Thinking of sending your employees to healthcare exchanges? Not so fast.

Many employees are worried that, starting in 2014, their employers will deem it cost effective to stop offering healthcare insurance to employees, and that they will, instead, tell their workers to just sign up for health coverage through the Patient Protection and Affordable Care Act's (ACA's) newly-created healthcare exchanges.According to a recently-issued press release, CVS Caremark's executive vice president and chief medical officer Troyen A. Brennan, MD, MPH, thinks that companies would be short-sighted to discontinue healthcare coverage for employees. He urged attendees of the National Business Group on Health's (NBGH's) annual meeting last week to consider continuing company-sponsored health and wellness plans.

Brennan seems to view employer-sponsored insurance as a way for companies to maintain some control over their employee's health, and, ultimately, their work output. "The decision you make regarding how to manage your employees' health care moving forward is important for your employees and your business," Brennan was quoted as saying, adding, "Do you stay in the driver's seat and proactively manage the health and productivity of your workforce, or do you climb into the back seat and take your chances?"

Medicare Beneficiairy Costs Rise Slowly, But Will Ours?

The Medicare premiums and deductible rates for 2012 were released yesterday, and, amazingly enough, some rates are actually going down while others are rising by just 2% to 3% from last year’s rates. The standard monthly premium amount for Medicare Part B—the program that covers physician and other outpatient services—will be around $100. And then add on premiums for Part D, prescription drug, coverage (an additional $38 or so, depending on the plan), and for Medicare supplemental coverage (better known as Medigap). Maybe the Medigap premiums will drop, too, in response to the more generous standard Medicare coverage afforded by the Affordable Care Act.

Gee, I can’t remember the last time in my recent memory that the price of any essentials dropped. Can you? Well, I was pleasantly surprised recently to find that my local Trader Joe’s had lowered by ten cents the price of their half gallons of milk—and their price is still lower than the price at other nearby retail options. I don’t know yet how much my premiums will rise in 2012 for my employer-provided private health insurance, but I bet it will be at a much higher rate than 3%.

Public Sector Employers Focused On Cost-Containment Too

Like their private sector counterparts, public sector employers faced with escalating health care benefits costs are focused on taiming those costs. Eighty percent of human resources managers with public sector employers said their organizations are looking at ways to reduce the cost of their employee benefits plan, according to recent research from Colonial Life & Accident Insurance Company and the International Public Management Association for Human Resources. In fact, more than half (58%) said controlling costs is the benefits program’s top priority. The ability to retain key employees and create employee satisfaction rated a distant second priority at 20%.

The survey showed public sector employers plan to make significant changes in their benefits programs within the next year, many of them strategies to control costs:

• Increasing employees’ health insurance premiums 64%
• Implementing wellness programs/promoting healthy behaviors 52%
• Increasing employees’ health insurance deductibles and/or copayments 45%
• Redesigning health plans to include higher deductibles 27%

“Budgets are tight and organizations are looking to save money,” said Pat McCullough, Colonial Life’s assistant vice president and public sector practice leader. “If they can’t save through premiums or services, they’ll have to reduce head count and nobody wants to do that.”

Change Drives Communication Needs

Public sector human resource managers almost unanimously agree that it is important for employees to understand their benefits and appreciate their employers’ investment in them, with 89% saying it is very important. However, like their counterparts in commercial industries, they do not think that their employees actually do understand their benefits. Just over half—54%—responded that their employees have some understanding and only 42% said their employees have a good understanding.

“Any time you’re introducing changes, especially if it involves cost shifting, a strong communication plan is essential to the success of the entire benefits program,” Mr. McCullough said. “Public sector employers have a tremendous opportunity to improve benefits communication without raising costs if they partner with a benefits provider that offers communication and enrollment services. It doesn't have to cost them—or the taxpayers—one dime.”

A comprehensive communication plan is also important to drive understanding of and participation in wellness programs, Mr. McCullough noted. “Wellness programs can have an impact not only on employee satisfaction but directly on the bottom line through reduced claims and absenteeism. But participation tends to be low unless the program is accompanied by good communication.”

While employers reduce their own spending on health care benefits, employees face higher costs for these, reduced, benefits.

