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Welcome to The Healthcare Savings Quarterly!
We are excited to introduce The Healthcare Savings Quarterly. This publication is designed to provide useful, timely and actionable information on a host of topics impacting the health insurance and healthcare markets. Each quarter we will identify a "hot topic" in the market, and will solicit articles from industry leaders to provide varying perspectives on issues and opportunities.
If you are a Self-Insured Employer, Payer, Labor or Trust Organization, Stop-loss Carrier, Health Plan, or a business that services this market,
this publication can be a useful source of information and guidance.
We hope you find this valuable and encourage your feedback, including future topics on which you would like information. |
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Self-Funded Survival in a Post - PPACA Era
By Ron Peck, Esq. and Sharryn Gedeon , The Phia Group
The Affordable Care act is known as a source of great assistance to citizens today. March 23, 2010 introduced us to what our industry can expect to see for the foreseeable future. The Patient Protection Affordable Care Act ("PPACA") has also caused some serious soul-searching by employers, as it relates to the continued provision of benefits to employees, versus payment of a relatively minor penalty to the government, and exiling employees to the exchanges for coverage. The background leading to this cost-benefit analysis, and what employers need to consider before doing anything too hasty, is the topic we address herein.
Grandfathered Plans
There will be many changes along the journey that is PPACA. In our industry, you've likely heard two key terms thrown about; Grandfathered and Non-Grandfathered. If a benefit plan gets "too" creative in its efforts to contain costs, it risks losing grandfathered status (and facing regulatory compliance requirements immediately). On the other hand, programs that cling to their existing terms in an effort to maintain grandfathered status, risk putting their otherwise archaic and hardly viable plan up against the exchanges in a "cheapest-benefits-winner-take-all" showdown. Walking the line between preservation of plan savings in the face of reform (remaining grandfathered) and implementing cool new cost saving mechanisms (such as wellness programs, medical tourism, Medicare based and other cost based fee schedules, etc.) but possibly losing grandfathered status in the process is a debate many sponsors are having with themselves.
Come 2014, benefit plans will have to be as robust in their offerings yet cheap in their expenses as possible, to remain intact in the face of the exchanges. Each state will establish an exchange. The plans that participate in the exchanges, provided by private carriers, will be accredited for quality, and will display benefit options in a standardized manner for simple user comparison. Employers with more than 200 employees must automatically enroll new full-time employees in coverage. Employers must notify all employees of existence of the exchange(s) and notify them of their potential eligibility for a subsidy to buy into the exchange. Moreover, employers must offer "free choice vouchers" to employees, who qualify for subsidies based on their income.
Play or Pay
These exchanges will no doubt be an attractive option to employers who are tired of seeing the cost of providing health benefits go up, up, up. Presumably in an attempt to counter this lure, and defend the President's declaration to employees around the Country that, "If you like your plan, you can keep it," the law attempts to "dissuade" employers from dropping coverage and sending employees to the exchange. How do they accomplish this? By implementing a penalty, directed against employers that would seek to take advantage of the exchanges, dropping coverage, and letting employees fend for themselves. The issue? The penalty is less than the cost employers pay for the coverage!
With this so-called "pay or play," scenario, employers with 50 or more employees will be penalized in accordance with the following: if employers do not offer coverage to all (95%) of full-time employees, their plan fails to cover at least 60% of medical expenses, and/or the participant contribution is equal to or more than 9.5% of their income, and said individual(s) buys into the exchange with a tax subsidy, the employer will pay $2,000 a year multiplied by total of number of full-time employees (not including the first 30), or $3,000 per subsidized employee buying into the exchange; [with the penalty that applies depending upon the reason for the penalty]. For many employers, this penalty is not as expensive as their current health plan expense! Why, then, would an employer consider maintaining their benefit plan? This is where we must extol the benefits of self-funding, and present the many wondrous cost-containment options available to sponsors.
Timothy Stoltzfus Jost, J.D. reports in his "Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues," (http://www.commonwealthfund.org/Publications/Fund-Reports/2010/Sep/Health-Insurance-Exchanges-and-the-Affordable-Care-Act.aspx), that of the eight most difficult issues facing State and Federal implementation of the exchanges, making self-funded plans compatible with exchanges, and the looming risk of adverse selection arising from self-funded plans, are at the top of the list.
Mr. Jost states that, "The most significant problem that exchanges have grappled with historically has been adverse selection. What should be done to avoid adverse selection against and within exchanges?" This can only be the case if indeed self-funding is an attractive option for many employers.
Keeping Staff Healthy
Employers have offered health plans for generations not due to legal mandates, but rather, because health benefits are a valuable form of consideration used to attract talented staff, while presenting a return on investment to the employer in the form of healthy employees. A healthy staff is a happy and productive staff. Employers that offer health benefit plans are confident that their staff is able to access quality care. Many employers don't want to leave the health and welfare of their employees in those employees' hands or place the welfare of their employees into the hands of the government.
