HealthCare Reform One Year Later: An update on where we are today and where we may be going

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HealthCare Reform One Year Later An update on
where we are today and where we may be going
Marty Hauser, President
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Healthcare Reform Impact
Healthcare Reform Will Be the Biggest Change To
the U.S. Healthcare System Since Medicare Was
Established in 1965
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For too long healthcare in the United States has
been fragmented failing to meet patients basic
needs, and leaving both patients and providers
frustrated.
Donald Berwick
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Triple Aim
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Source Donald Berwick
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Imperative for Change
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National Health Expenditures as a Percentage of
GDP
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Source Health Affairs
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How Much Healthcare Spending Is Too Much?

• Share of Income Spent ()

1875 1995
Food 49 5
Clothing 12 2
Shelter 13 6
Healthcare 1 9
Education 1 5
Leisure 18 68
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Source Fogel September 2008 National Bureau of
Economic Research Working Paper 14361
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Seniors

• 3.6 Million Boomers Age-in to Medicare Every Year
  Starting in 2011

Millions
Projected
US Population 65 2010 1 in 8 2030 1 in 4 4
million seniors over 85 will grow to 9 million by
2030
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Source U.S. Administration on Aging
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Growth in Medicaid Long-Term Care Expenditures,
1990-2006
In Billions
Tripled in 15 Years
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37
32
30
59
63
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Home Community-Based
68
70
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Institutional Care
87
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Source Kaiser Commission on Medicaid and the
Uninsured and Urban Institute analysis of
HCFA/CMS-64 data
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A Few Cost the Most
National Sample of 21 Million Insured Americans,
2003-2007
Mean Annual Cost per Person
of Population
of Total Healthcare Expense
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1
101,000
39
9
15,000
21
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3,700
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70
580
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Source Thomson Reuters Marketscan Database
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Where are we now?
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Change will occur over three distinct phases
Regulatory turbulence Exchange turbulence New Normal competition
Before 2014 2014-2016 Post 2016
Select federal insurance market rules go in force Regulations finalized Market pricing and enrollment levels settle
Regulatory uncertainty remains (medical loss ratio - MLR) Exchanges launched Rules periodically adjust
Compliance period begins for individual/small group market
Issues to Consider
Developing product/target segment strategy Addressing coverage shifts and rules Refining products as markets mature
Role of ACOs Direct retail marketing/sales
Organizational structure
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Source McKinsey Company
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Insurance Uncertainties

• Coverage Mandates
• Elimination of Underwriting
• Exchanges / Co-ops
• Risk Pools
• States Limiting Premium Rate Increases

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Provider Uncertainties

• Medicare Funding
• Medicaid Funding
• Payer Response based on Medical Loss Ratio (MLR)
  Requirements
• Transparency / Consumer Role
• New Payment Models

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Healthcare Reform Certainties

• Transparency of Data
• Improved Quality, Cost and Value
• Efficiencies
• Electronic Medical Records
• Accountable Care Organizations (ACOs)

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Definition of Accountable Care
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Accountable Care Organization (ACO)

• A model for delivering services which offers
  doctors and hospitals financial incentives to
  provide good, quality care to patients while
  keeping down costs.
• Includes medical home
• Medicare demonstration projects scheduled to
  launch in January 2012
• Could save Medicare up to 960 million in the
  first three years

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Examples of Current Healthcare Reform Impact on
Insurance Companies
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Early Phases 2010 / 2011 Provisions

• Coverage of Children with Pre-Existing Conditions
• Coverage of Dependents up to Age 26 (Federal) /
  28 (Ohio)
• Elimination of Lifetime Limits of Coverage
• Regulation of Annual Limits of Coverage
• Prohibited Rescinding of Coverage
• Certain Preventive Services Covered at 100
• Mandated Preventative Services for Women

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Implementation of MLR (Medical Loss Ratio)

• Health plans are required to report the amount of
  premium dollars spent on medical care relative to
  total premiums collected
• Healthcare Reform Requirement for MLR
• 85 for large group insured and Medicare
  Advantage products
• 80 for individual and small group insured
  products
• Implications
• More difficult for plans to make profit margins
• Greater pressure to reduce costs

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Greater Transparency

• CMS Star Ratings
• Plans are rated on Medication Safety, Patient
  Satisfaction, Preventive Care Measures and
  Chronic Care Management
• Potential Financial Impact / Transparency
• Medicare plans will be paid more or less based on
  star rating
• Today only three health plans are rated 5-star
  and 74 health plans are rated 4-star

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Exchanges (Effective
Jan. 1, 2014)

• A state-based insurance marketplace
• Standard benefit tiers Platinum, Gold, Silver,
  Bronze and Catastrophic
• Decision on State vs. Federal Model
• Federal grant of 1 million awarded to Ohio in
  September 2010
• Milliman Contract
• KPMG Contract

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Exchanges Continued
(Effective Jan. 1, 2014)

• States have broad latitude in design of new
  health insurance exchange for 2014
• Guaranteed issue, no medical underwriting
• Exchange to serve individuals and small groups
• Sliding scale subsidies based on income
• 16 million people expected to buy coverage
• Uncertainty about employers continuing coverage
• Think Expedia.com

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Additional Information
www.summacare.com/healthcarereform
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