Changes in the way Medicare pays physicians are set out in a final rule released Oct. 14 by the Centers for Medicare and Medicaid Services (CMS). The rules will increasingly base doctors’ pay on their efficiency and quality of care. Effective Jan. 1, 2017, the rules begin phasing in Medicare’s Quality Payment Program (QPP) which generally offers two approaches to physician compensation: the Alternative Payment Models (APMs) and the Merit-based Incentive Payment System (MIPS). Providers participating in APMs will get higher payments.
The American Medical Association and other physicians' groups said CMS appears to have taken the needs of their members into account in these QPP rules implementing the law, officially known as the Medicare Access and CHIP Reauthorization Act (MACRA). Congress cleared the measure last year with strong bipartisan support. Other changes in the law will require more beneficiaries to pay income-based Part B and Part D premiums and limit future Medicare supplement products.
First, let’s put public exchange enrollment in perspective. It’s a relatively small piece of the pie, although you wouldn’t know it from the amount of attention it gets. In a Wall Street Journal article, Drew Altman reminds us “about 11 million people are enrolled in the marketplaces. More than 13 times that many, around 150 million, have coverage through employers, and there are 66 million people in Medicaid and 55 million in Medicare. The marketplaces are an important part of Obamacare. However, more uninsured people have been covered by Medicaid expansions than in the marketplaces, even though 19 states have not expanded Medicaid. Millions of young adults have been covered on their parents’ employer plans.” Another important point: 24 million Americans still do not have coverage, a number that would be smaller if all states had expanded Medicaid.
Here’s my take on what’s going on in the public exchanges -- and how it may affect employers.
- The Risk Pool is still risky. It was expected that the first people to enroll in the public plans would be those previously uninsured and in need of care -- and hence, more costly. Analysis done by CMS documents very little change in the per member per month medical cost from 2014 to 2015. While it may appear the risk pool is stable, the bad news is that it is not getting better. The expectation was that the risk pool would improve over the years as healthier people sign up. So far, that hasn’t been the case. The “young invincibles” are still not signing up, likely because the individual mandate penalty is still considerably lower than the cost of coverage
- Big-name carriers are losing money and leaving the market. To be sure, some regional players are entering the market, but overall it appears that fewer insurers will participate in the marketplaces in 2017. That means less competition among those that remain and thus less downward pressure on costs. As the WSJ article points out, affordability is very important in the individual market. Those not relying on a government subsidy may find more choices on the “off exchange” individual market. There are also implications for employers: cost shifting to group plans. When carriers lose money in one market segment, they try to make it up where they can.
- Estimates for premium cost increases for 2017 now range from 11% to 23%. A person enrolled in the exchange this year who is looking to minimize their cost increase in 2017 would need to switch to a lower cost plan -- and then would still likely see an 11% premium increase, according to a McKinsey analysis of 18 state exchanges and the District of Columbia. The situation could be even worse in the other states that have not yet filed their premiums for next year. Blue Cross Blue Shield has requested a 62 percent increase for next year in Tennessee and an average 65 percent increase in Arizona. See #1 above for why insurers are raising rates so sharply.
- Plans with limited provider networks have been popular. The reward for agreeing to a limited network of providers is a lower price tag for the plan. The downside is that members may have to change doctors, which is also the case when employers implement a narrow network plan. But if most plans on the exchange are narrow network plans, it becomes a less attractive option for early retirees, because the longer you have had a physician relationship -- and/or the greater your health care needs -- the more important those relationships are.
- Satisfaction is high among those previously uninsured; not so for those coming to the exchange from employer plans. Over time, exchange plans have begun to look very much like Medicaid plans, but with higher cost sharing. The impact of higher cost-sharing is mitigated by federal subsidies for much of the population with exchange coverage, which may be why they are generally satisfied with their coverage despite limited plan options and limited provider choices. But in most states, a relatively small number of individuals are willing to pay the full cost of the coverage that’s available on the exchange.
This last item -- on satisfaction -- is important. The exchanges are new and have real problems that need to be addressed through some policy changes and greater enrollment. (Policymakers might want to study how employers, through a lot of hard work, have stabilized cost increases at about 4% over the past five years.) As the satisfaction data shows, the exchanges are clearly filling a critical unmet need for Americans who previously lacked access to decent coverage. But so far, they are not delivering an acceptable alternative to employer-sponsored coverage. Unless that changes, they will always play a limited role in the U.S. healthcare system.
Annual cost-sharing limits for nongrandfathered group health plans would increase to $7,350 for individuals and $14,700 for families in 2018, under a recent CMS proposal. This marks a 2.8% increase from the 2017 limits, which cap out-of-pocket costs for in-network covered essential health benefits under nongrandfathered group health plans at $7,150 for self-only coverage and $14,300 for broader coverage.
Applying the same premium adjustment percentage to employer shared-responsibility assessments, the play-or-pay assessment for not offering coverage would increase to $2,320, while the assessment for offering coverage that is unaffordable or lacks minimum value would increase to $3,480 for 2018.
