Benchmarking,
Best Practices and
Strategies
July
2015
Agenda
Healthcare Inflation,
Premium Rates, &
Contributions for
your Market
Cadillac Tax
Self-Insurance
Private
Exchanges
+
Wellness
Medical Plan
Design
Innovative
Alternatives:
Captives
Accountable Care Narrow Networks
Organizations
About Milliman:

Founded in 1947

You can find us in principal cities worldwide

3,000+ employees; 1,300+ qualified consultants
and actuaries

Milliman is among the world’s largest providers of
actuarial and related products and services

Consulting practices in healthcare, property &
casualty insurance, life insurance and financial
services, and employee benefits

Milliman is an independent actuarial consulting firm
Areas Surveyed
Survey Summary
Statistics
$
National
Virginia Area
Companies
Participating
Employees in the
Survey
Healthcare Dollars
Spent
4,479
132
2.5 million
57,946
$31.1 billion
$617.2 million
*Audience Poll*
Based on the 2014 National and 2015 Virginia Area survey responses
What is your favorite band?
0% 0% 0% 0% 0% 0% 0% 0%
Nirvana
Nickelback
Justin…
100%
80%
60%
40%
20%
0%
The…
Guns N’…
Bon Jovi
1. Fleetwood Mac
2. The Rolling
Stones
3. Guns N’ Roses
4. Bon Jovi
5. Backstreet Boys
6. Nirvana
7. Nickelback
8. Justin Bieber
What is your current position?
1. HR Assistant
2. HR Generalist
3. Benefits
Administrator
4. Benefits Manager
5. HR Manager
6. Director of HR
7. Vice President of HR
8. CEO
9. CFO
10. Other
100%
80%
60%
40%
20%
0%0%0%0%0%0%0%0%0%0%
0%
What is your tenure in
benefits?
1. 1 year (rookie)
2. 2-5 years
3. 6-10 years
4. 11-25 years
5. When can I
retire?!?
100%
80%
60%
40%
20%
0%
0%
0%
0%
0%
0%
How many of your company’s
employees are eligible for
your benefits program?
100%
80%
60%
40%
*Seminar
Presentation*
1,000+
751-999
501-750
251-500
101-250
0%
0% 0% 0% 0% 0% 0% 0%
51-100
20%
0-50
1. 0-50
2. 51-100
3. 101-250
4. 251-500
5. 501-750
6. 751-999
7. 1,000+
Healthcare Inflation,
Premium Rates, &
Contributions for Your
Market
Healthcare Inflation
National Historical Results
Healthcare Inflation
Final after all plan design changes
Healthcare Inflation – 2016
Expected
0% or less
1%
Increase
1-5% Increase
6-10%
Increase
11-15%
Increase
16-20%
Increase
21+%
Increase
18
%
17
%
5%
1%
*Audience Poll*
Based on the 2015 Virginia Area survey responses
58
%
10
%
What is the average annual
medical cost for a family of
four?
100%
80%
60%
40%
*Seminar
Presentation*
Greater…
$25,001 -…
$20,001 -…
$15,001 -…
$10,001 -…
0%
0% 0% 0% 0% 0% 0% 0%
$5,001 -…
20%
Less than…
1. Less than $5,000
2. $5,001 - $10,000
3. $10,001 - $15,000
4. $15,001 - $20,000
5. $20,001 - $25,000
6. $25,001 - $30,000
7. Greater than
$30,000
Components of
Spending
$24,67
1
In 2015, the cost of healthcare for a typical
American family of four covered by an
average employer-sponsored preferred
provider organization (PPO) plan is $24,671
according to the Milliman Medical Index
(MMI). The amount will almost certainly
surpass $25,000 in 2016.
*2015 Milliman Medical Index (May 2015): Figure 4 – 2015 MMI
Relative Proportions of
Medical Costs
$
Employer
Contributi
on
$14,198
58
%
Employee
Contributi
on
$6,408
26
%
*Audience Poll*
*2015 Milliman Medical Index (May 2015): Figure 7 – Relative
Employee
Out-of-Pocket
$4,065
16
%
How many people nationwide
participated in the
Government Exchange during
2015 open enrollment?
100%
1. 1.5 million
2. 5.2 million
3. 11.7 million
4. 15.8 million
5. 21.2 million
http://obamacarefacts.com/sign-ups/obamacare-
80%
60%
40%
20%
0%
0%
0%
0%
0%
0%
What percentage of people
who participate in the
Government Exchange
receive a premium subsidy?
100%
1. 13%
2. 38%
3. 51%
4. 67%
5. 87%
80%
60%
40%
20%
0%
0%
0%
0%
0%
0%
13% 38% 51% 67% 87%
*Seminar
http://obamacarefacts.com/sign-ups/obamacare-Presentation*
Exchange Plan
Premiums
What do average exchange plan premiums look like in the Virginia
Bronze
area?
Silver
Gold
$254
$301
$350
$395
$509
$602
$699
$790
$507
$600
$697
$787
$762
$902
$1,047
$1,182
Platinum
11.7 million people participated in a government
sponsored exchange
87% of enrollees receive a premium
subsidy
http://obamacarefacts.com/sign-ups/obamacare-
Comparison of Total Premium by
Plan Type: Employee Only
Comparison of Total Premium by
Plan Type: Family
Medical Premium Summary
By Plan Type
PPO
HDH
Virginia
NationalP
Area
National
(2014)
Virginia
Area
(2015)
$489
$503
$421
$380
$1,036
$1,064
$896
$833
$899
$979
$782
$728
$1,429
$1,465
$1,238
$1,139
(2014)
(2015)
Medical Contribution
Summary
By Plan Type
PPO
National
(2014)
Virginia
Area
(2015)
22%
HDH
Virginia
NationalP
(2014)
Area
(2015)
21%
19%
15%
35%
48%
32%
42%
35%
42%
32%
41%
36%
47%
33%
44%
Contribution
Strategies
2011
2015
*Audience Poll*
Based on the 2015 Virginia Area survey responses
How many employed people
are eligible for Medicaid?