Employers that believe their staff will access healthcare absent an employer sponsored plan need to think twice. Following the United States Supreme Court's decision regarding the so-called mandate, coverage is "mandated" but enforced via a tax, whose avoidance does not draw a penalty. As a result, there is no true penalty for failing to obtain coverage. Many employees without employment based coverage may forgo coverage entirely, risking their health and future ability to be a productive employee.
Regardless of PPACA, the benefits of self-funding are well known, and include:
* Elimination of Most Premium Taxes
* State Mandated Benefits are Optional
* Uniform Multi-State Operations (ERISA Based Preemption of State Laws)
* Lower Cost of Administration
* Cost Reporting & Access to Data
* Carrier Profit Margin and Risk Charge Eliminated
* Reduced Costs Pass on to Members
* Customer Service and Claims Process Customized to the Population
* Unique Cost and Utilization Controls - From Wellness to Utilization Review
* Cash Flow Benefit - Claims Paid as they are Incurred
* Control of Plan Design Tailored to Specific Population's Needs
These benefits of self-funding are well known, and have been enough to lure large employers away from insurance for years. Large employers (with large populations) present risk pools that are big enough to bear the financial strain of the occasional "catastrophic" claim. Smaller employers, however, fearing the financial burden such a large claim could pose, have generally spent more in premiums than they would have paid in self-funded claims, in order to spread the cost uniformly (in the form of premiums) and rest assured they would not be hit by a catastrophic (albeit rare) claim.
A Shift to Self-Funding?
A 2010 survey by Aon Corp. / Aon Hewitt's consulting unit found, however, that seven percent of businesses with 500 or fewer employees plan to switch from being fully insured to self-fund in 2011. Why the shift?
Beginning in 2010, PPACA required state review of premium rate increases for non-group, small-group, and fully insured large-group plans. Self-funded employer plans are not subject to this review. Many believe that fully funded insurance carriers raised premiums aggressively prior to the laws adoption, expecting - in the future - to be limited in their ability to do so. In a world where rates continue to rise on a percentage-based schedule, this resulted in plan costs being placed on an accelerated track indefinitely.
In response to this, and other PPACA spawned expenses, many employers that could no longer afford insurance, but for the reasons stated above didn't want to relinquish control over their employee's benefits entirely, started looking at self-funding as a viable option. This, in turn, resulted in an increasingly competitive market for TPA services and stop-loss insurance. The affordability of stop-loss coverage is especially relevant to small employers, since stop-loss insurance prices are a larger factor in their costs to self-fund, compared to large employers with risk pools big enough to bear catastrophic claims.
The Risk of Adverse Selection
Adverse selection can be broken down into two parts. It occurs when (Part 1) those that are financially responsible for providing benefits to a sicker-than-average population see an opportunity to shift that burden onto someone else, and (Part 2) those that were relied upon to lessen that burden (by adding young, healthy lives to the risk pool - diluting the risk posed by the sick lives) see an opportunity to avoid the risk pool, and horde the "low risk" lives to themselves.
Adverse selection has occurred for generations; employers with low risk populations self-fund rather than add their healthy lives to the risk pools of large insurance carriers; insurance carriers that cover unhealthy lives enrolled by employers that do not want to be financially responsible for those lives beyond payment of a premium.
Supporters of PPACA fear that this will also happen to the exchanges, and with good reason. The so-called "Prisoners Dilemma" is a term used to describe situations where, if one party makes a "selfless" move, and all other parties maintain a "selfish" position, the selfless entity suffers a tragic end.
In this case, those that support the PPACA created exchanges agree that adverse selection is (as described above) very likely. A greater concentration of older and less healthy workers (presently covered by their employers' fully insured plans - these employers know better than to self-fund such risky populations) will likely be "dumped" by their employers into the exchanges. Worse, not all such employers need "drop" coverage at all. Beginning in 2017, states can decide whether larger firms can purchase coverage in the exchanges; allowing the employer to "save face," offer benefits to employees, but shift the financial burden onto the exchanges.
If states allow this, the potential for adverse selection increases, since large firms with older and/or sicker workers, might find it advantageous to buy coverage in the exchange. This, in turn, makes enrollment in the exchanges more expensive.
Faced with the "selfless" option (enrolling a young, healthy population in the exchange to help bear the cost of insuring the older, sicker population), and the "selfish" option (taking advantage of a young, healthy risk-pool via self-funding), employers that choose the selfless option may find themselves alone, holding the bag.
