Society of Human Resource Management

1
Society of Human Resource Management

• HealthCare Reform Panel Discussion
• Wednesday, August 8, 2012
• Outrigger Guam Resort
• Presented By
• Jerry Crisostomo. NetCare Life
  Health
• Tim Ogata, TakeCare Insurance
• Francis Santos,
  Staywell Insurance
• Frank J.
  Campillo, Calvos SelectCare

2
Objective

• Provide a synopsis of and the impact on Health
  Plans by the recently upheld Patient Protection
  and Affordable Care Act and the Reconciliation
  Act (collectively PPACA)

3
AGENDA

• Background on Healthcare Cost
• Overview - Timeline of Reforms
• Insurance Market Reforms
• Expansion of Medicaid
• Premium and Cost-sharing Subsidies
• Tax Changes related to Health Reform
• Employer Requirements
• Individual Mandate
• State Role
• Health Insurance Exchanges
• Medical Loss Ratio Update
• Summary of Impact

4
Health Expenditures for Selected Services
20002015
Projected Projected
TOTAL 2000 2000 2005 2010 2015
Billions 1,353.3 1,353.3 1,987.7 2,879.4 4,031.7
Percent GDP 13.8 13.8 16.0 18.0 20.0
BY TYPE OF SERVICE BY TYPE OF SERVICE BY TYPE OF SERVICE BY TYPE OF SERVICE BY TYPE OF SERVICE BY TYPE OF SERVICE
Hospital care Hospital care 417.0 611.6 882.4 1,230.9
Physician clinical services Physician clinical services 288.6 421.2 610.7 849.8
Other professional services (dental, etc.) Other professional services (dental, etc.) 138.2 200.5 292.6 411.5
Nursing home care Nursing home care 95.3 121.9 160.5 216.8
Home health care Home health care 30.5 47.5 72.3 103.7
Prescription drugs Prescription drugs 120.8 200.7 299.2 446.2
Other medical products Other medical products 49.5 58.1 69.1 83.1
Program admin. net cost of private health insurance Program admin. net cost of private health insurance 81.2 143.0 210.6 289.8
Investment Investment 88.8 126.8 191.3 268.9
Source The Commonwealth Fund Data from A.
Catlin et al., National Health Spending in 2005
The Slowdown Continues, Health Affairs,
Jan./Feb. 2007 26(1)14253 C. Borger et al.,
Health Spending Projections Through 2015
Changes on the Horizon, Health Affairs Web
Exclusive (Feb. 22, 2006)w61w73.
5
U.S. National Healthcare Expenditures
6
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7
Global Payments
HEALTH SPENDING AS GDP AND PER CAPITA
8
Comparative Cost of ProceduresUSA vs. other
Countries
http//www.washingtonpost.com/wp-srv/special/busin
ess/high-cost-of-medical-procedures-in-the-us/
9
Average Annual Premiums for Single and Family
Coverage, 1999-2011
Estimate is statistically different from
estimate for the previous year shown
(plt.05). Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits, 1999-2011.
10
PPACA Has Three Basic Goals

• Expands Health Insurance Coverage. 94 of all
  Americans covered by 2019
• Strong regulations and oversight of the insurance
  industry
• Control cost, particularly for Medicare
• __________________________________
• But what is the intended consequence?
• A Single Payer System

11
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12
12
13
2010 Consumer Focused Provisions

• Grandfathered Plans
• Early Retiree Reinsurance Program
• Online Resources
• Appeals and External Review
• Cancellation of Coverage (Recissions)
• Dependent Coverage up to age 26
• Doctor Choice
• Restriction on Annual Limits and a Ban Lifetime
  Limits
• Emergency Care
• Prohibition in favor of highly paid individuals
• No pre-existing conditions for members under age
  19
• Preventive Care Services without cost share
• Temporary High Risk Pool
• No Unreasonable premium increases
• Small Business Tax Credit

14
2011 Preparing for Future Provisions

• Health Savings Account Distribution Tax Penalty
• Medical Loss Ratio
• -80 for Individual and Small Group
• -85 for Large Group
• Eliminating Medicare Part D Donut Hole
• Over The Counter Drug
• Rate Review Begins

15
2012 Creating Administrative Standards

• Insurers are required to standardize documents
  and implement new reporting requirements
• Encouraging Integrated Health Systems
• Summary of Benefit and Coverage
• Quality of Care Reporting
• Reducing paperwork and administrative costs
• Patient-Centered Outcome Research Fee