Early Retiree Reimbursements Pick Up In Late Summer

One of the most popular provisions of health reform, the Early Retiree Reinsurance Program (ERRP), made about $231 million in reimbursements in August and September 2011, the Center for Consumer Information and Insurance Oversight (CCIIO) reported. The rate of medical expense reimbursements picked up after slowing significantly in June and July.

Beginning 90 days after enactment (June 23, 2010) and ending on Jan. 1, 2014,or when the $5 billion appropriated for the program is exhausted, the temporary reinsurance program was established to reimburse part of the claims cost for participating employment-based plans that provide health insurance coverage for early retirees (ages 55 to 65), eligible spouses, surviving spouses, and dependents of such retirees. The reimbursement is for 80% of plan claims between certain limits, $16,000 and $93,000 beginning on Oct. 1, 2011. Reimbursement is available after applying and being approved for the program and submitting reimbursement requests. An earlier blog post discussed this program.

In the first 17 months after enactment of the Patient Protection and Affordable Care Act, the ERRP has made more than $2.95 billion in reimbursements to 2,149 approved retiree medical plans. The program has been so popular among retiree medical plan sponsors that in April the CCIIO announced that it would stop accepting applications for the ERRP on May 5, 2011, anticipating that the funds allocated for the program would be exhausted early if the reimbursement trend continued at the same rate.

Retiree medical plans that received the most reimbursement so far have included public employee systems, unions, and older, more established corporations.

A comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, is available here.

High Court could hear oral arguments on health reform law in March of 2012

Mark your calendars for March of 2012. Right around the time of the second anniversary of the Patient Protection and Affordable Care Act (PPACA), which is on March 23rd, the High Court could be holding oral arguments on the constitutionality of the landmark health reform legislation and its controversial individual mandate.

According to the Associated Press, the Obama Administration and several key challengers, including the 26 states that oppose the law and the small business association that wants the law to be invalidated, filed their legal briefs with the Court. That’s not news. What is news is that these legal briefs were filed more than a week before the October 28th deadline for their submission. Not surprisingly, in many instances, parties file their briefs at the last minute or even seek deadline extensions.

Just about everyone would agree that the health reform law is a large and complicated law. Holding oral arguments in March, instead of April, the AP says, would give the justices an extra month to write their opinions.

Of course, it’s not a done deal yet, even though the federal appellate courts have reached differing positions on the constitutionality of the law’s individual mandate. As the AP points out, under “the court's normal scheduling practices, the justices probably won't even decide whether to hear the health care case until the middle of November, at the earliest.” In other words, there’s no guarantee that the justices will even consider the law during this term.

Stay tuned. Decision time is fast approaching.

Health reform's long-term care provisions won't be implemented

Kathleen Sebelius, the Secretary of Health and Human Services, has told Congressional leaders that the long-term care program established by the Patient Protection and Affordable Care Act (PPACA) will not be implemented.

The Community Living Assistance Services and Supports (CLASS) Program, was added by the PPACA as Public Health Service Act Title XXXII. The CLASS program was intended to be a national voluntary, consumer-funded insurance program. For tax purposes, the CLASS program was to be treated in the same way as a qualified long-term care insurance contract for qualified long-term care services.

A trust fund known as the CLASS Independence Fund, which was to be managed and invested by the Treasury Secretary as the Fund's Managing Trustee, would consist of CLASS program participants' monthly premiums to be invested on behalf of the CLASS program enrollees to pay the administrative expenses related to the Fund and for cash benefits to eligible beneficiaries.

Under the law, HHS was required to design a plan that would be actuarially sound and financially solvent for at least 75 years.

According to Sebelius, actuarial analysis presented to Congress "does not identify a benefit plan that I can certify as both actuarially sound for the next 75 years and consistent with the statutory requirements."

Daily benefit amounts. In the analysis, premiums for the basic $50 per day CLASS benefits were estimated to range from $235 to $391 per month. According to the analysis, "In the current private long-term care insurance market, most buyers choose products that provide a substantial daily benefit (e.g., $150/day to $200/day) for three to five years of coverage --daily benefit amounts that are significantly higher than the $50/day lifetime benefit. This could be an issue for marketing CLASS to a broad population as participants in focus groups specifically mentioned that they preferred a benefit that covered more of the total cost of long-term care. Moreover, premiums for products similar to the CLASS benefit, when they are sold to an underwritten population in the private market, would cost much less than the estimated premiums above. Thus, most discussion of this Basic CLASS Plan suggested that the assumed take-up rates used to compute premiums could not be achieved and were not plausible."

