2014 health care reform overview 11-29-12 - unitedhealthcare
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UnitedHealthcare and Health Reform
On the Horizon: 2014
Health Care Landscape Reform Timeline
Though several key compliance provisions are behind us, the most material
marketplace changes won’t come until 2014 – Adjusted Community Rating, Guaranteed
Issue, Industry Fees, Essential Health Benefits, Medicaid Expansion and Exchanges
Compliance Compliance, Growth and Transparency
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July/August September Q4 2012 Q1 2013
• Supreme Court
decision (late June)
• MLR rebates
delivered 8/1
• Expansion of
Women’s
Preventive Care
• MLR process
begins for 2013 –
survey to
determine ATNE
• Summary of
Benefits and
Coverage
document for new
and open
enrollments after
9/23
• PCORI fee for
plans ending
10/1/12 (pay by
July 2013)
• Guidelines for
Essential Health
Benefits and
state benchmark
plan decisions
• New product
portfolio and rate
filings begin
Advocacy on impact of 2014 ACA requirements & market changes
• FSA limits $2500
• Employer
Required W-2
filing
• Broker meetings
and updates on
new product
portfolio – ACR
and market
changes for small
group
• Exchange
notification
Health Care Reform Landscape 2012 Focus
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Highlights
• 30 million newly insured
individuals
• Perhaps 80 million
switching coverage source
• 20+ million purchasing
through Exchanges
• Number covered by
Medicaid increases by 15+
million
• Average subsidy of $5,000-
$6,000 per subsidized
enrollee
• Medicaid primary care
reimbursement increased to
Medicare rates (2013 and
2014)
Estimates above based on public sources
including CBO and Lewin Group publications
Guaranteed
Issue
Taxes, Fees &
Assessments
Employer
Mandate /
Penalty
Medicaid
Coverage
Expansion
Premium
Subsidies
Cost-Sharing
Subsidies
Adjusted
Community
Rating
Expanded
Benefits /
Mandates
Cost-Sharing
Limits
Risk
Adjustment &
Reinsurance
CO-OPS &
Multi-State
Plans
Individual
and SHOP
Exchanges
2014 PPACA Insurance Market Provisions
Though several key compliance requirements are behind us, the
most material marketplace changes won’t come until 2014
Health Care Reform Landscape What Happens in 2014?
Health Care Reform Landscape What Happens in 2014?
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On the Horizon
• Expanded Benefits – State-defined Essential Health Benefits (EHB) to include ten mandated
categories, including pediatric dental/vision; No lifetime limits; No annual dollar limits on EHB; Actuarial
value thresholds.
• State definitions of EHB will vary and may require product adjustments. Employers will need to
adjust plan design and offerings based on rules going into effect.
• Rating Changes – Community rating; Guaranteed issue of coverage; No medical underwriting; Ban
on pre-existing condition exclusions (for all ages).
• Health insurance in the individual and small group market will only be able to vary premiums by
family size, geography, tobacco use and age. Other rating factors currently used, such as gender
industry, group size, health status and medical history will be prohibited.
• Taxes and Fees – Assessments to insurers and employers to pay for subsidies and risk adjustments
(e.g., Patient-Centered Outcomes Research Institute Fee, Insurer Fee, Reinsurance Fee)
The Resulting Landscape
• A number of fees and taxes, and benefit requirements that will affect the cost of health care for
employers during the next several years.
• While the exact cost may differ for each employer based on location and plan design offered, on
average employers are expected to see a substantial increase in costs.
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Eff.
