Presentation is loading. Please wait.

Presentation is loading. Please wait.

Senate Bill 6: Implementation of the Small Employer Health Benefit Premium Subsidy Program May 15, 2008 Rex Cowdry, M.D. Executive Director Maryland Health.

Similar presentations


Presentation on theme: "Senate Bill 6: Implementation of the Small Employer Health Benefit Premium Subsidy Program May 15, 2008 Rex Cowdry, M.D. Executive Director Maryland Health."— Presentation transcript:

1 Senate Bill 6: Implementation of the Small Employer Health Benefit Premium Subsidy Program May 15, 2008 Rex Cowdry, M.D. Executive Director Maryland Health Care Commission

2 ACCESS and COVERAGE

3 Who are the uninsured in Maryland?   “The uninsured” is not a single group but rather many different groups without insurance for widely varying reasons and for varying lengths of time   780,000 individuals,   14.2 % of the total population – 15.8% of the under-65 population 575,000 1,100,000 including 140,000 children

4 Current Population Survey (CPS) estimate of 780,000 uninsured in Maryland probably corresponds best to individuals uninsured for more than 3 months during the year, slightly lower than the “specific point in time” estimate. Using the CBO report and adjusting for changes in the surveys over the past 8 years: Equivalent to CPS estimate - 780,000 Maryland residents Equivalent to 450,000 to 650,000 Maryland residents Equivalent to 1,000,000 to 1,100,000 Maryland residents Maryland residents uninsured for the entire year = between 450,000 and 650,000 Maryland residents uninsured at any time during the year = 1,000,000 to 1,100,000

5 Comparison of Maryland with the entire United States Health Care Coverage of the Non-elderly ,500, ,000

6 Effects of Age: Uninsurance rates are highest among year olds Young adults (19-29) Relatively healthy Lower health expenditures Being uninsured may be a rational choice if price is high relative to benefit “Young immortals” may not purchase even at a low price Mandate or penalties may be necessary to motivate purchase

7 Income: 25% of the uninsured have incomes above 400% of the Federal Poverty Level (approximately $40,000 single and $80,000 family of four)

8 Income: 47% of the uninsured have incomes below 200% of the Federal Poverty Level (approximately $20,000 single and $40,000 family of four)

9 Uninsured by Age & Family Income Low Income (0-200%) Mod. Income ( %) High Income (401%+) Uninsured AgesRateShareRateShareRateShare %.074%.043% %.2812%.139% %.1812%.0712%

10 Family composition: Over half the uninsured are adults without children

11 Family composition: Single males are least likely to have coverage

12 Citizenship and the Uninsured   Rates of uninsurance are much higher among non-citizens at all income levels.   For non-US citizens, rates of uninsurance remain high even in high income families   27% of the uninsured are not US citizens

13 There are substantial racial and ethnic disparities in coverage

14 At a given income level, uninsured rates are generally similar across racial and ethnic groups; except that... at each income level, Hispanics are more likely to be uninsured

15 69% 9% 16% ~780, Trends in Maryland Health Insurance Coverage Marylanders under age 65, Employment- based Direct purchase Medicaid Other public Uninsured 7% 6% ~740,000 77% 72% 5% 4% 5% 13% 15% % 7%

16 Employer sponsored health insurance   Premiums continue to rise faster than wages   underwriting cycle   provider consolidation and bargaining pressures   technology, technology, technology (pharma )   Employers have generally not increased the employee’s share of the premium, but are increasing employee deductibles, co-pays   Employers are considering greater cost shifting, the use of defined contribution plans, and an end to retirement health benefits   Employers are also changing incentives   Employee incentives through HSAs, wellness, copays   Provider incentives through P4P, tiered providers, Leapfrog   Some employers, particularly small businesses, are dropping coverage   Employment-based coverage declined from 77% to 72% from 2000 to 2003

17 83% of the uninsured live in a family with one or more workers

18 Employer-sponsored insurance: Coverage rates are substantially lower in small Maryland firms Firms with under 100 employees have 57% of the uninsured employees in Maryland (but only 37% of the workers) Firms with under 25 employees have 42% of the uninsured employees in Maryland (but only 25% of all workers)

