Two Minute Drill

Where Are Our Healthcare Dollars Being Spent?

Quite often in the course of working with our clients on practical and innovative approaches to lower their healthcare costs or mitigate pending increases, we are asked two questions:

“Why is healthcare so expensive?” And “where is the money going?”

The first question is so hugely complicated there may not be enough bandwidth on the internet to analyze it and address it in writing. The second question was addressed in a recent study published by the Agency for Healthcare Research and Quality and related in easier to read fashion in a joint Kaiser Health News/Washington Post article.

While this is really big picture stuff, in answering the question on where the money is being spent, they present some interesting (perhaps only to analytical geeks like me) and startling facts worth taking a moment to contemplate:

  • In 2010, Americans spent @ $1.3 TRILLION on healthcare (This addresses direct payments for care provided during the year.  It jumps to $2.8 TRILLION when you include health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care).
  • 1% of the population accounted for 21% of the $1.3 TRILLION spent.
  • 5% accounted for 50% of all healthcare expenditures.  And, 10% are credited with 66% of the healthcare spend.
  • Contrast that with the 50% of the folks in the U.S. that accounted for less than 3% of the costs.

Our BBG world is micro and hyper-intensively focused on helping mid-size and small employers control costs and improve outcomes one employer at a time. We can’t even begin to suggest we know where the big picture solution lies. That’s for folks a lot smarter and better equipped. It does appear clear however, even to this lay person, that to put a dent in this ever growing cost curve, the lion’s share of the resources and efforts must laser focus on solving the 5% accounting for 50% cost equation…

For more on the study or the article, go here:

http://meps.ahrq.gov/mepsweb/data_files/publications/st421/stat421.shtml

And, here: www.kaiserhealthnews.org/stories/2013/october/08/one-percent-of-costliest-patients.aspx

Ezra says, “Healthcare.gov is in defacto shutdown.”

That is the title of Ezra Klein’s piece in yesterday’s Washington Post that indicates while the federal healthcare exchange is said to be open for business, it really isn’t.  Klein interviews highly respected health industry consultant Bob Laszewski who possesses up-close knowledge of the ballyhooed rollout of the federal health insurance exchange healthcare.gov. Laszewski and Klein provide some real, matter-of-fact insight and perspective on the utter chaos surrounding the rollout. Interestingly, while much of the latest news cycle highlights the many glitches associated with the exchange’s front end rollout, the article discusses even bigger problems that may loom on the system’s back end, if and when coverage is purchased and goes into effect.

Caveat emptor.

Read the entire piece at http://m.washingtonpost.com/blogs/wonkblog/wp/2013/10/23/healthcare-gov-is-in-de-facto-shutdown/

Looking for Official ACA Information?

Interested in finding what official online resources are available from the federal government for learning about the various requirements and other aspects of healthcare reform?  With implementation of the major pieces of healthcare reform around the corner and the complexity seemingly growing with each passing day, I was.  A cursory investigation led to these six main government-sponsored websites, no doubt there are many others.  Here are the big six for those who might want a handy reference:

Official Site of the Affordable Care Act
https://www.healthcare.gov/

U.S. Department of Health & Human Services (HHS)
http://www.hhs.gov/healthcare/

The Internal Revenue Service (IRS)
http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home

U.S. Department of Labor  (DOL)
http://www.dol.gov/ebsa/healthreform/

U.S. Small Business Administration
http://www.sba.gov/healthcare

The White House
http://www.whitehouse.gov/healthreform

Confused About 2014 Maximum-Out-of-Pocket Costs?

ACA Prescribed Limits Are Still on Track for Most Plans in 2014

Out-of-Pocket (OOP) maximums of $6,350 for individuals and $12,700 for families will still apply for most customary fully-insured health insurance plans in 2014 (coinciding with renewal/anniversary dates; new plan year effective dates). Many publications and other news sources have created some confusion by reporting that the Affordable Care Act provision limiting maximum out of pocket costs has been delayed until 2015. The delay only impacts those plans that carve out certain benefits (e.g. pharmacy, mental health benefits) for administration by separate third-party providers.  In those cases, a health plan’s medical benefits and its carved out benefit(s) may apply toward separate out-of-pocket maximums in 2014.  This appears to be a one year exception for carve-outs and all plans are expected to aggregate out-of-pocket maximums beginning in 2015.

ACA October 1 Notice of Coverage Mandatory for Employers

DOL Update Confirms No Penalties for Non-Compliance

As part of the implementation of the Affordable Care Act, Health and Human Services (HHS) is requiring that all employers distribute to their employees basic information related to the new Federally Facilitated Healthcare Exchange or Marketplace that is scheduled to be introduced on October 1, 2013.  While the details of the exchanges still have yet to be released, the requirement for employers to notify their employees remains in effect.