16
2013 Final Preparations

• Focus on the final preparations for the new state
  health insurance exchanges.
• Flexible Spending Account Limits
• Expanded Authority to Bundle Payments
• Increase Medicare Part A tax on wages by 0.9
• Higher Medicare payroll tax of 2.35 for
  individuals making 200K/250K

17
2014 Key Health Reform Provisions Take Effect

• PPACA comes to a cresendo in 2014. Many key
  changes will be implemented
• Health Benefit Exchanges
• Mandates (Individual, Employer)
• No Pre-existing Conditions for ALL adults
• Clinical Trials
• Guaranteed Availability, Renewability Rating
  Variations
• Limit on Waiting Periods
• Auto Enrollment Implemented
• Health Care Excise Tax
• Increases access to Medicaid
• No Annual Limits on Coverage

18
2015 Continuing Innovation and Lower Health
Costs

• Establishes an Independent Payment Advisory Board
  aimed at extending the solvency of Medicare
• Paying Physicians based on Value and not Volume.
  A new provision will tie physician payments to
  the quality of care they provide.

19
2016 Electronic Standards

• Health Claims Attachments standards for
  electronic transmission of health related
  documents
• Encounter, enrollment, disenrollment, premium
  payment and referral certification standards

20
2018 New Tax on Rich Benefits

• PPACA imposes a Cadillac Excise Tax on plans with
  rich benefits

21
2020 Medicare Donut Hole

• Donut Hole coverage gap in Medicare prescription
  drug benefit is fully phased out. Seniors will
  continue to pay the standard 25 of their drug
  costs until they reach the threshold for Medicare
  Catastrophic coverage

22
2010 - 2011 PPACA REQUIREMENTS
(NetCare's Experience)
Unlimited Lifetime
Max - 1.44
Non-Participating Emergency
Preventive
Services -3.48
Care
3.83
OB/GYN
Services -1.19
Essential Benefits
No Annual Limits - 2.45
Dependent Coverage Up to age 26 - 1.82
Annual Dollar Plan Max
Pre-Existing Coverage
Increase - 3.62
For Dep age lt19
2.31
Preventive Care Coverage
Essential Benefit Coverage - No Annual Limits
Increase in Annual Dollar Plan Max
Pre-Existing Condition Waiver for Dep age lt19
Extended Coverage for Dep age gt26
No Referrals for OB/GYN Services
Emergency Coverage at Non-Participating
Facilities
Unlimited Lifetime Maximum
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24
PPACA Supreme Court Decision
25
Insurance Market Reform Effective Date of
Enactment 03/23/10

• Annual Rate Review (individual group markets)
• Secretary states to establish process for
  annual review of unreasonable increases in
  premiums for health insurance coverage in the
  individual and small group markets.
• Insurer must submit prior justification for
  unreasonable premium increases and post on
  website.
• State to provide Secretary with trends on premium
  increases and whether particular insurer should
  be excluded from Exchange based on pattern or
  practice of excessive or unjustified premium
  increases.

26
Insurance Market Reform 90 Days of Enactment
06/23/10

• z? State High Risk Pool- Not applicable
  territories
• z ? Secretary to establish high risk pool for
  individuals with pre-existing conditions who
  do not have creditable coverage.
• z ? Will run through 1/1/14 (when Exchange is up
  and running)
• z ? If Secretary finds insurer or employer has
  encouraged individuals to disenroll in order
  to join high risk pool, insurer/employer must
  reimburse expenses.
• z? Early Retiree Reinsurance- Not applicable to
  territories
• z ? Secretary to establish temporary retiree
  reinsurance program to reimburse claims of
  retirees age 55 and older who are not
  Medicare-eligible. Program would pay 80 of
  eligible claims.
• Z ? Plan only may use reimbursement to reduce
  costs (premiums, copayments, out-of-pockets
  costs, etc.).

27

• Insurance Market Reform
• Six Months from Enactment - 9/23/10
• Annual Lifetime Limits (insured self-funded)
• No annual or lifetime limits on essential
  benefits (ok for nonessential benefits).
• May have annual limits on certain restricted
  benefits set by Secretary, prior to 1/1/14.
• No rescissions except for fraud
• Dependent Coverage to age 26 (insured
  self-funded)
• Not required to cover child of adult child
  dependent.

