Download Value Based Benefit Strategies

“Value Based Benefit Strategies”
Getting the most bang for the
Employer’s buck!
Agenda
•
•
•
•
•
•
•
•
•
•
Employer trends
Self funding – dodging some ACA mandates
Section 125
Transparency
“Narrow Networks”
Telemedicine
Tax subsidies for small groups
Defined Benefits vs. Defined Contribution
The Winners: employers, employees & brokers
Section 105 HRAs and Integrated HRAs
On your mark…get set…go!
The ACA requires new thinking!
B2B Shifting to B2C
• What are you doing to differentiate your
business model in the “sea of sameness”?
– To help consumers understand new health plans
– To guide consumers through new options
– To build brand loyalty for your agency
– To communicate your message
Employer Trends
• Shift more cost to employees?
 Higher health insurance premiums
 More out of pocket expenses
• Drop the plan & take the penalty?
• More Self funding
• Wellness programs
Employer Trends
• Offer more voluntary benefits like:
– Critical illness
– Dental
– STD / LTD
– Life insurance
– LTCI
• Move away from “Defined Benefits” to
“Defined Contribution”?
Self Funding
“What you’ve got is basically a
loophole for the small employer to
get out of the ACA requirements”
Robert Laszewski, VA-based consultant & former ins. executive
Self Funding
• Allows a plan to get out of several ACA
mandates. For example:
– No 3:1 age slope
– Allows for flexible deductibles and coinsurance
– May be underwritten
– Not community rated
– Eliminate some state mandates
– Save on health insurance premium tax
Advantages to Self Funding
• Employers’ desire to:
– Maintain a level of flexibility in plan design
– Gain more control in the financing of their
employees’ health benefits
– Potentially save money over a fully insured
plan
Section 125
• Premium Only Plan - POP
• Flexible Spending Account - FSA
– For unreimbursed Section 213d expenses up
to $2,500 as of 1-1-13
• down from $5,000 due to the ACA
– For dependent care
• Children
• Aging adults
Consumer Behavior Must Change
• We are a nation of “co-pay junkies”
• We need to start shopping for health care
like we do anything else
• But…what does health care cost?
• How & where do people research & shop
for health care costs?
Prices?
• Closely guarded by hospitals
• Recent government study of 3,300 hospitals
show a wild disparity in billing rates
• Example, hip replacement:
– In Houston, $126,157
– In Appleton, WI, $26,787
– Medicare only pays $14,000
Transparency must evolve
Hospital>Surgical>Heart
Various Heart Surgery Results
Clicked “Heart Valve Surgery”
Health Care Providers
What is in the ACA for them?
How do the providers win?
• Collaboration of services and information
– Share medical records
– Gain efficiency
– Save money
• Reduce hospital readmissions
• Join an Accountable Care Organization?
• Join a “narrow network”
• For exchange programs, Aetna will use
provider networks that are only 1/4 to
1/2 the size of its normal health plan
networks
– Mark Bertolini, President of Aetna Inc. (NYSE:AET),
said in the first quarter 2013 earnings call
ACOs
Telemedicine
• Up to 70% of medical issues could be
solved over the phone (Wellness Council of America 2008)
• 24/7 – call anytime and get a U.S. doc & get
a prescription written if needed
Reducing Cost via Telemedicine
• Could reduce the claim cost to the carrier
– Emergency room - $750
– Urgent care $150
– Doctor office visit $100
– Telemedicine: new benefit, no charge to carrier
Physical by Smart-phone?
• To measure blood pressure:
– an arm cuff can plug into a smart-phone for a quick
reading.
• To measure a heartbeat:
– user would place his or her fingers over the camera and
the squiggly lines of an EKG appear on the phone's screen.
• Other devices would enable a smart-phone user to
look inside a person's eardrum, eyes, listen to a
heartbeat, chart lung function or get a sonogram.
