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TAKING A DYNAMIC APPROACH TO MEDICAL PLAN STRATEGIZING IN A DIFFICULT ECONOMY LOOKING FOR OPPORTUNITIES FOR CHANGE IN YOUR HEALTH PLAN © 2010 RBGNE
THINGS HAVE CHANGED! We are at a cross roads in healthcare Health premium increases continue to take up a higher and higher percentage of our GDP Our area of the country enjoys the highest health premium costs per capita Employers dont feel comfortable making and filling new jobs when they are faced with more spending obligations © 2010 RBGNE 2
THINGS HAVE CHANGED! (cont.) Our country has relied upon employers to finance the majority of healthcare The new healthcare reform law puts more burden, responsibility and cost on the shoulders of employers None of the new healthcare reform initiatives promise a decrease in health cost increases 3 © 2010 RBGNE
ONE THING IS CLEAR… You, as an employer, need timely, relevant and accurate information with which to prepare actionable strategies/tactics to finance your health insurance plan Your goal is the proper alignment of financial incentives to maximize the efficiency of your plan. These incentives must encourage positive employee behavior changes and mitigate your financial risk! 4 © 2010 RBGNE
REFORM STARTED OVER A YEAR AGO Congress passed the first big reform last March when they mandated the TARP Cobra subsidy The legislation required that employers drag high utilizing employees and their dependents back onto their plan accompanied by a 65% subsidy to finance their care In addition to TARP Cobra– high unemployment rates have created selection on the part of plans with richer dependent contribution strategies where laid off dependents have opted into their spouses plan These variables have contributed to huge trend factors! Youll see these manifest in BIG rate increases this year….bigger than past years. 5 © 2010 RBGNE
A MODEL IN DISTRESS: MA Massachusetts healthcare reform was the precursor to the national reform model Universal coverage mandates there have pressured the infrastructure resulting in tremendous increases in healthcare costs Universal coverage mandates have jammed PCP offices and hospital ERs MA regulators are rebuffing carrier requests for requested rate increases which is threatening the solvency of some of the carriers 6 © 2010 RBGNE
OVERVIEW OF THE NEW REFORM Plan theoretically extends coverage to over 30 million uninsured Americans by: Expanding Medicaid Using federal health insurance premium subsidies Allowing employers with less than 100 employees to secure coverage through an exchange Allowing individuals who cant access coverage through an employer the option of the exchange with premium and cost sharing credits 7 © 2010 RBGNE
HOW THE REFORM IS BEING FINANCED The plan results in $500 billion in tax increases! The bulk comes from households earning $250,000 and individuals earning over $200,000 where a huge new Medicare payroll tax is imposed Self insured and insured plans will be taxed to subsidize a patient-centered outcomes research trust fund. New taxes on insurance companies, drug manufacturers and medical device manufacturers which are estimated to raise $107 billion in revenue 8 © 2010 RBGNE
IMMEDIATE IMPACT Coverage will be required to meet minimum standards including: Covering adult children to age 26 Elimination of lifetime maximums Removal of pre-existing condition clauses for dependent children Inclusion of preventative services to be covered at 100% 9 © 2010 RBGNE
GENERAL IMPACTS OF THE REFORM Employers will be required to offer minimum coverage standards or will become subject to an annual per person fee of up to $2,000 Groups with fewer than 100 employees will not be penalized Employers are incented to subsidize coverage via an earnings test and face up to a $3,000 penalty for not meeting the affordability test. Use of health FSAs will be limited to $2500 per year starting in 2013 HSAs will no longer be allowed to reimburse for over the counter drugs and non medical withdrawals will be taxed at 20% 10 © 2010 RBGNE
IMPACT ON PLAN SPONSORS Employers with fewer than 25 employees and annual wages under 50k will be eligible for tax credits starting in 2010 Small employers will have to offer better coverage, report on value of coverage, provide retiree subsidies but will not be subject to the $2,000 penalty for not offering coverage. Employers covering retirees 55-64 will get a one time subsidy to pay 80% of those claims between 15-90K with $5 billion funded for this measure to substitute for existing Medicare D RX subsidy 11 © 2010 RBGNE
PENALITES AND SUBSIDIES Large employers will pay penalties for employees securing tax credits and their coverage through an exchange. Any employer offering coverage will need to provide a voucher to employees with incomes below 400 percent of the federal poverty level if the employees share of the premium cost is between 8 and 9.8 percent of the employees income. This will permit the employee to purchase coverage through an exchange. Premium subsidies will be provided to families with incomes between 133% and 400 % of the poverty level ($29,327 to $88,200 for a family of 4 in 2009) so that they can purchase coverage through an exchange. Subsidies will be offered on a sliding basis limiting the premium cost to between 2% of income at the low level of the scale to 9.5% of income on the high end of the scale. 12 © 2010 RBGNE
WHAT DO WE HAVE TO WORRY ABOUT? Full-time employees must generally be asked to pay no more than 9.5% of their household income for coverage. (Note: Regulations will have to explain what levels of coverage the 9.5% affordability standard applies to, what is included in the definition of income, and whether the affordability percentage applies to all plans offered by an employer or just the lowest-cost plan.) More than a third of the nations employers – 38% – have at least some employees for whom coverage would be considered unaffordable under the newly enacted Patient Protection and Affordable Care Act (PPACA), according to a new analysis of data from Mercers annual employer health plan survey. 13 © 2010 RBGNE
