In 2014, new entities will be part of the health insurance world — health insurance marketplaces.
Health insurance marketplaces are key components of the Patient Protection and Affordable Care Act (PPACA). They are designed to make buying health coverage simpler by providing easy-to-understand information that allows consumers to make apples-to-apples comparisons of a wide variety of products. Marketplaces are intended to make health coverage more affordable by promoting increased competition among health insurers under new market and product standards. In addition, certain consumers may be eligible for premium tax credits and cost-sharing reductions that will further reduce health insurance costs. Qualifying small employers also may be eligible for a tax credit.
“Health insurance marketplaces have the potential to increase consumerism in health insurance,” says Sheryl Kashuba, vice president, Health Policy and Government Relations, and chief legal officer for UPMC Health Plan. “However, employers need to understand how they will operate and who they will serve.”
Smart Business spoke with Kashuba about what employers need to know about health insurance marketplaces.
What is a public health insurance marketplace?
The public health insurance marketplace, sometimes referred to as an exchange, will comprise two new marketplaces where consumers and employers will be able to purchase health insurance. Coverage will be available to individuals via the Health Benefit Marketplace and to small businesses via the Small Business Health Options Program (SHOP) Marketplace.
In Pennsylvania, companies with 50 or fewer employees will be eligible to purchase on the SHOP in 2014 and 2015; in 2016 and beyond, employers with 100 or fewer employees may purchase on the SHOP.
In some states, the state itself will operate these public exchanges. In other states, including Pennsylvania, the federal government will operate federally facilitated marketplaces. In order to sell coverage on public exchanges, including on the federally facilitated marketplace, insurers must receive certification that their plans meet the requirements established by the PPACA for qualified health plans (QHP).
How does an insurer earn qualified health plan status?
A qualified health plan is a health insurance plan that has been certified by a marketplace as meeting certain standards; plans must receive QHP certification in order to be sold through a public marketplace. The certification standards include coverage of all essential health benefits, adherence to established limits on cost sharing such as deductibles, copayments and out-of-pocket maximum amounts, establishment of quality standards and a host of other requirements.
Who can purchase coverage through a public marketplace?
Most U.S. citizens and lawful residents will be eligible to purchase coverage on the health insurance marketplace. Any small employer meeting the employee limits established in its state may purchase coverage via the SHOP.
What is a private health insurance marketplace?
A private health insurance marketplace is run by a private sector entity, such as an insurer or broker. Private marketplaces may be designed to allow employers to control costs through defined contribution models and to allow employees expanded coverage options. These marketplaces also may offer a broad range of retail products, such as life insurance and even non-insurance products.
Must every employer purchase insurance from a marketplace?
No. While both the SHOP and private marketplaces will be designed to offer a variety of coverage options, some individuals and employers may prefer to continue to purchase coverage outside these new distribution channels. Employers will continue to have the option to do so. However, premium tax credits and cost-sharing reductions for individual market coverage and tax credits for qualifying small group plans will only be available through the public Health Benefit and SHOP marketplaces, respectively.
Sheryl Kashuba is vice president of Health Policy and Government Relations and chief legal officer at UPMC Health Plan. Reach her (412) 454-7706 or email@example.com.
Insights Health Care is brought to you by UPMC Health Plan
Most employers offer a defined benefit plan, where they select one or two health insurance options to offer their employees. This approach is being replaced by defined contribution plans.
“Under a defined contribution plan, the employer is choosing a fixed dollar amount for employees and they use this money to purchase their benefits. Employees can select from multiple options, not just the traditional one or two plans, and personalize their selections based on their needs,” says Mary Spicher, sales executive with JRG Advisors, the management arm of ChamberChoice.
Smart Business spoke with Spicher about utilizing defined contribution plans.
Why the shift to define contribution plans?
The shift is directly related to health care reform and an effort to reduce insurance costs. This is not a new concept; for the past 20 years most employers have used a defined contribution plan for retiree benefits. Retirees are given a defined amount of income to apply toward defined contribution 401(k) plans, removing employer risk and allowing employees to make investment decisions based on their needs.