Date
Provision Description Small Group1 Large Group Individual Applies
to GF?2
FI ASO FI ASO
8-1
2
Women’s
Preventive
Expand to include additional screening, prenatal office
visits, breastfeeding support and some contraceptives. Yes Yes Yes Yes Yes
1-1
3
FSA Limits Employee contributions limited $2,500 per year, with
increases allowed in future years to adjust for inflation. Yes Yes Yes Yes n/a Yes
1-1
4
Essential Health
Benefits (EHB)
Health Plans must provide EHB for individual and small
group. Ten mandated benefit categories (to include
pediatric dental and vision). Subject to state variation. Yes No No No Yes
Annual/Lifetime
Limits
Must be removed for all services defined as essential
health benefits Yes Yes Yes Yes Yes3 Yes3
Deductible
Limits
Plan design deductibles may not exceed a $2,000 (self-
only) or $4,000 (other than self-only) limitation Yes No No No No
OOP Max Must comply with OOP limits for HSA qualified plans Yes Yes Yes Yes Yes
Clinical Trials Must cover routine costs associated with clinical trials Yes Yes Yes Yes Yes
Actuarial Value Plans must be Bronze (60%), Silver(70%), Gold (80%) or
Platinum (90%) Metallic Levels Yes No No No Yes
Waiting Periods Maximum 90 day waiting period Yes Yes Yes Yes No Yes
Pre-Ex
Conditions
Pre-existing condition exclusions must be removed for all
members, not just those under age 19. Yes Yes Yes Yes Yes Yes
Community
Rating
Rate factors limited to family structure, benefit plan design, geography, tobacco use and age. Prohibited: gender, group size, health status, medical history
Yes No No No Yes
Expanded Benefits & Rating Changes General Overview
1 Prior to 2016, states may define SG as 1-50 2 All provisions listed apply to nongrandfathered plans 3 Removal of annual limits does not apply to grandfathered Individual plans
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Plans in individual and small group markets must provide Essential Health Benefits Package – four components of the package:
1. Essential Health Benefits – 10 required coverage categories • Pediatric dental and “habilitative services” are “new”, not typically covered by UHC
• HHS has delegated EHB definition via “benchmark plans” to states (by Q4 2012)
• Practical impact State mandates will be required by EHB
2. Out-of-Pocket Maximum new accumulation rules and ceiling • OOPM ceiling at HSA level: likely $6,400/12800 in 2014 (indexed to inflation)
• All cost-sharing (for essential health benefits) must accumulate to OOPM
• Applies broadly all plans, all group sizes, all funding approaches
• Does not apply to out-of-network benefits
3. Small group deductible ceiling $2,000 single/$4,000 family • Indexed to inflation
• Exception for Bronze plans if you cannot “reasonably” design one with a $2000 deductible
• Does not apply in individual market
• Does not apply to out-of-network benefits
4. Limited to “Metallic” coverage levels (Bronze, Silver, Gold, Platinum) • Defined by actuarial value (plus/minus 2%): Bronze/60%, Silver/70%, Gold/80%, Platinum/90%
• Federal requirement to offer one Silver, one Gold plan on Exchanges
• Metallic level requirement applies BOTH on and off-exchange
*Grandfathered plans exempt from above requirements
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Expanded Benefits Reform Provisions Impacting Product & Plan Design
Individuals and employers will be required to have/provide “minimal essential coverage” • Minimum actuarial value of 60%
PPACA plan design rules pricing impact dependent on starting plan design & customer reaction
Small group pricing impact estimate: 4-11% pricing increase (in extreme situations, could be >20%)
Large group estimate: 3-6%
These changes are independent of other price impacts from PPACA (e.g. taxes/fees, community rating, etc.)
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Impact Assessment Estimated Pricing Impacts from ACA-driven Plan Design Changes
Plan A Plan B Plan C Plan D Plan E
Description
Mainstream copay
plan
Richer copay plan
(if conform to Silver)
Richer copay plan
(if conform to Gold)
High deductible
copay plan
Very high deductible
HSA plan
Deductible $1,500 $500 $500 $2,500 $5,000
Coinsurance 80% 80% 80% 90% 100%
Approx. Actuarial Value 70% 75% 75% 70% 60%
Essential Health Benefits 1-5% 1-5% 1-5% 1-5% 1-5%
Conform to Metallic Level n/a 3-7% 3-7% n/a n/a
Flat-dollar copays to OOPM 3-6% 3-6% 3-6% 3-6% n/a
Lower Deductible to Ceiling n/a n/a n/a 1-2% 11-17%
Changes to Compensate for Deductible n/a n/a n/a 1-2% 11-17%
Deductible $1,500 $1,500 $500 $2,000 $2,000
Coinsurance 80% 80% 90% 85% 50%
Approx. Actuarial Value 70% 70% 80% 70% 60%
Direct Pricing Impact 5-13% 12-22%
Impact if Compensating for Deductible Ceiling 4-11% 1-5% 4-11% 1-4% 7-18% Total
Starting
Plan Details
PPACA-
Driven
Product
Changes
Revised
Plan Details
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Description Effective
Date
Timing /
Duration
Payment
Cycle
Segment
Impact Basis of Assessment
PCORI Fee
• Help fund Patient-Centered Outcomes Research Institute
• Will assist patients, clinicians, purchasers and policy-makers
in making informed health decisions by advancing the quality
and relevance of evidence-based medicine through the
synthesis and dissemination of comparative clinical
effectiveness research findings.