28

• Insurance Market Reform
• Six Months from Enactment 9/23/10
• Prior to 1/1/14, group not required to cover if
  dependent is eligible to enroll in
  employer-sponsored coverage.
• Secretary to issue regulations to define
  dependent.
• No Pre-existing Condition Exclusion for enrollees
  under age 19 (insured self-funded)
• Applies to all enrollees as of 1/1/14.

29

• Insurance Market Reform
• Six Months from Enactment 9/23/10
• Preventive Health (insured self-funded)
• Must cover preventive health without cost sharing
• Nondiscrimination Based on Income (insured)
• May not discriminate in favor of highly paid
  individuals under IRC105(h) (for insured
  coverage already applies to self-funded)
• Choice of Providers (insured self-funded)
• Must allow child to designate pediatrician as
  primary care provider.
• May not require authorization or referral for
  participating OB-GYN.

30
Insurance Market Reform Six Months from Enactment
9/23/10

• Emergency (insured self-funded)
• Must cover emergency services without prior
  authorization and treat as in-network.
• Appeals External Review (insured self-funded)
• Must have internal review process.

• ? Must have external review that either meets
  NAIC Uniform External Review Model Act or
  standards set by Secretary. Secretary may deem
  external review process in operation on date of
  enactment as compliant.
• Must provide continued coverage pending outcome
  of appeals.

31
Insurance Market ReformSix Months from
Enactment 9/23/10

• ANNUAL LIMITS
• Restricted annual limits permitted with respect
  to essential health benefits until plan years
  beginning on or after January 1, 2010.
• Restricted annual limits are applied on a per
  person basis
• Restricted annual limits are
• For plan or policy years beginning on or after
  September 23, 2011 but before September 23, 2012
  1.25M
• For plan or policy years beginning on or after
  September 23, 2012 but before January 1, 2014
  2M
• For plan or policy years beginning on or after
  January 1, 2014 Unlimited

32
Insurance Market ReformSix Months from
Enactment 9/23/10

• ESSENTIAL HEALTH BENEFITS
• The rules defining essential health benefits
  have yet to be finalized by each state and
  territory based on a benchmark plan.
• Until the rules defining essential health
  benefits are finalized and benchmark plans are
  selected, HHS will take into account good faith
  efforts to comply with a reasonable
  interpretation of the term essential health
  benefits.
• For this purpose, a plan or issuer must apply the
  definition of essential health benefits
  consistently.

33
Insurance Market Reform Two Years from Enactment
- 2012

• Summary Documents (insured self-funded)
• Within 24 months of enactment, insurers must
  provide summary of benefits and coverage using a
  format issued by HHS (including uniform
  definitions).
• Limited to 4 pages and must state whether
  provides minimumessential coverage and whether
  meets 60 actuarial value.
• In addition to ERISA SPD requirements.
• Must provide 60-day prospective notice of plan
  changes.

34

• Insurance Market Reform
• As of 1/1/14
• No Pre-Existing Condition Exclusions (insured
  self-funded)
• Applies earlier for enrollees under age 19.
• Limit on Waiting Periods (insured self-funded)
• Waiting period cannot exceed 90 days.
• HIPAA Wellness Reward increased from 20 to 30
  (and
• Secretary has discretion to increase to 50)

35

• Insurance Market Reform
• As of 1/1/14
• May not discriminate based on health status
  (insured self-
• funded).
• Cost-sharing limits tied to HSA amounts (5,000
  individual /
• 10,000 family) (insured self-funded).
• For small group market, deductible limit is
  2,000 individual /
• 4,000 family (insured).
• Expanded coverage of clinical trials (may not
  impose
• additional conditions) (insured self-funded).
• Must cover essential benefits (insured /
  individual small
• group markets only).