In the 1990s, rising costs led companies to evaluate retiree health plans and cap the amount they pay for benefits. As costs continued to rise, companies declined to raise the capped amount, creating a defined contribution health plan. This has now migrated to active employee health plans.
How do these plans work?
Employers can control costs and keep expenses more predictable from year-to-year. A defined contribution plan creates a consumer-driven health plan where employees use the employer’s defined contribution to purchase health insurance specific to their needs. The employer can keep the defined contribution the same for all or use a tiered structure where employees pay the difference for more expensive plans and benefits. Exchanges, including benefit options with low to high deductible plans combined with a health savings account, copayments and ancillary products, were developed so employees can purchase plans with defined contributions.
An employer can change the defined contribution by a set amount annually, regardless of the actual plan increase, or simply keep it the same based on its financial stability. The decision to alter benefits plans — i.e. increase the deductible, change the copayments on medical and prescription drugs, etc. — is the employee’s responsibility.
What’s the effect on ancillary products?
The one-stop shopping through exchanges simplifies administration and allows employees to purchase ancillary products as part of their health plan. The convenience predicts substantial growth in everything from short- and long-term coverage to pet insurance.
Insurance is viewed as protection of an employee’s income and assets against unpredictable events. If employees get sick, they use their health insurance. If they need time off work for an illness or accident, they have short-term or long-term disability insurance. Some expenses for a serious illness like cancer might not be covered by the employee’s health plan. And, if the employee were to die from the illness, life insurance protects the family financially.
What does health care reform mean for the future of defined contribution?
Employers are deciding whether to continue to offer a health plan, and if so, what type, based on the new legislation and cost. So, employees may become more familiar with a defined contribution health plan through the public insurance exchanges. Products sold through the state or federal exchanges will be limited to essential health benefits or a benchmark plan for health, dental and vision. Health plans in a private health insurance exchange offer more inclusive coverage.
Bottom line, defined contribution is the future. Employers have been waiting to see how reform affects rising costs before changing their traditional thinking. Early indications predict that health care reform won’t eliminate increases, so providers still need to deliver more efficient care, especially with high-cost cases. However, defined contribution, consumer-driven plans are helping employers control their costs.
Mary Spicher is a sales executive at JRG Advisors, the management arm of ChamberChoice. Reach her at (800) 377-3539 or firstname.lastname@example.org.
Insights Employee Benefits is brought to you by ChamberChoice
The Patient Protection and Accountable Care Act (PPACA) has a number of employer provisions that all seem to fall, generally speaking, under an umbrella called “employer shared responsibility.”
Briefly, the PPACA mandates that large employers, those more than 50 employees including full-time equivalents, offer affordable coverage, which is that the lowest cost option for an employee is less than 9.5 percent of income. The coverage also must carry a minimum robustness — an actuarial value of at least 60 percent — to all eligible employees. If the employer doesn’t follow this, it must pay some kind of penalty.
Smart Business spoke with Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions, about how these penalties are triggered, in the first of a three-part series on the employer shared responsibility provision.
How can the employer shared responsibility penalties be triggered?
The penalties are only triggered by an employee of yours receiving a subsidy to purchase an individual policy through the coming exchanges. And, employees are only eligible for a subsidy if they earn less than 400 percent of the federal poverty level and are not eligible for another qualifying coverage like Medicare, Medicaid (Medi-Cal) or a qualified employer plan.
How does the penalty for not offering enough coverage impact employers?
The way this fine is triggered is you, the employer, do not offer insurance coverage to at least 95 percent of your staff. The key words are ‘offer’ and ‘95 percent.’ If they decline, you are not at fault, and at 95 percent there is some minimal leeway. So if you fail to offer coverage to at least 95 percent of your people, and one of them goes to the exchange and gets a subsidy, you are fined. It’s important to note this penalty, like all PPACA penalties, is a non-deductible tax penalty — so finance teams really need to factor that in when evaluating costs.