WHAT CAN YOU DO NOW? PREPARE! There are lots of things that you can do with your existing health plan and with your employees to make your plan more efficient and more effective ACT! Actions speak louder than words. Too many employers have ignored their health plans and simply continue year to year with the same old thing 15 © 2010 RBGNE
STRATEGY AND TACTICS For the last 8 years, health carriers have completely remanufactured their portfolios, and their technological infrastructure These changes make it easy to deliver and access useful information real time….information related to healthcare costs, providers, disease, health coaching and coverage 16 © 2010 RBGNE
WHATS IMPORTANT? Most carriers, even in the small group marketplace, offer a portfolio of products with pricing decrements with nearly a 65% rating spread Savvy employers have discovered ways to finance their health plans using plan designs that allow you to retain dollars rather than to spend them needlessly 17 © 2010 RBGNE
WHERE DO WE GO FROM HERE? Strategic brokers will be talking to their plan sponsors to not only educate them on the various aspects of the reform bill, but to develop specific plans to manage their benefits as they would any other corporate asset. This means… Using the breadth and scope of pricing in the carriers portfolio to create financial incentives that motivate change. Designing simple and logical financial incentives for employees to enroll in CDC options. Employees wont change their behavior unless financial incentives are simple to understand and meaningful. Using tools such as claim stratification reports that show us claims by dollar amount to help us manage predictable risk. 18 © 2010 RBGNE
CLAIM STRATIFICATION REPORT The following illustration is an Aetna claim stratification report. This report was generated using both medical and pharmacy claims comprised of 3 billion claim dollars for 2.2 million members over a 12 month period of time. Report based on Paid claimsReport based on Allowable claims Claim Range % of Claimants < $500 59.5%< $50021.3% $500- $750 9.5%$500- $75023.1% $750 - $1,000 3.7%$750 - $1,00015.2% $1,000 - $2,000 7.5% $1,000 - $2,000 13.1% $2,000 - $5,000 8.5%$2,000 - $5,000 11.6% $5,000 - $10,000 4.1%$5,000 - $10,000 5.6% 10K > 7.2%10K >10.1% 19 Source: Aetna, Inc. © 2010 RBGNE
HOW DO WE DO IT? It is important for you to realize where most people utilize your health plan. Using a claims stratification report, we can see that most of your utilization occurs in the first $500 of the plan for employees and the first $1,000 for families. It is also important for you to realize the power of consumerism in teaching employees the value of transparency: understanding the cost/quality of the services they consume. 20 © 2010 RBGNE
WHAT CAN YOU DO? Roughly 85% of all drugs have generic equivalents. Simple and easy strategies to promote consumerism… Promoting generic drug campaigns ($4 generics through Wal-Mart, Target, etc.) Promoting the free antibiotic programs at various grocery stores. Employees tend to utilize the ER for non-urgent issues. Think about developing a PCP campaign or educating your groups on more economical options such as CVS Minute Clinics. This program will be expanding over the next five years and set to double the number of in store clinics they currently have. 21 © 2010 RBGNE
WHAT CAN YOU DO? If you are trying to achieve efficiencies in your plan, you obviously want to decrease claims costs Simple wellness plans with incentives help to achieve this goal Encouraging your employees to get their free preventive examination is key to the success of your plan often discovering undiagnosed time bombs……diabetes, elevated BP, and other disease process 22 © 2010 RBGNE
WHAT CAN YOU DO? The following is a typical analysis that we do for our large group plan sponsors for which we receive preventive reporting data on a quarterly basis Preventive Care Report 5/1/09 – 12/31/09 (6 months of credible data) Childhood Preventive – 42% of those eligible received care Adult Preventive – 8.3% of those eligible received care Well baby visits and immunizations being sought on schedule Visits are low across the board; members are not getting their preventive care 23 © 2010 RBGNE
BEWARE OF THE WOLF IN SHEEPS CLOTHING! Health care reform has created a viral environment. Many disreputable persons are attempting to take advantage of dazed and confused business owners Health planning is already a confusing process. Beware of vendors trying to encourage self funding on small groups and individual underwriting scenarios promising cheaper premiums 24 © 2010 RBGNE
TAKE CARE OF YOURSELF! Many owners of small and larger employer groups are under the gun and stressed by the economy and the obligations of the new health reform bill You go to work to earn money Disability claims have risen precipitously in the last 2 years on executives and owners because of the stress of the economy 25 © 2010 RBGNE
TAKE CARE OF YOURSELF! Most owners ignore their own personal needs and put their families at risk when times are lean and employees are getting laid off Executives owe it to themselves to ensure that they are adequately and appropriately covered with protection that covers earnings in the event of an accident or sickness Most dont have this coverage despite the fact that their businesses/employees depend upon them 26 © 2010 RBGNE
IN CONCLUSION… You owe it to yourself to get ahead of the curve to learn the implications of the new world of health care financing and regulation There are many things that you can do proactively to efficiently engineer your plans and plan designs to mitigate costs and cost increases 27 © 2010 RBGNE
Jeffrey J. Hogan, Northeast Regional Manager 1 Forest Park Drive Farmington, CT 06032 860-606-0370 Jhogan@rbgne.com ROGERS BENEFIT GROUP
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