right decisions.

Only 10 percent felt confident in their enrollment choices when they were done, according to a VSP Vision Care study. One good strategy for overcoming inertia is to attach dollar values to their choices and show where their existing selections may be leaving money on the table.

5. Cutting too many corners

One of the most difficult financial decisions employers make each year is deciding how much money to allocate to employee benefits.

Spending too much goes straight to the bottom line and could result in having to lay off the very employees they are trying to help. Spending too little, however, can hurt employee retention and recruiting.

Voluntary benefits offer a win-win solution. Employees, who pick up the costs, have more options to tailor a program that meets their own needs.

In a recent study of small businesses, 85 percent of workers consider voluntary benefits to be part of a comprehensive benefits package, and 62 percent see a need for voluntary benefits.

6. Not taking a holistic approach

"Holistic" is not just a description of an employee wellness program; it also describes how employers should think about employee benefit packages.

The bread-and-butter benefits of life and health insurance now may include such voluntary options as dental, vision and critical illness. Employers and workers alike need to understand how all of the benefits mesh for each individual.

Businesses also need to think broadly about their approach to enrollment

"Overall, we take a holistic approach to the customer’s enrollment program, from benefits communication to personalized benefits education and counseling, as well as ongoing, dedicated service," says Heather Lozynski, assistant vice president of premier client management for Colonial Life in Columbia, South Carolina. "This allows the employer to then focus on other aspects of their benefits process."

7. Unbalanced benefits mix

Employee benefits have evolved from plain vanilla to 31 (or more) flavors.

As the job market rebounds and competition for talented employees increases, workers will demand more from their employers.

Benefits that were once considered add-ons are now considered mandatory.

Round out the benefits package with an appealing mix of standard features and voluntary options with the objective of attracting, retaining and protecting top-tier employees.

8. Incomplete documentation

Employee satisfaction is a worthy objective — and so is keeping government regulators happy.

The Affordable Care Act requires employers who self-fund employee health care to report information about minimum essential coverage to the IRS, at the risk of penalties.

Even if a company is not required by law to offer compliant coverage to part-time employees, it still is responsible for keeping detailed records of their employment status and hours worked.

As the old saying goes, the job is not over until the paperwork is done.

9. Forgetting the family

The Affordable Care Act has affected the options available to employers, workers and their families.

Many businesses are dropping spousal health insurance coverage or adding surcharges for spouses who have access to employer-provided insurance at their own jobs.

Also, adult children can now remain on their parents' health policies until they are 26.

Clearly communicate company policies regarding family coverage, and try to include affected family members in informational meetings.

Get to know more about employees' families — it will pay dividends long after open enrollment.

10. Limiting enrollment options

Carriers make no secret about their emphasis on electronic benefits education and enrollment.

All things considered, it is simpler and less prone to copying and data-entry errors.

It would be a mistake, however, to believe that the high-tech option is the first choice of every employee.

Be sure to offer the options of old-fashioned paper documents, phone registration and face-to-face meetings. One good compromise is an on-site enrollment kiosk where a real person provides electronic enrollment assistance.

11. Letting benefits go unused

A benefit is beneficial only if the employee uses it. Too many employees will sign up for benefits this fall, forget about them and miss out on the advantages they offer.

Periodically remind employees to review and evaluate their available benefits throughout the year so they can take advantage of ones that work and drop those that do not.

In addition to health and wellness benefits, also make sure they are taking advantage of accrued vacation and personal days.

Besides maximizing the return on their benefit investment, it will periodically remind them that the employer is looking out for their best interests.

12. Prematurely closing the 'OODA' loop

Col. John Boyd of the U.S. Air Force was an ace fighter pilot. He summarized his success with the acronym OODA: Observe, Orient, Decide and Act. Many successful businesses are adopting his approach.

After the stress of open enrollment, it's tempting to breathe a sigh of relief and focus on something else until next fall.

However, the close of enrollment is a critical time to observe by soliciting feedback from employees, brokers and carriers.

What worked this year, and what didn't? What types of communications were most effective? And how can the process be improves in 2017?

"Make sure you know what is working and what is not," said Linda Garcia, vice president for human resources at Rooms to Go, a furniture retailer based just outside Tampa. "We are doing a communications survey right now to find out the best way to reach each of our 7,500 employees. We also conduct quarterly benefits surveys and ask for their actual comments instead of just checking a box."

Source:

Goforth A. (2017 Aug 22). Avoid these 12 common open enrollment mistakes [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/08/22/avoid-these-12-common-open-enrollment-mistakes?ref=hp-in-depth&page_all=1


State Flexibility to Address Health Insurance Challenges under the American Health Care Act, H.R. 1628

Great article Kaiser Family Foundation about how states's health insurance markets will be impacted with the passing of the American Health Care Act (AHCA).

The American Health Care Act, as passed by the House, (HR 1628 or AHCA) would make significant changes to the insurance market provisions established by the Affordable Care Act (ACA) and to the financial assistance provided to people who purchase non-group coverage.  The proposal would reduce the federal role in health coverage and devolve authority to states over key market rules and consumer protections affecting access and affordability, albeit with federal back-up provisions if states fail to take action.  This brief outlines the provisions in the AHCA providing flexibility for states and addresses some of the issues and tradeoffs they could face.

The AHCA would dramatically reduce federal spending on health coverage between 2018 and 2026, lowering federal contributions to Medicaid by $834 billion and subsidies for non-group health insurance by an additional $290 billion.1  The AHCA also would eliminate the tax penalty for people who do not have health insurance, replacing it with a premium surcharge (30% for up to one year) for non-group enrollees who have a gap of insurance of at least 63 days in the previous year. The tax penalty for employers that do not offer coverage to full-time workers also would be repealed.  Overall, CBO estimates that the AHCA changes would result in an additional 23 million people being uninsured in 2026.2

To offset a portion of the federal spending reductions, the AHCA would create a federal fund called the Patient and State Stability Fund (“Fund.”) The bill appropriates up to $123 billion between 2018 and 2026 that states could use for a number of designated purposes related to coverage and the costs of care, plus an additional $15 billion for a federal invisible risk sharing program that states would have the option to administer.  States also would have flexibility to modify important insurance provisions: through waivers, they could extend rate variation due to age, modify the essential health benefits, or permit insurers to use an applicant’s health as a rating factor for individuals applying for coverage if they have had a coverage gap in the year prior to their enrollment.