100%
1. 1-5%
2. 6-10%
3. 11-15%
4. 16-20%
5. 20%+
80%
60%
40%
20%
0%
*Seminar
Presentation*
0%
0%
0%
0%
0%
Affordability
Standards
Employer-Sponsored Plan:
Employee Premium Contribution
as a Percent of Income
Household
Income
Federal
Poverty
Level
(FPL)*
$47K+ individual
$96K+ family
401%
$16K-$47K
individual
$33K-$95K family
139400%
$0K-$16K
individual
$0K-$33K family
0-138%
0.0%-9.5%
9.5% +
Not Eligible for Premium Subsidy
Not Eligible for
Premium
Subsidy
Eligible for
Premium Subsidy
Medicaid Eligible
Employer Penalties for Medicaid-Enrolled
Less than 5%Noof
employed
Employees
people are eligible for
Medicaid
Affordability Standard Definition: A plan is affordable if the employee only
payroll deduction of the cheapest plan that meets the minimum value
requirements
less thanSecretary
9.5% of W-2
earnings.and Evaluation, aspe.hhs.gov- 2015 Poverty
*Office
of the isAssistant
for Planning
Dental Premium/Contribution
Summary
DPPO
National
(2014)
Virginia
Area
(2015)
National
(2014)
Virginia
Area
(2015)
$32
$27
50%
100%
$66
$57
56%
100%
$72
$64
59%
100%
$103
$88
68%
100%
Cadillac Tax
AKA Excise Tax
*Audience Poll*
How many plans will be
affected by the Cadillac
Tax?
100%
1. 0-5%
2. 6-10%
3. 11-15%
4. 16-20%
5. 20%+
80%
60%
40%
20%
0%
*Seminar
Presentation*
0%
0%
0%
0%
0%
Cadillac
Tax
• Becomes effective in 2018
• Not affected by age/gender/zip
code/plan design – no
adjustments
• Tax = 40% x premium in excess
of the threshold
Rule of thumb based on 8% trend
Cadillac
• Initial estimates are thatTax
more than 20% of plans will be
affected by the Cadillac Tax
• If your plan has 2015 total premiums that are higher
than those listed below you may need a plan to deal
with the Cadillac Tax
$675
$1,80
0average of all of your
• Cadillac Tax is not a weighted
premiums. It is measured by each employee’s
premium.
• For example, an employer with 900 employees in
Omaha at $500 per employee and 100 employees
in New York City at $700 per employee, will have to
Rule of thumb based on 8% trend
SelfInsurance
*Audience Poll*
For your medical (PPO,
CDHP, POS) plans, are you:
1. Fully-insured
2. Self-insured
3. Participating in a
Captive
4. Purchasing an
ACO
5. Other
6. Don’t know
100%
80%
60%
40%
20%
0%
0% 0% 0% 0% 0% 0%
CFO: Are you (or is your CFO)
more involved in the health
care decision for your
company than 3 years ago?
1. Same
2. Less involved
3. Little more
4. Much more
5. It is not the
CFO’s decision
100%
80%
60%
40%
20%
0%
*Seminar
Presentation*
0%
0%
0%
0%
0%
Funding
Strategy
1-49 Employees
50-199 Employees
200-499 Employees
500-999 Employees
1000+ Employees
All Plans
Self-Insured
Plans
Minimum
Premium Plans
Fully-Insured
Plans
0.0%
8.0%
52.0%
57.4%
100.0%
33.7%
11.1%
0.7%
2.0%
0.0%
0.0%
1.1%
88.9%
91.3%
46.0%
42.6%
0.0%
65.2%
Based on the 2015 Virginia Area survey responses
Self-Insured Feasibility
Analysis
Fully-Insured
Claims Cost
Claims
Administration,
Margin, &
Commission
Pooling Charge
$710.8
6
Self-Insured
Claims Cost $710.86
$148.9
6
Claims Administration
$81.22
Broker Consulting
Fee
$79.44
Stop-Loss Premium $72.19
Premium Tax
$19.86
ACA (Insurer Fee)
$30.78
ACA (PCORI & TRF
Fee)
$11.15
Total Premium:
$1001.05
(PEPM)
Results based on a sample company
$27.07
ACA (PCORI & TRF Fee)
$11.15
Total Premium:
$902.49
(PEPM)
Self-Insured Feasibility
Analysis
Analysis of Aggregate Claim
Variability $100,000 Individual StopLoss: Sample Company
0.300
34.4% chance of
exceeding 105% of the
average
0.275
Probability of Occurrence
0.250
0.225
0.200
13.8% chance of
exceeding 115% of the
average
0.175
0.1477
0.1352
0.150
0.125
0.1045
0.1148
4.0% chance of
exceeding 125% of the
average
0.0908
0.100
0.0718
0.075
0.0629
0.0398
0.050
0.025
0.1343
0.0348
0.0204
0.0168
0.0003 0.0015 0.0045
0.000
Results based on a sample company
Range (Percent of Avg Claim)
0.0096 0.0063
0.002 0.0015 0.0004
0
Funding Strategy
Potential– Savings
Advantages of SelfInsurance
Savings Moving to Self-Insured
25%
 No Premium Tax
20%
 No ACA Insurer Fee
15%
 No Profit Margin
10%
 Interest on Reserves
 Greater Plan Design Flexibility
 Milliman-Omaha has
completed approximately 84
new Self-Insured Feasibility
Analysis (SIFA) reports for 2014 May, 2015
5%
Estimated Savings
0%
0
500
1000
1500
2000
-5%
-10%
-15%
# of Employees
2500
3000
3500
Private
Exchanges
Private Exchanges
Cred
it=$42
1
Carrier Carrier Carrier Carrier
1
4
3
2
$1,020 $1,650 $1,325
Premium
Rates
Content is not based on real numbers
$950
Private Exchanges
Private Exchanges are used to
transfer the healthcare decision
from the employer to the
employee while still providing
enough choice and
affordability.