Employers' first responsibility is to their staff. Employers that are focused on offering the most robust benefits for the lowest cost need to assess the level of risk their population poses, and decide whether self-funding is right for them. If they have a large risk pool, or a low-risk population, it is not their responsibility to "donate" those lives, and their employees' money, to exchanges or insurance carriers so that other, unaffiliated, high-risk lives can be affordably insured. It is their responsibility to ensure their employees receive the most bang for their buck.
About The Phia Group, LLC
The Phia Group, LLC, headquartered in Braintree, Massachusetts, is an experienced provider of health care consulting services including plan document assessments, health care cost containment techniques, comprehensive claims recovery, and consulting designed to control health care costs and protect medical plan assets. The Phia Group's overall mission is to reduce the cost of medical plans through its recovery strategies, innovative technologies, legal expertise, and focused, flexible customer service. To learn more, please visit www.phiagroup.com.
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Understanding ACA-Related Taxes and Fees Is Critical for Corporate Decision-Makers, Plan Administrators, TPAs and Brokers
By Matthew J. Rhenish, Senior Vice President, Strategy & Marketing, HM Insurance Group
The Accountable Care Act (ACA) introduces a number of taxes and fees applied to carriers and groups that provide coverage to their employees. These taxes vary by coverage type, distribution channel, year and other factors, creating significant complexity for plan advisors, group decision-makers, third party administrators (TPAs) and brokers. Sound financial decision-making and proper plan administration can only happen if these fees and taxes, their application and each party's responsibilities are understood.
Self-insured groups must be aware of new costs associated with coverage in order to prepare financially. When advising clients, brokers need to provide counsel on the administrative, data and cost implications of each fee. The TPAs that administer these self-insured plans need to understand the administrative and operational impacts of the fees as they relate to collection, payment and bill impacts, as well as determining the best practice for reserving for such fees. All parties must determine how they will answer client questions on these fees, confirm the proper procedures are in place and track regulatory changes over time.
The fees covered here include the Transitional Reinsurance Contribution fee, Annual Health Insurance tax, fee for Carrier Exchange Participation, Cadillac tax, Patient Centered Outcomes Research Institute (PCORI) fees and the Risk Adjustment Program. These fees, including the coverage type impacted, are detailed in the chart below. Keep in mind that the assumptions are based on a current interpretation of the regulations.
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Types of Coverage Impacted |
| |
Reform Measure |
Individual |
Fully Insured |
Self-Funded |
Stop Loss | |
Transitional Reinsurance Contribution fee |
|
X |
X |
| |
Annual Health Insurance tax |
X |
X |
|
| |
Fee for Carrier Exchange Participation |
X |
|
|
| |
Cadillac tax (starts in 2018) |
|
X |
X |
| |
PCORI fee |
X |
X |
X |
| |
Risk Adjustment Program |
X |
X |
|
|
Sources: HHS.gov; IRS.gov
With regard to the self-funded market, the Transitional Reinsurance Contribution fee and the PCORI fee have the greatest impact. Stop Loss insurance, which often goes hand-in-hand with self-funding, is not impacted at this time, though Stop Loss carriers and brokers must understand the impact such fees have on their clients' plans in order to provide appropriate guidance.
Transitional Reinsurance Contribution
The Transitional Reinsurance Contribution has a stated objective to help stabilize individual and small group premiums by assessing a fee on the self-funded and group markets. This fee will be collected regardless of whether a state elects to operate its own reinsurance program. The fees will be collected beginning in 2014 and run through 2016; during this time, $25 billion will be collected, and states may impose additional contribution requirements.
The national contribution rate will be determined by Health and Human Services (HHS) for each benefit year. The definition of "benefit year" in and of itself brings complexity to the situation as it does not align with tax year or effective date of coverage, at least in the first year, thereby requiring it to be tracked on a different yearly schedule than both standard practices. This creates additional complexity in billing and calculation that TPAs have to resolve. The federal rules and guidelines established that the contribution rate will be applied on a per capita basis rather than a percentage of premiums. To determine the reinsurance contribution, the number of covered lives during a benefit year for all contributing entities is multiplied by the per capita rate, which also is called that National Contribution Rate. According to the proposed rule, for the benefit year 2014, the following three components establish the national per capita rate:
- The National Reinsurance Pool - $10 billion
- The U.S. Treasury Contribution - $2 billion
- Administrative costs - $20 million
The national per capita rate will be calculated by dividing the sum of the three amounts by the estimated number of enrollees in plans that must make reinsurance contributions.
Therefore, for 2014, the fee is approximately $63 per member per year, or $252 for a family of four. This number will reduce (see below) for the following two years, with collections scheduled to end in 2017.
For 2015:
- The National Reinsurance Pool - $6 billion
- The U.S. Treasury Contribution - $2 billion
- Administrative costs - $20 million
For 2016:
- The National Reinsurance Pool - $4 billion
- The U.S. Treasury Contribution - $1 billion
- Administrative costs - $20 million
In addition to the rules above, states have some flexibility in establishing their own program. They can add fees to state reinsurance, including administrative expenses, but cannot collect less than the federal minimum. They also can opt to collect from self-funded plans or have HHS do the collection.