In the next sections, we describe the Fund and the waiver authority in the AHCA.  After that, we discuss some of the issues and tradeoffs that states would need to address with the flexibility and funds provided.

Patient and State Stability Fund

The AHCA creates a new grant program that makes up to $123 billion available to states between 2018 and 2026.  Of that, $100 billion ($15 billion for each of 2018 and 2019 and $10 billion each year from 2020 to 2026) would be available for a number of purposes described below, although in its estimate, CBO assumed that most of the funds would be used to reduce premiums or increase benefits in the non-group market.3  An additional $15 billion would be available in 2020 for maternity coverage and newborn care and prevention, treatment, or recovery support services for individuals with mental or substance use disorders.  An additional $8 billion would be available between 2018 and 2023 to reduce premiums and other out-of-pocket costs for individuals paying higher premiums due to a waiver permitting insurers to use health status in setting premiums (discussed below).

Funds would be allocated among states through a formula that considers the total medical claims incurred by health insurers in the state, the number of uninsured in the state with incomes under poverty, and the number of health insurers serving, for 2018 and 2019, the state’s exchange, and for 2020 to 2026, the state’s insurance market.

States could apply for funding for any of the permitted purposes under an expedited process, with applications automatically approved unless the federal government denies the application within 60 days for cause.  Starting in 2020, state matching funds would be required to draw down the allocated federal funds: states would be required to match 7% of the federal funds in 2020, phasing up to 50% in 2026.4  No funds would be appropriated for years after 2026.

States could seek funds for one or more of the specified purposes:

  • Providing financial assistance to high-risk individuals not eligible for employer-based coverage who enroll in the individual market.  The bill language is vague, but this provision appears to permit states to use their allocation to set up a high-risk pool or other mechanisms to provide or subsidize coverage for individuals with preexisting conditions without access to employer-sponsored coverage. By covering high-cost people in a separate pool, their costs are removed from the premium calculations of non-group insurers, lowering the premiums for other enrollees in private insurance.  The AHCA does not address how people with preexisting conditions might be encouraged or required to participate in separate high-risk pools in states without waivers, because people with preexisting conditions generally would have access to non-group coverage at a community rate during open and special enrollment periods.  A high-risk pool could be an option in states with a waiver to use health as a rating factor, where the pool could provide coverage to people with preexisting conditions who are offered coverage at very high premiums due to their health.
  • Providing incentives to entities (e.g., insurers) to enter into arrangements with the state to stabilize premiums in the individual market.  This provision appears to permit states to use their allocation for a reinsurance program. Reinsurance programs lower premiums in a market because they reimburse health insurers for a portion of the claims for people with high-costs, reducing the premiums they need to collect from enrollees.  A reinsurance program operated during the first three years of the ACA; the Congressional Budget Office  estimated that the reinsurance program ($10 billion in 2014) reduced non-group premiums by about 10% in 2014.
  • Reducing the cost of providing non-group or small-group coverage in markets to individuals facing high costs due to high rates of utilization or low population density. Premiums vary significantly across and within states.  This provision would allow states to use resources in higher cost or rural areas.
  • Promoting participation in the non-group and small-group markets and increasing options in these markets. In the past, for example, state based marketplaces that devote resources to outreach and enrollment assistance have been able to help more applicants during open enrollment periods.
  • Promoting access to preventive, dental and vision care services and to maternity coverage, newborn care, and prevention, treatment and recovery support services for people with mental health or substance disorders. This purpose was added to the bill as the House considered changes to the ACA essential health benefits standard.  Fifteen billion dollars in Fund resources are dedicated for spending on maternity, newborn, mental health, and substance abuse services in the year 2020.
  • Providing direct payments to providers for services identified by the Administrator of the Centers for Medicare and Medicaid Services (CMS). For example, states might use Fund resources to expand services provided by public hospitals, free clinics, and other safety net providers that offer treatment to residents who are uninsured or under-insured.
  • Providing cost-sharing assistance for people enrolled in health insurance in the state. The AHCA would repeal current law cost sharing subsidies ($97 billion between 2020 and 2026), which pay insurers for the cost of providing reduced cost sharing to low-income marketplace enrollees.  States could use their fund allocation to offset some of this reduction or assist others with private health insurance (such as those with employer-based coverage) who have high out-of-pocket costs.

These categories are quite broadly specified, providing states with discretion about what policies they may want to pursue and how to how to design programs to address different health care needs in their state.  The options include ways to reduce premiums (through reinsurance, for example), to make direct payments to health care providers, or to help insurance enrollees with high out-of-pocket costs.  States could pursue one or more of these approaches, although they are constrained by the amount of funds available and by their need to match the federal funds after 2020.

CBO estimated that $102 billion of the $123 billion provided to states would be claimed by states by 2026. CBO assumed that states would use most of their Fund allocations to reduce premiums or increase benefits in the non-group market; it assumed $14 billion of the available $15 billion available for maternity coverage, newborn care, and mental health and substance abuse care would be used for direct payments for services.5

Federal default program.  In states without an approved application for monies from the Fund for a year, the bill would authorize the CMS administrator, in consultation with the insurance commissioner for the state, to operate a reinsurance program in the state for that year.  The program would reimburse insurers 75% of the cost of claims between $50,000 and $350,000 for years 2018 and 2019; the CMS Administrator would adjust these parameters for 2020 through 2026.  To receive funds through the default program, the state would be required to match the federal funds, with matching rates starting at 10% in 2018 and increasing to 50% by 2024, remaining at 50% through 2026.

Invisible risk sharing program.  The AHCA also would create a separate reinsurance program as part of the Fund, called the Federal Invisible Risk Sharing Program (FIRSP).  The FIRSP is not a grant program, but would make payments to health insurers in every state to offset a portion of the claims for eligible individuals (e.g., enrollees with high claims or with specified conditions).  The CMS Administrator would determine the parameters of the program and would administer the program, although states would be authorized to assume operation of the program beginning in 2020.  The bill appropriates $15 billion to the FIRSP for 2018 through 2026.  Additionally, at the end of each year, any unallocated monies in the Fund (which could occur if a state did not agree to match the federal funds) would be reallocated to FIRSP as well.