*BenefitsPro, Benefitspro.com: How private exchanges are thriving
Are Private
Exchanges…
– Cheaper?
– Easier?
– Better for Employees?
– Sustainable?
Private Exchange Market
Commentary
• Private Exchanges are a great option for some
employers but definitely not for everyone
• Advantages:
•
•
•
•
•
•
Enhanced technology
Decision support tools for employees
Defined contribution funding approach
Potential for more choice
Less management of your plan
Potential for lower costs
• Disadvantages:
• Potential for over-hype
• Potential conflicts of interest
• Some brokers and carriers have made a significant
investment and need to show a high level return on that
investment
• Potential for perceived cost shifting to employees
• Potential for less choice
• Loss of control
• Potential for higher costs
Wellness
Wellness Programs
Offered
Top Three Incentives
Given to Employees
Lower employee medical
40%
contributions
Recognition
31%
Gift cards
29%
Reasons for Offering Wellness
Programs
Based on the 2015 Virginia Area survey responses
Expected ROI on Wellness
Programs
Within 5
years
Based on the 2015 Virginia Area survey responses
• The high participation rate has led to a
host of positive medical outcomes with
significant impact on the bottom line,
including*:
•
The overall healthcare cost increase fell to
5% in 2013, substantially below historical
increases of 10%-18%.
•
Emergency room visits decreased by 4%,
signaling stronger relationships with primary
care doctors and more appropriate use of
urgent care.
•
The cost of back surgeries dropped by 40%.
•
Early detection of cancers went up, due to
the increase in preventive visits and
screenings and allowing for treatment at
earlier stages.
*Milliman
Case Study:
focus
• Mail-order
vs. Wellness
retail prescription
drug orders
Wellness/Disease Management
Incentives
Based on the 2015 Virginia Area survey responses
*Audience Poll*
What state has the highest
percentage of people who
walk to work?
1. New York
2. Illinois
3. West Virginia
4. Alaska
5. Hawaii
100%
80%
60%
40%
20%
0%
https://noorslist.wordpress.com/2007/12/19/interesting-trivia-questions-
0%
0%
0%
0%
0%
What state is the
unhealthiest?
1. Oklahoma
2. California
3. Mississippi
4. West Virginia
5. Arkansas
100%
80%
60%
40%
20%
0%
0%
0%
0%
http://www.benefitspro.com/2014/01/02/top-10-unhealthiest
states?utm_source=BPro2014TopContent_010915&utm_medium=Email&utm_campaign=Ben
efitsPro_Marketing_Campaign&t=core-group&page=11/
0%
0%
What types of wellness
program structure does your
company currently offer?
1. Newsletters
2. Newsletters, web-based resources
3. Newsletters, web-based resources, health club discounts
4. Newsletters, web-based resources, health club discounts,
blood pressure/cholesterol screening
5. Newsletters, web-based resources, health club discounts,
blood pressure/cholesterol screening, on-site exercise
facilities, on-site health clinic
6. Does not currently offer
Wellness Structure
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0%
0%
0%
0%
0%
0%
Do you offer incentives to your
employees for participating in
the wellness program?
100%
80%
60%
40%
20%
0%
1. Yes, $25-$49
2. Yes, $50-$74
3. Yes, $75-$99
4. Yes, $100-$124
5. Other (e.g. PTO,
merchandise,
recognition,
etc…)
*Seminar
6. No
Presentation*
0% 0% 0% 0% 0% 0%
Medical Plan
Design
+
Medical Plan
Prevalence
Based on the 2015 Virginia Area survey responses
Number of Plans
Offered
Based on the 2015 Virginia Area survey responses
Deductible
PPO Plans (In-Network)
The 2014 National
Out-of-Network
Median Differential
was $700
Coinsurance
PPO Plans (In-Network)
The 2014 National
Out-of-Network
Median
Differential was
20%
Out-of-Pocket Maximum
PPO Plans (In-Network)
The 2014 National
Out-of-Network
Median
Differential was
$3,000
Office Visit Copay
PPO Plans (In-Network)
The 2014 National
Specialist Copay
Median
Differential was
$20
Medical Plan Summary
PPO Plans
Safe Harbor Plan
(2015)
$1,000/$1,500
$3,500/$7,000
80%/60%
80%/50%
$3,000/$6,000
$6,000/$12,000
$25
Subject to
Deductible &
$40
$50
$10/$30/$50/$80 $10/$30/$50/$50 Coinsurance
National (2014)
Deductible
Coinsurance
OOP Max
PCP Copay
Specialist Copay
Rx Copays (retail)
Virginia Area
(2015)
$1,000/$1,875
80%/60%
$4,000/$6,625
$25
Green highlighting represents if the National or Virginia Area plan is richer based on
High Deductible
Health Plans
Age
Deducti
ble
Premi
um
Inco
me
Deducti
ble
Premi
um
High Deductible
Health Plans Plan
Prevalence
National
Considering Offering
15%
Virginia Area
Considering Offering
22%
Deductible
HDHP Plans (In-Network)
The 2014 National
Out-of-Network
Median Differential
was $2,000
Coinsurance
HDHP Plans (In-Network)
The 2014 National
Out-of-Network
Median
Differential was
20%
Out-of-Pocket Maximum
HDHP Plans (In-Network)
The 2014 National
Out-of-Network
Median
Differential was
$4,050
Medical Plan Summary
HDHP Plans
Deductible
Coinsurance
OOP Max
$2,500/$4,000
90%/60%
$4,000/$8,000
Virginia Area
(2015)
$3,000/$3,000
90%/70%
$4,000/$7,500
Employer
Contribution
(HSA/HRA)
Employee
Only/Family
$600/$1,200
Employee
Only/Family
$800/$1,150
National (2014)
Green highlighting represents if the National or Virginia Area plan is richer based on
Safe Harbor Plan
(2015)
$3,500/$7,000
80%/50%
$6,000/$12,000
Do you have a “skinny”
plan?