This penalty’s costs are — pro-rated monthly for each violating month — $2,000 per year multiplied by every single full-time employee you have, which obviously can add up. The bill has a provision where you can, for the purposes of calculating the penalty dollar amount, deduct 30 employees from your full-time equivalent count. In other words, if you have 530 full-time employees, you’re fined on only 500 at $2,000 per person, per year for an annual fine of $1 million.
How does the affordability penalty work?
The second penalty, also non-deductible, centers on affordability. In this case, while you are still fined an annual amount that is pro-rated monthly, the fine is actually $3,000 annually but only assessed on people affected. It also is only up to a maximum of what you would have paid for not offering coverage at all.
It’s important to note that the employer is only going to be penalized on the people for which coverage is unaffordable. In other words, there are going to be times where you want to be strategic about this. You may have a situation where your employee/employer premium split is in compliance for most of your staff — where the dollar amount you ask the employees to pay for premium is less than 9.5 percent of most employees’ incomes. But, a couple of employees actually earn a smaller salary, so they are outside of the 9.5 percent. In this case, the employer needs to know it has a choice: Either raise your employer contribution or pay a fine on those couple of employees. Again, the penalty is only $3,000 per person affected, so it may be less expensive to pay those couple of fines than to completely restructure the way you split premiums.
Next, we’ll address how you know which employees qualify for coverage. A lot of employers have part timers, variable-hour people and project-based staff. So with all of these fines, it’s important to know exactly how you find the safe harbor of which employees qualify and don’t qualify for benefits.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or email@example.com.
Insights Business Insurance is brought to you by Montage Insurance Solutions
In business, everyone loves numbers, charts and reliable data points to make decisions. However, when it comes to transforming a company’s most valuable asset, its workforce, many are at a loss for data that drives actionable insights. Small businesses that don’t have direct access to a vast pool of data can still stay on top of developments and save themselves a lot of time, says Liz Brashears, director of Human Capital Consulting at TriNet, Inc.
“An entrepreneur doesn’t get into business to measure data about trends they see in their workforce,” says Brashears. “Businesses need to leverage additional resources to prepare for trends in workforce management and the complexities of health care reform — don’t try to do it all yourself.”
Smart Business spoke with Brashears about workforce management trends and how companies can get ready for the future.
What is meant by workforce management?
Workforce management comprises all activities needed to accomplish work that must to be done while effectively utilizing the people who do the work. It covers activities such as payroll processing, benefits, succession planning, managing employee performance and scheduling.
Do workforce management tasks need to be automated?
It’s most effective to have processes automated, but many small and growing businesses handle tasks manually. When you automate components together, you can utilize the data in the workforce management system and learn from it. Information is power and knowing more about payroll, benefits, and work hours helps you see trends and make decisions that impact your business. More importantly, knowing the trends helps you get your business ready for the future.
What are some of the latest trends?
Most trends revolve around technology and an increase in mobile technologies as part of workforce management. Mobile apps are transforming the way companies interact with employees and customers, and how they receive information. Many companies are sitting on a mountain of information; if they have a human resources information system, they are collecting data. But not every system is designed to provide information in a format that’s easily understood. Small and midsize businesses tend to miss that component because they can’t manage it internally — they need to leverage other resources.
One other trend is responding to requirements of the Patient Protection and Affordable Care Act (PPACA). There’s considerable uncertainty and management is going to have to figure out the costs involved to make better decisions about health care, as well as how to stay in compliance. PPACA includes new requirements for benefit summaries and how information is presented to employees. There are also new reporting requirements for employers, and potential tax credits for some, while others may face penalties. In light of these complexities, organizations should leverage expertise, whether it’s through a vendor, a software system or hiring expertise in-house, to cope.
A third trend concerns attracting and retaining top talent. As the economy improves, the top talent that has been waiting on the sidelines the past few years will start looking for new opportunities. In order to prepare, companies first need to address how they manage their own top talent. Company management must convey to their employees how much it values them, whether it’s paying appropriately or developing them, and letting them know they have a future in the organization. In order to attract top outside talent, you need to evolve your company culture and find a way to brand your organization.
Do companies need help addressing these trends or can they be managed in-house?