Reaction to the announcement. "While we appreciate that the Secretary has recognized the challenge of long term care has not gone away, we're disappointed that the Secretary has prematurely stated she does not see a path forward to properly implement CLASS. In fact, the CLASS actuarial report established that CLASS can still be designed to be a 'value proposition,' although development work still needs to be done. We urge the Administration to continue dialogue and development of a viable path forward," Joyce A. Rogers, Senior Vice President for Government Affairs at AARP wrote in a statement reacting to Sebelius's announcement.

"Medicare does not cover long-term care, and 70 percent of people age 65 and over will need long-term care services at some point in their lifetime. Families will continue to need a workable long-term care option to protect themselves, and CLASS was meant to help families plan and pay for their long-term care needs. A path forward is essential because the need for long term care will only continue to grow," Rogers stated.

Steve Schoonveld, the co-chairperson of the Joint American Academy of Actuaries and Society of Actuaries CLASS Act Task Force, said in a statement, "Our analysis of the CLASS Act legislation and our assessment of the program after the law was enacted both raised serious actuarial concerns about the program's design and benefit structure. An initial review of this report appears to validate our concerns that without considerable restructuring of the program, the CLASS program would have remained highly vulnerable to adverse selection and ultimately would have been unsustainable. While we are pleased that we were able to provide an actuarial perspective on the program, we recognize the critical need for Americans to have affordable long-term care financing solutions. As actuaries we will continue to work with policymakers to help provide consumers with robust financing options for long-term care services and supports."

A look at the current state of grandfathered plans under health reform

The Patient Protection and Affordable Care Act (PPACA) provided new standards for employer-sponsored health plans but many of those standards do not apply to so-called “grandfathered” health plans. “Grandfathered" plans are defined as those plans (1) that were created before the enactment of the PPACA (March 23, 2010) and (2) which have not been substantially changed since that time. One has to wonder whether plans are keeping their grandfathered status more than a year and a half after health reform was enacted.

Basic rules for grandfathered plans

First, the basics on grandfathered plans. Grandfathered plans are exempted from some health reform requirements, including covering preventive benefits with no cost sharing or annual limits and having an external appeals process. To obtain this status, employers cannot make significant changes to their plans that reduce benefits or increase employee cost, specifically, companies cannot significantly change cost sharing, benefits, employer contributions, or access to coverage in grandfathered plans, according to regulatory guidance from the Department of Health and Human Services. Further, new employees can enroll in a grandfathered plan as long as the firm has maintained consecutive enrollment in the plan.

Although grandfathered plans are exempted from most of the PPACA’s new requirements, as noted above, they are subject to some PPACA provisions, such as (1) the uniform explanation of coverage, (2) the reporting of medical loss ratios and provision of premium rebates if medical loss ratios are not met, and (3) the extension of dependent coverage to age 26. Companies must decide whether to grandfather their insurance plans, which limits the changes they can make to their plans, or whether to comply with the full set of new health reform requirements imposed by the PPACA.

Current state of grandfathered plans

So where do grandfathered plans stand now? Benefits experts had indicated that few firms expect to maintain grandfathered status for their health plans beyond the next few years. However, according to a recent survey by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET), 72 percent of firms reported that they currently had at least one health plan that was a grandfathered plan. Small firms (defined by Kaiser/HRET as having 3 to 199 workers) were more likely than larger firms to report having at least one grandfathered health plan (72% vs. 61%).

The Kaiser/HRET survey also found that 56 percent of covered workers were enrolled in a grandfathered health plan. Covered workers in small firms (3-199 workers) are more likely to be enrolled in a grandfathered health plan than covered workers in larger firms (63% vs. 53%), the survey said.

Why not grandfather? Where companies indicated that their sponsored plans were not grandfathered, they were asked why the plans aren’t grandfathered (the firms could provide more than one reason). According to Kaiser/HRET, 28 percent of covered workers are in plans that were not in effect when the PPACA was enacted. Roughly similar percentages of workers are in plans where the deductibles (37%), employee premium contributions (35%), or plan benefits (29%) changed more than was permitted for plans to maintain grandfathered status. Among firms offering some other reason, numerous firms responded that being grandfathered was administratively difficult or that being grandfathered would limit the firm’s flexibility in the future.

