What companies need to do to prepare for health care reform

Joseph R. Popp, JD, LLM, Tax Supervisor, Rea & Associates

Joseph R. Popp, JD, LLM, Tax Supervisor, Rea & Associates

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 protected]

 

Webinar: Our free webinar, ‘Bracing for Impact: What You Need To Know About Health Care Reform,’ offers more on this topic.

 

Insights Accounting is brought to you by Rea & Associates

How the right on-site facility lowers costs, improves health management

Leonard Eisenbeis, director, Clinical Health Operations, UPMC WorkPartners

Leonard Eisenbeis, director, Clinical Health Operations, UPMC WorkPartners

On-site workplace centers have grown in recent years from being traditional in-house occupational health clinics where someone who was injured on the job could get basic care, to more extensive total health management centers that offer acute care treatment, health and wellness programs, health coaching, behavioral health assistance and chronic disease management.

Not all on-site facilities are right for all employers, but many different-sized companies are finding models that make sense for them.

“Studies have shown that only about 25 percent of large, self-insured firms offer some type of workplace center,” said Leonard Eisenbeis, director of Clinical Health Operations for UPMC WorkPartners, an affiliated company of UPMC Health Plan. “But, studies have also shown that the number of companies planning to open a worksite center doubled between 2007 and 2011 because employers are looking for a way to lower health care costs and support their bottom line.”

Smart Business talked with Eisenbeis about on-site services and why they can make sense for some employers.

What are some of the benefits that employees receive in on-site centers? 

An on-site health management center is attractive to employees because it provides convenient and timely treatment for a set of acute conditions. It also replaces what, for the employee, would be a more costly visit to an emergency room or urgent care facility. Additionally, the center can monitor employees’ chronic conditions, which can easily be relayed to their primary care provider or medical home, improving overall total health management.

What are some of the benefits employers see with on-site centers?

Employers like the fact that on-site centers reduce employees’ lost time from work, which increases productivity. In addition, a good on-site center can help generate employee awareness through physician referrals by engaging at-risk employees in a comprehensive management of lifestyle behavior and disease management. Also, directly avoidable health care costs — such as physician visits, urgent care and emergency room use — can be diminished through on-site centers.

What are some features you can expect at an on-site center?

On-site center staff provide primary care support and on-site care for acute health care services, such as headaches, minor injuries, sore throats, sprains and strains.

You can expect the center to be a front door to occupational health services, where occupational injuries can be reviewed quickly and triaged, and occupational health exams, drug testing and OSHA reporting could take place. Good on-site total health management centers provide health and wellness education and referrals. Employers may include prescription medication services by providing a courier service to deliver prescriptions to employees.

Is there one model for on-site centers?

No. Employers can choose from several delivery methods to find the one that works best for their individual companies. For instance, they can have on-site health centers, or they can have a ‘near-site’ center within several miles of the employer’s campus to be used by employees who work at different sites. Another form of on-site services is mobile medical units, which are a cost-effective option for targeted medical services or testing.

Employers also may take advantage of telehealth technology within an on-site center to effectively service a number of worksite campuses. Telehealth is a remote health management application that links employees from an on-site health center to a physician or provider using interactive videoconferencing, voice and data systems, and embedded peripheral devices.

Telehealth is becoming more popular because this technology could allow an employer to install telehealth equipment with a nurse or medical assistant and transmit a patient encounter to a provider, greatly increasing the affordability of on-site care and financial return on investment. There are many options in the deployment of telehealth that make providing total health management care very scalable to companies of all sizes.

Leonard Eisenbeis is a director, Clinical Health Operations at UPMC WorkPartners. Reach him at (412) 454-4960 or [email protected]

 

Save the date: Join UPMC WorkPartners for an upcoming webinar, “The Next Generation Worksite Health Center,” at 10 a.m. April 24. To register, contact Lauren Formato at (412) 454-8838 or [email protected]

 

Insights Health Care is brought to you by UPMC Health Plan

 

How new developments are helping in the fight against cancer

Philip DiSaia, M.D., Medical Director, Todd Cancer Institute at Long Beach Memorial Medical Center

Philip DiSaia, M.D., medical director, Todd Cancer Institute, Long Beach Memorial Medical Center

Amanda Termuhlen, M.D, medical director at Jonathan Jaques Children’s Cancer Center, Miller Children’s Hospital.