Finding someone who can help leverage technology to understand how to manage benefits is always helpful. Particularly with the PPACA, small businesses are seeking outside help because the knowledge and expertise isn’t available in-house. Companies prefer to focus on growing their business, so finding a partner or system to accomplish these tasks is often the best solution, as outsourcing HR tasks can free up valuable resources and minimize risk.
Liz Brashears is director of Human Capital Consulting at TriNet, Inc. Reach her at (510) 352-5000 or firstname.lastname@example.org.
Website: See how companies grow their business with workforce management.
Insights Human Resources Outsourcing is brought to you by TriNet, Inc.
The Patient Protection and Affordable Care Act (PPACA) mandate for employers to provide employees health care or pay a penalty takes effect Jan. 1, 2014, and many businesses aren’t sure how to prepare.
“We regularly talk with people in various industries about what is important to them. For the past six months, every person from every industry has mentioned the employer mandate. There’s a lot of uncertainty,” says Joseph R. Popp, JD, LLM, tax supervisor at Rea & Associates.
Smart Business spoke with Popp about the employer mandate and steps business can take now to be ready for 2014.
What do employers need to do first?
The first step is to determine if you’re considered a large employer. The test is whether you have 50 full-time equivalent (FTE) employees; if not, the employer mandate does not apply to you. This will be easy to answer for many businesses. However, for some it will be difficult to calculate. Employers will have to add up their full-time workers, which are those who work 130 total hours a month or more, and all the part-time people. Part-time employees must be converted to FTEs by adding up the total hours they worked that month and dividing by 120. When that figure is added to your number of full-time workers, you have your monthly FTE count. Businesses with 40 to 60 FTEs may want to look at how they can stay or get under 50, and they may need to pull in various professionals to help them with that planning.
If they are deemed a large employer, what’s next?
Determine which employees may pose a risk for penalties based on your current situation if you were to make no changes. To do so, you need to look at a number of factors on a case-by-case basis.
One factor is whether the coverage provided by the employer is considered affordable. If an employee’s income is between 133 and 400 percent of the federal poverty level based on family size, you have to provide him or her with affordable coverage. Affordability is based on a sliding scale that starts at 3 percent and goes to 9.5 percent of gross income. There are a number of safe harbors that the IRS has provided to calculate if your coverage is considered affordable to a particular employee.
There’s also the coverage test, which is not concerned with premiums but instead an employee’s actual out-of-pocket medical costs. The minimum standard is 60 percent of medical costs paid by the plan — the new bronze-metal tier plan. If you have a plan with a high deductible, this along with other plan features may disqualify it from being considered adequate coverage. The Department of Health and Human Services (HHS) has released a calculator that allows you to enter details of your plan and it will calculate its value in percentage terms. That will work for most plans. If it doesn’t, you’ll need to have an actuary calculate that value.
What are the penalties for not providing affordable or adequate coverage?
If you provide coverage to 95 percent of full-time workers, but it fails one of those tests for some employees, the penalty is $250 per month per full-time employee or $3,000 annually. If you don’t provide adequate coverage to 95 percent of full-time workers, the penalty is $166 per month per full-time employee, or $2,000 annually. On this $166 penalty, you’re not penalized for the first 30 employees each month.
Based on analysis we’ve done for companies, in most cases the least expensive option as an employer/employee group is for the employer to enhance health insurance payments to correct affordability and adequacy test failures. But that’s the most expensive option for employers.
Many employers will most likely make some plan changes so coverage is more affordable to the employee group as a whole, and then pay penalties on the outlying employees. In many cases, paying those annual penalty amounts for some employees will be cheaper than implementing a 100 percent compliance plan. Early planning will give businesses adequate time to build the best course of action.
Joseph R. Popp, JD, LLM, is a tax supervisor at Rea & Associates. Reach him at (614) 923-6577 or email@example.com.
Webinar: Our free webinar, ‘Bracing for Impact: What You Need To Know About Health Care Reform,’ offers more on this topic.