19 Public Coverage (Effective 07/01/06) Note: This chart is for illustrative purposes only. Each coverage group has specific eligibility and some asset requirements, which are not shown Age 65 and Over Parents or disabled age 19 to PW 185 Poverty Level: 1 person = $10,210 2 persons =$13,690 4 persons = $20,650 As of 1/24/2007 MCHP Premium MCHP Medicaid Primary Adult Care Program – 116% FPL Pregnant Women Medicare 300

20 Adult Medicaid Eligibility, Eligibility Maryland Massachusetts Vermont District of Columbia Maine Minnesota Eligibility (%FPL) Catamount Dirigo Commonwealth Maryland significantly trails leading states in Medicaid eligibility for parents Median Income Income (thousands of dollars) Median Income and

21 “Safety Net” FQHCs In Maryland Source: Mid-Atlantic Association of Community Health Centers There are 14 FQHCs (38% serve rural Maryland) and 2 FQHC look-alikes that operate over 82 health centers

22 Summary: Who are the uninsured in Maryland?   780,000 individuals, including 140,000 children   14.2 % of the total population – 15.8% of the under-65 population   The majority are young and healthy   83% live in families with at least one adult worker   44% are single adults who are not parents   47% have incomes below 200% FPL (approx. $40,000 for a family of 4)   35% of uninsured have family incomes above 300% of the poverty level (approx. $60,000 for a family of four in 2005)   A significant number of the uninsured are either on Medicaid/ MCHIP (the “Medicaid undercount”) or are eligible   27% are not US citizens   Uninsured rates are higher in our Hispanic (39%) and black (19%) populations. This primarily reflects income differences, except in the Hispanic population   Small businesses have a disproportionate share of the uninsured workers

23 Why This Matters   There is a well-documented connection between insurance coverage and access to care and health:   The uninsured are more likely to go without needed care and have poorer health outcomes that those with insurance.   Care is often provided in the most expensive setting with the least continuity of care – the Emergency Department.   We all pay the cost of caring for Marylanders who either cannot afford or choose not to get health insurance.   In Maryland, premiums for family coverage were estimated to be $948 higher because of uncompensated care in (FamiliesUSA)   Hospital Uncompensated Care - $800 million a year in rate adjustments   Caveat: Most of the uncompensated care is bad debt   Caveat: The Feds have already contributed to the fund through Medicare and Medicaid rates

24 The Emergency Department as Safety Net Care Source: Maryland Health Care Commission A substantial proportion of Maryland ED visits are treatable without an ED visit - at least in theory % of population % of ED visits Medicare 1112 Medicaid 921 Private insurance 6446 No insurance 1422 Individuals with Medicaid and the uninsured are more likely to use the ED

25 Senate Bill Special Session   Expands Medicaid eligibility to cover parents with incomes below 116% FPL effective July 1, 2008   Gradually expands Medicaid services for other adults below 116% FPL, subject to funding   Creates the Small Employer Health Benefit Premium Subsidy Program   Net result: 100,000 fewer uninsured

26 SB6 Changes in Public Coverage beginning 7/1/08 Note: This chart is for illustrative purposes only. Each coverage group has specific eligibility and some asset requirements, which are not shown Age 65 and Over Parents or disabled age 19 to PW 185 Poverty Level: 1 person = $10,210 2 persons =$13,690 4 persons = $20,650 As of 1/24/2007 MCHP Premium MCHP Medicaid Primary Adult Care Program – 116% FPL Pregnant Women Medicare 300 Parents All adults

27 Small Business Health Benefit Premium Subsidy Maryland Health Care Commission In consultation with: Department of Health and Mental Hygiene Maryland Insurance Administration