• Proposed rule
10/1/12
Begins
2012
Phases out
2019
July 31
(calendar year
following end
of plan year)
FI and ASO
(ASO paid and
remitted by
customer)
Groups and
Individuals
$1 pmpy in Year 1
$2 pmpy in Year 2
Insurer Fee
• Annual fee on health insurance sector, allocated by market
share, to fund health insurance exchange subsidies.
• Fees assessed on net written health insurance premiums,
with certain exclusions.
• No federal guidance received to date
1/1/14 Permanent
No later than
September 30
of calendar
year
FI Only
Groups and
Individuals
Industry wide targets
$8B – 2014
$11.3B – 2015
$11.3B – 2016
$13.9B – 2017
$14.3B – 2018
~ 2.3% of premium
Reinsurance
Fee
• Transitional fees to stabilize individual market; assessed on
a per capita basis for both fully insured and ASO members.
• Fee funds reinsurance for high claimants in non-
grandfathered individual market plans, on and off Exchange.
• Final Rule from CCIIO; awaiting federal and state notices of
payment rules (fall 2012)
1/1/14 3 Years
(2014-2016)
FI: State
determined;
ASO: Federal,
Quarterly
basis
beginning
1/1/14
FI and ASO
(ASO funded
by customer,
TPA remit on
behalf of ASO
groups)
Groups and
Individuals
Industry wide federal
targets, to which states
may add:
$12B – 2014
$8B – 2015
$5B – 2016
~ $6 pmpm
Excise Tax
on High Cost
Coverage
(Cadillac Tax)
• Imposes an excise tax on insurers and employers who offer
rich benefit coverage.
• No federal guidance to date.
1/1/18 Permanent TBD
FI and ASO
Groups
40% of value of
employer-sponsored
coverage exceeding
$10,200
individual/$27,500
family; indexed by cost
of living in subsequent
years
* Projections based on analysis of study by Oliver Wyman & AHIP 2012
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Taxes and Fees General Overview
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Individual Market Premium Increase Small Group Market Premium Increase
Avg Rate
Increase
15%
Taxes / Fees
3.8%
Product
5%
Pre-Reform Post-Reform
15%
25% - 50%
Healthiest
Groups
25%
Avg Rate
Increase
12%
Taxes / Fees
3.8%**
Rating Rules
/ Product
100%+*
Pre-Reform Post-Reform
12%
116%
Reform Compliance Drives
Significant Price Increase
Community Rating Causes Material
Price Disruption For Healthiest Groups
• Consumers (both group and individual buyers) will face substantial price increases,
further pressuring the system.
• New pricing rules and new product design mandates will have a significant impact
on the price consumers pay for insurance in 2014 and beyond.
* Individual rates expected to increase 100% to up to 200% due to product and rating changes.