Amanda Termuhlen, M.D, medical director, Jonathan Jaques Children’s Cancer Center, Miller Children’s Hospital.

This year, nearly 1.7 million new cases of cancer are expected to be diagnosed. Thanks to significant medical advances, prevention and healthier lifestyles, survival rates continue to improve.

Smart Business turned to Philip DiSaia, M.D., medical director, MemorialCare Todd Cancer Institute at Long Beach Memorial and world leader and researcher in gynecologic oncology, and Amanda Termuhlen, M.D., medical director, Jonathan Jaques Children’s Cancer Center at Miller Children’s Hospital Long Beach, the region’s renowned pediatric cancer facility.

Does prevention really work?

A substantial proportion of cancers can be prevented. Not smoking, maintaining a healthy weight and diet, and plenty of exercise help reduce risks. Regular screening tests that allow detection and removal of precancerous growths can help prevent many cancers. Pap smears help detect cervical cancer, colonoscopies can identify colon cancer, PSAs may determine the likelihood and treatment of prostate cancer, and breast self-exams and mammograms reduce mortality for breast cancer.

What are some advances available locally?

Todd Cancer Institute and Jonathan Jaques Children’s Cancer Center are dedicated to early diagnosis, research, treatment and education of patients with cancer or serious blood disorders. At interdisciplinary treatment planning conferences, specialists review new and difficult cases, developing treatment plans suited to patient needs. Our world-renowned Leavey Radiation Oncology Center achieves break-through results with the most advanced technologies and therapies. Patients can access more than 100 cancer research protocols.

At the forefront of adult cancer management are our gynecologic, thoracic, breast, gastrointestinal, genitourinary, radiation oncology, genetic counseling and robotic surgery. We were one of the first centers to make individualized therapy and targeted treatment a clinical reality.

Is there progress for childhood cancers?

Prior to the 1970s, only half of children with cancer survived beyond five years following diagnosis. Today that number is 80 percent, thanks to better cancer drugs, treatment, research and access to clinical trials. Jonathan Jaques Children’s Cancer Center supports advanced diagnostic tools and treatments with comprehensive psychosocial services and a multi-disciplinary care team that follows every patient from admission through their hospital stay and follow-up in outpatient settings. New research efforts offers patients access to leading therapies.

What can be expected in the future?

Vaccines like those to prevent cervical cancer may be effective in other cancers. Emerging treatment technologies, techniques and drug discoveries more accurately treat cancer, and with fewer side effects. Myriad cancer therapies and treatment in varying stages of development continue to unveil more about cancer cell biology and new treatments.

New pharmaceuticals may better kill tumors by cutting off their blood supply. There is hope therapeutic vaccines will help activate a patient’s immune system. Gene sequencing seeking specific DNA mutations with different types of cancers may lead to new treatments. Physicians are researching family history and DNA to better predict cancer risk. Screenings for higher risk patients can help diagnose cancer at earlier stages. Doctors are customizing treatments and choosing the most effective outcomes.

How can businesses help?

Encourage employees to access cancer screenings. Offer wellness, nutrition and exercise programs. Partner with hospitals for on-site education. Memorialcare.org provides online risk assessments, tools and information on prevention, screenings, diagnosis and treatments.

MemorialCare Health System, a not-for profit, integrated delivery system, includes six top hospitals — Long Beach Memorial, Miller Children’s Hospital Long Beach, Community Hospital Long Beach, Orange Coast Memorial, and Saddleback Memorial in Laguna Hills and San Clemente; medical groups — MemorialCare Medical Group and Memorial Prompt Care; the Independent Practice Association (IPA) Greater Newport Physicians; retail health; ambulatory surgery centers; and numerous outpatient facilities across the Southland.

Philip DiSaia, M.D., is medical director at MemorialCare Todd Cancer Institute, Long Beach Memorial.

Amanda Termuhlen, M.D, is medical director at Jonathan Jaques Children’s Cancer Center, Miller Children’s Hospital.