• If you had a “skinny” plan last year
to accommodate for minimum
value, that plan may no longer be
appropriate.
• There was an error in the
calculation that is now fixed.
• Potential for plans to be
grandfathered.
• This plan may have been wrongly
recommended to you.
Relative Value of Plan
Designs
$120
Plan Design Value
$100
$100.00
$96.75
$92.44
$91.44
$73.38
$80
$60
$40
$20
$0
2014 National
PPO
2015 Virginia
Area
2014 National
2015 Virginia
Area
HDHP
2015 Safe Harbor
Plan
2014 Regional Summary
Highest
concentration of
HMO plans
based on plans
offered: 42%
Richest Plan
Designs:
$500/$1,000
90%/70%
Highest
concentration
of HDHPs
based on
plans offered:
34%
Least Rich Plan
Designs:
$1,000/$2,000
80%/60%
Industries
Represented
Based on the 2015 Virginia Area survey responses
Industry PPO
Medians
Deductible
Coinsurance
OOP Max
OV Copay
Specialist Copay
Rx Copays (retail)
Health Care and Social
Assistance
Manufacturing
Professional, Scientific,
and Technical Services
$1,000/$1,500
80%/60%
$4,000/$6,250
$25
$50
$10/$30/$50/$50
$1,000/$1,500
80%/60%
$4,000/$6,125
$25
$40
$10/$30/$50/$100
$1,000/$2,000
80%/60%
$3,500/$6,625
$25
$50
$10/$30/$50/$50
Based on the 2015 Virginia Area survey responses
Dental Plan
Summary
DPPO Plans
Deductible
Coinsurance:
Prev entativ e
Basic
Major
Orthodontia
Annual Max
Ortho Max
National (2014)
Virginia Area
(2015)
$50/$50
$50/$50
100%
80%
50%
50%
$1,500/$1,250
$1,000/$1,000
100%
80%
50%
50%
$1,000/$1,000
$1,000/$1,000
*Audience Poll*
What would most people
rather do than enroll in
benefits?
1. See the dentist
100%
80%
2. See a movie
60%
about the life of
40%
20%
Lindsay Lohan
0% 0% 0%
0%
3. Star on The
Apprentice with
Donald Trump
4. Sell items doorto-door
http://ebn.benefitnews.com/gallery/ebn/5-things-employees-would-rather-do-than-enroll-inbenefits-2744483-1.html?utm_campaign=ebn%20daily5. Have dinner with
oct%2023%202014&utm_medium=email&utm_source=newsletter&ET=ebnbenefitnews%3Ae3233916
%3A4195463a%3A&st=email
0%
0%
On a scale of 1-10 (10 being
the best), how would your
employees rate your health
plans?
1. 1
2. 2
3. 3
4. 4
5. 5
6. 6
7. 7
8. 8
9. 9
10. 10
100%
80%
60%
40%
20%
0%
0%0%0%0%0%0%0%0%0%0%
1
3
5
7
9
What is the most important
objective for your benefits
package in 2015-2016?
1. Increase
productivity
2. Control costs
3. Retain
employees
4. Increase job
satisfaction
5. Attract
employees
100%
80%
60%
40%
20%
0%
0% 0% 0% 0% 0% 0%
What is your top strategy to
combat the increases in
health care in 2015?
3.Change to self-funded
arrangement
4. Implement HRA/HSA
CDHP
5. Additional emphasis on
wellness
6. Participate in private
exchange
*Seminar
7. Move to a narrow network
Presentation*
plan
0% 0% 0% 0% 0% 0% 0% 0% 0%
Move to…
Join a…
Do nothing
2. More cost sharing with
employees
100%
80%
60%
40%
20%
0%
Plan…
More cost…
Change…
1. Plan design changes
Innovative
Alternatives:
Captives
What We Are Hearing in the
Market
• Smaller fully-insured groups are most interested (75-200
EEs)
• They desire to go self-funded, but the risk is too much for
smaller employers
• They desire to pool SOME of their large medical claims
with other like-minded companies
• Almost all chose to use a captive manager instead of
building it themselves
• They rely on other experts to manage the risk, acquire TPA,
purchase the stop-loss, set premium and reserve levels, and
onboard clients
What We Are Hearing in the
Market
AC
A
Most
importantly…
Desire more
How Do Captives
Work?
Reinsurer
Reinsurer
$250,000
Captive
Carrier
Employer
$50,000
Employer
$2,500
Employee
Employee
FullyInsured
CAPTIVE
Captive
FULLY-INSURED
Employee
SelfInsured
SELF-INSURED
Captives – Pros and
Cons
Pros
• Allows for smaller groups to be self insured with potential for
long-term cost savings
• Avoid ACA Insurer Fee
• Avoid ACA plan design requirement
• Avoid premium tax
• Reduce insurer profit margin
• Hold your own reserves – earn interest
• Access to data to understand network differentials, utilization
patterns and wellness.
Cons
• Upfront capital requirements can be a burden
• Extra layer of fees for captive manager and other services.