28 Subsidy Design Team Maryland Health Care Commission Bruce Kozlowski, Director, Center for Health Care Financing and Policy Bruce Kozlowski, Director, Center for Health Care Financing and Policy Ben Steffen, Director, Center for Information Services and Analysis Ben Steffen, Director, Center for Information Services and Analysis Janet Ennis, Chief, Small Group Market Janet Ennis, Chief, Small Group Market Nicole Stallings, Director, Government Relations Nicole Stallings, Director, Government Relations Mel Franklin, AG’s office Mel Franklin, AG’s office Plus: Administration, AG, Contracting, Regulations Plus: Administration, AG, Contracting, Regulations Other State Government Agencies DHMH (design, implementation, financial management of SF) DHMH (design, implementation, financial management of SF) MIA (wellness, regulations) MIA (wellness, regulations) HSCRC (regulations) HSCRC (regulations) Comptroller (subsidy payments, auditing family income) Comptroller (subsidy payments, auditing family income) DLLR (quarterly wage reports as audit check, information dissemination) DLLR (quarterly wage reports as audit check, information dissemination) DBM (financial management and budget) DBM (financial management and budget) DBED (information dissemination) DBED (information dissemination) The Governor and Administration The General Assembly Members of the Health and Government Operations Committee Members of the Health and Government Operations Committee Members of the Senate Finance Committee Members of the Senate Finance Committee Consultants - Academy Health / RWJ Jonathan Gruber, MIT – health economics consultation Jonathan Gruber, MIT – health economics consultation Mercer – John Welch – Section 125 plans and design advice Mercer – John Welch – Section 125 plans and design adviceCarriers Third-Party Administrators Brokers/agents Small business owners Small business associations (NFIB, Chamber, Retailers and Restaurant Assn)

29 Small Employer Health Benefit Plan Premium Subsidy Program The purposes of the program are to: provide an incentive for small employers to offer and maintain health insurance for their employees; help employees of small employers afford health insurance premium contributions; promote access to health care services, particularly preventive health care services that might reduce the need for emergency room care and other acute care services; and reduce uncompensated care in hospitals and other health care settings.

30 Small Employer Health Benefit Plan Premium Subsidy Program : Eligibility Requirements in SB 6 At the time of initial application, the business meets the following requirements: The business has at least 2 and no more than 9 eligible employees 30 or more hrs/wk The business has not offered insurance to its employees in the most recent 12 months Corollary: Must have been actively engaged in business for 12 months The coverage purchased must have a wellness benefit The average wage of the eligible employees is less than an amount determined by the Commission

31 Design fundamentals: The program should have stability and continuity – –Eligibility should not disappear or phase out unless firm grows and prospers – –There should be no “cliffs” – abrupt changes in subsidy as firm grows or prospers The program should be simple and easily explained – –Wages rather than income – –Average wage rather than median – –Subsidy applies equally to all employees – no separate employee income test except for family coverage The program must be affordable and “efficient” in an economic sense – –Requires targeting a subset of small businesses – –Requires targeting the program to employers not currently offering insurance – a tradeoff between efficiency and fairness The program should be designed to: – –Provide employers with choices of plans – –Simplify administration and keep administrative costs low – –Maintain established business relationships, processes, and incentives – –Assure that subsidies are seamlessly integrated into routine billing and payroll deductions – –Assure effective auditing of the subsidy – –Minimize bureaucracy while preventing fraud and abuse

32 Implications for Program Administration Subsidize a variety of current small group market health plans rather than contract with a single carrier Administer the subsidies through premium reductions, not through checks to employers and employees Basic agreement is with the carriers, who are free to designate fiscal agents to handle administration and billing The subsidy is paid to the carrier Total subsidy is passed through to the employer as a reduced group premium The subsidy is shared between employer and employee in proportion to the amount each has contributed toward the premium Employers in turn must agree to pass through the employee’s share of the subsidy in the form of lower payroll deductions for health insurance