Insights Health Care is brought to you by MemorialCare Health System

 

 

 

 

For franchisor Interim HealthCare, cutting the vision creep clutter was a job for Kathleen Gilmartin

Kathy Gilman, president and CEO, Interim HealthCare Inc.

Kathleen Gilmartin, president and CEO, Interim HealthCare Inc.

“We’re in that generation that is now caring for our parents,” says Gilmartin, president and CEO of Sunrise, Fla.-based Interim HealthCare Inc., the nation’s oldest health care franchisor. “And I see the technology driving a lot of care that will be. You’ve got this whole surge of baby boomers that are going to demand more [health] care at home…They’re going to be driving a lot of policy and insurers by being incented and motivated to do more care at home.”

Health care can now be delivered in the home easier than ever before, thanks to advancing technology and a growing demand for health care services. But the rise in the demand for home health care also places significant pressure on home care providers such as Interim HealthCare, which must continually adapt on both fronts in order to stay competitive and effectively serve a new generation of clients with diverse needs.

“The challenge over the last four years is the speed of change,” Gilmartin says. “We’re in an industry that is changing very quickly — home care, personal care, hospice and health care staffing. Pick one. There have certainly been changes in any one of those areas of our business.

“It puts a lot more on providers to accelerate what they’re doing. It isn’t a time to say, ‘We’re just fine the way we are.’ It’s going to be a case of, ‘We’ve got to do more and probably do it at a faster clip.’”

Since rejoining Interim HealthCare in 2008 — she first left the company when split off from a larger health care entity in 1997 — Gilmartin has worked on positioning the company and its network of 300 franchised locations in 43 states at the forefront of the home care evolution. Here’s how she is doing it.

Avoid ‘vision creep’

When Gilmartin came on as CEO in 2008, Interim HealthCare was in the process of transitioning to a 100 percent franchised company. The change came as company leaders looked for a way to streamline the focus on supporting franchises. Eventually, that meant doing away with all of the company-owned locations.

Founded in 1966, Interim HealthCare is the only home care franchisor with a model that delivers health care services from personal care and support to hospice services. This involves a broad spectrum of business areas. So as the company shifted to a 100 percent franchised model, Gilmartin also discovered a number of business lines that no longer made sense under the new model.

“It’s not unusual when you have companies that have close to 50 years of history that they start out and they grow, and as they grow, things get a little bit more complex and spread out,” Gilmartin says.

“You think that you’re focused on something, but you don’t realize that other things have sort of grown up inside of that. Sometimes they’re on the periphery. Sometimes they’ve been there so long that you get a scotoma, where you just don’t see what’s right in front of you. You have a blind spot to it.”

Gilmartin calls this “the vision creep.” What begins as a small investment gradually takes up more and more support, resources or time. Over years or decades, it may even start to take away resources from critical areas of business.

Innovation, while beneficial, can be one of the biggest culprits of vision creep. The same muscles that lead you to innovate can send you in directions that cause your company to stray from its core strengths. For example, investing in innovation led Interim HealthCare to develop its own IT system and a technology platform geared specifically for delivering home health care services. But Gilmartin and the company’s leaders soon found that an IT operation was an unjustified cost.

“We don’t have the DNA of being an IT company,” Gilmartin says. “We have the DNA of providing health care services in the home and providing health care personnel to facilities that need them.”

Instead of funding a whole division to support its IT platform, Gilmartin and her team decided it was a better investment to find a partner to handle its IT. In 2011, the company handed off the division to health care IT firm Procura for continued development.

“That care and feeding is probably being sacrificed from something else,” Gilmartin says. “So you always have to be sure that you look yourself in the eye and say, ‘This is our primary focus. This is what we do best. This is what we want to be doing for our constituents and stakeholders.’ Anything that doesn’t fit in that picture you have to be willing to say the time has come.”

The same went for the other “clutter” accumulated under the old model. Before long, Gilmartin was able to find homes for all of the business lines that weren’t synergistic with the 100 percent franchised structure.