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The Patient Protection and Affordable Care Act (PPACA) is full of employer mandates, but the most prominent and pressing for employers is the Shared Responsibility provision where large employers need to offer affordable coverage.
“The Employer Shared Responsibility part of PPACA is one of the most onerous and complex parts of the legislation, with employers needing as much guidance as possible,” says Tobias Kennedy, vice president of Sales and Service at Montage Insurance Solutions.
Smart Business spoke with Kennedy for an overview of the provision, as there are several intricacies that can confuse one from gaining a broad, basic knowledge on the topic.
How do you know if you’re a large employer?
Generally speaking, a large employer has 50 full-time equivalent employees. It’s important to note the word equivalent, because when the legislation defines 50 employees it is actually counting full-time workers plus full-time equivalent employees. As an example, if you have 45 full timers, and you also have a few people doing part-time work, the reform bill would have you add up all of those hours worked by the part-time people and figure out how many full-time equivalents that equates to.
The penalty for not offering coverage at all is basically $2,000 per year, per person, minus the first 30, applying only to full timers.
What does affordable coverage mean?
Talking high-level affordable coverage would ask an employer to evaluate two things. For any person where you are in violation of either of these two things, the employer is fined $3,000 annually.
- Does the plan have an actuarial value of at least 60 percent? To figure this you have several options, but the easiest is to use the calculator provided by the Department of Health and Human Services.
- Are the employee’s premiums affordable? This is asking for the employee-only portion of your cheapest — above 60 percent, of course — plan not to exceed 9.5 percent of an employee’s income. Income can be calculated a few ways, but the easiest is probably using the wages inserted in the most recent W-2.
Who are employers supposed to cover?
Any employee who works an average of 30 hours or more per week is considered full time, and therefore needs to be offered affordable coverage to avoid fines. If you do not know whether certain employees average more than 30 hours because of varying hours, busy seasons, etc., employers can use a measurement safe harbor.
It can be complicated, but generally speaking, if an employer choses to, the legislation allows for a measurement period. During the measurement period, you look at the employee’s hours and average it out over time. How long the measurement period lasts is up to the employer, but needs to be between three to 12 months.
Once the measurement period ends, an employer must enter a stability period. During the stability period, an employer treats all ongoing employees according to the results of the measurement period. In other words, regardless of hours worked during the stability period, if an employee was full time during the measurement period, you have to offer coverage for the stability period. And, regardless of hours worked during the stability period if an employee averaged below 30 hours per week during the measurement period, the employer does not have to offer insurance.
The measurement/stability period is quite complicated with very particular time frames; the option to implement an administration period; different treatment for new hires versus ongoing employees; rules to transition employees from new hires to ongoing; and a host of other technicalities that truly require the assistance of a trained PPACA professional.
As with all parts of the health care reform bill, consult your professionals for help in the details of this and other provisions.
Tobias Kennedy is vice president of Sales and Service at Montage Insurance Solutions. Reach him at (818) 676-0044 or firstname.lastname@example.org.
Insights Business Insurance is brought to you by Montage Insurance Solutions
The Patient Protection and Affordable Care Act regulations are changing every day as the legislation continues to roll out. Each of these new provisions has an impact on many aspects of a company — from employee retention to the bottom line. In this constantly changing environment, business owners need health insurance brokers who are health care reform experts to guide them through each new complex step. However, this means brokers need to prepare themselves for a new role.
“Change is hard for many brokers to implement,” says Sherrie Zenter, senior vice president at Momentous Insurance Brokerage, Inc. “Brokers need to get past this fear of change to avoid failing in the current marketplace. Revenue will continue to diminish with health care reform changes, but those who distinguish themselves as experts will rise to the top and succeed.”
Zenter says business owners are concerned with how new regulations will affect them, their employees, what the costs could be and their responsibilities as employers. By choosing a health insurance broker who is knowledgeable, available and a good communicator, business owners can stay well informed.
“Brokers exist to help their clients. Therefore, the ones that help their clients understand the bigger picture and adapt to the reform changes quickly will help everyone succeed,” she says.
Smart Business spoke with Zenter about what to look for in a health insurance broker.