• Goal is to offset additional fees with savings from premium tax,
profit margin and ACA insurer fee
• Usually requires a long-term commitment from employer to
realize savings. Not a year-to-year decision
Captive Trends
• Feasibility Study for
Potential Groups
• Milliman has completed
numerous Captive Feasibility
Reports
• 10 most recent groups showed
a cost savings of 4.5% on
average
• The 4 groups that showed
additional cost were higher
than projected fully-insured
premium, by double digits
Accountable
Care
Organizations
(ACOs)
Pharm
acy
Special
ists
Post
Acute
Care
Home
Care
Ancillar
y
Provide
rs
Long
Term
Care
Peop
le
Public
Health
Agenci
es
http://bhmpc.com/2013/02/5-types-of-accountable-care-
Hospita
lity
Hospic
e
What is an ACO?
• Organization of providers that operates a team-based
model to coordinate care
• Employs advanced health information technology
that continuously collects, connects and shares
patient information with doctors, and provides
clinical decision support backed by current medical
evidence
• The ACO is accountable to the patients and the third
party payer for the quality, appropriateness and the
efficiencies of healthcare provided.
• There is an effort to tie provider reimbursements to
quality metrics
• Overall goal is better quality with a reduction in total
costs
• Financially, providers can share in profits but are also at
risk for losses depending on the ACO’s performance vs.
ACO - Pros
Pros
• Member:
• One-stop shop for all your healthcare
needs
• Access to coordinated care
• Increase accuracy of diagnosis
• Employer:
• Potential for reduced costs
• Potential for more coordinated care for
their employees
• Potential for improved quality of care
• Provider:
• Promote health information exchange
• Can share in profits
ACO - Cons
Cons
• Member:
• Potential for limited access to providers and
facilities
• Potential for HIPAA violations
• Employer:
• Increased education required
• May require more HR involvement
• Provider:
• Potentially expensive to implement
• Additional time for education and change
management
• Have to share in financial losses
ACO Trends
• According to Kaiser Family Foundation, about 14 percent of the
•
•
•
•
•
•
•
U.S. population is now covered by an ACO arrangement.
The number of ACOs in U.S. exceeds 600
Most ACOs are through federal healthcare programs
51% of ACOs are physician led
In January of 2014, The Centers for Medicare and Medicaid
Services analysis said that more than 50 ACOs had managed to
save about $380 million.
More than two-thirds of Americans live in localities served by
ACOs
More than 40% live in areas served by two or more ACOs
ACOs are in infancy stage so still too early to measure long-term
outcomes
http://industryview.cdwcommunit.com/index.php/2014/06/23/aco-infographic/
http://www.benefitspro.com/2014/07/15/are-acos-transforming-american-healthhttp://www.beckershospitalreview.com/accountable-care-organizations/acos-by-the-numbers-8-recent-statistics-and-findings.html
care?t=health-care-reform&page=2
Narrow
Networks
Network Analysis/Narrow
Network
48%
Narrow
Networks
+ + +
70%
42%
3170%
30%
Narrow
UltraBroad
Network Network Narrow
s
Networks
s
of lowestprice
products
are built
around
narrowed
networks
Compared to
of respondents
enrolled in an
ACA plan, and
were aware of
of those who indicated they had
the network
enrolled in an ACA plan were unaware
type,
of the network type they selected
purchased a
http://healthcare.mckinsey.com/sites/default/files/McK%20Reform%20Center%20%20Hospit
product with a
al%20networks%20national%20update%20(June%202014)_0.pdf
26%
$
70%
plans with
narrowed
networks,
products with
broad networks
have a median
increase in
premiums of
13% to 17%
Narrow Networks – Pros and
Cons
Pros
• Excludes most expensive doctors and hospitals in
the community
• Fosters competition between providers
• Reduces costs
Cons
• Can severely limit choice
• Misleading -- individuals can purchase plans on the
public exchange and not be aware that it is a
narrow network
Next Steps
Want more details?
• Refer to the ICR
• More data points are available upon request
• Contact your Scott Insurance Representative.
Standard Caveats
In performing our analysis, we relied on data provided to us by
Scott Insurance. We have neither verified nor audited the
accuracy of the data contained in the files. If the underlying
data is inaccurate or incomplete, the results of our analysis
may likewise be inaccurate or incomplete. Where
practicable, the data was reviewed for consistency and
reasonableness. Due to the nature of any medical block of
business, results are highly variable. As such, actual results
may vary from the results provided in this report.
This report and the models herein have been prepared for the
internal use of Scott Insurance in their relationship with the
survey participants and are only to be relied upon by those
organizations. No portion may be provided to any other party
without Milliman’s prior written consent. All copyrights and
trademarks property of Milliman and all rights reserved.