33 How will the subsidy be delivered? Current design, subject to change Apply for insurance and subsidy Include info re wages and existing coverage for all employees MHCC registry confirms The subsidy rate for each type of coverage (indiv, +children, +spouse, family) The total premium subsidy amount passed through to the employer The subsidy to be passed through to each employee through lower payroll deductions Carrier sends MHCC info re all payments received, all persons insured Carrier bills for following month Employer pays by 1 st of month Comptroller pays by 1 st of month Bill employer for premium - subsidy Bill MHCC for subsidies MHCC compares with registry Any subsidy payment not matched by a corresponding employer payment will be deducted from the next payment to the carrier Application Monthly payment and reconciliation Employer establishes Section 125 plan Employer begins payroll deductions for employee’s share of premium

34 How Will the Subsidy Be Calculated? Design based on models developed by Jonathan Gruber Consultation supported by AcademyHealth / RWJ grant

35 Amount of premium subsidy ( proposed - subject to final regulations) SB6: Either 50% of the premium or an amount set by the Commission, whichever is lower SB6: Either 50% of the premium or an amount set by the Commission, whichever is lower Proposed “limiting amounts” for FY2009 Proposed “limiting amounts” for FY2009 Based on recent HMO premiums “as purchased” in SGM Based on recent HMO premiums “as purchased” in SGM Average wage Employee only Employee + child Employee + spouse Family <$25,000$2000$3000$4000$5000 $30,000$1600$2400$3200$4000 $35,000$1200$1800$2400$3000 $40,000$800$1200$1600$2000 $45,000$400$600$800$1000 $50,000$0$0$0$0

36 How Will the Average Wage Be Calculated? Information provided by employer Information provided by employer Hourly x avg. hours/wk x 52 Hourly x avg. hours/wk x 52 Add weekly tip income x 52 Add weekly tip income x 52 Annual salary Annual salary The owner/partner dilemma The owner/partner dilemma Owner’s draw income from the company in a variety of ways, not just wages, so it’s necessary to use the owner’s income if he/she works more than 30 hours a week at the business and thus is eligible for coverage. Owner’s draw income from the company in a variety of ways, not just wages, so it’s necessary to use the owner’s income if he/she works more than 30 hours a week at the business and thus is eligible for coverage. The goals are to assist the low wage small business and to get employees insured The goals are to assist the low wage small business and to get employees insured An owner’s high income should not immediately disqualify a low- wage firm An owner’s high income should not immediately disqualify a low- wage firm Resolution: Resolution: Use the average wage of the firm Use the average wage of the firm Count only the first $60,000 of each owner’s/partner’s income in figuring the average wage of the firm Count only the first $60,000 of each owner’s/partner’s income in figuring the average wage of the firm If the owner’s AGI is below $60,000, use the AGI instead If the owner’s AGI is below $60,000, use the AGI instead

37 Examples of Average Wage Calculations $120,000$60,000$60,000$35,000 $32,000$32,000$60,000$32,000 $26,000$26,000$60,000$26,000 $18,000$18,000$20,000$18,000 $17,000$17,000$17,000 Average$43,200$31,200$50,000$25,600 Subsidy – empl. only $540$1,560$0$1,960

38 The Special Case of Health Savings Accounts $35,400 max OOP reached $2700 deductible $15,450 max OOP reached $2700 deductible Preventive care $2700 deductible Remainder of deductible - $ % co-ins Employer contribution to HSA - $1500 Standard HMO $3900 premium $1950 subsidy High-deductible HMO with HSA $2400 premium $1200 subsidy HD HMO/HSA - employer contributes premium savings to HSA Preventive care $15,450 max OOP reached $2400 premium + $1500 HSA $1950 subsidy 20% co-ins Preventive care = Patient OOP Increasing health expenditures =>

39 The Special Case of Family Coverage We expect the great majority of coverage to be employee only We expect the great majority of coverage to be employee only Spousal coverage is relatively expensive, in part due to risk selection Spousal coverage is relatively expensive, in part due to risk selection Employers subsidize family coverage less generously, if at all Employers subsidize family coverage less generously, if at all Nonetheless, subsidizing dependent coverage would be as efficient as the employee subsidy, and we wanted to encourage coverage of the entire family. Nonetheless, subsidizing dependent coverage would be as efficient as the employee subsidy, and we wanted to encourage coverage of the entire family. Note that some of the children are MCHIP eligible Note that some of the children are MCHIP eligible If eligibility were solely wage-based, a low-wage spouse could get subsidized coverage for a high income family If eligibility were solely wage-based, a low-wage spouse could get subsidized coverage for a high income family Therefore, employees will have to attest to having a family income below $75,000 * to be eligible for a subsidy for the dependent coverage Therefore, employees will have to attest to having a family income below $75,000 * to be eligible for a subsidy for the dependent coverage