How should business owners gauge the effectiveness of their health insurance broker?
Business owners must work with health insurance brokers who are well informed to give them the most up-to-date information on health care reform. There are several indicators that your broker can be an asset to your company:
• He or she tells a good story by using education tools, such as webinars and/or seminars, that help you understand the issues well enough to make intelligent decisions for your business.
• He or she is available to react quickly when you ask for information. Your broker should have current literature at hand and deliver it to you in a timely manner.
• He or she maintains a viable network of experts in the health care community to stay current with new regulations and how each could impact your business.
• He or she serves as your go-to leader on health care reform.
It can also be beneficial if your broker’s associates in his or her firm are educated as well. That means there is a greater pool of knowledge that you and your broker can tap into.
What else do brokers need to demonstrate in this area?
Brokers need to demonstrate that they are well versed on this topic, and it should be clear that they take the time daily to learn about changes put in place as this legislation unravels in the marketplace.
Your broker’s skills should position him or her as a trusted adviser and expert on health care reform — someone you’re willing to rely on when making decisions that will impact many levels of your business.
What’s the current health insurance marketplace like?
There is a lot of competition among brokers. As they adapt to this new landscape, they are developing new servicing models. This can be a benefit to business owners who can leverage the competition and take advantage of the new skills brokers are developing. Some brokers are leaning toward ancillary sales, while others are focusing on large group sales versus small group. Bottom line, brokers have taken a cut in commissions but are still striving to maintain the quality of service promised to all clients. Business owners can benefit from brokers who are eager to stand out among the competition and prove they are an asset to their clients and their businesses.
Sherrie Zenter is senior vice president at Momentous Insurance Brokerage, Inc. Reach her at (818) 933-2739 or email@example.com.
Insights Business Insurance is brought to you by Momentous Insurance Brokerage, Inc.
The new year means we are closer to the 2014 changes under the Patient Protection and Affordable Care Act (PPACA), the health care reform bill.
While we’re approaching the implementation of major changes to the way care is delivered in this country, some provisions are pending guidance and structure, so many employers are in a holding pattern until things are clearer.
“The best thing an employer can do is become familiar with upcoming changes and talk to their insurer and financial planners now,” says Marty Hauser, CEO of SummaCare, Inc. “Though they might not have all the answers to your questions, it’s a good time to begin the conversation.”
Smart Business spoke to Hauser about what provisions have gone into effect and what we can look forward to this year and into 2014.
What provisions exist now?
In 2010, early provisions included coverage of children with pre-existing conditions; coverage of dependents up to age 26 and 28 under federal and Ohio law, respectively; elimination of lifetime limits of coverage; regulation of annual limits of coverage; prohibiting rescinding of coverage; and 100 percent coverage of certain preventive services.
In 2011, more provisions were implemented, including extending 100 percent coverage of certain preventive services to Medicare members; medical loss ratio requirements; and changes to Federal Savings Accounts (FSAs).
Last year, women’s preventive health services were added to services covered at 100 percent, when received in-network, and insurers were required to distribute Summary of Benefits and Coverage (SBC) documents to potential enrollees upon application and renewal. Employers were also required to include aggregate costs of employer-sponsored health coverage for the 2012 tax year on W-2 documents provided to employees earlier this year.
This year, employers will be required to notify employees of the availability of state exchanges, now referred to as ‘marketplaces.’ There is also a $2,500 cap on FSA contributions.
What provisions are next?
In 2014, one provision impacting consumers will be guaranteed issue of health insurance policies. Guaranteed issue will provide access to affordable coverage to hundreds of thousands of individuals who may have previously been denied coverage because of pre-existing conditions.
Another provision impacting consumers is the implementation of state, federal and partnership marketplaces. A marketplace, in essence, is a state-based transparent and competitive insurance shopping and buying website administered by a governmental agency or nonprofit organization, where individuals and small businesses with up to 99 employees can buy health insurance plans. On Jan. 1, 2014, marketplaces will open to individuals and small employers, and some consumers will qualify for a subsidy from the federal government, helping to offset the cost of coverage purchased through the marketplace.
