impact of health care reform rims conference 2012 sam geraci director carine simon consultant...
TRANSCRIPT
Impact of Health Care Reform
RIMS Conference 2012
Sam GeraciDirector
Carine SimonConsultant
Patrick LearyProgram Manager – Workers’
Compensation, Disability and Leaves of AbsenceEmployee Benefits and Services
Agenda
• Impact on employers
• Workers compensation– Medical inflation– Service availability
• Employers can grandfather existing plans as long as they are made compliant with certain PPACA rules, but are limited in the plan changes they can make thereafter
• Employers will have to pay a 40% nondeductible tax on the value of plan costs exceeding $10,200/year for individuals ($27,500/year for families) in 2018
• Private health insurers must provide members (employer and employee) premium reimbursements unless they comply with a minimum medical loss ratio
• Qualifying coverage must comply with the following:– Ban on rescissions, annual/lifetime limits, pre-existing condition exclusions for children– Coverage of dependents up to 26 years old– Coverage of certain preventive services – Restriction on “discriminatory” practices such as charging more to older Americans– Covers 60% of health care expenses
• Requirement for large employers to offer qualifying coverage and premium subsidies or face fines of $2,000 per employee
Summary of PPACA as it applies to businesses
• Subsidized health insurance exchanges for individual and small group market
• Fully insured (as opposed to self insured) plans can no longer discriminate in favor of highly-compensated individuals
Choices employers will face
• Switch to a self-insured plan• Provide coverage through a fully insured plan
• Drop coverage and pay $2,000 fine
• Provide qualifying coverage
• Hire full time employees• Hire part-time employees or/outsource
• Pay 40% excise tax• Eliminate “Cadillac” plans
• Drop coverage and pay $2,000 fine
• Replace “mini-med” with qualified plans
• Comply with new regulations• Grandfather a plan
SCOTUS may strike down part or all of PPACAThe betting markets price over 60% chance of SCOTUS striking down the individual mandate
Does the Anti-Injunction Act
apply?
Is the individual mandate
constitutional?
YesNo
SCOTUS decision deferred until law
is applied
NoYes
PPACA implemented with individual mandate
Is it severable from the rest of PPACA?
Is Medicaid federal expansion
constitutional?
YesNo
PPACA struck down
PPACA implemented
without mandate
NoYes
Is it severable?Medicaid expansion
implemented
YesNo
PPACA struck down
PPACA implemented
without expansion
Employers and employees may benefit from dropping coverage
Employer provided insurance Employer drops coverage Gap
Employer $10,000 $9,000• $2,000 (Fine paid to the gov’t)• $7,000 (Paid to employee)
($1,000)
ILLUSTRATIVE
Employee$2,000 $1,000
• +$7,000 (From employer)• +$4,000 (From government)• -$12,000 (to insurer)
($1,000)
Government$0 $2,000
• +$2,000 (From employer)• -$4,000 (To employee)
$2,000
Total $12,000 $12,000 $0
Employer + Employee
$12,000 $10,000 ($2,000)
Reform provides incentives for employers and employees to go to state exchanges for health insurance
Combined net savings by age and % of FPL realized when dropping employer coverageNet savings($)
Income (% of FPL)
150% 175% 200% 225% 250% 275% 300% 325% 350% 375% 400% >400%
($25,000)
($20,000)
($15,000)
($10,000)
($5,000)
$0
$5,000
$10,000
$15,000
$20,000
$25,000
20 years old40 years old60 years old
Employer and employee gain when drop-ping employer coverage
Employer and employee lose when dropping employer coverage
7
The goal is to ensure quality coverage without requiring families to pay more than 9.5% of their income
Plans for active em-ployees
Plans for retirees
4334
5155
6 11
Likelihood that organization will be subject to excise tax
Likely Unlikely Don't know
Employers may be hit by surprise by the excise tax for “Cadillac” plans
● Beginning in 2018, plans with group health coverage exceeding $27,500/family ($10,200/individual) will be subject to a 40% non-deductible excise tax (on the balance above the threshold)