Small Business Tax Credit
• 2014 - up to 50% for groups up to 25 lives
– Up to 35% for non-profits
• To qualify:
1. Must have an average salary of <$50,000
2. Employer must pay at least 50% of the premium
3. Employees must work at least 30 hours per
week
Section 105 MERP
• There are many different types of arrangements
that fall within the umbrella of Section 105
Medical Reimbursement Plans
• Some common terms you might hear are:
–
–
–
–
–
–
Health Reimbursement Arrangement
Health Reimbursement Account
Healthcare Reimbursement Plan
Medical Expense Reimbursement Plan
Medical Reimbursement Plan
Section 105 Plan
MERP Tax Benefits
• Section 105(e) states that amounts received under an
accident or health plan for employees are treated as amounts
received through accident or health insurance for purposes of
§ 105
• Section 1.105-5(a) of the Income Tax Regulations provides
that an accident or health plan is an arrangement for the
payment of amounts to employees in the event of personal
injuries or sickness
• Reimbursements by an employer of amounts paid by an
employee for medicines and drugs purchased by the
employee without a physician's prescription are excludable
from gross income under § 105(b)
https://www.irs.gov/pub/irs-drop/rr-03-102.pdf
https://www.law.cornell.edu/uscode/text/26/105
Defined Benefits vs.
Defined Contributions
Fact #1:
Employers want more value from
their employee benefit dollars
Fact #2:
Employees want benefit options to fit
their personal needs
Defined Benefits – today’s world
• 18 life group
• Dual option plan
– $545 monthly employee premium
1. PPO $2,500, 70/50, $4k/$8k coinsurance, office
copay and drug copay…or
2. HDHP $5,000/100%, plus a $1,650 annual
contribution to an HSA from the employer
• Paid employee premium = $117,720 per year
Could this be the future?
• Drop the group health plan
• Penalized $2,000 per ee?
– Not in a group of <50 FTEs
• We still finance the benefits, but:
– We control our budget and
– Each employee may customize benefits to
fit their personal needs
“Defined Contribution”
• Employer sets up:
– HRP (Sect 105 Health Reimbursement Plan)
– Section 125 Plan
• Employee submits defined expenses for
reimbursement via the HRP, such as:
– Health insurance premiums
– Out of pocket Section 213(d) expenses
– Optional Lasix or “Lap Band” procedures, etc.
Remember this…
• January 1, 2014
–All QHPs are guaranteed issue
• May not discriminate based on
health status
Example of how this could work
• Employer budgets $500 PEPM
• Employee purchases a QHP
– With at least 60% actuarial equivalency
– Including all of the EHBs
• Employee submits the premium expense for
reimbursement via the HRP
• Employee purchases additional supplemental
benefits via the Sect 125
$500 Employer Contribution
• Example:
– Employee purchases a Bronze plan
• $300 per month of unreimbursed premium
• 2016 $6,850 max out of pocket
• Employee has $200 left over
$200 left to customize their plan
•
•
•
•
•
•
•
Supplemental health plans
Long Term Care Insurance
Dental and/or Vision
Life insurance
Accident policy
LTD or STD
…whatever fits their needs
What are the most common ways to
hit your max out of pocket?
• Accidents
– Slips, falls & fractures
• Cancer
• Heart Disease
– Heart attack
– COPD
• Stroke or TIA
“It can’t happen to me…right?”
• Cancer
– 1 in 2 men will be diagnosed at some point
– 1 in 3 women
• Heart attack
– 1,300,000 each year in the USA
• Accidental injury
– 38,000,000 receive medical attn each year
Cancer Stats
• There were 1.4 million cancer cases in the U.S.
– Men: 745,180, Women: 692,000
• Estimated cancer deaths
– Men: 294,120, Women: 271,530
• Most common cancers - men:
– Prostate (25%), lung & bronchus (15%), colon (10%),
urinary (7%)
• Most common cancers - women:
– Breast (26%), lung & bronchus (14%), colon (10%), uterine
(6%)
Heart Attack Stats
• An estimated 80 million American adults (one in three) have one or more
types of cardiovascular disease.
• 785,000 Americans will have a new coronary attack (this year) and
470,000 will have a recurrent attack.
• Every 34 seconds, an American will suffer a heart attack. Estimated direct
cost of CGD is $165.4 billion.
• The average age of a person having a first heart attack is 64.5 for men and
70.3 for women.
• Annual number of diagnosed heart attacks:
Ages 35-44 Men: 30,000 Women: 10,000
Ages 45 - 64: Men: 265,000 Women: 95,000
Ages 65-74 Men: 180,000 Women: 95,000
• From 1995-2005 the death rate from Coronary Heart Disease declined
34.3 percent.
What could a 40 yr old get for $100 per mo of
supplemental coverage in today’s market?
 $30,000 lump sum for each:
 when diagnosed with cancer
– plus upgraded radiation and chemo
 17 different critical illnesses
 Plus, organ transplant, coma, paralysis, and/or blindness
 Heart attack or stroke
 Plus - recurrence benefits for the above benefits!