Stop Loss insurance is not impacted by the funding of this reinsurance program. Groups should understand that the contribution rate collected from or on behalf of the self-funded plan does not take into account whether there is any Stop Loss coverage in place.
The IRS has indicated that sponsors of self-insured plans may treat the contributions as ordinary and necessary expenses subject to any applicable disallowances or limitations under the Tax Code. This treatment applies whether the contributions are made directly or through a TPA.
PCORI Fee
The PCORI fee is being assessed to fund evidence-based medicine. For health insurers and employer-sponsored self-funded health plans, ACA imposes this fee for each policy or plan year ending on or after October 1, 2012, and before October 1, 2019. For plan years ending on or after October 1, 2012, and before October 1, 2013, the applicable fee is $1 per covered person. It grows to $2 per covered person for plan years ending on or after October 1, 2013, and before October 1, 2014. For plan years ending on or after October 1, 2014, the applicable dollar amount is indexed based on increases in the projected per capita amount of National Health Expenditures.
The plan sponsor fee is based on the average number of participants and dependents covered by the plan. To calculate the fee, the group should multiply the average number of lives covered under the plan for the plan year by the applicable dollar amount. In addition, there are three alternative methods for calculating lives under the self-funded plan.
The three alternative calculation methods include:
- Actual Count Method - Covered lives are determined by calculating the sum of the lives covered each day in the first nine months of the plan year and dividing that sum by the number of days in the first nine months of the plan year.
- Snapshot Factor Method - Covered lives are determined by adding the total lives covered on one date in each quarter (or an equal number of dates for each quarter) and dividing the total by the number of dates on which a count was made. For those plans that do not track the number of dependents, a "snapshot factor method" is available. Under the "snapshot factor method," the number of lives covered on a date is equal to the sum of the number of participants with self-only coverage on that date, plus the product of the number of participants with coverage other than self-only coverage on the date and 2.35. For this purpose, the same months must be used for each quarter (i.e., January, April and July). (Please note that the Treasury Department and IRS developed the 2.35 dependency factor in consultation with economists and plan sponsors.).
- Form 5500 Method- Under the Form 5500 method, covered lives are determined by using information from the ERISA Form 5500 filings for the last applicable plan year. Plans using this method will calculate the number of lives by adding the number of covered lives on Form 5500 at the beginning and end of the plan year and then dividing that number by two.
Keep in mind that the plan sponsor must use the same method to calculate the average number of lives covered under the plan consistently for the entire plan year, though the plan sponsor may use a different method from one year to the next. This practically means that brokers and TPAs must have the flexibility to handle different calculation methods across groups or even for one group across years as groups may want to use the method that minimizes their fee payment.
In instances where a group health plan has a self-insured coverage option and a fully insured option, the number of covered lives is determined by using either the Actual Count Method or the Snapshot Factor Method above. All calculations except the Form 5500 Method are based on the calendar year. Under the Form 5500 Method, however, calculations are based on the plan year (i.e., August 1, 2012, through July 31, 2013).
As shown above, the Transitional Reinsurance Contribution and the PCORI fees are just two fees that impact the insurance industry. It is in the best interest of all involved to understand how each impacts their particular situation and/or that of their clients in order to make the best decisions for financial security and to ensure proper implementation of ACA requirements going forward.
This article was contributed by Matthew J. Rhenish, Senior Vice President, Strategy & Marketing, at HM Insurance Group. Matt can be reached at matthew.rhenish@hmig.com.
About HM Insurance Group
HM Insurance Group, headquartered in Pittsburgh, is a recognized leader in stop loss and reinsurance, offering employer stop loss, provider excess and HMO reinsurance. HM's product portfolio also features workers' compensation (Pennsylvania only) and worksite/voluntary critical illness, accident, disability income and term life insurance, as well as individual critical illness and accident insurance. Through its insurance companies, HM Insurance Group holds insurance licenses in 50 states and the District of Columbia and maintains 23 regional sales offices across the country. For more information, visit www.hmig.com. |
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Moving Ahead with Health Care Reform in 2013
By Kathryn Bakich, The Segal Company
While employers have been tackling some of the smaller mandates of the Affordable Care Act since its enactment more than two years ago, 20 13 is the year in which many significant provisions must be implemented. Group health plan sponsors face major decisions and must take action to prepare for this next phase. This article offers a preview of what employers can expect this year and what they need to do to keep their plans on track. Additional details and updates are available at Segal's Health Care Reform Guide at http://www.segalco.com/publications-and-resources/health-care-reform/.