Official rules defining compliance have not been issued. HHS, however, has issued guidelines. Here’s a net of those guidelines:

  • Applies to employers that employ one or more employees and generate annual revenue of $500,000 or more.
  • Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status.
  • The notice must include information regarding the existence of a new Marketplace and contact information and description of the services provided by a Marketplace. It must inform the employee that he/she may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Marketplace; and inform the employee that if the employee purchases a plan via the Marketplace, they may lose the employer contribution (if any) to any health benefits plan offered by the employer; and, that all or a portion of such contribution may be excludable from income for Federal income tax purposes.
  • Employers are required to provide the notice to ALL current employees not later than October 1, 2013.  In 2014, any new employees are to be provided a notice within 14 days of an employee’s start date.   It may be provided electronically.
  • Model language is available on the DOL’s website.  Employers may use it or a modified version, provided the notice meets the content requirements described above.

Complete details can be found on the DOL website http://www.dol.gov/ebsa/newsroom/tr13-02.html

Our take on the bottom line is this:  Even though details of the exchanges have not yet been released, HHS is requiring all employers to distribute by October 1, 2013 an announcement to all employees regarding the upcoming open enrollment for the Federally Facilitated Healthcare Exchange or Marketplace – regardless of each employee’s employment or plan enrollment status.  However, and contrary to some of the fear mongering opportunists kicking up dust in and around the market, in a recently released FAQ the DOL clarified that while employers should provide a written notice to all employees about the Health Insurance Marketplace by October 1, 2013, there is no fine or penalty under the law for failing to provide the notice .

www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html

We will try and keep you posted on any new developments.

Employer Sponsored Coverage – Just the Facts

We’re often asked by clients and colleagues about how their health coverage (and related costs) stacks up against the averages. Kaiser Family Foundation (KFF) recently released the results of their Annual Employer Health Benefits Survey. Among the findings:

  • Employer-sponsored insurance covers about 149 million nonelderly people.
  • In 2013, the average annual premiums for employer-sponsored health insurance are $5,884 for single coverage and $16,351 for family coverage.
  • There is significant variation around the average single and family premiums, resulting from differences in benefits, cost sharing, covered populations, and geographical location.
  • 21% of covered workers are in plans with an annual total premium for family coverage of at least $19,622 (120% of the average family premium).
  • 21% of covered workers are in plans where the family premium is less than $13,081 (80% of the average family premium).
  • Over the last 10 years, the average premium for family coverage has increased 80%.
  • 57% of firms offer health benefits to their workers.
  • 45% of employers with 3 to 9 workers offer coverage, but virtually all employers with 1,000 or more workers offer coverage to at least some of their employees.

The complete results and analysis of KFF’s Employer Health Benefit Survey can be found at http://kff.org/private-insurance/report/2013-employer-health-benefits/

Year 2 of Medical Loss Ratio Rebates: A Refresher For Employers In Case the Check Comes

This month certain employers may be receiving rebate checks from their insurance carriers. Some may have received checks last year and know what to do. Others may be receiving the checks for the first time and scratching their heads on what to do with the rebates. Here’s a primer summarizing key points that may help guide you.

What is it? Medical Loss Ratio Rebates (MLR) are a provision of the Affordable Care Act requiring insurance companies to issue a refund if they do not spend at least 80% (small group and individual; 85% large group) of premium on healthcare related services with no more than 20% going toward administrative costs.

What to do with the check? Rebates are considered plan assets to be used for providing benefits to enrollees and defraying plan costs. Employers are entitled to keep a portion of the rebate commensurate with the company’s percentage contribution to total premium. The remainder must be allocated to the benefit of those enrolled in the plan(s). Employers have some flexibility in terms of how to distribute the rebate. At a high level, the options include:

  • Reduce employees’ portion of premium for the next policy year.
  • Provide a cash refund to those employees covered under the health plan(s) associated with the rebate.

Allotment of the rebate needs only to include current employees. Employers are not required to track down or include former employees in the distribution or apportionment of rebates (any Cobra enrollees being the exception).

To drill into the technical details go to http://www.dol.gov/ebsa/pdf/tr11-04.pdf. IRS guidance on tax implications of the rebates can be found at http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs.

Major Obamacare Surprise: The Administration Delays Employer Mandate Until 2015

A surprise announcement out of Washington concerning a major provision of Obamacare led into the 4th of July holiday and served as fireworks of sorts to large employers and those in the industry. Late on Tuesday July 2nd, the Administration announced that the Employer Mandate, a central piece of the Affordable Care Act, was delayed until 2015.

Under the Employer Mandate an employer with 50 or more employees must offer full time employees “minimum essential group health coverage” that is “affordable” or pay penalties. Employers who elect not to offer coverage would be subject to a $2,000 per employee penalty. Those employers offering coverage that doesn’t meet ACA’s minimal coverage and/or affordability standards  would be subject to a $3,000 per employee fine for any employees that obtain subsidized coverage through the insurance exchanges.

In making the announcement, officials pointed to complications related to data collection, complex employer reporting requirements and other administration issues as the reasons for the delay.

So far, this delay does not affect the January 1, 2014 Individual Mandate or any of the new requirements that will impact the small group market (firms with less than 50 employees) such as the essential health benefit requirements and the rating reforms.

More information and coverage can be found at Kaiser Health News, Summaries of News Coverage,  Delay In Major Health Law Provision Raises Doubts At Critical Stage Of Rollout, http://www.kaiserhealthnews.org/Daily-Reports/2013/July/02/employer-mandate.aspx

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