36
Insurance Market Reform As of 1/1/14 Insured Only
? Guaranteed Access Renewability ? Rating Restrictions (individual small group markets large group if offered through Exchange) ? May not vary rate except for ? Individual versus family ? Rating Area ? Age (limit of 3 to 1) ? Tobacco Use (limit of 1.5 to 1) ? Guaranteed Access Renewability ? Rating Restrictions (individual small group markets large group if offered through Exchange) ? May not vary rate except for ? Individual versus family ? Rating Area ? Age (limit of 3 to 1) ? Tobacco Use (limit of 1.5 to 1)

37
Expansion of Medicaid

• Expand Medicaid to all non-Medicaid eligible
  individuals under age 65 with incomes up to 133
  FPL based on modified adjusted gross income
• All newly eligible adults will be guaranteed a
  benchmark benefit package that meets the
  essential health benefits available through the
  Exchanges
• To finance the coverage for the newly eligible,
  states will receive
• 100 federal funding for 2014 2016
• 95 federal financing in 2017
• 94 federal financing in 2018
• 93 federal financing in 2019
• 90 federal financing in 2020 and subsequent
  years
• Increase Medicaid payments in fee-for-service and
  managed care for primary care services provided
  by primary care doctors to 100 of the Medicare
  payment rates for 2013 and 2014

38
Premium and Cost-Sharing Subsidies to Individuals

• Eligibility
• Availability of premium credits and cost-sharing
  subsidies through the Exchanges to U.S citizens
  and legal immigrants who meet income limits
• Premium Credits
• To eligible individuals and families with
  incomes between 133-400 FPL to purchase
  insurance through the Exchanges
• Tied to the second lowest cost silver plan in the
  area
• Contributions limited to the following
  percentages of income for specified income
  levels
• Up to 133 FPL 2 of income
• 133-155 FPL 3 4 of income
• 150-200 FPL 4 6.3 of income
• 200-250 FPL 6.3 8.05 of income
• 250-300 FPL 8.05 9.5 of income
• 300-400 FPL 9.5 of income
• Increase the premium contributions for those
  receiving subsidies annually
• Provisions related to the premium and
  cost-sharing subsidies are effective January 1,
  2014

39
Premium and Cost-Sharing Subsidies to Individuals

• Cost-sharing subsidies
• To eligible individuals and families
• Reduce cost-sharing amounts and annual
  cost-sharing limits
• Have the effect of increasing the actuarial value
  of the basic benefit plan to the following
  percentages of the full value of the plan for the
  specified income level
• 100-150 FPL 94
• 150-200 FPL 87 of income
• 200-250 FPL 73 of income
• 250-300 FPL 70 of income
• Verification
• Required for both income and citizenship status
  in determining eligibility for the federal
  premium credits
• Subsidies and abortion coverage
• Ensure that federal premium or cost-sharing
  subsidies are not used to purchase coverage for
  abortion if coverage extends beyond saving the
  life of the woman or cases of rape or incest.

40
Premium and Cost-Sharing Subsidies to Employers

• Small business tax credits
• Phase I (2010 2013),
• Provide a tax credit of up to 35 of employers
  contribution toward employees health insurance
  premium if employer contributes at least 50 of
  the total premium cost or 50 of a benchmark
  premium
• Full credit will be available to employers with
  10 or fewer employees and average annual wages of
  less than 25,000.
• Phase II (2014 and later)
• For eligible small business that purchase
  coverage through the state Exchange, provide a
  tax credit of up to 50 of the employers
  contribution toward employees health insurance
  premium if the employer contributes at least 50
  of the total premium cost.
• Credit will be available for two years
• Full credit will be available to employers with
  10 or fewer employees and average annual wages of
  less than 25,000.
• Reinsurance program
• Created temporarily for employers providing
  health insurance coverage to retirees over age 55
  who are not eligible for Medicare
• Will reimburse employers or insures for 80 of
  retire claims between 15,000 and 90,000
• Payments from the reinsurance program will be
  used to lower the costs for enrollees in the
  employer plan
• Effective 90 days following the enactment through
  January 1, 2014

41
TAX CHANGES

• W-2 reporting of value of employer-sponsored
  health
• benefits, effective in 2011
• ? Employee salary reduction contributions to
  FSAs limited
• to 2,500, indexed to CPI-U, effective 2013
• Restrictions on the reimbursement of
  over-the-counter
• (OTC) drugs from FSA, HSA, or HRA, effective
  in 2011
• Exemption for prescribed OTC drugs difficult to
• administer
• Increase additional tax on distributions from
  HSAs that are not used for qualifying
  medical expenses from 10
• to 20 of the distribution, effective in 2011

42
TAX CHANGES - Individuals

• Additional Taxes on High Income Individuals
• Additional HI payroll tax of 0.9 for wages
• in excess of 250,000 (joint filers) and
• 200,000 (all others)
• Effective for remuneration received after
• December 31, 2012
• Also 3.8 tax on same filers on investment income

