HOW TO BEND THE COST CURVE FOR MEDICAL COVERAGE

The following is from an earlier post but as we get closer to the implementation of the exchanges the information is even more important.  Many of these types of partially-self funded plans have included wellness provisions and many other value added services.  In addition, for groups that are relatively healthy, can significantly drive down the cost of health care coverage with no risk to the employer.


Under Health Reform (PPACA) and currently in the Maryland Small Group Market (Under 50 Employees), medical plans are guaranteed issue.  This means that when a small group employer puts a medical plan in place there are no questions asked.  Plans are chosen, employees enrolled and thats it.  There are two main criteria used  to establish a rate:  Average age of the employees electing coverage and Location of the Company.  All things being equal, one employer located in the same county as another employer with the same average age will pay the exact same rate for the same medical plan through the same carrier.  The rates that the insurance carrier uses are filed with the State of Maryland and based on pooling.  What this means is that regardless of how much or how little you or your employees use the medical coverage you will pay the exact same rates as other companys with the same demographics because all claims are pooled together.  Now, if your company is sick, then this is a good thing because you are going to benefit from all the healthy people in the pool.  However, if your group is healthy, you are helping to pay for all those sick, unhealthy people.  This is where self-funding or partial self-funding comes in.  For small group plans, partial self-funding is a combination of traditional medical coverage, a claims fund, and stop-loss coverage.  Under a traditional plan you pay your premium whether you use the plan or not.  Under self-funded plans, if you don't use the plan, some of those premium dollars may come back to you.  For example, lets say a 40 employee group pays $200,000 in medical premium per year.  Under a partially self-funded plan $100,000 may go to a claim fund.  To protect your fund there are limits on claims.  One is a specific Stop-Loss Insurance, maybe $10,000 (for specific one-time claims) and Aggregate Stop-Loss Insurance (this amount is the total amount of claims that will be paid out before this coverage kicks in).  If all those dollars aren't used in the plan year, they are paid back to the employer.  If claims exceed this amount, under partially self-funded plans, employers costs are only limited to their premiums paid in.  These plans will become ever more attractive to healthy employer groups as Exchanges are set-up and younger healthy employees may be opting-out to go find cheaper coverage leaving the employer group with older, more costly, employees that will only drive up the costs of their coverage. 

PPACA-HHS DEFINES "ESSENTIAL HEALTH BENEFITS"

In December the Department of Health and Human Services outlined proposed policies defining what exactly are "Essential Health Benefits" to be included in health plans.  All insurance policies must cover these services in order to be certified and offered in the exchanges.  Below are a list of those services:

Ambulatory Patient Services
Emergency Services
Hospitalization
Maternity and Newborn Care
Mental Health and Substance Abuse Disorders
Prescription Drugs
Rehabilitative and Habilitative Services
Lab Services
Preventive and Wellness Services, Including Chronic Disease Management
Pediatric Services, Including Oral and Vision Care

Each state would need to select a "Benchmark Plan" which could include at least all of the services above.  Could be from the largest plan in the state, largest state plan, largest federal plan, largest hmo plan offered in state.  This is the HHS's way of saying we are flexible.  If the state does not elect their own, the default benchmark plan will be the small group plan with the largest enrollment in the state. 

This "benchmark plan" is not to be confused with "Minimal Essential Coverage" which if you have more than 50 employees, could determine whether your health plan could set you up (or help you avoid) a big penalty from the fed. More to come later on that...........

So basically this means that all health plans would need to include an array of services in each of those ten areas identified in order to be offered through the state exchanges. 

PPACA-ANOTHER PROVISION OF HEALTH REFORM DELAYED

Under the Affordable Care Act (PPACA), a provision requiring health care insurers and employer-sponsored health plans to furnish a standardized Summary of Benefit and Coverage (SBC) by March, 2012, has been delayed.  This provision has been put on hold because final rules and regulations have yet to be released by the Fed.  Therefore, the Department of Labor determined that carriers and employer-sponored health plans will not be required to issue SBC's until after the final rules and regulations are released.

SUPREME COURT TO HEAR HEALTH CARE LAW CASE

The US Supreme Court announced that it will hear over 5 hours of oral argument regarding the legality of certain provisions under the health care law (PPACA).  In particular below is the allotted times for each argument to be heard:

• 90 Minutes-Whether the entire health care law should be terminated if the "Individual Mandate" is ruled unconstitutional. 
• 120 Minutes-Did Congress have the power under Article 1 of the Constitution to enact the Affordable Care Act? (Article 1 regulates interstate commerce and other laws under Congressional Authority they are able to pass)
• 60 Minutes-determine if the Supreme Court should rule on whether the individual Mandate Penalty constitutes a tax.  This would thereby trigger a federal statute called the anti-injunction act.  They may not be able to rule on this as there hasn't been any tax levied since this provision doesn't go into effect until 2014 (This is required under the anti-injunction act)
• 60 Minutes-Determining the Constitutionality of Congress allowing the Federal Government to allow states to gain funding based on their participation in the Laws Health Care Reforms.