Women's Preventive Health Services
Employers that sponsor non-grandfathered health plans face the greatest challenge in 2013. They must add women's preventive health services, effective for the plan year beginning on or after August 1, 2012. The list of required services, published by the Health Resources and Services Administration (part of the Department of Health and Human Services - HHS), was based on recommendations from the Institute of Medicine and can be viewed at http://www.hrsa.gov/womensguidelines/.
Implementing women's health benefits can be challenging. Federal agencies recently issued guidance clarifying that non-grandfathered group health plans must cover the full range of contraceptive methods approved by the Food and Drug Administration. This includes, but is not limited to, oral contraceptives, barrier methods, hormonal methods and implanted devices (e.g., intrauterine devices), as well as patient education and counseling, as prescribed by a health care provider. Consequently, implementing these benefits will likely require addressing coverage provided by both the medical provider and the pharmacy benefit manager (PBM).
New Fees
Employers are also watching the development of rules on three new fees slated for this year. The comparative effectiveness research fee is effective now, but plans are waiting for guidance on how to pay it. The fee is $1 per person per year for the first year and then $2 per person per year through 2019.
The second new, and unexpected, fee is the transitional reinsurance fee. When the Affordable Care Act was passed, most assumed that this fee was only payable by insurers, in their capacity as an insurer or an Administrative Services Organization provider. However, regulations unexpectedly expanded liability to self-insured employers, even those that do not use a carrier for plan administration. The fee is expected to be $63 per person per year and will be used to support insurers that offer coverage through the individual Exchanges. Many plan sponsors have challenged the applicability of the fee to self-insured arrangements, which becomes payable in 2014 through 2016, but the federal agencies have not reversed their position that self-insured plans are liable for the fees.
A third fee under the Affordable Care Act applies to insurance companies. It is paid based on the percentage market share of the insurer. The fee is effective in 2014, and will likely affect the cost of purchasing an insured group health plan.
It is a good idea for employers to check with their professional advisors as to whether the three new fees apply to them and whether the fees may affect plan costs.
Employer Shared Responsibility Penalty
Another new rule employers must prepare for this year is the employer shared responsibility penalty. The penalty may apply if a large employer (over 50 full-time equivalents) has at least one full-time employee who obtains a federal subsidy in a state health insurance Exchange. All large employers, but particularly those with large part-time workforces, seasonal workforces and other variable workforces, will be examining their covered employee population carefully to assure that they have a system in place that prevents penalties from being applied. This, plus the new benefit mandates and fees, is likely to tax HR departments throughout 2013.
Employer Notice of Exchange Coverage
The Affordable Care Act amended the Fair Labor Standards Act to add a requirement that covered employers must provide all employees with a written notice telling them about the Exchanges, what services they offer and that if employees may lose their employer's pre-tax contribution to their health care coverage if they purchase a qualified health plan through an Exchange. The notice also requires the employer to provide information about the premium assistance tax credit and that employees might be eligible for such credit if the actuarial value of the employer's plan is less than 60 percent of a standard benefit package (as determined by HHS).
Although the Affordable Care Act refers to an effective date of March 1, 2013 for the written notice, the Department of Labor (DOL), which has authority for implementing the Fair Labor Standards Act, has issued Frequently Asked Questions (FAQs) that delay distribution of this notice until late summer or early fall 2013. This timing will coordinate with the October 2013 open enrollment period for the Exchanges. Future guidance regarding this notice is expected. Delaying the employer notice makes much more sense than sending the notice now because (1) guidance on testing the plan's minimum value has not yet been finalized and (2) the status of state Exchanges is still uncertain, as only 19 states have been approved to operate either state or partnership Exchanges.
New Guidance
This year will see a huge amount of guidance with regard to implementing the Affordable Care Act. Additional guidance is expected, which will finalize existing rules. It is hoped that rules that helped employers implement the law but relieved them of the risk of penalties, such as the one-year good faith period for implementing SBCs, will be continued through 2014, because of the extent of work that remains.
President Obama held a press conference in January concerning the Newtown, CT shootings and the administration's programs to stop similar events in the future. The president's plan includes "increasing access to mental health services." He announced that final regulations under the Mental Health Parity and Addiction Equity Act (MHPAEA) are a priority and could be expected as part of the effort to stop gun violence.
Other expected regulations include regulations on employer reporting requirements under the Affordable Care Act (Sections 6055 and 6056), which are effective in 2014; new Flexible Spending Arrangement use-it-or-lose-it guidance; regulations on how Health Reimbursement Arrangements can continue under the Affordable Care Act; regulations on the 90-day waiting period; the minimum value calculator for employer plans; how the individual mandate works; and, how nondiscrimination rules work for insured plans under Section 105(h). Regulations are expected on the requirements applicable to non-grandfathered group health plans in 2014, including the obligation to cover routine costs associated with clinical trials and the obligation to limit out-of-pocket (OOP) costs to certain maximums, which are tied to the OOP maximums for health savings accounts.
