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Personal Care Accounts &
Healthcare Consumerism
under PPACA
Patient Protection
and Affordable Care Act
(PPACA)
•GET OVER IT!
•IT’S THE LAW
Now, What Do You Do?
What To Do?
• Do what is required by PPACA
• Do what was needed without PPACA
• Recognize that regulations may change initial
interpretations of PPACA
• Be prepared to change course if PPACA is
modified by courts or new legislation
• STAY PATIENT & FLEXIBLE
Rec: Focus on Healthcare Consumerism
Personal Care Accounts
• Flexible Spending Accounts (FSAs)
• Health Savings Accounts (HSAs)
• Health Reimbursement
Arrangements (HRAs)
Personal Care Accounts are the foundation
for Healthcare Consumerism
Healthcare Consumerism
Healthcare Consumerism is about transforming a
health benefit plan into one that puts economic
purchasing power—and decision-making—in the
hands of participants.
It’s about supplying the information and decision
support tools they need, along with financial
incentives, rewards, and other benefits that
encourage personal involvement in altering
health and healthcare purchasing behaviors.
Megatrends
Megatrends represent major movements so
powerful that the direction of change cannot
be stopped. Federal laws can speed up or slow
down megatrend forces.
But, like dammed rivers megatrends will
redirect themselves to achieve the inevitable
result. Healthcare consumerism is such a
force.
Consumerism Megatrend
• Americans:
– bank electronically at ATMs,
– purchase stocks over the internet,
– buy and sell goods through eBay,
– maintain their music with iTunes,
– keep personal videos on facebook,
– seek employment through LinkedIn, and
– control television programming with Tivo
Caution: Many Ees and Ers wanted
reform, but do not want PPACA. 56% still
want it repealed.
You Can’t Fight Megatrends
Healthcare Consumerism
Healthcare consumerism is independent of plan
design.
Healthcare consumerism is a compelling force
because it embraces lowering costs, improving
quality, enhancing choice, and expanding access
by empowering individuals and reinforcing
personal responsibility.
It is the force operating throughout our economy
and is just beginning to be structured into
healthcare and insurance.
American Academy of Actuaries
Consumerism Study
• The 2009 AAA multi-year study of healthcare
consumerism concluded that 1st year claims
could be lowered by 12-20%.
• Future cost trends decreased by 3-5%.
• More than 50% of employers now offer
consumer-driven options.
Growth of Healthcare
Consumerism
• Mercer: 23 million people were enrolled in
Healthcare Consumerism plans in 2009, up
from 18 million in 2008 – an increase of 27
percent.
• Small employers were the major driver for the
rise in enrollment from 9% in 2008 to 15% in
2009.
Mercer National Survey of
Employer-Sponsored Plans
PPACA Promotes
–Wellness
–Prevention
–Early Intervention
–Rewards & Incentives
But, PPACA has mixed messages on
Healthcare Consumerism
PPACA & Healthcare Consumerism
• Under PPACA, financial rewards for health
status are increased from 20% to 30%.
(1/1/2014)
• The Secretary of Health and Human Services
has the authority to increase that limit to 50%.
• PPACA allows unlimited rewards and
incentives for participation.
PPACA Restrictions on HSAs
PPACA Favors Premiums over Savings
• In 2011, HSA eligible plans for singles can have
a maximum deductible of $5,950.
• PPACA includes a max. deductible for small
groups of $2,000 for a single: eliminating
lower cost plans with the option of putting the
difference into an HSA.
• PPACA limits out-of-pocket costs to the same
amount as applicable to HSAs (2011: $5,950).
PPACA restrictions on HSAs
Excise Tax Limits Potential of HSAs
• H.H.S. regulations will determine “essential benefits”
and coverage requirements for all plans, including
HSAs.
• A 40% excise benefits tax applies if health plan costs
exceed $10,200 for an individual. If one puts the
maximum $4,050 into an HSA (including a $1,000
catch- up provision for ages 55 and older), that leaves
$6,150 regardless of age to purchase medical and any
other federally designated health coverage.
PPACA Restricts HSAs
Regulations May Stifle HSAs
• In the proposal, broad categories of healthcare are
listed without any specifics on treatment or financial
limits that may apply.
• Regulations are to ensure that coverage is “equal to the
benefits provided under a typical employer plan.”
• By definition, HSA eligible plans are not “typical.” A one
size fits all government approach that regulates,
restricts, and approves only a narrow range of “typical”
products will stifle creative solutions.
PPACA Restrictions on HSAs
Regulatory Powers Can Make HSAs Illegal
• Broad regulatory powers can easily outlaw HSA
eligible plans by requiring essential health
benefits to include coverages that violate HSA
eligibility.