The AHCA does not specify how FIRSP would be coordinated with states that adopt a reinsurance program or for which the CMS Administrator is operating a federal default program.  These issues could be addressed as the Administrator specifies the parameters of the FIRSP.  CBO assumed that all of the $15 billion in FIRSP funding would be used over the period.6

State Waiver Options

The AHCA would permits states to seek waivers to federal minimum standards for non-group and small-group coverage to (1) modify the limit for age rating,7 (2) modify the essential health benefit package, and (3) permit insurers to consider the health status of applicants for non-group coverage if they have had a coverage gap in the past year.

To obtain a waiver, state must show that the waiver would do one or more of the following: reduce average premiums, increase health insurance enrollment, stabilize the market for health insurance, stabilize premiums for people with preexisting conditions or increase choice of health plans. The waiver permitting health as a rating factor has an additional requirement, discussed below.

WAIVER TO PERMIT RATING BASED ON HEALTH

The AHCA generally would require non-group insurers to assess a premium surcharge of 30% to all applicants (regardless of their health) who have had a coverage gap of at least 63 consecutive days in the 12 months preceding enrollment. The surcharge would apply during an enforcement period (which ends at the end of a calendar year).

In lieu of the 30% premium surcharge, the bill also authorizes states to seek a waiver that would permit insurers to consider an applicant’s health in determining premiums.  Health status rating could apply for people with a coverage gap in the year preceding enrollment.  States could seek a waiver for enrollments during special enrollment periods for 2018 and beyond, and for signups during open enrollment periods for 2019 and beyond.  Insurers would not be permitted to deny coverage to an applicant based on their health, but the bill does not limit the additional amount that an applicant can be charged based on their health (the state could limit the amount of the health surcharge but is not required to do so).  Similar to the rules regarding the 30% surcharge, insurers would be able to apply the health status rating through December 31 of the plan year for which the individual enrolled.

To be eligible for a community-rating waiver, in addition to the general waiver requirements, the state must have in place a program that either provides financial assistance to high risk individuals (e.g., a high risk pool) or provide incentives to help stabilize premiums in the individual health insurance market (e.g., reinsurance payments to insurers) or it must participate in the FIRSP.  Because the FIRSP would operate in all states, with no requirement for state matching funds, it would appear that all states would be eligible for the community-rating waiver without having to set up a separate high-risk pool or reinsurance program.  The bill imposes no additional requirements for the state programs. The bill would provide $8 billion to the Fund over five years (2018 through 2022) for states with these waivers to help reduce the premiums out-of-pocket costs for people who have higher premiums due to waiver.  State matching funds would seem to be required to draw down funds starting in 2020. CBO estimates that $6 billion of the $8 billion would be used.

Because there is no limit on the amounts by which insurers could vary premiums based on health, a premium surcharge for people with pre-existing conditions who have had gaps in coverage could provide a stronger incentive for people to maintain continuous coverage than the 30% surcharge that would otherwise apply. Before passage of the ACA, insurers declined applicants frequently, even when they could have charged a higher premium instead, suggesting that insurers would likely assess very high health premium surcharges for people with potentially costly preexisting conditions.  While not an actual denial, very high surcharges would likely have in practice the same effect for many people subject to surcharges based on their health.

Under the bill, states with a waiver could also permit insurers to use health rating to charge healthy applicants with a coverage gap a lower than standard premium available to people with continuous coverage.  Under this approach, healthy applicants would have an incentive to submit to health rating, even if they had continuous coverage.  This could have a destabilizing effect on the market because healthy people could have an incentive to switch to new coverage at renewal, without submitting proof of continuous coverage, in hopes of finding a lower premium based on their good health, which would cause the standard rates generally available for people with continuous coverage to increase.

As a condition of receiving a community-rating waiver, the AHCA does not require that a state must assure access to non-group coverage or make an alternative source of coverage available to people subject to health rating if the rate they are offered is very high.  For example, a state participating in the FIRSP is eligible for this waiver, and that program reimburses health insurers for people that become enrollees; a person offered a very high health status rate might never become covered.  It is unclear how much authority the Secretary of Health and Human Services (HHS) would have to address this issue in the waiver process, given the expedited waiver approval provisions in the bill.

WAIVER TO MODIFY THE ESSENTIAL HEALTH BENEFITS PACKAGE

Under current law, insurance policies offered in the non-group and small-group markets must cover a fairly comprehensive list of defined essential health benefits: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care.  The essential health benefits are a minimum that must be offered; insurers may offer additional benefits as well.

In addition to the list of essential health benefit categories, a number of constraints and consumer protections apply to their definition by the Secretary of HHS, including:

  • that the scope of the essential health benefits offered in these markets is equal to the scope of benefits provided under a typical employer plan;
  • that coverage decisions, determination of reimbursement rates, establishment of incentive programs, and design benefits cannot be made in ways that discriminate against individuals because of their age, disability, or expected length of life;
  • that essential health benefits take into account the needs of diverse segments of the population, including women, children, and people with disabilities;
  • that essential health benefits not be subject to denial to individuals against their wishes on the basis of the individuals’ age or expected length of life or of the individuals’ present or predicted disability, degree of medical dependency, or quality of life;
  • that emergency services provided by out-of-network providers would be provided without prior authorization or other limits on coverage, and would be subject to in-network cost sharing requirements;

Current law also prohibits insurers from applying annual or lifetime dollar limits to essential health benefits.

The AHCA would authorize states, for years 2020 and beyond, to seek a waiver to modify the essential health benefits that insurers would need to offer in the non-group and small group markets.  States also could seek to modify the provisions relating to the scope of the benefits and to their definition.  There are no limits or parameters in the AHCA regarding the changes a state could make to the essential health benefit list or its definitions, although several provisions of current law could limit their discretion.  For example, the current prohibition on applying annual and lifetime maximum dollar limits to essential health benefits may prevent states from using dollar limits in defining the scope of benefits they include as essential health benefits, and the application of mental health parity rules to qualified health plans may prohibit a state that includes mental health or substance abuse services as an essential health benefit from applying limits to the scope of those benefits that are not applicable to other benefits.

The waiver authority gives states wide latitude in defining essential health benefits that would be required in non-group and small group coverage.  A state could remove one or more benefits from the list, which would mean that insurers could offer plans without those benefits or could offer them as an option in some policies or with limits.  Maternity benefits, for example, were often not included in non-group policies prior to the ACA.  A state also could limit the scope of a benefit; for example, determine that only generic drugs were essential health benefits or limit the scope of hospitalization to 60 days per year.  Insurers would then be required to offer at least the limited scope of the benefit, with the option to cover a broader scope of the benefit (in our example, hospital coverage without no day limit) in some or all of their policies in the state.  A state could also eliminate the standard, defining essential benefits to mean whatever insurers in a competitive market offer.  As discussed below, however, adverse selection concerns would make it difficult for insurers to offer coverage that is much more comprehensive than the defined minimum at a reasonable premium.