ACA AND WELFARE BENEFIT
UPDATE
Brydon M. DeWitt
July 22, 2015
WELLNESS PROGRAMS
96
WELLNESS PROGRAMS
> Kaiser Survey:
> 80% of workers support wellness programs that promote
healthy lifestyles
> 62% opposed to requiring employees to pay more for health
insurance if they do not participate
97
WELLNESS PROGRAMS
> RAND Health / DOL Study (2013)
> Approximately half of U.S. employers offer wellness promotion
incentives
> 80% of those with wellness programs screen for health risks
> 77% offer lifestyle management programs
> 80% of are focused on nutrition and weight loss
> 77% offer smoking cessation programs
> Employers with 50 or more employees and offer wellness
programs
> 69% use financial incentives
> 10% use incentives tied to health-related standards
98
HIPAA Nondiscrimination
>HIPAA prohibits “health factor” discrimination
>Health Factors
>
>
>
>
>
>
>
99
Health status
Medical condition
Claims experience
Medical history
Genetic information
Evidence of Insurability
Disability
HIPAA Nondiscrimination
>Two Types of Programs:
> Participatory Wellness Programs
> Health Contingent Wellness Programs
100
HIPAA Nondiscrimination
>Participatory Wellness Programs
> Rewards are not based on an individual meeting a health
standard; or
> The program does not provide a reward
>Examples
> Reimbursement of Weight Watchers fees
> Gym membership
> Reward for participating in a diagnostic testing program
(regardless of findings)
> Reward for attending a monthly diet and fitness seminar
101
HIPAA Nondiscrimination
>Participatory Wellness Programs
> Must be offered to all “similarly situated individuals”
> Bona-fide employment classifications
> Classifications may not be based on health factors
> Examples
> Part-time or full-time employees
> Seniority
> Geographic locations
> Do not violate discrimination prohibition because they are
not based on health factors
102
HIPAA Nondiscrimination
>Health-Contingent Wellness Programs
> Require individual to meet a health standard; or
> Undertake more than a similarly situated individual based
on a health factor to obtain the same reward
>Two Types of Health-Contingent Wellness Programs
> Activity-Only
> Outcome-Based
103
HIPAA Nondiscrimination
> Activity-Only, Health-contingent Wellness Programs
> Requires completion of a health-factor related activity
> Is not based on health outcome
>Examples
> Diet
> Walking
> Exercise Programs
>Some may not be able to participate due to health
factors
104
HIPAA Nondiscrimination
> Outcome-Based, Health-contingent Wellness Programs
> Requires individuals to obtain or maintain health goal
> Example
> Program tests individuals for risk factors such as high
cholesterol, high blood pressure, high BMI, or high glucose
level
> Individuals within normal range receive reward
> Individuals outside of healthy range earn reward by taking
additional steps such as:
> Following an exercise program
> Meeting with a health coach
> Taking fitness classes
105
HIPAA Nondiscrimination
> Compliance Requirements for Health-Contingent
Wellness Programs
> Annual opportunity to qualify for the reward
> Reward limited to 30% of cost of employee-only
coverage (additional 20% allowed for tobacco
cessation)
> Reasonably designed to promote health or prevent
disease
> Reasonable alternative standards for compliance
> Disclose reasonable alternative standards in all
materials describing the program
106
HIPAA Nondiscrimination
>Reasonable Alternative Standards
> If standard is completing an education course
> Employer must make the program available or help the
individual find the program
> Employer may not require the employee to pay for the course
> Time commitment must be reasonable
> If the standard is a diet program
> Employer must pay the membership fee
> Alternative standard must be medically appropriate
for the individual
107
Americans with Disabilities Act
>Three Primary Requirements
> Prohibits discrimination based on a disability
> Requires employers to reasonably accommodate
disabled individuals
> Limits an employer’s ability to ask disability-related
questions
108
Americans with Disabilities Act
>Wellness Programs Compliance
> Participation must be voluntary
> Health information must be kept confidential
> Health information may not be used to limit health
coverage availability or adversely impact employment
decisions
109
Americans with Disabilities Act
>Voluntary Participation
> EEOC held that programs were not voluntary where
> Health plan participation conditioned on HRA participation
> Level of health plan coverage conditioned on HRA
participation
> Monetary incentive provided for wellness program
participation (depending on size of reward)
> Seff v. Broward County (11th Circuit, 2012)
> Broward County’s plan required employees to take a
biometric screening or be charged an additional $20 for
monthly health insurance premiums
> 11th Circuit: The wellness program fell under the ADA’s
exception for “bona fide benefit plans”
110
Americans with Disabilities Act
>EEOC Proposed Regulations
> Regulations issued on April 16, 2015
> Programs that ask for disability or medical
information must be voluntary
>
>
>
>
Does not require participation
Does not condition coverage on participation
No adverse employment action for failure to participate
Notice describing medical information to be obtained, use of
the information and confidentiality restrictions
> Financial reward limited to 30% of cost of employee-only
coverage
111
Americans with Disabilities Act
>EEOC Proposed Regulations
> All programs must offer reasonable accommodations
> Examples:
> Sign language interpreter at nutrition class
> Wellness materials available in large print for those with
vision impairment
> Alternative to drawing blood for individual with a
disability that makes drawing blood dangerous
> Smoking Cessation Programs
> Not subject to EEOC 30% limit if employer merely asks
employees if they use tobacco
> Subject to EEOC 30% limit if program requires a
biometric screening or medical exam to test for
nicotine
112
EMPLOYER MANDATE
113
Employer Mandate
>King v. Burwell
– Challenge to IRS interpretation of the ACA
permitting premium tax credits in states that did
not establish exchanges
– In 5 – 4 vote, Supreme Court found ACA
language ambiguous and determined that
Congress intended to make premium tax credits
available in states with federal exchanges
– Availability of premium tax credit means the
employer shared responsibility (employer
mandate) applies in all 50 states
114
Employer Mandate
>Review:
– Applicable Large Employers Must Offer
Coverage to “Full-Time Employees” or
Face Penalties in 2015
–Monthly Penalties:
A. No Coverage Offered
» $167 X Full-Time Employees in Excess of . . .
» 80 full-time employees for 2015 plan year
» 30 full-time employees in later years
B. Inadequate Coverage Offered
» $250 x Full-Time Employees receiving coverage
assistance through an exchange
115
Employer Mandate
>2016 – Must offer coverage to 95% of
full-time employees
>Two Options for Determining Full-Time
Employees
– Month-to-month
– Look-back measurement method
safe harbor
116
EMPLOYER MANDATE
>Are Plan Documents Up to Date?