** May be partially offset by reinsurance payments, net impact not yet known.
Reform Premium Impact Assessment Individual, Small and Large Fully Insured Market
Product
3 to 6%
Pre-Reform Post-Reform
15%
20% to 25%
Avg Rate
Increase
15%
Taxes / Fees
3.8%
Avg Rate
Increase
15%
Avg Rate
Increase
15%
Avg Rate
Increase
15%
Large Group Premium Increase
Incremental Increase to rates beginning in
2013 to cover taxes, fees, and benefit Δs
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Health Care Reform Landscape Key Things You Need to Know
Small Groups
1. 2014 – SG definition may be
different by state
(ATNE/eligible or 50 vs. 100)
2. 2014 - No medical underwriting
and moving to adjusted
community rating (ACR)
3. 2014 exchanges available
4. Essential Health Benefits
(EHB) applies to non-
grandfathered groups
5. Women’s preventive, FSA
limits and OOP max changes
apply
6. New taxes and fees apply
Large Groups
1. 2014 guaranteed issue
applies
2. No pre-ex
3. Women’s preventive,
FSA limits and OOP max
changes apply
4. Deductible limits and
EHB do not apply
5. New taxes and fees
apply
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We give
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Integrating more
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sources and
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standards helps
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earlier and better
control costs.
We provide
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UnitedHealthcare Engaged and Positioned for the Future
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health.
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decisions.
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United for Reform Resource Center
• Health Reform Provisions and Health Reform Videos
− Summary, Links, FAQs, Video, Employer Guide
www.uhc.com/reform
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• Adult child coverage until
age 26
• Annual dollar limits
restricted
• Early retiree reinsurance
program (ERRP)
• ER coverage as
in-network, no
prior authorization G
• Initial appeals review
standards G
• Lifetime dollar limits
prohibited
• Medicare Part D rebate
for beneficiaries in the
gap
• No pre-existing conditions
for kids until age 19
• Online consumer
information at
healthcare.gov
• Pediatricians as PCPs,
direct access to
OB/GYNs G
• Preventive services with
no cost sharing G
• Rescissions prohibited
except for fraud or non-
payment
• Small business tax credit
• Temporary high risk pool
• Annual fee on pharmaceutical manufacturers begins
• Annual rate review process
• Appeals ombudsmen and process documentation G
• Auto-enrollment for groups with 200+ FTEs (implementation delayed until regulations released)
• Discounts in Medicare Part D “donut hole”
• HSAs/HRAs/FSAs: limitations for OTC medications
• Increase penalty for non-qualified HSA withdrawals
• Minimum medical loss ratio (MLR): 85% for large group; 80% for small group and individual
• Non-discrimination rules apply to insured plans (implementation delayed until regulations are released) G
• Small business wellness grants
• Administrative
simplification begins
• Annual fee on medical
device sales begins
• Deduction for
expenses allocable to
the Part D subsidy for
“qualified prescription
drug plans” eliminated
• Employee notification
of access to
Exchanges
• FSA contributions
limited to $2,500
• High earner tax begins
• Patient-centered
Outcomes Research
Institute (PCORI) fee
increases to $2 per
member/year
• W-2 reporting on the
value of employer-
sponsored health
benefits
• Annual insurer industry fee through 2018
• Coverage for all adult children until age 26 including those that have employer coverage (formerly not covered for grandfathered plans)
• Deductible caps cannot exceed $2K for individual and $4K for family G
• Guarantee issue and renewal rules G
• Health Benefit Exchanges
• ICD-10 code adoption
• Individual & employer mandates
• Mandatory coverage for clinical trials G
• No annual limits
• No pre-existing condition exclusions
• OOP limits must comply with OOP limits for HSA qualified plans G
• Rating restrictions G
• Standardized essential health benefits
• Tax credits and subsidies for individuals and small employers
• Waiting period limits
• 60-day advance notice
of material modifications
• Accountable Care
Organization
requirements
• Appeals provision fully
implemented G
• First medical loss ratio
rebates to be paid by
August
• New women’s
preventive services with
no cost sharingG
• Patient-centered
Outcomes Research
Institute (PCORI) fee
($1 per member/year)
• Quality bonus begins for
Medicare Advantage
plans
• Quality of Care
Reporting Requirements
• Summary of Benefits
and Coverage (SBC)
and the Uniform
Glossary
• High-value plan
excise tax begins
(2018)
• Medicare Part D
“donut hole” closed
by 2020
• States can open
Exchanges to CHIP
eligibles (2015) and
all employers (2017)
2010 2011 2014 2012 2013 2015 & beyond
G Grandfatherable provision
Rev. 9/12
Note: some provisions apply only to fully insured business (e.g., MLR and guarantee issue)
Health Care Reform Timeline