● The tax is the third major source of increased revenue to fund PPACA ($32B in projected revenue in 2020)
Research suggests that more than 60% of employers may be subject to the tax in 2018
9
The minimum Medical Loss Ratio standard will affect many employer-sponsored health plans
Individual market
Small group market
Large group market
43
7077
> 80% MLR rule > 85% MLR rule
• Mini-Med plans
• New plans
• Plans from small insurers
Types of plans with low MLR
• Expat plans• HDHPs
Health insurers potential reactions
• Dropping out of individual or small group market
• Stop offering HDHP, mini-med, expat plans
• Dropping employers selectively, e.g. those with young, healthy workforce
% of insurers meeting MLR standards
10
PPACA will lead to the elimination of mini-med plans
Sep 23 2010
Sep 23 2011
Sep 23 2012
Jan 1 2014
$750
$1,250
$2,000
Unlimited
Permissible annual limits on health care coverage ($ Thousands)
Mini-med plans
● Mini-med plans are low-cost plans offering limited coverage to part-time, seasonal or low-wage employees
● They fail to comply with several PPACA’s regulations, e.g. qualifying coverage, restrictions on annual and lifetime limits
● Waivers have been offered to ~1,500 firms but will expire in 2014
In 2014, employers who used to offer Mini-Med plans will have pay a $2,000/employee fine
11
Grandfathered plans are exempt from some but not all PPACA requirements…
Exempt from…
● Coverage of preventive services without cost sharing
● Exemption from the “essential benefits” package as of 2014
● Exemption from limits on out-of-pocket costs to participants
Must comply with…
● No lifetime or “restricted” annual limit
● No rescissions of coverage● Extension of parents’ coverage
to young adults 26 and under● No coverage exclusions for
children with pre-existing conditions
12
… and can lose their grandfather status
Plan feature Change allowedCo-insurance or other cost sharing agreement No increase allowed
Deductible or out-of-pocket limit Cumulative increase limited to medical inflation + 15%
Fixed-dollar copayment Cumulative increase limited to greater of $5 (inflation-adjusted) or medical inflation+15%
Employer contribution to premium Cannot decrease by more than 5%
Annual limit on benefits No new limit or reduction in existing limit allowed
Loss of grandfather status implies becoming fully compliant with the law
● Routine changes can be made without losing grandfather status, e.g.− Cost adjustments to keep pace with medical inflation− Adding new benefits or modestly adjusting existing benefits− Voluntarily adopting new consumer protections
● But some changes lead to loss of grandfather status:
PPACA makes self-insured plans more attractive
● Small group market: not subject to reform’s price regulations, risk-adjustment provisions and essential health coverage provisions
● Not subject to fee imposed on insurers starting in 2014
● Not subject to the minimal Medical Loss Ratio rule
● Not required to undergo reviews of premium increases
Self-insured plans exempted from…
If stop-loss insurance coverage is available and affordable, firms can self-insure, especially in the small group market where reform is more onerous
Share of firms with at least one self-insured plan by size
Small Firms (<100)
Medium Firms (100 - 499)
Large Firms (500+)
13.5%25.7%
82.1%
86.5%74.3%
17.9%
Self-Insured Fully Insured
14
Under PPACA, fully insured plans cannot favor highly compensated employees
● ERISA nondiscrimination rules (Section 105) now apply to fully insured plans
● Fully-insured plans cannot offer executives and highly-compensated employees a different plan
● Failure to comply leads to taxation of those benefits (tax of $100 per day per participant)
● Grandfathered plans are exempt
● Incentive to use fully insured plans to provide executives and highly-compensated employees with different benefits than other employees disappears
● Employers should self-insure and provide executives and highly-compensated employees with cash benefits
What does all this mean for employers?