 Accident – covers 14 different types of accidents
 Hospital indemnity
Who wins in this new strategy?
1. The Employer
2. The Employee
3. The Broker
The Employer Wins!
Premiums
Health Insurance
Critical
Illness
Long Term
Care
Insurance
2015
$117,720
Not
offered
Not
offered
2016
Defined
Contribution
$64,800
$300 x 12
months x 18
employees =
$64,800
Dental
Not
offered
Accident
Not
offered
$43,200 tax deductible voluntary employee benefits
($200 x 12 months x 18 employees = $43,200)
$117,720 – ($64,800 + $43,200) =
$9,720 annual savings!
More Employer Savings
• FICA tax savings of 7.65% on all qualified
premium placed through the Section 125
• Example:
– The Employer has $43,200 in payroll deduction via
the Section 125
– $43,200 x 7.65% = $3,305 in FICA savings to the
Employer
The Employee Wins!
Health Insurance
2015
2016
$2,500 ded, 70/30
with a $4,000 in
network
coinsurance
($8,000 OON)
Max OOP of
$6,850 for an
individual
CI, Cancer,
Heart &
Stroke,
Accident
Long Term
Care
Insurance
Dental
Accident
Plan
None
None
None
None
$30,000 for
multiple
catastrophic
risks
$200,000 of
indemnity,
5%
compound
inflation
Preventive,
Basic and
Major
coverage,
$1,000 CYM
Up to 14
covered
accidents
The Broker Wins!
Supplemental health product illustrated is “Active Care” from Washington National
Commission
2015
2016
Health Insurance
4% of annual group health
premium = $4,787
6% of annual IMM
premium = $3,732
Critical Illness, Cancer,
Heart & Stroke, Accident
$0
50% of $21,600 = $10,800
Long Term Care Insurance
$0
50% of $10,800 = $5,400
Dental
$0
20% of $10,800= $2,160
Total Commission
$4,787
$22,092
~461% commission increase!
($4,787 x 461% = $22,068)
Health Reimbursement Arrangements
•
•
•
•
•
•
•
100% Employer financed accounts
Not required to be pre-funded
Tax advantages for Employer
Employees may not contribute to HRAs
IRS approved Section 105 plan
HRAs are not health insurance
Usually coupled with an HDHP
HRAs
• May reimburse medical expenses, like:
– Co-pays, deductibles, and coinsurance
– Dental and vision care
– Prescriptions
• May reimburse individual/family health
premiums
• May offer HRA benefits to 1099 contractors
– Must report all HRA reimbursement as income
Integrated HRAs
• HRA vs. Integrated HRA - differences
– Must be linked to a health plan
• Available only to those who take health plan coverage
– May not be integrated with an IMM
– May not reimburse individual major
medical premiums
What about employers under 50 lives?
• No penalties
• No “pay or play”
• Employees may also qualify for tax
subsidies via public HIEs
• HRAs may reimburse the non-subsidized
portion of the employee’s premium
What is the “Defined Contribution” blueprint?
• The Employer:
– cancels the group health plan
– determines their budget
– designs a stand alone HRA
– chooses HRA software or HRA
Administrator
– Implementation
How does the employer maintain compliance?
• Hire a qualified HRA administrator…or
• Use HRA software to keep in compliance
with these three key areas:
1. Tax savings & compliance
2. Federal compliance
3. ACA/Health Care Reform
Tax Savings and Compliance
• The IRS requires that a formal HRA be
established in order for HRA
reimbursements to be tax-free for the
employer & employees
• The HRA must have HRA plan documents
Federal Compliance
• HIPPA
– Employer never sees the medical information
or the type of claims
• ERISA
– Employers are not allowed to “endorse” a
specific IMM under ERISA
• “carrier-agnostic” defined contribution health
insurance program for small businesses
– HRA software keeps employer complaint
• Employers never know what policies are purchased
ACA & Health Care Reform
• Introduces new requirements for HRAs
– Summary of Benefits and Coverage – SBC
– New reporting forms (720/5500)
– New plan design requirements
HRA software makes sure employers have the
appropriate documents, data, and plan settings in
place to be ACA compliant!
HRA Software Features
• Defines classes of employees
– Each class may receive different benefits
• Categories of expenses
– May specify different benefits, such as:
•
•
•
•
Annual maximum
Coinsurance
Dental
Vision
Q&A
Thank you for attending!
Turn in your evaluation forms, please!