WAIVER TO MODIFY THE LIMIT ON AGE RATING

The AHCA would generally amend current law to expand the permissible premium variation due to age from 3 to 1 to 5 to 1, or any other ratio a State might elect.  States also would be authorized to seek a waiver, for years 2018 and beyond, to put in place a higher rate permissible ratio. There are no limits in the AHCA on the ratio that a state could permit insurers to use.  The waiver authority here appears to be redundant, as the underlying bill would authorize states to elect different ratios without seeking a waiver.

Issues and Tradeoffs that States May Need to Resolve

The AHCA would reduce the federal role and resources in providing health insurance coverage, particularly for people who are lower and moderate income and are covered though the Medicaid coverage expansion or through the non-group market.  States would assume an expanded role, both financially and in making key decisions about the access and scope of benefits available to these people.

States would undertake this role facing some significant challenges.

COMPETING DEMANDS FOR REDUCED FEDERAL FUNDING

The AHCA, by reducing the overall amount of federal premium tax credits, eliminating cost-sharing subsidies, and reducing federal contributions for the Medicaid expansion population and overall, would significantly reduce federal health care payments received by insurers, providers and people, leaving fewer people covered and more people with higher out-of-pocket costs.  CBO estimates that, between 2018 and 2026, the AHCA would reduce federal Medicaid spending by $834 billion and federal spending on subsidies for non-group health insurance by $290 billion (Figure 1).8 By 2026, 23 million fewer people would have health insurance.  States would have access to grant money through the Fund to try to address some of the issues, but the resources available through the Fund would be far less than the spending reductions. CBO estimates that states would use $102 billion from the Fund, with an additional $15 billion being spent by the FIRSP.9 States would be faced with a number of competing demands for the federal grant money, including lowering premiums, helping people with high cost sharing, and helping people and providers address access and financial issues resulting from the greater number of people without insurance.

CHALLENGES IN REDUCING PREMIUMS AND MAINTAINING COVERAGE

A second challenge for states relates to the cost of non-group health insurance premiums.  Proponents of the AHCA have identified lowering the cost of non-group health insurance as a significant goal of the proposed law, but the underlying federal portions of the bill do not really do that.  In fact, replacing the individual requirement to have health coverage with the continuous coverage provision would initially increase premium rates as compared with current law.10 A few provisions, including the elimination of the health insurance and the medical device taxes, the FIRSP, and the elimination of standard cost-sharing tiers would offset some of the increase from repealing the individual coverage requirement. The most significant tools to potentially lower premiums, however, would be under state discretion: using Fund dollars for reinsurance to offset premiums and seeking waivers to modify the essential health benefits and to permit the insurers to use health as a rate factor for applicants with a coverage gap.  Each of these options, however, would involve significant policy and political tradeoffs.

Applying the grant dollars from the Fund could have a significant additional impact on premium rates, particularly because fewer people would likely be covered than under current law. CBO has assumed in its cost estimates of the AHCA that states would use most of their grants from the Fund to reduce non-group premiums or increase benefits.11 Based on a previous CBO cost estimate for the AHCA, researchers at the Brookings Institution estimated that the AHCA increased average premiums by about four percent when age is held constant (see box below). This suggests that states would need to use most of their grant Funds to bring premiums back to current levels. As just discussed, however, applying all or a large percentage of the grant funds to reduce premiums would mean that other potential needs might remain unaddressed.

Measuring Premium Change

Determining how much premiums would change due to changes in law is complicated because a number of factors affect what people pay and who would actually buy coverage.  There are a few ways to look at this.  One is the change in the average premium; this is the change in the average amount that people are expected to pay under current law and under the change.  This is a good measure of how overall costs will change, but not a very good measure of how a particular person might see their premium change.  Because premiums vary by things, such as where people live and what age they are, the average can change just because the distribution of enrollees changes; for example, if more young people enroll, the average premium goes down, but the premium that a person at any given age sees might remain the same.  Looking at changes for people in certain rating classes, such as by age, comes closer to looking at what particular people may see, although the changes still may vary by location or by health status if insurers can use them in rating.  Premiums for a person of a particular age or health also could vary due to changes in benefits or to the cost sharing they face.

WAIVING ESSENTIAL BENEFITS COULD REDUCE PREMIUMS BUT ALSO LIMIT AVAILABILITY

The waiver options would also pose difficult decisions for states.  For example, a state could lower premium rates by using an essential health benefits waiver to reduce the required benefits in non-group or small-group policies.  The argument for this approach is that some people could choose policies that cost less because they cover less, and others who want additional benefits could pay more for policies that covered those benefits.  There are several difficulties with this, however.

One is that most claims costs fall into the basic insurance categories that would be hard to exclude.  A recent report from Milliman based on their commercial claims database, found that claims from hospital care, outpatient care including physician costs, and prescription drugs accounted for around 70% of claims costs; adding emergency care and laboratory services brings that to over 80%.  Redefining essential health benefits to meaningfully lower premiums would require either placing meaningful limits on these categories (for example, only including generic drugs as an essential benefit) or eliminating whole other categories.  Looking at some of the categories that were sometimes excluded prior to the ACA: maternity coverage accounts for 3.4% of claims, mental health and substance abuse accounts for 4.2% of claims and preventive benefits account for 5.6% of claims.12 To obtain policies with lower premiums, people would need to choose policies with important limitations.  CBO also notes that, should such categories be dropped from the definition of essential health benefits, non-group enrollees who need such care could see their out-of-pocket medical care spending increase by thousands of dollars in any given year.