40 Employer role Select an agent/broker, who will handle the subsidy application Select an agent/broker, who will handle the subsidy application Provide information about the business and its employees Provide information about the business and its employees Quarterly wage reports and current wages/salaries Quarterly wage reports and current wages/salaries Any previous health insurance offered by the business Any previous health insurance offered by the business Select a health plan with a wellness benefit Select a health plan with a wellness benefit We anticipate that both HMO and PPO plans will be available, and that some will be high-deductible plans with HSAs We anticipate that both HMO and PPO plans will be available, and that some will be high-deductible plans with HSAs Select a percentage of the premium as the employer contribution Select a percentage of the premium as the employer contribution Employer contributions toward dependent coverage are allowed and are subsidized, but are not required Employer contributions toward dependent coverage are allowed and are subsidized, but are not required If an HSA plan is chosen, decide whether to contribute premium savings to the HSA (employer contributions to the HSA are eligible for the subsidy) If an HSA plan is chosen, decide whether to contribute premium savings to the HSA (employer contributions to the HSA are eligible for the subsidy) Contribution should be high enough to achieve the 75% participation rate required by insurers Contribution should be high enough to achieve the 75% participation rate required by insurers The employer receives the entire subsidy in the form of reduced premiums The employer receives the entire subsidy in the form of reduced premiums the State pays the subsidy to the insurance company the State pays the subsidy to the insurance company the employee’s share of the subsidy is passed through in the form of reduced payroll deductions the employee’s share of the subsidy is passed through in the form of reduced payroll deductions The employer pledges to establish a Section 125 plan The employer pledges to establish a Section 125 plan

41 Employer attestation (draft)

42 Employee Form   Choice of coverage   Employee only   Employee plus children, or spouse, or both   Agreement to payroll withholding under Section 125   Information about public or private health insurance coverage within the last three months   to assess crowd-out   to document effect of program on uncompensated care   If dependent coverage is chosen, signed attestation that family Adjusted Gross Income (AGI) < $75,000   If single, AGI from the individual return   If married filing separately, combine the AGI’s of the separate returns   If married filing jointly, AGI from the joint return

43 Broker/Agent   Vital to the success of small group programs   Provide advice and education for the employer   HSA’s and HDHP’s, Section 125 plans pose special educational challenges   Gather information necessary for carrier and subsidy applications, obtain quotes and subsidy estimates, assist employer decision-making   Submit applications to subsidy program and carrier   Subsidy submission may also be handled by the carrier or a TPA   Broker/Agent attests that:   To the best of their knowledge, employer is eligible for the subsidy   Wages and number of full-time employees reported on the subsidy application are consistent with the employer’s Quarterly Wage Report   Health benefit plan includes a wellness benefit   Provide employee education, HR support, assistance in claims resolution

44 The Wellness Benefit The wellness benefit is part of the carrier’s benefit design, not a stand-alone employer-sponsored wellness program. A qualifying wellness benefit must include:  Health Risk Assessment (HRA)  Education based on the HRA responses  Financial incentive for prevention, health promotion, or disease management  Direct financial reward  Reduced cost sharing

