Maryland Delaying The Launch of the Small Business Exchange

The state’s health department changed the start date for businesses to enroll in the small business exchange from October, 2013 to January 2014. The state’s decision comes after the federal government said it would give states until January 2015 to get up and running a key piece of the small business exchange that gives employees more insurance options.

The health insurance marketplaces for both small businesses and individuals were supposed to begin enrollment this October for coverage that would take effect in January. The individual exchange is still expected to stick to that timeline. The exchanges are part of the federal Affordable Care Act.

Excerpt from the Baltimore Business Journal, April 3, 2013

3:1 AND WHY THIS RATIO IS HUGELY IMPORTANT

As part of Health Reform (Affordable Care Act), one of the requirements is that insurance carriers can't charge the oldest members more than three times the cost of coverage of the youngest policyholders.  What this means in a nutshell is that the younger, healthier, minimal users of health care are going to be paying as much as 40% more than they do now.  With medical costs and insurance costs spiraling out of control, hitting the youngers with higher costs is simply going to make them stay out of the market, pay their penalty and get guaranteed issue coverage when they need care.  We need the younger population getting coverage to offset the older users.  If not, the majority of people with health coverage are going to be the older population and those who need it.  So what this leaves us is less dollars coming in and more dollars being spent because now we will have guaranteed issue coverage and the older, higher users of medical care paying less to satisfy the 3:1 ratio.  Currently, the "Liberty Act", HR 544 is being kicked around a bit.  This would change the ratio from 3:1 to 5:1. This could potentially make it more attractive to the younger population and gain more premium dollars.

ESSENTIAL HEALTH BENEFITS COULD MAKE AFFORDABLE CARE UNAFFORDABLE

Essential Health Benefits

February 20th, 2013, the Department of Health and Human Services issued a final rule outlining essential health benefits and actuarial value requirements under the Affordable Care Act.

About the Final Rule

Under the ACA (Affordable Care Act), health plans in state health insurance exchanges must provide coverage for 10 broad categories of benefits, such as maternity care, prescription drugs and preventive care. 

The final rule goes beyond what regulators initially proposed and applies to non-grandfathered plans for individual and small group markets inside and outside of the health insurance exchanges.

Most of the rules include benefits that commonly are covered by plans, including:

Ambulatory patient services;
Chronic disease management;
Emergency care;
Hospital services;
Laboratory services;
Maternity and newborn care;
Mental health and substance use disorder services, including behavioral health treatment
Pediatric services, including oral and vision care
Prescription drugs; and
Preventive wellness services

However, some changes represent an expansion of coverage to include rehabilitative care, pediatric dental care and pediatric vision care. Further, the rule expanded coverage and federal parity protections for mental health and substance use disorder services, including behavioral health treatment, to both the individual and the small group market.  The problem is that the more coverage that is added to the "Essential Health Benefit List" the higher the costs will become until eventually "Affordable Care" is anything but affordable.  

The final rule also prohibits insurers from discriminating based on an “individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life or other health conditions”.....but not if you are a smoker.  If you are a smoker, you could be charged up to 50% more in premium.

Benchmark Plan

For 2014 and 2015 each state was to select a base-benchmark plan as the reference for defining EHB in the state.  States could choose 1) the largest plan by enrollment in any of the three largest small group insurance products in the state; 2) any of the largest three state employee health benefit plans; 3) any of the largest three Federal Employees Health Benefits Program plans; or 4) the largest insured non-Medicaid HMO in the state.  For Maryland the  Health Care Reform Coordinating Council selected the CareFirst State of Maryland PPO for State employees to be Maryland’s benchmark plan.


Actuarial Value

Actuarial Value, or AV, is calculated as the percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an AV of 60 percent, on average, a consumer could expect to be responsible generally for 40 percent of the costs of all covered benefits in that plan.

Starting in 2014 plans in the Individual and Small Group Markets will need to meet certain Actuarial Values.  The Center for Consumer Information and Oversight has posted an Actuarial Value Calculator to help determine if your plan meets those requirements. 

The plans offered (Metals) will consist of the Bronze Plan with an Actuarial Value of 60% of cost, Silver, 70% of cost, Gold at 80% of Cost and Platinum 90% of Cost.  In addition there will be a Catastrophic for those individual who are eligible (under 30 and other metal plans are unaffordable)  This age used to be younger and will only hurt the loss ratio of the exchange even further.


Cost of Coverage

Insurers and some business groups had lobbied the federal government to scale back the scope of mandated coverage categories because of concerns that such coverage would make policies too costly, the Wall Street Journal reports. However, rather than scale back benefits, the rule includes several ways to limit the costs to consumers, such as capping total out-of-pocket costs and limiting the deductible amount for plans offered in the small-group market to about $2,000 for an individual and $4,000 for a family.  Again, adding all of these additional benefits and limiting exposure to the covered person will only add cost to the final product and have the exact opposite effect of what the Affordable Care Act was designed to do, make care more affordable and available to all who need it.

SO WHAT'S IT GOING TO LOOK LIKE?

I know, everyone is on the edge of their seats wondering what the health care environment is going to look like come the big day....January 1, 2014.  The date of the full enactment of the Affordable Care Act (Health Reform) in all its glory.  Well, it's anybody's guess but I'll give you mine.  Carriers will be offering their guaranteed issue Medal Coverage's (bronze, silver, gold, platinum plans) through the Maryland Health Benefit Exchange.  Coverage may be accessed by individuals or groups of up to 50 employees.  Our firm will be able to help you access those coverage options in the same way we do now.  Carriers will also be offering the same coverage directly through them.  So, in a sense, they will be competing against themselves.  