– Eligibility rules must comply with ACA
– Plan document, SPD, handbooks may
be inconsistent with new ACA eligibility
requirements
– Out of date documents may give
employee unintended ERISA right to
coverage
117
New reporting requirements
Form 1095-C: Employer Provided Health
Insurance Offer and Coverage
Form 1094-C: Transmittal of Employer
Provided Health Insurance Offer and
Coverage Information Return
118
CAFETERIA AND EMPLOYER
PAYMENT PLANS
119
Cafeteria Plans
New Mid-Year Election Changes
– Revocation due to reduction in hours
of service
– Revocation due to enrollment in a
Qualified Health Plan
– Effective September 18, 2014
– Amend by last day of plan year in which
elections are allowed. May amend for
2014 plan year by end of 2015 plan year
120
HRAs, FSAs, and Premium
Reimbursements
>Health Reimbursement Arrangements must
be integrated with a group health plan
>Flexible Spending Arrangements must be
excepted benefits
>Reimbursing premiums (pre-tax or aftertax) may create a “plan” subject to the ACA
121
CADILLAC TAX
122
CADILLAC TAX
>Internal Revenue Code Section 4980I
– Imposes 40% excise tax on “excess
benefits”
– Applies to taxable years beginning after
December 31, 2017
123
CADILLAC TAX
>Excess Benefit Subject to 40% Excise Tax
– Excess of the aggregate cost of the
applicable coverage of the employee for
the month over the applicable dollar limit
for the employee for the month.
124
CADILLAC TAX
>IRS Notice 2015-16
– Intended to “initiate and inform” the
process of developing cadillac tax
regulations
– Provides insight on how the IRS will
implement the cadillac tax
– Is not formal guidance, but helps
employers prepare for 2018
125
CADILLAC TAX
>“Applicable Coverage” Subject to the Tax
– Insured and self-insured group health
plans sponsored by all employers
(private, governmental, non-profit, and
churches)
126
CADILLAC TAX
>“Applicable Coverage” Subject to the Tax
– Also Included
• Health Flexible Spending Arrangements
• HSAs and Archer MSAs
• On-site medical clinics
• Retiree coverage
• Multiemployer plan coverage
• Specified disease and hospital or other fixed
indemnity health coverage if provided on a pre-tax
basis
• HRAs
• Executive physical programs
127
CADILLAC TAX
>“Applicable Coverage” Subject to the Tax
– Excluded
• Military-based coverage
• Long-term care
• Accident or disability income
• Workers’ compensation
• Auto medical payment
• HAS/Archer MSA after-tax employee contributions
deductible by the employee
• EAPs that are excepted benefits
• Limited scope dental and vision coverage
128
CADILLAC TAX
>Cost Determination
– Process similar to COBRA cost of
coverage determination
>Annual Dollar Limit
– $10,200 for self coverage; $27,500 for
other coverage
– Limits subject to adjustment before 2018
129
CADILLAC TAX
>Who Pays?
– Insurer for fully-insured plans
– Employer for salary reduction
contributions to HAS or Archer MSA
– “Person who administers plan benefits”
for other self-insured and other coverage
– Employer must calculate the excess
benefit and report to responsible parties.
130
Brydon M. DeWitt
Williams Mullen
804.420.6917
bdewitt@williamsmullen.com
Employee Benefit Compliance
Requirements
Tammy E. Colvin
Regional Sales Director - TASC
Total Administrative Services Corporation
www.tasconline.com
TASC Confidentiality
•
This presentation and all materials presented are the property of TASC. No part of
this presentation or any of the materials provided may be reproduced or transmitted
in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise, without prior written permission from TASC. To the extent allowed by law,
TASC intends to recoup any value lost by an unauthorized use or disclosure including
the TASC profits that may have been lost or the profits made by the disclosing party.
•
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the
IRS, we inform you that if any advice concerning one or more U.S. Federal tax issues is
contained in this seminar material or is provided by a speaker at the seminar, such
advice is not intended or written to be used, and cannot be used, for the purpose of
(i) avoiding penalties under the Internal Revenue Code; or (ii) promoting, marketing,
or recommending to another party any transaction or matter addressed herein, and
you should seek advice based on your particular circumstances from an independent
tax advisor.
Total Administrative Services Corporation
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241,000 Reasons to be in
Compliance
• Why should you care about being in compliance with
the DOL regulations?
• There are 39 reasons why an employer should comply
with the DOL.
• All cases are for non-compliance adding up to
$21,455,285 in fines from 1999 – 2014!!!
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Penalties and Fines
Enforced by the DOL
• $5,215 - Employer inattentive in providing Life Insurance plan document
and refused to furnish copy of Form 5500 to participant until ordered to
by court 2
• $5,880 - Failure to deliver SPD within 30 days of request.3
• $8,910 - Delay in providing copy of policy upon request. $55/day, 162
days 4
• $9,800 - Failure to provide LTD plan document; employer only provided
SPD 6
Total Administrative Services Corporation
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Penalties and Fines
Enforced by the DOL
• $10,220 - Excessive delay in providing Severance Pay plan document7
• $10,560 - Late delivery of SPD to employee after 3 written requests,
max. penalty $110/day8
• $11,550 - Failure to provide SPD after written notice 9
• $13,750 - Failure to provide SPD upon written request. Maximum
penalty for employer's unresponsiveness and lack of excuse. $110/day
for 125 days.10
• $17,475 - Employer did not have SPD; only provided Certificate of
Insurance to participant; repeatedly insisted they were the same thing11
Total Administrative Services Corporation
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Penalties and Fines
Enforced by the DOL
• $17,550 - Failure to provide requested plan document and SPD to
participant 12
• $18,400 - Failure to deliver SPD on request 13
• $25,000 - Continuous failure to provide COBRA election notice to a
terminated employee and children14
• $26,100 - Failure to respond to document request over very long time15
• $32,850 - Delay, indifference, disregard in failure to provide copy of
requested plan document to participant 16
Total Administrative Services Corporation
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Penalties and Fines
Enforced by the DOL
• $37,650 - Requested documents provided at widely spaced intervals18
• $50,000 - Failure to file Form 550019
• $50,000 - HIPAA breach of unsecured electronic protected health
information20
• $50,000 - Breach of GINA by requesting family medical history (i.e.,
genetic info.)21
• $55,760 - Incompetence and neglect delivering policies to participants22
• $62,250 - Failure to deliver SPD to participant in manner required by
DOL23
Total Administrative Services Corporation
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Penalties and Fines
Enforced by the DOL
• $64,900 - Provided SPD, but failed to provide requested full plan
document24
• $83,050 - Failure to provide COBRA Notice. Penalties and legal costs25
• $86,500 - Failure to file complete and accurate Form 550026
• $159,000 - Late entrant; employer gave employee wrong waiting period
& ordered to pay claim29
• $215,000 - General and widespread noncompliance with HIPAA privacy
and security rules30
• $241,000 - Failure to provide SPD to participant31
Total Administrative Services Corporation
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Penalties and Fines
Enforced by the DOL
• $1,000,000 - Class action. COBRA violations. $375,000 award &
$625,000 attorney's fees.34
• $1,700,000 - Failure to implement appropriate safeguards as required
under HIPAA34
• $2,166,725 - Bad faith failure to provide COBRA notices to 711
employees over 7 years. $1,852,500 penalty, $302,780 attorney fees,
and $11,445 costs 36
• Prison - Ten months & $46,844 fine for failure to file 5500 and diverting
employee contributions 39
Total Administrative Services Corporation
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DOL Audit
•
•
•
•
•
•
ERISA Plan documents.