A second difficulty is that this approach would lead to significant adverse selection against plans with benefits that were more comprehensive than the minimum required.  Because market rules permit applicants to choose any policy at initial enrollment, and change their level of coverage annually at renewal, people who have or develop higher needs for a benefit that is not a defined essential health benefit can enroll or switch a plan that covers it without any impediment.  For example, if a state were to determine that prescription drugs were not an essential health benefit, people without current drug needs would be more likely to take policies that did not provide drug coverage while people with current needs would be more likely to take policies that did.  This would increase premiums for policies covering prescriptions to relatively high levels, discouraging people without drug needs from purchasing them, which would lead to even higher premiums. While the risk adjustment program could offset some of the impacts of selection, developing a risk adjustment methodology where there is substantial benefit variation is difficult.13  This dynamic would discourage insurers from offering coverage for important benefits not defined as essential health benefits, or if they were to offer it, they would do so at high premiums.  People at average risk would likely not have reasonable options if they wanted to purchase coverage with significant benefits beyond those that were required for all policies.  CBO also estimates that insurers generally would not want to sell policies that include benefits that were not required by state law.

The AHCA requires that $15 billion of the money in the Fund be used for maternity coverage, newborn care, and prevention, treatment and recovery support services for mental health and substance abuse disorders.  States that chose not to include any of these services as essential health benefits could use these funds to make these services available, for example, by subsidizing optional coverage or providing direct services.  The funds would only be available in 2020, although it might be possible for a state to use them over a longer period.  The $15 billion was added to the Fund along with the authority to waive essential health benefits, which suggests that the sponsors may be anticipating that these services are at risk of not being defined as essential health benefits by states.

The second significant waiver option for states in the AHCA, allowing insurers to use health as a rating factor for applicants with a coverage gap within the previous year, would put states in the middle of one of the most contentious issues in this debate: how to provide access to coverage for people with preexisting health conditions.  There are few specifics in the bill, but generally, as discussed above, a state could seek a waiver to allow insurers to use health in rating applicants with a coverage gap and to apply the health rate until the end of the calendar year (their enforcement period).

WAIVING COMMUNITY RATING VS. PROTECTING ACCESS FOR PEOPLE WHO ARE SICK

This provision has the potential to reduce non-group premiums overall because permitting health-based rates that exceed 30% penalty that otherwise would apply to applicants with a coverage gap rating would make it more expensive for them to buy non-group plans, either generating more premiums from them or, more likely, diverting them from enrolling in the non-group market. If the permitted health surcharges were sufficiently high, the effect would be very close to a denial.  As noted above, the AHCA does not require states seeking this waiver to have any alternative method of access for people facing very high premiums based on their health.  The state would at least have to participate in the FIRSP (and it appears that the program operates in all states), but that mechanism only assists insurers when high-risk or high-cost people enroll, and people assessed a very high premium might not have an opportunity to enroll.

States electing this waiver would have tools to protect access for people with coverage gaps and preexisting conditions.  One option that has been mentioned by supporters would be to create a high-risk pool that could offer coverage to people facing a high health surcharge.  The bill would permit states to use monies from the Fund to support a high-risk pool, and the bill would appropriate an additional $8 billion for 2018 through 2023 that could be used to reduce premiums or other out-of-pocket costs for people assessed a higher premium because of the waiver to use health status as a factor.  States could use their share of the $8 billion to reduce premiums for high-risk pool coverage as an alternative for people who could not afford the health status surcharge for non-group coverage, and could use their general allocation from the Fund to support the costs of the pool if the $8 billion were to be insufficient or when it ends in 2023.

For states, the tradeoff would be balancing providing reasonable access to people with coverage gaps and preexisting conditions against the goal of lowering premiums for others.  A state could have the biggest impact on premiums for non-group coverage by permitting insurers to assess a health surcharge without limits and not providing an alternative means of access.  This would result in many people with coverage gaps and preexisting conditions being priced out of the market, which would not only lower claims costs immediately, but would also prevent them from establishing continuous coverage and migrating to non-group plans at regular rates after their enforcement periods end.  Possibly more likely is that states would take some steps to assist people subject to health rating from being effectively declined through high premiums.  Options could include establishing a high-risk pool with premiums that are more affordable than the health adjusted premiums people would be assessed under the waiver, limiting the health surcharges that insurers could assess, or using a portion of their share of the $8 billion to reduce premium costs to a more affordable level.  For states weighing these choices, as they improve access and affordability for people who would be subject to the health adjusted rates, they generally lessen the impact that the waiver would have on premiums overall.

Likely, the high-risk pool option would have the largest impact on non-group premiums of these options, because it would move the claims for some high-risk people outside of the non-group market, at least until the people established continuous coverage and moved to non-group plans with premiums not adjusted for their health.  The bill does not establish any parameters for a high-risk pool, such as the premiums that could be charged, what the coverage and cost sharing would be, and whether there would be any limits on coverage.  For example, it is not clear if a high-risk pool would need to offer essential health benefits, would be subject to provisions prohibiting dollar limits, or would be considered coverage for which people could receive a premium tax credit.  States would need to establish parameters in all of these areas.

CBO estimated that about one-half of people live in states that would seek a waiver to modify the essential health benefits, use health as a rating factor, or both.  About two-thirds of these people would live in states that would choose to make moderate changes to market regulations, which would result in a modest reduction in premiums. One-third of these people live in states that CBO assumed would choose to substantially modify the essential health benefits and allow health status rating in their non-group markets.14  In these states, CBO estimated that people in good health would face significantly lower premiums while people less healthy people would be unable to purchase comprehensive coverage at premiums similar to current law and might not be able to purchase coverage at all.15  Although the additional grant funds for states with waivers to use health status rating would lower premiums and out-of-pocket premiums, CBO found that the premium effects would be small because “. . . the funding would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees”16 .  CBO did not produce illustrative premiums for this scenario.

ADDRESSING FUNDING LIMITATIONS OVER TIME

A third challenge for states is that the annual appropriations to the Fund do not grow over time and end entirely after 2026, even though the underlying health care needs continue to grow.  For example, the cost of health care would continue to increase over the period, while the number of uninsured would also increase.  Adding to the increasing cost burden, the federal premium tax credits would grow more slowly than premium over time, shifting more costs to enrollees and reducing their impact on affordability.  The appropriations for the Fund also end in 2023 (for the $8 billion) and 2026 for the rest of the Fund.  At the same time, the state matching requirements for money from the Fund grow over time, from 7% in 2020 to 50% in 2026.  This means that states would need to invest an increasing amount of resources on policies and programs for which federal funds may end, perhaps abruptly, in the foreseeable future. Unless the federal government would agree to commit to appropriate funds several years in advance, states might be reluctant to make budget or program commits to programs that they may be unable to maintain without significant federal assistance.