Penalty, excise tax and impact of medical inflation and regulatory costs
• Incentive to self insure
• Incentive to drop high-end plans
• Higher costs
• Incentive to outsource or hire part-time employees
• Incentive to avoid changing current plans
Avoid being subject to the employer mandate
Avoid the Cadillac tax
Avoid regulations applying to fully-insured plans
Keep grandfathered status
Agenda
• Impact on employers
• Workers compensation– Medical inflation– Service availability
Medical costs represent an increasing share of Workers Compensation losses
1987 1997 2007
54% 47% 41%
46% 53% 59%
Medical Share of WC benefits
Medical Indemnity
Medical inflation driver PPACA impact Data…
PPACA impact on drivers of medical inflation
2008 2010 2015 2020
699 710 736 760
2002 2003 2004 2005 2006 2007 2008 2009
43%57%
43% 43%
79%60% 67%
39%
Before AfterPhysician shortages after Mass. reformHigher
waiting times for treatment
Supply of MDsLimited supply of doctors and nurses
• Number of doctors limited by Medicare
• Availability of substitutes remains limited by law
• Greater waiting times for treatment
Insured consume more, and more is covered
• ACA bans lifetime limits and coverage exclusions
• ACA requires free preventative care
Children remain on parents plans until 26
Free preventative care
Aging of Americans
2008 2009P 2010P 2011P 2012P 2013P 2014P 2015P 2016P 2017P 2018P 2019P
Number of insured AmericansIndividual
mandate startsMore insured Americans
• ACA requires all Americans to have a compliant medical plan
States with the lowest insured rates and fewest doctors per capita will see the greatest medical inflation
2
3
4
5
6
5 8 11 14 17 20 23 26%
TX
NM
FL
AK
LA
AZ
CA
NV
GAAR
OR
CO
OKMT
NJ
TN
ID
WV
VA
WY
NY
IL
MD
MO
INSD
RI
NH
VT
PA
CT
ME
IA
WI
MNHI
MA
MS
SC
NC
KY
UT
NEKS
WA
AL
MIOH
DE
ND
MDs per 1,000
persons
% Population lacking health insurance
U.S median MD per 1,000
persons
Hardest implementation
Easiest implementation
U.S median uninsured rate
South and West may experience the most medical inflationMost medical inflation
Least
As consumers pay less, they will demand more
21
2004
2005
2006
2007
2008
2009
P
2010
P
2011
P
2012
P
2013
P
2014
P
2015
P
2016
P
2017
P
2018
P
2019
P
13% 13%12% 12% 12%
12% 11% 11% 11% 11% 11% 11% 11% 11% 11% 10%
% of health care spending paid for by consumers
● PPACA lowers/eliminates out of pocket costs for certain services, e.g. preventive care
● Prevention, health and wellness incentives’ impact on medical spend are mixed
But supply of doctors cannot be increased easily
2008 2010 2015 2020
699 710 736
760
22
Supply of MDs in the US (000)
What’s limiting the supply of doctors?
●Limited number of residency positions ●Medical schools are adding few seats●Doctors are retiring baby boomers ●Security and immigration laws burden
foreign doctors willing to practice in the US, even in underserved areas
Shortage of 91,500 doctors by 2020 based on a huge increase in demand and little increase in supply
23
PPACA may impact the waiting times for primary care and specialty physicians…
Impact of Massachusetts reform on physician shortage
Pre-reform Post-reform
2005 2006 2009
Anesthesiology
Cardiology
Emergency Medicine
Family Medicine
Gastroenterology
General Surgery
Internal Medicine
Neurosurgery
OB/GYN
Orthopedics
Pediatrics
Psychiatry
Radiology
Vascular Surgery
% with shortage 43% 79% 39%
Critical shortage
Severe shortage
No Shortage
… thus increasing STD claim durations and costs
Shortage No Shortage
55.4
39.2
59.0
40.2
2006 2009
STD durations for specialties with and with-out physician shortage
Shortage No Shortage
$8.02
$7.85
$8.54
$7.85
2006 2009
STD claims cost for specialties with and without physician shortage
Short-term disability durations for diagnoses associated with specialists in short supply have increased since the introduction of the reform in Massachusetts thus increasing claims costs
Roche At A Glance
• Roche is the world’s largest biotech company with truly differentiated medicines in oncology, virology, inflammation, metabolism and CNS.