43
TAX CHANGES - Individuals

• Itemized deduction for medical expenses
• Floor for claiming goes from 7.5 to 10 of AGI
• Effective tax years beginning after December 31,
  2012
• o ? Delayed effective date to 2017 for those age
  65 or
• over
• Tax on indoor tanning services
• 10 of amount paid
• Effective for services performed after July 1,
  2010

44
TAX CHANGES Others

• New fees on health care companies beginning in
  2011
• Pharmaceutical manufacturing companies
• 2014 -- 8 billion 2015, 2016 -- 11.3 billion
  2017 -- 13.7 billion 2018 -- 14.3 billion
• Medical device manufacturers
• ? 2.9 tax on sale of medical device after
  12/31/12
• Health insurance companies (certain nonprofits
  exempted)
• ? 2014 -- 8 billion 2015 -- 11.3 billion
  2016 -- 11.3
• billion 2017 -- 13.9 billion 2018 -
  14.3 billion
• Thereafter indexed to medical cost
  growth
• Fee is allocated based on market share
• Fee expected to be passed on to consumers as
  higher health care costs

45

• TAX CHANGES
• Others

• Health Insurance Company Compensation
• Denial of deduction for compensation in excess of
• 500,000 for health insurance providers
• Applies to deferred compensation also
• No performance-based compensation exception
• Applies to more than top-5 executives
• Officer, director or employee
• Anyone who provides services to insurer
• What does this mean for doctors?

46
Employer Requirements Currently unknown if
applicable to territories

• ? Applies to employers who employed an average
  of at least 50 full- time employees on business
  days during the preceding calendar year
  (full-time employee average of 30 hours per
  week).
• Must pay a fee if coverage IS NOT offered to
  full-time employees AND any full-time employee
  receives premium assistance from federal
  government.
• 2,000 annual fee for each full-time employee
  employed (minus the first 30 employees)
• Must pay a fee if coverage IS offered to full
  time employees BUT any full-time employee still
  receives premium assistance from federal
  government.
• the lesser of 3,000 annual fee for each employee
  receiving premium assistance OR 2,000 annual fee
  per employee for each full-time employee employed
  (minus the first 30 employees)
• Generally effective beginning in 2014.

47
Employer Requirements Other Provisions Currently
unknown if applicable to territories

• Automatic Enrollment
• Employers with more than 200 employees that offer
  coverage
• must automatically enroll new full-time employees
  in
• coverage with the opportunity to opt-out.
• Notification To Employees Regarding Exchange
  (effective 3/1/13)
• Cafeteria Plan
• Exchange coverage is considered qualified under
  a cafeteria plan only for qualified employers
  that are permitted to offer a choice of Exchange
  plans to their employees.
• W-2 Reporting
• Employers must report, for information purposes,
  the
• aggregate cost of employer-sponsored coverage on
  an
• employee's W-2.

48
Employer Requirements Other Provisions Currently
not known if applicable to territories

• Automatic Enrollment
• Employers with more than 200 employees that offer
  coverage
• must automatically enroll new full-time employees
  in
• coverage with the opportunity to opt-out.
• Notification To Employees Regarding Exchange
  (effective 3/1/13)
• Cafeteria Plan
• Exchange coverage is considered qualified under
  a cafeteria
• plan only for qualified employers that are
  permitted to offer a
• choice of Exchange plans to their employees.
• W-2 Reporting
• Employers must report, for information purposes,
  the
• aggregate cost of employer-sponsored coverage on
  an
• employee's W-2.

49
Employer Requirements Vouchers Currently not
known if applicable to territories

• ? Free Choice Voucher Used by "Qualified
  Employees" to purchase qualified health plan
  coverage through the Exchange.
• Qualified employees those whose required
  contribution for minimum essential coverage
  through the employers plan exceeds 8 but is
  less than 9.5 of the employees taxable income
  for the year, whose household income is less than
  400 FPL and who do not participate in a health
  plan offered by the employer.
• Amount The most generous amount the employer
  would have contributed for self-only (or family,
  if applicable) coverage under the employers
  plan.
• Employers may deduct the amount paid in vouchers
  as an amount paid for personal services.
• Employees that receive free choice vouchers do
  not trigger the fee on employers who have
  employees receive coverage through an Exchange.