Discussion

Overall, the AHCA would present states with a number of difficult problems and choices, and with limited resources with which to address them.  The bill would reduce federal contributions for Medicaid and federal payments to subsidize non-group insurance by about $1 trillion dollars, while repealing the federal tax penalty for not having health insurance would increase non-group premiums significantly above current levels.  These provisions would disproportionately affect the affordability of coverage and care for lower income and older people, and would cause millions of people to become uninsured.

States would be eligible for $123 billion in grant funds to help offset these impacts, but would face difficult tradeoffs. If states use most of their grant funds to reduce premiums, as CBO has assumed, there would not be funds left to address other needs, such as helping lower income and older people facing higher premium and out-of-pocket costs and health care providers who would be serving a growing number of uninsured people.  States also would have the options of reducing covered benefits or allowing insurers to increase premiums for applicants with pre-existing conditions, each of which would lower premiums but would raise out-of-pocket costs for people with health problems.

State also would need to find an increasing amount of matching state funds to be eligible for the federal grant fund, and could face uncertainty if federal funds are not appropriated in advance.  States choosing not to participate (by not providing matching funds) would be left without resources to address the higher premiums and affordability issues that would arise.

See the original article Here.

Source:

Claxton G., Pollitz K., Levitt L. (2017 June 5). State flexibility to address health insurance challenges under the american health care act, h.r. 1628 [Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/state-flexibility-to-address-health-insurance-challenges-under-the-american-health-care-act-h-r-1628/


Insurer Participation on ACA Marketplaces, 2014-2017

Have you wondered how the health insurance marketplace has fared since the passing of the ACA. Here is a really good article by Ashley Semanskee and Cynthia Cox highlighting the impact the ACA has had on insurance marketplaces across the country.

Since the Affordable Care Act health insurance marketplaces opened in 2014, there have been a number of changes in insurance participation as companies entered and exited states and also changed their footprint within states. Our earlier analyses of insurer participation and some notable company exits can be found here.

In 2014, there were an average of 5.0 insurers participating in each state’s ACA marketplace, ranging from 1 company in New Hampshire and West Virginia to 16 companies in New York. 2015 saw a net increase in insurer participation, with an average of 6.0 insurers per state, ranging from 1 in West Virginia to 16 in New York. In 2016, insurer participation changed in a number of states due to a combination of some new entrants and the failure of a number of CO-OP plans. In 2016, the average number of companies per state was 5.6, ranging from 1 in Wyoming to 16 in Texas and Wisconsin.

In 2017, insurance company losses led to a number of high profile exits from the market. The average number of companies per state in 2017 was 4.3, ranging from 1 company in Alabama, Alaska, Oklahoma, South Carolina and Wyoming to 15 companies in Wisconsin. In 2017, 58% of enrollees (living in about 30% of counties) had a choice of three or more insurers, compared to 85% of enrollees (living in about 63% of counties) in 2016.

Insurer participation varies greatly within states, and rural areas tend to have fewer insurers. On average, metro-area counties have 2.5 insurers participating in 2017, compared to 2.0 insurers in non-metro counties. In 2017, 87% of enrollees lived in metro counties.

There are a number of areas in the country with just one exchange insurer. In 2017, about 21% of enrollees (living in 33% of counties) have access to just one insurer on the marketplace (up from 2% of enrollees living in 7% of counties in 2016). Often, when there is only one insurer participating on the exchange, that company is a Blue Cross Blue Shield or Anthem plan. Before the ACA, many state individual markets were often dominated by Blue Cross Blue Shield plans.

See the original article Here.

Source:

Semanskee A., Cox C. (2017 June 1). Insurer participation on ACA marketplaces, 2014-2017 [Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/insurer-participation-on-aca-marketplaces-2014-2017/


Enrollment in vision plans remains high

Original post benefitsnews.com

Employers hoping to attract and retain employees need not look further than their vision benefit offerings. New research shows vision benefits have high engagement with employees, but some experts say employers need to work closer with advisers to build the benefit plan workers are seeking.

According to the 2016 annual Employee Perceptions of Vision Benefits survey conducted by Wakefield Research on behalf of Transitions Optical, eight in 10 people chose to enroll in employer-sponsored vision plans. It’s the only benefit to experience a year-over-year increase, the survey found, adding that some benefits such as life, dental and 401(k) plans saw a slight decrease in enrollment compared with 2015.

As more millennials enter the workforce, ancillary benefits such as vision may be considered a more immediate need than retirement plans or some medical benefits, Jonathan Ormsby, strategic account manager with Transitions Optical suggests.

“A competitive benefits package is a significant consideration and draw for workers,” he he says. “Nearly a third of survey respondents said they have, or know somebody, who has accepted a job in the last year because it offered a competitive benefits package – and one in five note that vision is the most appealing element of the package.”

The survey also found employees are increasingly making demands of their employers in terms of what options the vision plans cover. Forty-one percent say it is very important and 46% say it is somewhat important to have premium materials covered, including impact resistant polycarbonate lenses, photochromic lenses, anti-reflective treatment and others.

vision chart

A desire for broader choice is also affecting the vision market, according to Srikanth Lakshminarayanan, senior director for the Center of Excellence at HGS Healthcare, which provides business process management and end-to-end services for healthcare payers and provider organizations.

“What we now hear from the customer is that they want a choice of options to be much broader,” he says. “They don’t want to be tied up to a particular vision care company” in order to obtain group discounts.

Education

“I think education is the top priority and one strategy we recommend for that is better collaboration between advisers and employers,” notes Ormsby.

For example, he says, “Advisers need to better educate employers on the materials especially the frames and lenses side of the benefits.”

Eighty-seven percent of employees say having premium material coverage is important when selecting their vision plan but more than a quarter are uninformed about the lenses covered by their vision plan, Ormsby says.

“So plenty of room for education,” he says.

Education should be a year-round initiative, he adds, something advisers should think about when working with employers. The survey found 29% of respondents felt a vision plan’s website was the most valuable resource in helping understand benefits, while 26% felt the benefits provider was valuable.


High-Deductible Health Plans Cut Costs, At Least For Now

Originally posted on March 26, 2015 on www.npr.org.

Got a high-deductible health plan? The kind that doesn't pay most medical bills until they exceed several thousand dollars? You're a foot soldier who's been drafted in the war against high health costs.

Companies that switch workers into high-deductible plans can reap enormous savings, consultants will tell you — and not just by making employees pay more. Total costs paid by everybody — employer, employee and insurance company — tend to fall in the first year or rise more slowly when consumers have more at stake at the health-care checkout counter whether or not they're making medically wise choices.