Plans that probably will start to become very popular are the partially self-funded medical plans.  These are plans that look at the medical history of the group and come up with a premium much as plans are now.  However, if you have a good claims year and dollars aren't spent on claims, these will come back to the employer.  If they don't, then your only exposure is what you've already paid in premium, no more. 

 In time, the exchanges become full of unhealthy people and will probably become unattractive to most healthy employer groups and individuals who will purchase on the underwritten private market.  It seems that the exchanges are going to be a death spiral unable to sustain itself.  So in order to keep it breathing those life support dollars will need to come from somewhere.......fines, taxes and penalties.  

In the meantime........................

Employers of all sizes need to:

1. Make sure their plans aren't discriminatory based on income.
2. Not allow waiting periods longer that 90 days
3. Make sure their part-time employees are working 29 or less hours a week on average
4. Notify ALL employees of the existence of the Health Exchanges (was in March now June/July maybe)
5. Issue Summary of Benefits Coverage of medical plans to ALL eligible employees
6. Let employees also know that they will be charged an additional 50% surcharge for medical plans offered through the exchanges if they are smokers.

In addition, those employers over 50 employees:

1. To avoid potential penalties associated with offering "Affordable" "Minimal Essential Coverage" Do a "Pay or Play Calculation".  (We will/have worked with our clients to arrive at these numbers)
2. Show value of health plan for those employers issuing more than 250 W-2's

This is simply a snap-shot of what the health care landscape could look like come 2014 and some areas needing to be addressed to avoid fines or penalties.

HEALTHCARE EXCHANGES AND COVERAGE COSTS

January 1, 2014 and people are flocking to the health exchanges to find cheap health coverage because the Affordable Care Act (ACA) has promised "Affordable Health Care". According to the ACA, affordable means the cost will be no more than 9.5% of income.  If it is higher than 9.5% there will be tax credits and/or subsidies given to make it affordable.  

Interestingly, the cost of a person who is 64 years old cannot be any higher than 3 times the cost of a 20 year old.  In other words, the cost for older people, who use on average 5 times the amount of health care than a 20 year old, would pay less while the 20 year old will pay more, than in our current market.  In addition, if you are a smoker, your premium can be up to 50% more than a non-smoker at the same age level.  The question is, if I am a smoker and paying 50% more than a non-smoker making it unaffordable for me, will I get a subsidy even though if I wasn't a smoker it would be affordable?  Since the smoking surcharge is considered a penalty, the answer seems to be no.  

Since coverage in the exchanges will be guaranteed issue, it seems that younger, healthier people will find cheaper coverage elsewhere while older, sicker people will flock to it. If this happens it won't be long before the exchanges implode and/or we are taxed even more to supplement the deficit. 

YOU NEED TO TELL YOUR EMPLOYEES ABOUT THE EXCHANGES, MARCH 2013

According to the Affordable Care Act (Health Reform), by March 2013 all employers must notify their employees of the existence of the Maryland Health Benefits Exchange.  In addition they will need to provide:

1. Written notice informing employees about the state’s Exchange, including a description of how the employee may contact the Exchange for assistance.
2. Notification to employees if the plan offered by the employer is inadequate, meaning it does not meet the actuarial value of 60 percent. The employer must let employees know that they may be eligible for a premium tax credit and a cost-sharing reduction if they purchase a health plan through the Exchange.
3. Employers must notify employees that if they purchase a health plan through the Exchange, the employee may lose the employer’s contribution to health benefits offered by the employer.

The Maryland Health Benefit Exchange will begin enrollments into their plans October 2013 for a January 1, 2014 effective date.  Brooks Benefit Services will be forwarding verbiage for this notification to all of our clients.  In addition we will be able to assist any employees with determining whether the exchange plans may or may not be a good fit for them.  It is important to remember that the exchanges are available to all employees whether they are full-time or part-time.  

The Maryland Health Exchange is going to be made up of several plans: Bronze, Silver, Gold, Platinum and a Catastrophic plan for younger people.  These plans will be underwritten by current carriers and will basically compete with themselves.  Since the coverage through the exchange is guaranteed issue, many believe most of our sickest and oldest individuals will jump or be pushed into these plans.  Since the cost of these plans is directly relative to the individuals income, it could make more sense to go with an exchange plan than one through an employer and visa-versa.  Depending upon the size of the employer (50+ Full-Time Employees), if the employee goes to the exchange,  your plan is deemed to either be "un-affordable" or isn't "minimal essential coverage", you will be fined.....heavily.

If any of this is new to you or needs further conversation, please do not hesitate to contact our office at 410-239-5009.

NEW HEALTH REFORM FEES COMING!!??

More fees are coming to pay for health reform AKA Affordable Care Act.  Listed below are fees that are in place or going to be in place soon to pay, in some part, the cost of health reform.

1. Patient Centered Outcomes Research Fee (PCORI) Fee: (This fee is also known as the comparative effectiveness fee.  Most understand this to be where doctors tell us if the procedure we need is cost effective.  The fee is $1 per member per year in 2012 then moved to $2 per member per year the second and then will be adjusted each year until 2019 when its supposed to dissolve.  Which seems unlikely.)
2. Transitional Reinsurance Fee: (Fees collected from Health Issuers and Third Party Administrators to distribute funds to carriers with non-grandfathered plans that attract individual at risk for high medical costs).  Again, penalize the people who try to maintain a healthy lifestyle.  In effect from 2014-2016
3. Insurer Fee:  Goes into effect in 2014 and is permanent. (This fee funds premium tax subsidies for individual and families with household incomes between 100 and 400 percent of Federal Poverty Level who purchase health insurance through the exchanges.) This fee will be approximately 2.3% of premium the first year.  

In total you can expect your premium to increase approximately 3.8% in 2014 just because of the above fees.  This isn't the end though.  I am sure there are more to follow once they have been dug out of this law.