45 Section 125 Premium Only Plan Allows employee premium payments to be excluded from both income tax and FICA tax Allows employee premium payments to be excluded from both income tax and FICA tax Substantial benefit to employees who pay taxes Substantial benefit to employees who pay taxes Modest benefit to employers (no FICA tax on employee premium payments) Modest benefit to employers (no FICA tax on employee premium payments) Simple to establish, no annual reporting Simple to establish, no annual reporting Cost will be between $0 and $200 – easily recaptured through FICA savings Cost will be between $0 and $200 – easily recaptured through FICA savings Establish plan and notify employees Establish plan and notify employees No filing of documents or reports required No filing of documents or reports required Keep plan document on file Keep plan document on file Review the plan if the Federal law changes Review the plan if the Federal law changes Make adjustments to payroll Make adjustments to payroll Contract with Mercer Contract with Mercer Materials, PowerPoint, community meetings Materials, PowerPoint, community meetings Carriers and TPAs may provide as additional benefit Carriers and TPAs may provide as additional benefit

46 Expected questions: Is this subsidy time-limited? Is this subsidy time-limited? No – the Governor and the General Assembly intended this to be an ongoing program No – the Governor and the General Assembly intended this to be an ongoing program What happens if the average wage of my business increases? What happens if the average wage of my business increases? Subsidies will be adjusted annually at policy renewal to reflect the firm’s then current average wage Subsidies will be adjusted annually at policy renewal to reflect the firm’s then current average wage The income limits in the subsidy table will be adjusted annually for inflation The income limits in the subsidy table will be adjusted annually for inflation The gradual phase-out from $25,000 to $50,000 assures that the subsidy phases out gradually as the firm grows and prospers The gradual phase-out from $25,000 to $50,000 assures that the subsidy phases out gradually as the firm grows and prospers

47 Expected questions: What happens if my firm grows in size? What happens if my firm grows in size? Individual firms initially qualify as program participants based on their size at the time of application Individual firms initially qualify as program participants based on their size at the time of application As long as the program as a whole is not capped, new employees are eligible for the subsidy. As long as the program as a whole is not capped, new employees are eligible for the subsidy. During the current policy year, the business pays the same per employee premium and receives the same per employee subsidy that apply to other employees. During the current policy year, the business pays the same per employee premium and receives the same per employee subsidy that apply to other employees. At the time of policy renewal: At the time of policy renewal: The firm’s age distribution will be used to determine a premium for the next year. The firm’s age distribution will be used to determine a premium for the next year. The firm’s average wage will be recalculated and used to determine the maximum subsidy for the next year The firm’s average wage will be recalculated and used to determine the maximum subsidy for the next year If the firm has ten or more employees, a further adjustment will be made based on the number of employees, so that the subsidy phases out between 10 and 20 employees. If the firm has ten or more employees, a further adjustment will be made based on the number of employees, so that the subsidy phases out between 10 and 20 employees.

48

49

50 Expected questions: What happens when the program reaches its maximum sustainable size? What happens when the program reaches its maximum sustainable size? The subsidy program will be closed to new businesses The subsidy program will be closed to new businesses Although the proposed regulations allow the Commission also to close the program to new employees of participating businesses, the intent is to close the program only to new businesses, while allowing already participating businesses to provide subsidized coverage to additional employees Although the proposed regulations allow the Commission also to close the program to new employees of participating businesses, the intent is to close the program only to new businesses, while allowing already participating businesses to provide subsidized coverage to additional employees When does the program start? When does the program start? Subsidized coverage starts October 1, 2008 Subsidized coverage starts October 1, 2008 Carriers or their financial agents may enter applications and confirm subsidies in the Registry beginning in early to mid- September Carriers or their financial agents may enter applications and confirm subsidies in the Registry beginning in early to mid- September

51 We turn to you as our consultants who know small businesses: Is the subsidy design reasonably clear? How will small businesses respond? What are the main concerns that we need to address head- on? What are the best ways of communicating with these small employers about the subsidy? Presentations at meetings Mailings, newsletters, newspaper articles Web site with information about likely premiums and tools to calculate likely subsidy amounts Other innovative ideas? ______________ We plan to make presentations throughout the state and will hold at least one information and training session for brokers and agents at the Commission during the summer

52 Thank you…. Contact: Janet Ennis


Download ppt "Senate Bill 6: Implementation of the Small Employer Health Benefit Premium Subsidy Program May 15, 2008 Rex Cowdry, M.D. Executive Director Maryland Health."

Similar presentations


Ads by Google