 Arguments are slated to be heard sometime in mid-March with decisions possibly by the end of June prior to the summer break. 

EHHHH......WHAT'S UP DOC?

It seems employers are just getting tired of paying for unhealthy lifestyles.  Many companies are instituting wellness programs where if you sign-on and get your blood pressure checked and do some smoking cessation classes or a walk here and there, you get rewards.  Maybe you get $25 or $50 for participation or an umbrella or a beach blanket.  A pat on the back could be just the right kind of encouragement to get employees engaged in a healthier lifestyle.

There is a second school of thought however, and it is shared by companies such as Walmart, and Veridian Credit Union which are going the route of the "stick" versus the "carrot".  These companies are charging employees higher premiums for unhealthy lifestyles.  For those that can't get their obesity or cholesterol in check or stopping the smoking habit, they will pay.  Employers are getting tired of making the healthier employees pay for the bad habits or lack of attention to health issues of the unhealthy employees.

The Cleveland Clinic has decided to cut smoking at their medical centers, refused to hire smokers, implemented a comprehensive wellness plan, gym and weight loss classes.   In addition they reduced premiums to those employees who maintained or improved their health.

It seems as though trying to be "nice" regarding having employees become serious about their health isn't working for some employers.  Under health reform (PPACA), employers will be allowed to have a premium differential of 30% in 2012 and could go as high as 50% in 2014 for healthy versus unhealthy employees.  This means that for some unhealthy employees,  that choose to remain that way, health care could get a lot more expensive for them.

Free Money For Small Group Wellness Programs!! Maybe.....

If you are thinking of starting a Wellness Program for your small group (Under 100 Employees), there may be funding available for you.  Under PPACA (Health Reform) certain provision have been set-up to fund a five year $200 Billion grant program.  However, with the nations check-book getting a little light, who knows if and when there will be funding available and to what extent. 

Starting with the next fiscal year (October 1, 2011), the PPACA authorizes an appropriation of $200 million over five years (fiscal years 2011 through 2015) for certain small businesses that implement wellness programs.[Section 1201 of H.R. 3590, adding section 2705 to PHSA]

• A five-year/$200 billion grant program will be available to small employers (less than 100 employees working 25 hours per week) that did not provide a wellness program as of March 23, 2010.  The grants are intended to apply to "comprehensive" wellness programs that include the following components:

• Health awareness initiatives (including health education, preventive screenings and HRA(Health Risk Assessment)
• Efforts to maximize employee engagement (including mechanisms to encourage employee participation).
• Initiatives to change unhealthy behaviors and lifestyle choices (including counseling, seminars, online programs and self-help materials).
• Supportive environment efforts (including workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity and improved mental health). 
• It is expected that regulations will be issued to clarify various aspects of the program, such as the criteria for a qualifying wellness program, how to apply for a grant, etc.

Grant application
Eligible employers seeking to participate in the grant program must submit an application to the Secretary of HHS that contains a proposal for a comprehensive workplace wellness program meeting the criteria and requirements listed above.  However, the PPACA fails to indicate whether grants will cover part or all of the cost of a qualifying wellness program. It is anticipated that HHS will issue guidance on the grant application and other details surrounding workplace wellness programs prior to October 2011.

The Cadillac Tax Under PPACA-Is It Discriminatory?

Under Health Reform (PPACA), in 2018 the Cadillac Tax will be implemented.  The Cadillac Tax is a 40% Tax on any amount an employer pays for Health Coverage over $10,200 for an individual and $27,500 for a family.  It would seem that this is suppose to discourage companies from offering premium health plans with all the bells and whistles.  Initially when this provision was inked, Unions and the Federal Government employees were exempt.  However, as of now, Unions have been included in the provision. 

The reason that the Cadillac Tax could be considered discriminatory, at least for small employers in the state of Maryland, is that one of the primary factors that determines cost is age.  For example: A HMO (you need to get referrals) through Carefirst with a $20 Co-pay for Primary Office Visits and $30 for Specialist Visits and a $10-$20-$30 Prescription Plan (hardly a Cadillac plan) would cost a company in Baltimore with an average age of 32, $450 for an Individual and $1260 for a family.  This same plan for a company in Baltimore with an average age of 62 would cost $918 for an individual and $2570 for a family or $11,016 per year for individual and $30,840 per year for a family.  As I understand it there are provisions made for slightly higher triggers for older age groups.  However, these rates are for 2011,  if we consider an 8% trend- increase in medical costs per year, the rate could be 60% higher than it is now, easily breaking through those trigger points simply for being an older group. 

In addition, following this logic (if there is any), this could encourage employers to hire younger employees to keep their average age down, reducing their medical premium and keeping them further away from the Cadillac Tax trigger points.  I guess this would be discrimination to avoid an arguably discriminatory provision in the law?????