Consumers with high deductibles sometimes skip procedures, think harder about getting treatment and shop for lower prices when they do seek care.

What nobody knows is whether such plans, also sold to individuals and families through the health law's online exchanges, will backfire. If people choose not to have important preventive care and end up needing an expensive hospital stay years later as a result, everybody is worse off.

A new study delivers cautiously optimistic results for employers and policymakers, if not for consumers paying a higher share of their own health care costs.

Researchers led by Amelia Haviland at Carnegie Mellon University found that overall savings at companies introducing high-deductible plans lasted for up to three years afterwards. If there were any cost-related time bombs caused by forgone care, at least they didn't blow up by then.

"Three years out there consistently seems to be a reduction in total health care spending" at employers offering high-deductible plans, Haviland said in an interview. Although the study says nothing about what might happen after that, "this was interesting to us that it persists for this amount of time."

The savings were substantial: 5 percent on average for employers offering high-deductible plans compared with results at companies that didn't offer them. And that was for the whole company, whether or not all workers took the high-deductible option.

The size of the study was impressive; it covered 13 million employees and dependents at 54 big companies. All savings were from reduced spending on pharmaceuticals and doctor visits and other outpatient care. There was no sign of what often happens when high-risk patients miss preventive care: spikes in emergency-room visits and hospital admissions.

The suits in human resources call this kind of coverage a "consumer-directed" health plan. It sounds less scary than the old name for coverage with huge deductibles: catastrophic health insurance.

But having consumers direct their own care also requires making sure they know enough to make smart choices. That means getting vaccines and skipping dubious procedures like an expensive MRI scan at the first sign of back pain.

Not all employers are doing a terrific job. Most high-deductible plan members surveyed in a recent California study had no idea that preventive screenings, office visits and other important care required little or no out-of-pocket payment. One in five said they had avoided preventive care because of the cost.

"This evidence of persistent reductions in spending places even greater importance on developing evidence on how they are achieved," Kate Bundorf, a Stanford health economist not involved in the study, said of consumer-directed plans.

"Are consumers foregoing preventive care?" Bundorf asks. "Are they less adherent to [effective] medicine? Or are they reducing their use of low-value office visits and corresponding drugs or substituting to cheaper yet similarly effective prescribed drugs?"

Employers and consultants are trying to educate people about avoiding needless procedures and finding quality caregivers at better prices.

That might explain why the companies offering high-deductible plans saw such significant savings even though not all workers signed up, Haviland said. Even employees with traditional, lower-deductible plans may be using the shopping tools.

The study doesn't close the book on consumer-directed plans.

"What happens five years or 10 years down the line when people develop more consequences of reducing high-value, necessary care?" Haviland asked. Nobody knows.

And the study doesn't address a side effect of high-deductibles that doctors can't treat: pocketbook trauma. Consumer-directed plans, often paired with tax-favored health savings accounts, can require families to pay $5,000 or more per year in out-of-pocket costs.

Three people out of 5 with low incomes and half of those with moderate incomes told the Commonwealth Fund last year their deductibles are hard to afford.

As in all battles, the front-line infantry often makes the biggest sacrifice.


IRS Clarifies Prior Guidance on Premium Reimbursement Arrangements; Provides Limited Relief

Originally posted February 24, 2015 by Daimon Myers, Proskauer - ERISA Practice Center on www.jdsupra.com.

Continuing its focus on so-called “premium reimbursement” or “employer payment plans”, the Internal Revenue Service (IRS) released IRS Notice 2015-17 on February 18, 2015. In this Notice, which was previewed and approved by both the Department of Labor (DOL) and Department of Health and Human Services (collectively with the IRS, the “Agencies”) clarifies the Agencies’ perspective on the limits of certain employer payment plans and offers some limited relief for small employers.

Prior guidance, released as DOL FAQs Part XXII and described in our November 7, 2014 Practice Center Blog entry, established that premium reimbursement arrangements are group health plans subject to the Affordable Care Act’s (ACA’s) market reforms. Because these premium reimbursement arrangements are unlikely to satisfy the market reform requirements, particularly with respect to preventive services and annual dollar limits, employers using these arrangements would be required to self-report their use and then be subject to ACA penalties, including an excise tax of $100 per employee per day.

Since DOL FAQs Part XXII was released, the Agencies’ stance has been the subject of frequent commentary and requests for clarification. With Notice 2015-17, it appears that the Agencies have elected to expand on the prior guidance on a piecemeal basis, with IRS Notice 2015-17 being the first in what may be a series of guidance. The following are the key aspects of Notice 2015-17:

  • Wage Increases In Lieu of Health Coverage. The IRS confirmed the widely-held understanding that providing increased wages in lieu of employer-sponsored health benefits does not create a group health plan subject to market reforms, provided that receipt of the additional wages is not conditioned on the purchase of health coverage. Quelling concerns that any communication regarding individual insurance options could create a group health plan, the IRS stated that merely providing employees with information regarding the health exchange marketplaces and availability of premium credits is not an endorsement of a particular insurance policy. Although this practice may be attractive for a small employer, an employer with more than 50 full-time employees (i.e., an “applicable large employer” or “ALE”) should be mindful of the ACA’s employer shared responsibility requirements if it adopts this approach.  ALEs are required to offer group health coverage meeting certain requirements to at least 95% (70% in 2015) of its full-time employees or potentially pay penalties under the ACA. Increasing wages in lieu of benefits will not shield ALEs from those penalties.
  • Treatment of Employer Payment Plans as Taxable Compensation. Some employers and commentators have tried to argue that “after-tax” premium reimbursement arrangements should not be treated as group health plans.  In Notice 2015-17, the IRS confirmed its disagreement. In the Notice, the IRS acknowledges that its long-standing guidance excluded from an employee’s gross income premium payment reimbursements for non-employer provided medical coverage, regardless of whether an employer treated the premium reimbursements as taxable wage payments. However, in Notice 2015-17, the IRS provides a reminder that the ACA, in the Agencies’ view, has significantly changed the law, including, among other things, by implementing substantial market reforms that were not in place when prior guidance had been released. The result:  the Agencies have reiterated and clarified their view that premium reimbursement arrangements tied directly to the purchase of individual insurance policies are employer group health plans that are subject to, and fail to meet, the ACA’s market reforms (such as the preventive services and annual limits requirements). This is the case whether or not the reimbursements or payments are treated by an employer as pre-tax or after-tax to employees. (This is in contrast to simply providing employees with additional taxable compensation not tied to the purchase of insurance coverage, as described above.)
  • Integration of Medicare and TRICARE Premium Reimbursement Arrangements. On the other hand, although the Notice confirms that arrangements that reimburse employees for Medicare or TRICARE premiums may be group health plans subject to market place reforms, the Agencies also provide for a bit of a safe harbor relief from that result. As long as those employees enrolled in Medicare Part B or Part D or TRICARE coverage are offered coverage that is minimum value and not solely excepted benefits, they can also be offered a premium reimbursement arrangement to assist them with the payment of the Medicare or TRICARE premiums. (The IRS appropriately cautions employers to consider restrictions on financial incentives for employees to obtain Medicare or TRICARE coverage.)
  • Transition Relief for Small Employers and S Corporations. Although many comments on the prior guidance concerning employer payment plans requested an exclusion for small employers (those with fewer than 50 full-time equivalent employees), the IRS refused to provide blanket relief. The IRS notes that the SHOP Marketplace should address the small employers’ concerns. However, because the SHOP Marketplace has not been fully implemented, no excise tax will be incurred by a small employer offering an employer payment plan for 2014 or for the first half of 2015 (i.e., until June 30, 2015). (This relief does not cover stand-alone health reimbursement arrangements or other arrangements to reimburse employees for expenses other than insurance premiums.) This is welcome relief to small employers who adopted these arrangements notwithstanding the Agencies’ prior guidance that they violated certain ACA marketplace provisions.
  • In addition to granting temporary relief to small employers, the IRS also provided relief through 2015 for S corporations with premium reimbursement arrangements benefiting 2% shareholders. In general, reimbursements paid to 2% shareholders must be included in income, but the underlying premiums are deductible by the 2% shareholder. The IRS indicated that additional guidance for S corporations is likely forthcoming.

The circumstances under which premium reimbursement arrangements are permitted appears to be rapidly dwindling, and the IRS indicated that more guidance will be released in the near future. Employers offering these arrangements should consult with qualified counsel to ensure continuing compliance with applicable laws.


5 companies that dropped part-time employee health care

Originally  posted on https://ebn.benefitnews.com.

Just 25% of companies that offered employee health insurance made coverage available to part-time workers in 2013, according to the Kaiser Family Foundation. That percentage will decline further with Walmart Stores Inc.’s announcement that it is dropping health insurance for part-time employees. Walmart joins a growing list of major retailers that have done the same.

Target

Target announced in January 2014 that it was dropping coverage for part-time employees. The company said in a blog post that less than 10% of its total employee population participated in that plan.

Home Depot

The world’s largest home improvement retailer said in September 2013 that it was ending coverage for 20,000 part-time employees. Employees with fewer than 30 hours a week were no longer offered limited liability medical coverage, Bloomberg reported. At the time, 5% of the company’s 34,000 employees were enrolled in that plan.

Trader Joe's

In August 2013, the retailer sent a memo to staff that it was dropping coverage for part-timers, but giving them a check for $500 to find coverage through the public exchanges.

Forever 21

In August 2013, the retailer announced it was cutting some employees’ hours to 29.5 hours, or just under the 30 hour threshold at which the Affordable Care Act mandates coverage be provided. Forever 21 does not provide coverage to part-time employees. In a Facebook note, the company said the decision was made “independent of the Affordable Care Act” and that the change impacted less than 1% of all U.S. store employees.

Walmart

On Oct. 7, the world’s largest retail chain said it plans to stop offering health benefits to employees who work less than 30 hours a week, or about 2% of its U.S. staff.

 


3 Takeaways From the Medicare Trustees Report

Originally posted at 9:41 am EST,  August 1, 2014 by Drew Altman on https://blogs.wsj.com.

The annual report from the Social Security and Medicare trustees predicted that Medicare will be solvent until 2030, four years later than the trustees predicted last year. That’s thanks to the recent slowdown in Medicare spending and a stronger economy that yields higher revenue through payroll tax contributions to the Medicare trust fund.

The administration and congressional Democrats are taking credit for elements of the Affordable Care Act that have helped to slow the growth in Medicare spending, and they warn against changes to Medicare that they fear would shift costs to seniors and undermine the program.

Republicans, however, see little good in the trustees’ report. “Don’t be fooled by the news that Medicare has a few more years of solvency,” Rep. Kevin Brady, chairman of the House Ways and Means subcommittee on health, said in a statement. More fundamental changes to Medicare are needed, many Republicans argue, such as transforming the program to a premium-support or voucher model.

Here are three points that might have been lost in the back and forth over the report by those on the left and the right:

* Contrary to conventional wisdom, Medicare appears to be outperforming the private sector. Medicare spending per capita rose at a 6.1% annual clip between 2000 and 2012 vs. a 6.5% growth rate for private health insurance. And Medicare spending is projected to rise at a 4% per capita rate between 2013 and 2022 vs. 4.9% for private insurance. (The bad news is that GDP per capita is projected to rise more slowly, at 3.7% per year.) Medicare’s problem is less poor performance and more the challenge of meeting the needs of an aging society and seniors who have modest incomes to pay for their health care.

* The ACA is projected to cut $716 billion in expected increases to providers and insurers between 2013 and 2022. Despite claims that cutting payments to providers and private plans could make the sky fall, there is no evidence so far that the industry or beneficiaries have been adversely affected by the reductions. In fact, enrollment has been growing in the private Medicare Advantage plans, which were hit by the most severe and controversial reductions, and the gains are projected to continue. So far, complex schemes to reform the way Medicare pays doctors and hospitals, which many believe hold promise, have produced mixed results in the effort to cut costs. But as $716 billion in Medicare savings demonstrates, the tried-and-true way to save money continues to be shaving a little off payment increases each year, as long as the health-care industry is still in the black and can absorb it.

* Perhaps the best news from the 2014 trustees report is that the country has a bit more time to hope for a more functional Congress that can figure out how best to finance Medicare for an aging population. It is almost impossible to envision the current Congress and administration working together on these long-term challenges.

With liberals and conservatives at odds over Medicare’s future direction and seniors such a strong voting group, it will be difficult to shift Medicare quickly in any direction. But there is good news for now in the trustees report.