• For example, in the proposed bill a special low
cost non-group catastrophic plan is allowed for
individuals under age 30. Rather than
designating an HSA eligible plan, the proposal
requires three primary care visits that disqualify
the plan from being HSA eligible.
PPACA Restrictions on HSAs
Restrictions on Use of HSAs
• New HSA restrictions limit paying for over-thecounter medications.
• The penalty for non-medical HSA withdrawals
is increased from 10 to 20 percent.
PPACA Restrictions on HSAs
HSA Rewards Left Out
• New generation consumer-driven plans include
rewards and incentives for healthy behaviors.
• PPACA outlaws health status rewards and
incentives in determining premium rates. The
proposal does include certain “wellness program”
rewards based on health status.
• However, employer and insurer HSA
contributions are not listed in the allowable uses
of rewards.
PPACA Restrictions on HSAs
Price Controls
• The PPACA proposal limits young adult
premiums to 33% of older adult premiums.
• Actuarially, young adult claims are about 20%
of older adults.
• This restrictive price control will substantially
raise the cost of premiums by 50 to100
percent or more for younger population a key
market for HSAs.
Individual Experience Rating
• Single Risk Pool
A health insurance issuer shall consider all
enrollees in all health plans (other than
grandfathered health plans) offered by such
issuer in the individual market, including those
enrollees who do not enroll in such plans
through the Exchange, to be members of a
single risk pool.
Group Experience Rating
• Single Risk Pool
A health insurance issuer shall consider all
enrollees in all health plans (other than
grandfathered health plans) offered by such
issuer in the small group market, including
those enrollees who do not enroll in such
plans through the Exchange, to be members
of a single risk pool.
The Power of The Consumerism
Megatrend
• Insurance with personal savings accounts (HSAs.
and FSAs) are not killed, but may be limited.
• But these are not the only forms of healthcare
consumerism.
• In 2002, health reimbursement arrangements
(HRAs) were established by the Treasury
Department.
• HRAs are very flexible and can be used with any
plan that the Secretary mandates.
The New Direction of Consumerism
• The real world has moved to next generation
healthcare consumerism with member
engagement, rewarding healthy behaviors, and
promoting personal responsibility.
• Plans are now focusing on rewards and
incentives. Health Incentive Accounts (HIAs) are
a special form of HRA that builds value only from
rewards and incentives. There are many other
special use HRAs that may become the channels
for healthcare consumerism.
Rewards & Incentives
Rewards can include activities such as:
• Participation in a wellness assessment,
• Compliance with a condition management
program (e.g. taking medications, diet, exercise,
office visits), and
•Maintenance of good health characteristics (e.g.
blood pressure, cholesterol, nicotine use, body
mass index) using bio-metrics.
Four Phases
• Legislation
• Regulation
• Compliance
• Litigation
Legislation
• PPACAwill likely require a large “technical
corrections” bill.
• Politicians and special interests can use a
technical corrections bill to pass new provisions
and mandates.
• A technical corrections bill could include entirely
new provisions not a part of the original law.
• For example, the public option could return as a
“technical correction
Regulation
• The regulatory process is likely to be a nightmare of delays,
missed deadlines, and confusing interpretations.
• In the bill there are scores of references to decisions to be
made by the Secretary of H.H.S.
• Major areas of implementation and coverage
determinations for “essential benefits” are left to the
discretion of the Secretary.
• Lobbyists from every provider and self-interest group will
converge on the bureaucracies to have their services
included through regulation.
• Ultimate coverage mandates are likely to go beyond what
employer plans typically consider as medical/surgical
benefits.
Compliance
• Consultants and lawyers will find expanded needs for their
services.
• Insurers will need to determine if they are in compliance.
• Employers not in compliance will be subject to large
penalties and fines.
• Self-insured employers will require compliance audits to
assure required essential coverages and mandates are
included.
• Each employee contribution will need to be measured
against the government affordability standard.
• Each year will likely produce new regulations and changes
that must meet with compliance standards or employers
will suffer penalties and fines.
Litigation
• Courts will decide what the language of the laws
2700+ pages mean.
• New laws require a period of adjustment that can
take decades to sort out the meanings and
conflicts of legal interpretations.
• Given the national impact and financial
consequence of any single coverage requirement,
every self-interest group wanting to be included
in the essential benefits package will push
litigation to add or solidify their coverage
demands.
The Circle of Life
The never ending cycle will then
repeat itself, as new laws will be
passed to respond to court decisions
and off it goes again to repeat the
four phases of legislation, regulation,
compliance and litigation.