Additionally, on June 28, 2012, the U.S. Supreme Court ruled the individual mandate constitutional. It’s considered a tax that will be reported and paid when filing income taxes. The individual mandate takes effect Jan. 1, 2014, meaning all persons will be required to have health insurance or pay a tax penalty.
At the same time, the employer mandate also goes into effect, meaning employers who employed an average of at least 50 full-time employees, with full-time equaling an average of 30 hours per week, are required to offer employees and their dependents an employer-sponsored plan or the employer pays a penalty. Penalties don’t apply to employers with fewer than 50 full-time equivalent employees and there is no penalty if affordable coverage is offered. Employers with 25 or fewer employees may be eligible for a health insurance tax credit if they offer insurance, but the credit is only available on the marketplace in 2014.
Lastly, in 2014 employers will be allowed to offer wellness incentives of up to 30 percent of the cost of coverage.
What can be done to prepare for 2014?
Talk to your health insurer and financial adviser to find the best health insurance option for your employees next year.
Marty Hauser is the CEO of SummaCare, Inc. Reach him at firstname.lastname@example.org.
Website: To learn more about health care reform, visit www.summacare.com/healthcarereform.
Insights Health Care is brought to you by SummaCare, Inc.
As accountable care programs are implemented, health care providers are going through significant financial, clinical, operational and strategic transformation. This has profound effects not only on health care providers, but also on those touched by health care delivery.
Payment transformation, re-admission penalties and demographic shifts are creating a perfect storm where health care providers have to be very skilled, says Ron Calhoun, managing director, national health care practice leader, at Aon Risk Solutions.
“Providers are going to have to get it right,” he says. “They’ve got to be clinically integrated, and a majority of them are not.”
Smart Business spoke with Calhoun about the risks health care providers are facing in this new environment.
What are the impacts of payment transformation and re-admission initiatives?
Numerous payment reform programs are moving providers toward payment for value and outcomes, as opposed to volume or service. The Patient Protection and Affordable Care Act has increased emphasis on Medicare/Medicaid outcomes, which has in turn led to more commercial sector payment transformation. The fundamental question is how are health care providers going to clinically manage a population in a non-clinical environment with all of the quality measures by which they’re assessed?
In 2012, Medicare’s Hospital Re-admission Reduction Program started penalizing hospitals for re-admission of certain acute myocardial infarction (heart attack), heart failure and pneumonia patients. Reimbursement penalties are expected to be $280 million in year one, and to increase as penalties go up and the program expands.
With financial risks tied to reducing re-admissions, there is de-emphasis on acute care — short-term medical treatment — and emphasis on post-acute care. This puts more demand on non-physician clinicians like registered nurses. Hospitals also are managing discharged patients to reduce exposure by either pushing a patient into a post-acute setting earlier or managing that patient more aggressively. However, this has direct and vicarious liability implications.
How are demographic changes creating risk?
As Medicare and Medicaid grow, payment transformation models will proliferate, placing more emphasis on outcomes and value. Roughly 44.3 million Americans are on Medicaid, which will increase by 10 to 20 million, depending on how many state Medicaid programs expand. Michigan Gov. Rick Snyder included an expansion of about 320,000 residents in his budget proposal. Also, 60 percent of the 169 million with employer-sponsored health care are ages 40 to 65, so the Medicare population will double to 88.6 million by 2035.
The Centers for Medicare and Medicaid Services is bundling reimbursements with outcomes, which shifts liability to the provider. Health care providers need to adhere to established clinical protocols, narrow physician practice pattern variation, be highly communicative between specialties and with patient hand-offs, and have sophisticated clinical decision support capabilities within electronic medical record platforms. The tighter the clinical integration, the more confident the health care provider will be in participating in bundled or value-based reimbursement.
Why are family caregivers so important?
About 45 million Americans are unpaid, informal caregivers for those with dementia and/or the top 15 chronic conditions. In the next three to five years, care will systematically go into the home, increasing the demands on home health. Health care providers must connect to caregivers to drive outcomes, such as decreasing re-admissions or increasing medication compliance.