Once again, the reasons given as to why plans were not grandfathered varied by firm size. Workers in small firms (3 to 199 workers) are much more likely than workers in large firms to be in a new plan that was not in effect when the PPACA was enacted (63% vs. 18%) and generally less likely to be affected by plan changes. Employees in large firms are more likely than workers in small firms to be in a plan where the deductibles or copays have changed (40% vs. 24%) or where employee premium contributions have changed more than permitted by federal law (41% vs. 15%).

It’ll be interesting to see how these numbers change over time.

Essential health benefits: an approach to updating (part 3)

In our final post focusing on recent recommendations by the Institutes of Medicine (IOM) regarding the process HHS should use to define the essential health benefits (EHB) package, we’ll examine the approach to updating the package recommended in “Essential Health Benefits: Balancing Coverage and Cost” (go here  to access a prepublication copy of the full report). Annual updates to the EHB are expected to commence in 2016.

Cost remains key. IOM urges HHS to continue to factor the cost of the EHB package into its updating decisions. Thus, any changes to the EHB package should not result in a package that exceeds the actuarially estimated cost of the current package in the next year.

Evolution of the benefit package. While IOM acknowledges that Congress expected the EHB package to be similar in structure to existing employer benefit packages, it urges HHS to use the updating process to “improve the content and structure” of the EHB in at least three ways.

Essential health benefits: Steps to a final definition (Part 2)

In the second of our posts discussing recent recommendations by the Institutes of Medicine (IOM) regarding the process HHS should use to define the essential health benefits (EHB) package, we’ll examine the proposed steps in the definition process HHS should undertake. (In “Essential Health Benefits: Balancing Coverage and Cost,”  IOM recommends that HHS should publish the initial EHB draft by May 1, 2012.)

First: follow the law. The starting point, says IOM, is to follow the statutory mandates regarding the EHB package. So, HHS must determine the scope of benefits and design provided under a typical small employer plan in today's market.

This scope of benefits must then be modified to ensure that the 10 general categories of benefits set forth in ACA Sec. 1302(b)(1) are included. (These categories include ambulatory patient services and hospitalization, as well as preventive and wellness services and mental health services.) Not every service that could be offered within those 10 categories should be defined as “essential.”

Essential health benefits: Affordability is key criteria (part 1)

An influential expert panel has released its recommendations to the Department of Health and Human Services regarding the criteria and methods HHS should use to decide which benefits to include in the "essential health benefits" (EHB) package mandated by the ACA. HHS is expected to publish draft proposals in 2012.

Here's the key takeaway of "Essential Health Benefits: Balancing Coverage and Cost," issued by the Institute of Medicine of the National Academies: HHS should keep the affordability of coverage at the forefront as it designs the EHB. If coverage is not affordable, the panel warns, then even with government help "many people would not be able to obtain it," thus conflicting with a key goal of the ACA.

So, what does this mean?

Nearly 30% Of Employers Are Interested In Exploring ACOs

Nearly 30% of employers are interested or very interested in exploring Accountable Care Organizations (ACOs) as a way to continue offering employer-sponsored benefits, while reducing costs and improving quality of care, according to recent research from consultants Aon Hewitt and Polakoff Boland. An ACO is the organizational mechanism adopted by the Centers for Medicare and Medicaid Services (CMS) to implement the Shared Savings Program established by the Patient Protection and Affordable Care Act. Aon Hewitt noted that ACOs also have come to represent a broader value-based approach of delivering care, where providers assume more financial risk, along with the opportunity of more financial reward for delivering better care at a lower cost.

HHS Report Outlines Effects Of Health Reform Law

One year after many of the health reform provisions took effect, the Department of Health and Human Services (HHS) released a report summarizing some of the results of the September 2010 implementation of provisions in the Patient Protection and Affordable Care Act. The report calls these provisions the “Patient's Bill of Rights.”

Over 2 Million Young Adults Added To Employer Plans Due To ACA

While most of the significant provisions of the Patient Protection and Affordable Care Act (ACA) take effect in 2014, some provisions have become effective already. Kaiser Family Foundation and the Health Research & Educational Trust (HRET) asked employers about some of these early provisions in the 2011 Employer Health Benefits Survey.