• Roche is also the world leader in in-vitro diagnostics, tissue-based cancer diagnostics and a pioneer in diabetes management.
• Roche’s personalized healthcare strategy aims at providing medicines and diagnostic tools that enable tangible improvements in the health, quality of life and survival of patients.
• Fast Facts • Founded in 1896 in Basel, Switzerland• Currently over 80,000 employees worldwide• In 2011, group sales were 42.5 billion Swiss francs• In 2011, R&D investment was over 8 billion Swiss francs • 21,000,000 patients were treated with innovative Roche medicines in 2011
Genentech At A Glance• Founded more than 35 years ago, Genentech is a leading biotechnology
company that discovers, develops, manufactures and commercializes medicines to treat patients with serious or life-threatening medical conditions.
• Personalized Healthcare is a key element of our research and early development strategy. We're focused on tailoring treatments to specific diseases and patients and identifying which patients are most likely to respond.
Fast Facts• Founded in 1976• Became a member of the Roche Group in March 2009• Headquarter in South San Francisco, California for all Roche
pharmaceutical operations in the United States• Over 11,000 employees• Genentech sell over 35 products and devices in the US• US Pharmaceutical sales were 12.2 billion Swiss francs in 2011• gRED has over 30 new molecular entities in clinical development
Roche US – Approach to Health Care Reform
• Applying various tools and techniques to address HCR as well as marketplace position – Constantly reviewing plan design
• Reduce the value of the plans by adding or changing certain plan features
– Testing Consumer Driven Health Plans• Create health care consumers who will utilize health care more
efficiently• Design with consideration of excise tax triggers • Expand our culture of health
Roche US Workers’ Compensation Stats/Trends
• 2010 – 2011 Policy Year Total Claims: 392• 2010 – 2011 Policy Year Lost Time Claims: 24• 2010 Policy Year Top 3 Loss Areas:
– Repetitive Trauma (24%)– Slip and Falls – same level + elevation (27%)– Material Handling (14%)
• 2010 – 2011 Policy Year Average Cost per Claim: $16,506• 2010 – 2011 Policy Year Frequency Rate: 0.11 claims per $100 of Payroll • 2010 – 2011 Policy Year Loss Rate: $0.18 per $100 of payroll
Most medical inflation
Least
How is Roche Positioned?
How is Roche Positioned?
R2 = 0.26342
3
4
5
6
5% 8% 11% 14% 17% 20% 23% 26%
Hardest implementation
MA
MS
LA NM
TX
ID
KY
US medianBottom third state for percent uninsured and doctors per capita
BOLD
AR
AZ
AKGA
FLCA
NV
CO
MT
OK
OR
NCTN
NJ
SC
AL
NE WV
IN KS
WA MO
UT
OH ILVA
MI
MD NY
WY
IA
HI
SD
NHMN
WI
CT
ME
RI
DE
ND
PA
VT
Easiest implementation
Source: Kaiser Family Foundation
What I Heard That’s Important to Employers
• Workers’ Compensation Costs Will Increase– Increase in medical cost per claim
• Also may mean more lost time– higher cost medical/more complex medical treatment often
means more lost time
• Access to Care Negatively Impacted– Fewer doctors willing to accept WC cases– Fewer choices to give employees – Longer wait times for appointments– Lower quality and less satisfied employees
What Does All This Mean For Roche?
• Health and Wellness programs essential– Focus on age and weight related issues
• WC physician network development– Consider participation in Managed Care Network– More pressure on vendor to provide strong network
• Better integration across benefits– Medical– Behavioral Health– Disability– Wellness– Workers’ Compensation