Summary Plan Description (SPD) from including any changes in Plan
benefits and entitlement to benefits. Please indicate the date of the SPD
and the most recent date and method of distribution.
Summary of Benefits and Coverage (SBC), Notices of Material
Modifications, and Uniform Glossary.
Copies of the annual open enrollment information.
Copies of the employee handbook describing or explaining the Health
Plan eligibility and benefits.
All contracts with insurance companies for the provision of health
benefits.
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DOL Audit
•
•
•
•
•
If self‐insured, all contracts, fee schedules, and written
guidelines/procedures for:
a. Claims processing (including claims installation documents);
b. Administrative services including utilization review and claim appeals;
c. Reinsurance
Documents which describe the responsibilities of both the employer
and employees with respect to the payment of the costs associated with
the purchase and maintenance of health and welfare benefits.
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DOL Audit
• In accordance with the Health Insurance Portability and Accountability
Act of 1996, please provide the following records:
• a. Copy of the Plan Rules for Eligibility to enroll under the terms of the
Plan (including continued eligibility).
• b. Sample copy of a Certificate of Coverage provided to an employee
who lost health care coverage after December 1, 2012, which certifies
creditable coverage earned under this Plan;
• c. Copy of the record or log of all Certificates of Creditable Coverage for
individuals who lost coverage under the Plan, or requested certificates
from January 1, 2013;
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DOL Audit
• d. Copy of the written procedure for individuals to request and receive
Certificates of Credible Coverage;
• e. Copy of the necessary criteria for an individual without a Certificate of
Creditable Coverage to demonstrate creditable coverage by alternative
means;
• f. Sample General Notice of pre‐existing condition informing individuals
of the exclusion period, the terms of the exclusion period, and the right
of individuals to demonstrate creditable
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DOL Audit
• g. coverage (and any applicable waiting or affiliation periods) to reduce the
pre‐existing condition exclusion period, or proof that the Plan does not
impose a pre‐existing condition exclusion;
• Copies of individual Notices of pre‐existing condition exclusion issued to
certain individuals since January 1, 2012 per the regulations (including any
lists or logs an administrator may keep of issued Notices), or proof that the
Plan does not impose a pre‐existing condition exclusion;
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DOL Audit
• h. Records of claims denied due to the imposition of the pre‐existing
condition exclusion (as well as the Plan's determination and
reconsideration of creditable coverage, if applicable), or proof that the
Plan does not impose a preexisting condition exclusion;
• i. Copy of the written procedures that provide special enrollment rights
to individuals who lose other coverage and to individuals who acquire a
new dependent, if they request enrollment within 30 days of the loss of
coverage, marriage, birth, adoption, or placement for adoption, including
any lists or logs an administrator may keep of issued Notices; and
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DOL Audit
• j. Copy of the written appeal procedures established by the Plan.
• The Plan’s Newborns' Act Notice including lists or logs of Notices
an administrator may keep of issued Notices.
• If the Plan has claimed grandfathered health Plan status within
the meaning of section 1251 of the Affordable Ca re Act, please
provide the following records:
• a. Copy of the grandfathered health Plan status disclosure
statement that was required to be included in Plan materials
provided to participants and beneficiaries describing the
benefits provided under the Plan.
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DOL Audit
• Minutes of Board of Directors, Plan Committee, and/or any other
committee meetings where Plan health benefits were discussed. Note:
Do not make copies, but please make records available for our review.
• A copy of any Fidelity Bond and Fiduciary Liability Policy, including any
riders and amendments.
• Documents identifying Plan assets, liabilities, revenues, and
expenses.
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DOL Audit
• Please provide the names, phone numbers, and addresses (on
company letterhead) of parties‐in interest to the Plan including:
• a. Actuary
• b. Attorney(s)
• c. Accountant and/or Auditor(s)
• d. Investment Advisor/Manager(s)
• e. Insurance Agent(s)
• f. Contract Administrator(s) (and copy of the engagement letter)
• g. Trustee(s)
• h. Plan committee members
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Compliance Checklist
• Section 125 Plans
• ERISA (All Health and Welfare Benefits)
1.
2.
3.
4.
5.
6.
7.
Plan Documents
SPDs
SMM
5500
MLR
Healthcare Reform Notices
Exchange Notices
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Compliance Checklist
•
•
•
•
•
•
Medicare Part D Notices
PCORI Fees
HIPAA
Discrimination Testing
FMLA
ACA Reporting - Play or Pay
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Questions
Total Administrative Services Corporation
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