50
Individual Mandate Penalty Currently not known
if applicable to territories

• ? Individuals are required to maintain "minimum
  essential coverage" for each month beginning in
  2014. Failure to maintain coverage for the entire
  year will result in a penalty. The monthly
  penalty is 1/12thof the greater of
• For 2014, 95 per uninsured adult in the
  household or 1 of household income over the
  filing threshold,
• For 2015, 325 per uninsured adult in the
  household or 2 of household income over the
  filing threshold, and
• For 2016 and beyond, 695 per uninsured adult in
  the household or 2.5 of household income over
  the filing threshold.
• ? The penalty will be one-half of the amounts
  listed above for individuals under 18.
• ? The total household penalty may not exceed
  (i) 300 percent of the per adult penalty or (ii)
  the national average annual premium for bronze
  level health coverage offered through the
  Exchange.

51
Individual Mandate - Exceptions

• Exceptions to the individual responsibility
  requirement
• religious exemptions,
• individuals not lawfully present in the United
  States,
• incarcerated individuals,
• those who cannot afford coverage (required
  contributions
• toward coverage exceed 8 of household income),
• taxpayers with income under 100 percent of the
  poverty
• level,
• those who have received a hardship waiver, and
• those who were not covered for a period of less
  than three
• months during the year.

52

• STATE ROLE
• Create an American Health Benefit Exchange and a
  Small Business Health Options Program (SHOP)
  Exchange for individuals and small businesses and
  provide oversight of health plans with regard to
  the new insurance market regulations, consumer
  protections, rate reviews, solvency, reserve fund
  requirements, premium taxes, and to define rating
  areas.
• Enroll newly eligible Medicaid beneficiaries
  into the Medicaid program no later than January
  2014.
• Establish an office of health insurance consumer
  assistance or an ombudsman program to serve as an
  advocate for people with private coverage in the
  individual and small group markets.
• Permit states to create a Basic Health Plan for
  uninsured individuals with incomes between 133
  and 200 FPL in lieu of these individuals
  receiving premium subsidies to purchase coverage
  in the Exchanges.

53

• HEALTH INSURANCE EXCHANGES
• Create state-based American Health Benefit
  Exchanges and Small Business Health Options
  Program (SHOP) Exchanges
• Administered by a governmental agency or
  non-profit organization
• Individuals and small businesses with up to 100
  employees can purchase qualified coverage. Permit
  states to allow businesses with more than 100
  employees to purchase coverage in the SHOP
  Exchange beginning in 2017.
• (Funding available to states to establish
  Exchanges until 2015).
• Public Plan Option Require the Office of
  Personnel Management (OPM) to contract with
  insurers to offer at least two multi-state plans
  in each Exchange. At least one plan must be
  offered by a non-profit entity and at least one
  plan must not provide coverage for abortions
  beyond those permitted by federal law.

54

• HEALTH INSURANCE EXCHANGES
• Four benefit categories of plans plus a separate
  catastrophic plan to be offered through the
  Exchange in the individual and small group
  markets
• Bronze Plan represents minimum creditable
  coverage and provides the essential health
  benefits (EHB), cover 60 of the benefit costs of
  the plan with an out of pocket limit equal to the
  Health Savings Account current law limit
• Silver Plan provides the EHBs, covers 70 of the
  benefits costs of the plan, with the HSA out of
  pocket limits
• Gold Plan provides the EHBs, covers 80 of the
  benefits costs of the plan with the HSA out of
  pocket limits
• Platinum Plan provides the EHBs, covers 90 of
  the benefits costs of the plan with HSA out of
  pocket limits
• Catastrophic Plan available to those up to age 30
  or to those who are exempt from the mandate to
  purchase coverage

55

• HEALTH INSURANCE EXCHANGES
• Insurance Market and Rating rules
• require guarantee issue and renewability and
  allow rating variation based only on age, premium
  rating area, family composition, and tobacco use
  in the individual and small group market
• require risk adjustment in the individual and
  small group markets and in the Exchange
  (effective January 1, 2014)
• Qualifications for Participating Health Plans
• require qualified health plans participating in
  the Exchange to meet marketing requirements, have
  adequate provider networks, contract with
  essential community providers, be accredited with
  respect to performance on quality measures, use a
  uniform enrollment form and standard format to
  present plan information
• require qualified health plans to report
  information on claims payment policies,
  enrollment, disenrollment, number of claims
  denied, cost-sharing requirements, out of network
  policies and enrollee rights in plain language