One way to spot vision creep is by constantly asking, “Am I getting the best output in all areas?” or, “Are we getting the results we want?” If you’re not hitting on all cylinders, you need to step back and do some mining with your management team, board and equity partners, Gilmartin says.

When you are able to have those difficult conversations and to look objectively at each area of your business, you free yourself to bring even more leverage to your core competencies.

“You suddenly have this renewed energy, and you feel like, ‘Oh my goodness, we have more resources than we thought because some were being diverted or distracted getting these projects done,” Gilmartin says.

“It was being able to take the clutter out of the picture so that you see very clearly who you are, what your mission and purpose is and what is ultimately our ‘hedgehog,’ which [for us] is knowing that we want to be the most successful ‘continuum of care’ franchisor.”

Lay down a path

In most industries, it’s not enough anymore to respond to the market. Leaders of great companies don’t just evaluate change; they are in a regular cycle of changing all the time, always asking “What’s coming next?”

However, the key to driving proactive change across a large organization — Interim HealthCare employs more than 40,000 health care workers — is to balance the urgency of wanting to see change happen with the patience of recognizing that some changes take time to spread and be adopted by employees.

“Like a Rubik’s Cube — it would be one of those mental challenges of how do you keep the moving pieces and how do you get them to be at the right place at the right time?” Gilmartin says.

“Do franchisees have the information? Are we training them? Do they have the support? When I think of what makes this business tick and be successful, it’s people, but it’s people across a number of moving pieces.”

Essentially, the nature of care at home is that it’s a very personal service. Yet much has changed in the way that service is delivered. Ten years ago, there was no automation. But today, health care providers use point-of-care devices such as tablets, laptops and smartphones to capture patient interactions and electronic data in real time. This emerging technology is also a valuable tool for leaders such as Gilmartin to help drive change at all levels of their organizations.

In addition to traveling year-round to visit different franchise locations, which includes home care visits with nurses and meetings at the franchise and regional level, Gilmartin utilizes technology to stay connected and to find out what staff and management need to be successful, whether it’s training, support or technology resources.

“Every stakeholder has a nugget of wisdom or inspiration that leaders need to constantly be gathering,” Gilmartin says. “I sometimes look at our key leader group or key franchise group and think that the loudest and the biggest have it all right. But what I’ve done a better job of, and every leader can do better, is to communicate more and use lots of media in how you communicate … using the technologies of email and Skype and FaceTime but also including more voices that help shape the future rather than fewer voices.”

Once you have a clear destination in mind, making progress comes down to working closely with members of your team to get there.

“Some groups may have been doing certain pieces of health care for 20 years, but they recognize now that they have patients who require services that they haven’t done and would like to,” Gilmartin says. “We will train them in that and bring them through all the additional certification, training, hiring and actual management of how to do that business … so they can do it just as well as they’ve done all the other parts of the franchise.

“If you’re true to what the core of your company is, you’ll always be innovating better processes, better programs and, in our case, go to the next level of care delivery,” Gilmartin says. “That’s what has to be continually inspired and perspired, because there is a lot of sweat that goes with change.”

Helping its franchises continually adapt and grow has continued to pay off for Interim HealthCare. In 2011, the company generated $740 million of network revenue while maintaining one of the highest employee retention records in the industry — its average employee tenure is 18 years.

“People often think of return on investment first as financial, but there are also stakeholders of our patients and our caregivers and our management team — all of the people who work in our individual franchises,” Gilmartin says. “It’s taking those three circles, and if you bring those together, you can crystallize where those overlap and that keeps you focused. It keeps you rooted in, ‘Is every initiative we’re doing helping reinforce that?’ And success is the result.” ●

How to reach: Interim Healthcare Inc., (800) 338-7786 or www.interimhealthcare.com

 

The Gilmartin File

Kathleen Gilmartin
President and CEO
Interim Healthcare Inc.

Born: Buffalo, N.Y.
Education: D’Youville College

What do traits you look for in an employee?