Looking Ahead
One aspect of the Affordable Care Act that has helped employers is the expansion of the Medicare Part D Prescription Drug Program. In 2014, many employers will move from the Retiree Drug Subsidy (which has lost its tax preference) to offering a Medicare Part D program, which now has greater federal subsidies. Employers are also looking at the pre-Medicare retiree population to determine whether Exchanges may serve as an attractive coverage alternative to employer-sponsored coverage, and what the potential effect on retirees would be if they move to Exchange coverage. While many of the law's other key provisions, including the individual mandate and the requirement that insurance companies cover individuals with pre-existing conditions, do not take full effect until 2014, employers have a lot of work to do this year to ensure everything is in place when the time comes to implement them.
Conclusion
After years of wondering when and if health care reform would take effect, employers now know there is no turning back. Group health plan sponsors will have to take action this year to prepare for implementation of some of the more significant provisions of the Affordable Care Act.
About the author:
Kathryn Bakich, JD, is a Senior Vice President and National Health Compliance Practice Leader for The Segal Company. She is one of the country's leading experts on employer-sponsored health coverage. She can be reached at 202.833.6494 or kbakich@segalco.com.
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Health Care CO-OPs; a Compelling New Option
By Ranee Randby, Communications Director
Community Health Alliance
Beginning January 2014, health insurance in the United States will  become mandatory just as car insurance is in many states.
Many factors go into choosing a health insurance plan, depending on your age and life circumstances. Consumer Operated and Oriented Health Insurance Plans, or CO-OPs, are a compelling new option under the Affordable Care Act. Individuals and small businesses that live or operate in a CO-OP state will have another option to traditional health insurance.
Gone are the pre-existing condition exclusions and arbitrary cancellations; additionally, dollar limits on coverage will be restricted. More Americans will have access to health care and will be required to take a more active role in their health, ushering in a new era for health care coverage in many ways.
A lot of attention has been given to the Health Insurance Exchanges (now called the Marketplace), with 26 states choosing the federal government-run online insurance Marketplace, 17 states electing to run their own and seven deciding to split the duties in a partnership. But a lesser known - but equally important - health care revolution is happening in the 23 states where applications were approved for CO-OPs.
What is a CO-OP?
The CO-OP model was created by a Congressional bipartisan panel under the Affordable Care Act to promote competition in the health insurance industry. As state and federally regulated health insurance plans, CO-OPs have a specific mandate to provide health insurance that is responsive to individuals and small business needs through fair and effective competition. CO-OPs will begin member enrollment in 23 states in October 2013 for coverage effective on Jan. 1, 2014.
"You could say that the traditional insurance company is like a big bank," said Jerry Burgess, the president and CEO of the South Carolina and Tennessee CO-OPs, Consumer's Choice Health Plan and Community Health Alliance. "They are managed the same way, with comparable business goals: to make money, gain market share and avoid losses. A health insurance CO-OP is nonprofit by definition, so it's more like a credit union, with members governing the business and benefitting from the organization's success."
CO-OPs are unlike any other health insurance company. The emphasis is on the consumer. No traditional health insurance company is governed by its members, providers and brokers who elect representatives from each group to the board of directors. A few ways they are different include:
"Member-governance promotes a bottom-up business strategy for managing the plan and encourages the exchange of ideas and best practices," said Martin Hickey, MD, New Mexico Health Connections CEO. "And most importantly, care, communications and business practices center around the member/patient - which is different from the traditional health insurance company model."
All the approved CO-OPs were funded through loans from the U.S. Department of Health and Human Services (HSS) to help set up and maintain CO-OP health insurance issuers. CO-OP loans must be repaid with interest, and loans have been made only to private, nonprofit entities that demonstrate a high probability of becoming financially viable. The Centers for Medicaid and Medicare (CMS, a division of HSS) closely monitors CO-OPs to ensure they are meeting program milestones. CO-OP loan recipients are subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years.