What’s the impact for consumers?
As health care providers move toward value-based or bundled reimbursement, health care networks may become narrower and include only the highly effective providers in a given geography. Consumers with higher deductible, more consumer-driven plans will demand that all providers demonstrate an ability to comply with quality measures. Group health plan providers are certainly going to demand quality, as well. Population management will only become more critical. Consumers and employers will want relevant medical data pushed beyond the hospital’s four walls and into their hands.
Ron Calhoun is a managing director, national health care practice leader, at Aon Risk Solutions. Reach him at (704) 343-4128 or email@example.com.
Insights Risk Management is brought to you by Aon Risk Solutions
Young adults ages 19 through 29 are the largest growing age group in the U.S. at risk for being uninsured. Officials estimate this age group accounts for approximately 13 million of the 47 million Americans living without health insurance.
“As young adults transition into the job market, they often have entry-level jobs, part-time jobs, or jobs in small businesses and other employment that typically come without employer-sponsored health insurance,” says Keith Kartman, client advisor at JRG Advisors, the management arm of ChamberChoice.
The Dependent Insurance Coverage provision in the Patient Protection and Affordable Care Act (PPACA) was designed to address the millions of young adults currently uninsured.
Smart Business spoke with Kartman about how dependent coverage laws work.
What are the dependent coverage laws?
The PPACA requires private insurers that offer dependent coverage to children to allow young adults up to the age of 26 to remain on their parent’s insurance plan.
A number of states also require insured health plans to cover dependents past age 26. Every group health plan purchased by employers from commercial health insurers and health maintenance organizations must comply with Pennsylvania’s dependent coverage laws. However, self-funded plans subject to the Employee Retirement Income Security Act are exempt from this dependent coverage law. Pennsylvania’s dependent coverage only applies to medical. This excludes dental and vision only, hospital indemnity, accident or specified disease only, Medicare supplement, long-term care and individual health insurance policies.
Who qualifies for this dependent coverage?
Regulations specify a young adult can qualify for this coverage if he or she is no longer living with a parent, is not a dependent on a parent’s tax return or is no longer a student. Both married and unmarried young adults can qualify, although that coverage does not extend to a young adult’s spouse or children.
The law also states that young adults can only qualify for dependent coverage through group health plans in place prior to March 23, 2010, if they are not eligible for another employer-sponsored insurance plan. In other cases, a young adult can choose to remain insured through a parent’s dependent coverage, even if the young adult is eligible for other employer-sponsored coverage.
What do employers need to know?
The Department of Health and Human Services has stated that young adults gaining dependent coverage under the PPACA can’t be charged more for coverage than similar individuals who didn’t lose coverage due to the end of their dependent status. Also, young adults newly qualifying as dependents under the law must be offered the same benefit package as similar individuals who were already covered as dependents.
What are the tax implications?
Treasury Department-issued guidance on the tax benefits states that employer-provided health coverage for an employee’s child is excluded from the employee’s income through the end of the taxable year in which the dependent turns 26. The benefit applies regardless of whether the plan’s coverage is required or voluntarily.
Key elements include:
- The tax benefit continues beyond extended coverage requirement. Some employers may decide to continue coverage beyond the 26th birthday. In that case, if an adult child turns 26 in April but stays on the plan through Dec. 31 — the end of most people’s taxable year — all health benefits that year are excluded for income tax purposes.
- Broad eligibility. This tax benefit applies to various workplace and retiree health plans, as well as self-employed individuals qualifying for the self-employed health insurance deduction on federal income tax returns.
- Health premium shares for both employer and employee are excluded from income. In addition to excluding any employer contribution toward qualifying adult child coverage from income, employees can receive the same benefit by contributing toward the cost of coverage through a cafeteria plan. The IRS states that a cafeteria plan allows employees to choose from two or more benefits consisting of cash or qualified benefit plans.
Keith Kartman is a client advisor at JRG Advisors, the management arm of ChamberChoice. Reach him at (412) 456-7010 or firstname.lastname@example.org.
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