There are many things you can overcome with training and knowledge, but if people don’t have the right caring and have a leaning to ‘I want to be in this business because I like health care and I choose health care to apply my business skills to’ — it’s not a right fit for everybody. I can tell you from new franchise development we’ve had franchise prospects come in and they are genuinely nice people. By the time we’re meeting them we’ve had a phone relationship, they’ve gone through initial screening, they’ve done homework; but there are times where we have the discovery day to meet us … they don’t necessarily recognize that caring for people is a 24/7 commitment. It includes holidays. It includes vacations.

What’s next for Interim HealthCare?

I see us being in a real growth mode because we’ve clarified we’re 100 percent franchised. We’ve got new franchises that we’re back selling and starting and feeding the forest in places where we haven’t had franchises. We have some very, very large franchises that have been building their infrastructure and working on management and succession planning because the business is getting bigger and more complex. I think home care has come of age.

If you could have dinner with one person you’ve never met, who would it be and why?

That’s easy, Bill Gates. He spent three decades creating products and services at Microsoft that changed how we operate businesses and manage our lives. Then he put his creativity and capital to work to eradicate disease in Africa and other parts of the globe. It would be a fascinating dinner to pick his brain and learn what makes him tick.

What do you to regroup on a tough day?

In any leadership role you have incredibly high days and rock bottom low days. The key is to keep the mental snapshots of the great days front and center so you don’t lose focus or faith on the bad days. The bookcase in my office also has photos I love of my family and friends to remind me not to take myself too seriously.

How accountable care measures are transforming our health care system

Ron Calhoun, Managing Director, National Health Care Practice Leader, Aon Risk Solutions

Ron Calhoun, Managing Director, National Health Care Practice Leader, Aon Risk Solutions

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 protected]

 

Website: Aon’s health care reform microsite can help businesses navigate this complex issue. Visit www.aon.com/healthcarereform/ to learn more.

 

Insights Risk Management is brought to you by Aon Risk Solutions

 

How health care reform is driving employers to self-fund their plans

Mark Haegele, Director, Sales and Account Management, HealthLink

Mark Haegele, Director, Sales and Account Management, HealthLink

To avoid elements of the Patient Protection and Affordable Care Act (PPACA) adversely affecting fully insured health plans, growing numbers of employers — especially smaller ones — are self-funding their plans.

“The problem is that everybody has been in a wait-and-see mode for two years, but now we’re starting to see the impact,” says Mark Haegele, director, sales and account management, at HealthLink. “I expect a lot of fully insured employers to make a change this year, mid-year. There are just so many compelling reasons to entertain it because self-funding policies still protect small employers and allow them to avoid many forthcoming taxes and rules.”

Smart Business spoke with Haegele about why the PPACA has prompted more employers to explore self-funding or partial self-funding.

How does medical loss ratio (MLR) reporting drive employers to self-funding?

Less service.

MLR reporting requires insurance companies to spend 80 or 85 percent — depending on their size — of premiums received on health care claims. Plan administration, such as overhead, payroll, sales efforts, network contracting, etc., comes from the remaining 15 to 20 percent.

MLR gives insurance companies an incentive to squeeze administrative services to make more profit. Some insurance companies have changed staffing and service models. One company had service people out to help with claim issues and problems for different segments — health insurance groups with two to 40 members, and 40 to 100 members. They recently bundled the segments into one, cutting staff and decreasing field service.

What will community rating rules do to health care costs?

Effective Jan. 1, 2014, insurers must comply with community rating factors based on geography, age, family composition and tobacco use. This means all fully insured small employers in an area or industry will pay the same for premiums. The idea is to get everybody to an affordable and stable price point, but many fully insured groups will be hit with big increases.

Here’s an example: in Missouri and Illinois, groups of fewer than 50 employees will be underwritten based on community rating rather than the specific group’s risk. A small, healthy employee group in Chicago can expect a 173 percent increase in 2014, according to the American Action Forum Survey of Insurance Companies. At the same time, a small Chicago group with older, less healthy members could have its premium decrease by 21 percent.

Under self-funding, healthy small groups are able to maintain rate stability based on the health of their own population.

How will the insurance tax affect health premiums for fully insured employers?

Starting in 2014, insurance carriers will be assessed a tax, projected to be $8 billion to $12 billion. The federal government will use this money to subsidize poor uninsured. However, insurance is a cost-plus business, so carriers will pass this on to employers. It’s still unclear how much the fully insured’s premium will increase as the tax is shared across the industry; it depends on your insurance company’s market share.