Approved CO-OPs, their loan amounts and websites:
- Land of Lincoln Health (incorporated as Metropolitan Chicago Healthcare Council CO-OP), Illinois, $160,154,812 landoflincolnhealth.org
- Compass Cooperative Health Network, Arizona, $93,313,233 compasscoopaz.com
- Colorado Health Insurance Cooperative, Inc. (CHI), Colorado, $69,396,000
- HealthyCT, Connecticut, $75,801,000 cohinc.org
- CoOportunity Health (formerly Midwest Members Health), Iowa and Nebraska, $112,612,100 cooportunityhealth.com
- Kentucky Health Care Cooperative, Kentucky, $58,831,500 mykyhc.org
- Louisiana Health Cooperative, Inc., Louisiana, $65,040,660 mylahc.org
- Maine Community Health Options (MCHO), Maine, $62,100,000 maineoptions.org
- Evergreen Health Cooperative Inc., Maryland, $65,450,900 evergreenmd.org
- Minutemen Health, Inc., Massachusetts, $88,498,080 minutemanhealth.org
- Michigan Consumer's Healthcare CO-OP, Michigan, $71,534,300 hcofm.com
- Montana Health Cooperative, Montana, $58,138,300 mhc.coop
- Hospitality Health CO-OP, Nevada, $65,925,396 hospitalityhealth.org
- Freelancers CO-OP of New Jersey, New Jersey, $107,213,300 newjerseycoop.org
- New Mexico Health Connections, New Mexico, $70,364,500, nmhealthconnections.org
- Freelancers Health Service Corporation, New York, $174,445,000 newyorkcoop.org
- Coordinated Health Plans of Ohio, Inc., Ohio, $129,225,604, website under construction
- Freelancers CO-OP of Oregon, Oregon, $59,487,500 orhealthco-op.org
- Oregon's Health CO-OP (Incorporated as Community Care of Oregon), Oregon, $56,656,900 orhealthco-op.org
- Consumers' Choice Health Insurance Company, South Carolina, $87,578,208 cchpsc.org
- Community Health Alliance Mutual Insurance Company, Tennessee, $73,306,700 chatn.org
- Arches Community Health Care (AHC or Arches), Utah, $85,400,303 archeshealth.org
- Common Ground Healthcare Cooperative, Wisconsin, $56,416,600 commongroundhealthcare.org
- Vermont Health CO-OP, Vermont,$33,837,800 vermonthealth.coop
Big changes are coming.
Forthe health insurance industry, The Affordable Care Act requires insurers to spend premium dollars primarily on health care, not on administrative costs, overhead and marketing. This is called the 80/20 rule because 80 cents of every premium dollar must be spent on health care. Insurers must justify a rate increase of 10 percent or more to the state or federal rate review program before the increase takes effect.
Insurers also are required to use plain language when describing benefits and coverage. Preventive care such as vaccines and mammograms will be free. Health insurance plans must include a comprehensive package of items called the essential health benefits, which include 10 categories from emergency services to mental health services and oral and vision care ... and so much more. New information is coming out daily. The CMS website, www.healthcare.gov, is a great place to visit for information - you can sign up for updates.
Americans will be able to enroll for health insurance online on the Marketplace (see the Exchange reference above). The Marketplace has been compared to a grocery store or Travelocity - CO-OP insurance plans will be one of the options. Some state CO-OPs also are offering their products on the private market through insurance brokers.
The impact on employers.
Employers have new responsibilities in regard to health benefits, and the regulations are tiered according to number of employees. Businesses with less than 50 full-time employees are exempt from having to offer health insurance. However, businesses with less than 25 full-time employees may be eligible, if they meet certain criteria, for a health insurance tax credit for offering health insurance coverage to their employees. Businesses with more than 50 full-time employees have a shared responsibility to provide access to coverage, adequate coverage and affordable coverage. If employers do not provide these three items they can face monetary penalties.
It's a new day for health care in the United States. Americans will have many more choices at their fingertips. The goal is to create an environment of healthy competition, broader coverage for everyone, and ultimately, a healthier America.
About Community Health Alliance
CHA is Tennessee's health insurance CO-OP. For more information, visit www.chatn.org or call 888-415.3332. Ranee Randby may be reached directly at rrandby@chatn.org. |
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Affordable Care Act Opportunity: Sharpen Your Transplant and Specialty Care Plan Language
By: John M. Van Dyke, Chief Executive Officer
INTERLINK Health Services, Inc.
Throughout my 2012 travels, I met industry executives all over wishing for a repeal of the Affordable Care Act (ACA). During the election year, plans and consultants often took the wait and watch strategy and modified plan language only as needed. With the election well behind us, and implementation of the ACA assured, industry executives and consultants are changing plans and benefits to meet these new mandates. Nearly all plans will modify their plan language this year, so let's capitalize on this opportunity and make some meaningful changes.
The company I manage is in its 18th year of existence and each year there have been considerable health insurance increases. We made the decision to move to a fixed contribution model, which enabled our company to focus compensation in other areas. Regardless if you are an ACA advocate or not, I think we can all agree the system needed some major changes. Since change is inevitable, I propose we make some change that will potentially have a major impact on future costs. There is no better place to perpetuate change other than benefit language and this article will explore those opportunities.
Many ideas such as Value Based Incentives, Surgical Competency Networks, Narrowed Networks, Medical Homes, Accountable Care Organizations, Single Patient Records and Predictive Modeling are all revolutionary ideas, but to implement any of these ideas requires significant changes to plan design and language. Unfortunately, a lot of the existing plan language out there hinders implementation of these types of ideas. The good news is that there are Plan language changes that can significantly enhance the employer's ability to manage costs.