56
Medical Loss Ratio Update 2012
57
Calculations Based on Aggregation Set

• How are rebates determined?
• MLR calculation will be performed for each
  Aggregation Set
• Aggregation sets are based on policyholder
  groupings as determined by a legal entity, by
  state of issue and segment (Individual, Small
  Group or Large Group)
• Group policies placed into the appropriate state
  based on
• contract issuance state situs where policy is
  issued
• Rebates are calculated based on the MLR of the
  Aggregation Set as a whole
• NOT solely on the experience of the individual
  group policy
• NOT solely on the claim experience of individual
  members
• Rebates are based on the experience of the
  Aggregation Set, not on the claim experience of a
  specific employer or individual.

58
Rebate Calculation

Incurred claims plus expenses for activities that
improve health care quality and credibility
adjustments Premium revenue less Federal State
taxes, premium taxes, licensing regulatory fees
and adjustments for state and federal high risk
pools, I any.
Medical (numerator) Premium (denominator)
Quality Improvement Activities (examples)

• Included
• Case Disease Management, Discharge Planning
• Nurse line
• Fraud Abuse (lesser of expenses and recoveries)
• Certain Wellness Expenses
• Prospective Utilization Review
• HIT Expense for Quality
• Some ICD-10 Implementation Costs

• Excluded
• HIPAA Implementation Costs
• Concurrent Retrospective Utilization Review
• Provider Credentialing
• Provider Contracting / Network Management
• Claims Adjustment Expensesexcluded from medical

59
Distribution of Rebates

• Are there restrictions on how a group
  policyholder can use the
• rebate payment received from the health
  insurer?
• Yes, restrictions depend on whether the plan is a
  federal government plan, a non-federal government
  plan, a plan governed by ERISA or a plan that is
  neither a government plan nor governed by ERISA.
  The requirements are outlined below.

Group Policyholder PlanCategories Requirements on Group Policyholders for Use and Distribution of Rebates
ERISA plans Most businesses are ERISA including employee welfare benefit plans. These are plans sponsored by private sector employers, unions or associations. Most private sector plans are governed by ERISA. ERISA plans are subject to the jurisdiction of the Department of Labor (DOL), which has provided guidance to assist plan sponsors in determining how MLR rebates may be used. There are very specific rules for ERISA plans around return of premium. DOL Technical Release 2011-04 (December 2, 2011).
Federal Governmental plans (like FEHBP) The use of the rebate dollars would be governed by the legal requirements under federal law applicable to the government agency.
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Distribution of Rebates
Group Policyholder PlanCategories Requirements on Group Policyholders for Use and Distribution of Rebates
Non-Federal Governmental Plans (states, counties, municipalities, public schools) Group policyholder must use the amount of the rebate that is proportionate to the total amount of premium paid by all subscribers under the group health plan option for which the rebate applies, in one of the following ways Used to reduce the premium for the subsequent policy year (2013), for all subscribers (2012), who are covered at the time the rebate is received by the policyholder. Used to reduce the premium for the subsequent policy year (2013), for all subscribers under the group health plan option for which the rebate is issued, who are covered at the time the rebate is received by the policyholder. A cash refund to subscribers enrolled in the group health plan option. With respect to the three (3) options above, the reduction in future premium or the cash refund provided may at the option of the group policyholder be Divided evenly among such subscribers, Divided based on each subscribers actual contribution to premium, or Apportioned in a manner that reasonably reflects each subscribers contribution to premium.
Non-ERISA, non- governmental plans (churches, tribes) Group policyholder will only receive rebate dollars if they execute a written assurance that outlines how the rebate dollars are to be used. If the group policyholder in this situation does not execute the written assurance, then the entire rebate will be distributed to subscribers.
Reduction would be based on subscriber portion of
premium Note Group policyholders should consult
their company attorney and tax advisor
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Impact to Guam

• Insurance Market Reforms will benefit consumers
  including unreasonable rate increases
• Access and Affordability through Health Exchange
• Increased Funding for Medicaid up to 58 Million
  in 2019
• Medical Loss ratio Rebates
• 21 New Taxes will be implemented

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Impact to Guam

• The bottom line is the Federal Government is
  about to assume MASSIVE new powers
• These powers include designing insurance plans,
  telling people where they can go for coverage and
  how much insurers are allowed to charge
• How then are doctors and hospitals suppose to
  practice medicine?

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Health Care Reform
Questions?