How will minimum essential benefits make self-funding more attractive?

Fully-insured plans sold in the small group market — fewer than 50 employees for Missouri and Illinois — will be required to limit annual deductibles to $2,000 for single coverage and $4,000 for family coverage, as of Jan. 1, 2014. This places upward pressure on premiums. If your current deductible is greater than $2,000, in order to decrease it premiums will go up because the insurance company faces more risk.

Also, for the past five years, many small employers’ deductibles have increased, which keeps premiums down, but employers haven’t passed it on. For example, because most members don’t use their deductibles, the employer could give employees a $1,000 deductible and use self-funding to cover the gap for the remaining $4,000 when the insurance company requires a $5,000 deductible to keep premium increases low.

Small employers could consider a self-funded platform in order to maintain their current deductible and keep rates stabilized.

Mark Haegele is a director, sales and account management, at HealthLink. Reach him at (314) 753-2100 or [email protected]

 

VIDEO: Watch our videos, “Saving Money Through Self-Funding Parts 1 & 2.”

Insights Health Care is brought to you by HealthLink

How to examine employee health insurance options under the PPACA

Dwight Seeley, Vice President, Employee Benefit Programs, Sequent

Dwight Seeley, Vice President, Employee Benefit Programs, Sequent

Employers are scrambling to figure out the impact of the Patient Protection and Affordable Care Act (PPACA) on their business and whether it makes sense to “pay or play” when it comes to providing health insurance coverage for employees.

“Pay or play regulations were released Dec. 28, so we’re all trying to digest this. Employers want to know what the rules mean for them,” says Dwight Seeley, vice president of Employee Benefit Programs at Sequent. “I have several meetings scheduled to review the math of the penalty phase with companies so they know where they stand.”

Smart Business spoke with Seeley about the pay or play provisions under PPACA and what employers need to do in preparation for the Jan. 1, 2014, start of health care exchanges.

How do companies prepare?

They need to determine answers to these questions:

  • Do they have a general understanding of pay or play?
  • Are they considered a large employer?
  • Will any employees receive federally subsidized exchange coverage?
  • Does the company plan offer minimum essential coverage?
  • Does the plan provide minimum value?
  • Is the plan affordable?
  • What penalties could apply and what is the potential cost?

First off, pay or play applies to employers with at least 50 full-time or full-time equivalent (FTE) employees, so you have to determine if that applies to you. PPACA rules are different from those of the IRS. Under PPACA, a full-time equivalent is considered 120 hours per month, 30 hours per week. There’s a fairly detailed structure for measuring FTEs based on employees with variable hours, seasonal employees, etc. Companies that have variable schedule employees, part-timers or a lot of seasonal employees are going to be challenged to determine how many FTEs they have.

If you have 50 or more FTEs, what do you need to do to avoid penalties?

Businesses can avoid penalties by providing minimum essential coverage with a plan that offers at least minimum value and is affordable. No guidance has been given on minimal essential coverage but there’s a general idea of what it’s going to look like based on industry standards.

Once you’ve established that a plan provides minimal essential coverage, you then look at whether it meets the minimum value requirement and if it’s affordable. It’s considered poor if it pays less than 60 percent of total benefits under the plan. To be affordable, it has to cost less than 9.5 percent of an employee’s household income.

What are the potential penalties?

If you do not offer coverage and at least one full-time employee receives a federal subsidy, the tax is $2,000 per the number of full-time employees minus the first 30. An employee can get a subsidy if their income is between 100 to 400 percent of the federal poverty level — about $92,000 for a family of four.

If you offer coverage that’s considered unaffordable and at least one full-time employee receives a federal subsidy, the annual tax is the lesser of $3,000 per subsidized full-time employee or $2,000 for all full-time employees.

Should some employers drop health care coverage and pay the penalties?