Less is more.
A TPA client requested we evaluate their standard transplant language. As worded, preferred benefits are paid when a member receives a transplant at any "Centers of Excellence" program. Having access to rates for all five big Centers of Excellence transplant networks, plus Centers of Excellence named centers in various PPOs, means this plan is paying preferred benefits at over 60% of all transplant programs nationally. This language likely does more harm than good. Data suggests that 5-8 transplant teams for any organ type are vastly superior to all others. The benefit of a "narrowed network" is easy to visualize and most networks will have appropriate model benefit plan language to work from.
Another opportunity for creating a large financial impact is related to the excessive charges for the drugs and biologics associated with cancer care. It is actually a BIG and growing problem. There is a cancer treatment center that provides a record number of procedures and also charges at hyper inflated rates. How about the tune of $850,000 for a course of care most providers charge $84,000! Work with your consultant to create language which clearly states the maximum the plan would pay. For example, some plans are working from Average Sales Price (ASP) or Average Wholesale Price (AWP) plus some reasonable profit.
Since we are discussing cancer language, and it might sound surprising, but 80% of health plans do not even have a section in their benefit book dedicated to cancer treatments or oncology services. Given cancer is a top 1, 2, 3 or 4 plan expense, how could this occur? I was reviewing The 2013 Genentech Oncology Trend Report, and table called The Implementation Status of Benefit Plan Coverage Options for Cancer Care. This table estimates the number of self-funded employer plans that currently have very specific cancer care benefit language items, and predicts what percentage of plans intend to implement additional plan limits in 2013 and also over next 3-5 years. For an example, it is estimated 69% of plans surveyed will incorporate significant incentives/limits for cancer treatments delivered according to guideline care.
The carrot and the stick.
My last benefit language segment will address the use of penalties and incentives in plan design. This year INTERLINK has been invited to participate in numerous discussions around benefit language, and one of the things we learned is to drop the term penalty. Most plans intend to incorporate significant incentives to achieve plan goals and objectives, which is a significant improvement over member non-compliant benefits. Having forfeited their grandfathered status, most plans now have many options to incent plan members through plan design. Incentives create a positive view about achieving a desired action or change; using the term penalties is just the opposite. With all the changes coming in health care, plans and their members simply respond better to positive reinforcement.
The challenge of dialysis.
At nearly every meeting now, it seems someone mentions dialysis charges. The only cure for dialysis is transplantation, but how to contain those ever increasing dialysis charges as they wait? Unfortunately, I simply have no tried and tested solution to offer. I am aware of numerous solution attempts, and the most promising have always included benefit limits.
Final thoughts.
With so many benefit language changes to make, here are some closing points:
1) Identify high-cost areas of the plan, and narrow provider offerings through positive incentives;
2) Work with consultants, but also with the service vendors; many offer very effective benefit language for little to no cost;
3) Seek vendors and programs that have sound provider selection/measurement strategies, and move away from layers and layers of networks;
4) Understand that it takes time to design and make changes, so start planning and implementing well before renewal;
5) And lastly, look for areas of billing vulnerability, and install limits when able.
The cost of health care and health insurance has been rising for as long as I can remember. This year, our plan took a 15.08% increase, and it caught our attention. After 28 years in the healthcare industry, I am pleased at the number and quality of new programs hitting the market. Many of these new programs, however, require benefit plan language modification which often takes time to implement, so get started.
There are many opportunities in ACA, but by far the biggest opportunity is that plans of all types are changing benefit plan language this year.
About INTERLINK Health Services, Inc.
INTERLINK® is a privately held medical excellence company, founded in 1995. INTERLINK is most known for its transplant Centers of Excellence network and integrated line of education programs. Our CancerCARE Program ties member reimbursement to NCCN Guideline® compliance, and features Pathology/DiagnosticCOE and CancerCOE networks. For more information please visit www.interlinkhealth.com. |
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UCS Update: New Services for 2013
- Negotiations PLUS. This is a cutting edge service combining direct negotiations with quality medical management, enabling us to impact the cost of care PRIOR to the delivery of service. The result is deeper savings for the plan and the member.
- Medicare Plus Repricing: For clients interested in a more aggressive approach to driving down medical costs, we have the solution for you.
- Workers' Compensation and Auto Liability: We have expanded our proven solutions for generating significant savings on medical bills to these markets. It includes our negotiations, nurse bill audit and PPO repricing solutions.
For more information contact Corte Iarossi, VP, Sales & Marketing at 602-393-4553 X 120, or via e mail at ciarossi@unitedclaim.com |
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Issue: 1
A Focus on the Affordable Care Act |
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