Studies corroborate the fact that a lot of employers feel they still need to offer health insurance as a differentiator and as a recruitment and retention strategy. What they want is to get the numbers straight in order to make an informed decision. That means going through the penalty scenarios and working out the math. Any penalties will not be deductible or tax favored, whereas the health insurance you’re providing is tax favored, so you have to calculate the impact from pre-tax and post-tax perspectives.

One other challenge that’s not being talked about is the cost companies are going to incur to implement the administrative changes required by the law. They’re going to have to put in new processes to allow easy access to data the way it is defined by the PPACA, such as an ongoing way to monitor the number of FTEs.

The published regulations contain many detailed examples so there has been an attempt to provide direction. Still, the sheer volume and complexity make it a lot to absorb.

Dwight Seeley is a vice president, Employee Benefit Programs, at Sequent. Reach him at (614) 839-4059 or [email protected]

 

Save the date: Learn about the changing landscape of health care reform. Register for the March 19  Pay or Play Webinar at http://bit.ly/XFjwB3.

 

Insights HR Outsourcing is brought to you by Sequent

 

How to keep retiree health care billing from draining time, resources

Tammy Clay, Manager, Flexible Spending Accounts and COBRA, UPMC Benefit Management Services

Tammy Clay, Manager, Flexible Spending Accounts and COBRA, UPMC Benefit Management Services

Many employers realize that their commitment to their employees doesn’t necessarily end at retirement. But wanting to deliver post-retirement health benefits and doing so in an effective and affordable manner is not always possible for all businesses.

However, employers do have several options, including outsourcing retiree billing administration to a firm that specializes in that area.

“It may make sense for many companies to outsource their retiree billing administration,” says Tammy Clay, manager for Flexible Spending Accounts and COBRA with UPMC Benefit Management Services. “It can save a company money, time and valuable resources.”

Smart Business talked with Clay about retirement billing administration and why it can work for many employers.

What is retiree billing?

Basically, it’s a Web-based service that provides coordination of enrollment and billing. For many companies, retiree billing is considered as a sort of a yolk around their necks. They need help in this area and sometimes an outside source is the best place to look for it.

What makes retiree billing difficult for some employers?

Retiree billing is generally considered to be among the most time- and paperwork-intensive assignments that a human resources department ever has to deal with.

There are a number of ‘necessary evils’ employers have to deal with where retiree billing administration is concerned. When billing the appropriate premiums and relaying timely eligibility updates to the carrier, a multi-functional billing system should be at the heart of the process.

In some cases, an employer provides credits to the retirees to apply toward Medicare supplement plans. The process used to determine if the money leaving an account matches the amount claimed, and ensuring that the correct credit is being applied for a certain time period, is account reconciliation. Account reconciliation is important because it helps with cash management and protects businesses against fraudulent activities.

Regardless of the size of the company, the retiree populations will always continue to grow. For some companies that growth might dwarf the active population. As a result, many companies find that they cannot afford to grow their HR departments to keep up with it.

What are some advantages of outsourcing retiree benefits administration?

Employers want to reduce their liability for post-retirement health benefits and can often do that by outsourcing. Retiree premium billing administered by a neutral third party can protect retiree privacy. Health and financial matters are sensitive issues that retirees may not want to share with a former employer. Moreover, there can be complications and frustrations in dealing with the complexity of retiree benefits. It is best for all involved that any frustration is not directed at the former employer.

What are some advantages for employers of outsourcing the process?

Retirees will no longer call an employer’s human resources department to ask questions that the HR department may or may not be able to answer. This can save both money and time, and increase the productivity of the HR department. When billing is outsourced, the people dealing with the retirees are specialists in this area who can answer any questions or concerns retirees might have. In many instances, retirees can access 800-number phone lines and 24/7 websites to make it easier for them to get information and answers to their questions. An employer is saved the hassle of dealing with multiple phone calls and emails to resolve these issues.

By outsourcing retiree billing to an experienced, reliable organization, employers can be confident that the service is compliant with federal, state and local laws. Employers also like the fact that by outsourcing retiree benefits administration, they have more time to focus on strategic planning that can create value for a company.

Tammy Clay is a manager, Flexible Spending Accounts and COBRA, at UPMC Benefit Management Services. Reach her at (412) 454-8739 or [email protected]

WEBSITE: For more information about what UPMC Health Plan has to offer employers, please go to www.upmchealthplan.com/employers/index.html.

Insights Health Care is brought to you by UPMC Health Plan

What current and future health care reform laws mean for you

Marty Hauser, CEO, SummaCare, Inc.

Marty Hauser, CEO, SummaCare, 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 [email protected]

 

Website: To learn more about health care reform, visit www.summacare.com/healthcarereform.

 

Insights Health Care is brought to you by SummaCare, Inc.

 

How captives and insurance exchanges can reduce health care costs

Bill Goddard, Principal, Insurance Consulting, Brown Smith Wallace

Bill Goddard, Principal, Insurance Consulting, Brown Smith Wallace

Ron Present, Health Care Industry Group Leader, Brown Smith Wallace

Ron Present, Health Care Industry Group Leader, Brown Smith Wallace

The financial impact of the Patient Protection and Affordable Care Act (PPACA) may seem to be its  most challenging aspect. Mitigating that impact may seem like the most practical solution. However, Ron Present, health care industry group leader at Brown Smith Wallace, says, “There are a lot of strategic implications to what you do and how you do it. Management should avoid just calculating the math and saying, ‘This saves us money so it’s what we’re doing.’”

To that point, Bill Goddard, principal, insurance consulting at Brown Smith Wallace, says, “You should consider many potential solutions before making a decision that could drastically diminish your ability to retain and acquire talent, and keep your workforce engaged.”

Smart Business spoke with Present and Goddard about dealing with health care insurance after the PPACA from a cost and strategic perspective.

How has the PPACA affected private insurance?

Starting Jan. 1, 2014, employers with 50 or more full time or full-time equivalent employees, considered large employers, must offer health insurance that fits certain affordability and coverage criteria or face a penalty. This could have an immediate impact on an employer’s cost to provide health insurance because a group of employees that had not had insurance may enroll in the plan and because of pre-existing conditions or high use of care, will cost the employer a significant amount of money.

Also, the health care law changes the status of some who had been considered part timers for insurance purposes to full-time employees. In some industries, many employees have not historically taken health insurance, sometimes as much as 66 percent of a company’s workforce. These employees will need to be offered coverage, potentially tripling costs.

How might that impact employers?

Companies are calculating their potential risk to cost. However, that’s only one aspect. The other is the strategic impact.

Some companies have considered limiting their variable hour, or part time, employees, to less than 30 hours per week to reduce the number of employees considered full time. To maintain an adequate workforce, such changes can require hiring additional employees, or changing existing employees’ workloads and job descriptions to keep up production and prepare for 2014.

Should employers not provide coverage?

Let’s say a large employer decides not to offer health insurance and instead pay the $2,000 per employee (minus 30) penalty, which may seem cheaper. However, the law requires individuals to have insurance regardless of employer coverage, so employees may leave for a competitor that provides it. Those who stay out of necessity may always be looking for another employer that provides coverage, lessening their productivity and loyalty while raising turnover, which is a significant expense.

Counsel employees. Let them know that they can refuse insurance coverage from the employer and either purchase insurance through a public exchange/marketplace or instead pay an annual penalty. Employees may prefer to pay the penalty instead of paying far more each month for coverage.

How can employers that provide insurance cope with rising premiums?

Large employers offering health insurance to a population of purely full-time employees can potentially control premium costs by forming a captive insurance company. This is an insurance company that non-insurance companies with 50 or more full-time employees can start. It is generally owned by the company that forms it and insures a limited population, typically just its own employees.

Another potential solution is to form a private exchange, which may be complementary to forming a captive insurance company, in that the entity forming it creates its own marketplace, which means it may qualify as providing insurance with a defined contribution that may help control costs.

Bill Goddard is a principal, insurance consulting, at Brown Smith Wallace. Reach him at (314) 983-1253 or [email protected]

Ron Present is a health care industry group leader at Brown Smith Wallace. Reach him at (314) 406-5105 or [email protected]

 

WEBSITE: For more on this topic, visit http://bswllc.com/industries/health-care.

 

Insights Accounting is brought to you by Brown Smith Wallace LLC