The Department of Health and Human Services' Office for Civil Rights (OCR) has launched an initiative to more widely investigate HIPAA breaches affecting fewer than 500 individuals. Historically, investigations have focused on breaches involving protected health information (PHI) of 500 or more individuals, but OCR now intends to shift more attention to the root causes of smaller breaches. OCR believes breach investigations allow it to better understand industry-wide compliance problems as well as compel corrections for entity-specific deficiencies.
The House Republicans released a white paper outlining their plan to provide “High Quality Health Care for All” – the GOP’s proposed approach to replace the ACA. While it lays out some interesting strategies that could potentially be attractive to employers, the paper lacks the details necessary to be able to evaluate the impact on employer-sponsored health benefits as we know them today. And we all know the devil is in the details.
Here are some of the highlights:
- Let’s start with the good news for employers – no more employer mandate. The document doesn't go into detail on what exactly goes away. Presumably scratching the employer mandate would mean no more 30-hours requirement, hours tracking, minimum plan standards, affordable contributions, or reporting (pinch me, am I dreaming?). But none of these are specifically called out in the paper.
- No surprise, the most popular features of the ACA will remain. Dependents will continue to be eligible for coverage until age 26. Lifetime maximums and pre-existing condition exclusions will still be banned.
- The Excise Tax is replaced with a new cap on the employee tax exclusion for employer-sponsored health care coverage. Currently employees are not taxed on the value of the health care benefits provided by their employer. The GOP plan will cap the exclusion “at a level that would ensure job-based coverage continued unchanged”. The authors think employers will keep benefits under the cap and convert the reduced benefits to additional cash compensation. While this theory is continually touted by economists and academics, in numerous Mercer surveys, employers have told us they will not increase wages to “make up” for cuts in benefits.
- Which leads us to Health Savings Accounts. The proposal expands catch-up contributions for spouses and increases maximum contribution limits, among other changes to encourage broader use of these savings vehicles. In addition, HSA contributions won’t count when calculating the cap on the employee exclusion.
- In a show of support for private exchanges, employers would be allowed to fund health reimbursement accounts to be used by employees to buy coverage on a private exchange.
- Other notable features include changes to support insurance competition, medical liability reform, individual tax credits for those not eligible for an employer-sponsored plan, and additional reforms to Medicaid and Medicare.
Employers will no doubt push back on the cap on the tax exclusion. It’s important to note that this is only the beginning – it’s a white paper; not proposed legislation. Step one in what could be a long journey, or – depending upon the election results – no journey at all.
The beginning of June serves as a reminder that we’re approaching the halfway point of 2016. Now is a great time to pull out those strategic plans and assess what you've accomplished and what's left to do. And don't forget to do a mid-year compliance check. I know, it's not the most exciting task, but it is a necessary evil. To make it a little easier, I’ve asked Mercer's compliance experts to describe – in just two minutes each – the top 10 compliance issues on their checklists. Here’s what they had to say.
1. Employer Shared Responsibility: Transition relief ended this year – coverage of “substantially all” increased from 70% to 95%. Are there ACA full-time employees that you don’t cover?
2. ACA Reporting: Make sure it’s right – no more good faith standard and the old deadlines return for the 2016 reporting year.
3. Cost-sharing limits: Know your limits – the ACA in-network out-of-pocket maximums differ from the maximum for high deductible health plans used with health savings accounts (HSAs).
4. Wellness Plans: More innovative designs make it critical to know the new rules that begin on January 1, 2017.
5. Mental Health Parity: Make sure your benefits are aligned with current law and best practices.
6. Cadillac Tax: Remember it hasn't been repealed – it's in your best interest to prepare.
7. Essential Health Benefits: Check those dollar limits and maximum out-of-pocket maximums against updated benchmark plans for 2017.
8. Affordability: Know the impact of opt-out cash and flex credits.
9. 30-hour: Understand what payments must be converted to hours of service.
10. Summary of Benefits and Coverage: New model SBC must be used for open enrollments on and after April 1, 2017.
Mercer’s Washington Resource Group recently released our top 10 compliance priorities for 2017 health benefit planning. There aren’t any surprises on this list. In fact, we’ve recently blogged about many of them. Employee Benefit News created a slide show on our Top 10 and here is a list of related posts and podcasts if you want to take a deeper dive into a topic.
- Wellness Plans (podcast): More innovative designs make it critical to know the new rules that begin on January 1, 2017.
- Essential Health Benefits (podcast): Check those dollar limits and maximum out-of-pocket maximums against updated benchmark plans for 2017.
- Mental Health Parity (podcast): Make sure your benefits are aligned with current law and best practices.
- Employer Shared Responsibility: Affordability (podcast): Know the impact of opt-out cash and flex credits; 30-hour (podcast): Understand what payments must be converted to hours of service; ACA Reporting (podcast): Make sure it’s right – no more good faith standard and the old deadlines return for the 2016 reporting year.
- Preventive care: Modify benefit terms to reflect latest recommendations and guidance on preventive care.
- Summary of Benefits and Coverage (podcast): New model SBC must be used for open enrollments on and after April 1, 2017.
- FLSA overtime rules: It’s not just a compensation issue – don’t forget to consider the benefits implications.
- Expatriate group health plans: Position group health plans covering globally mobile employees to take advantage of ACA relief.
- HIPAA privacy, security, and electronic transactions: Revisit health plans’ privacy and security obligations.
- DOL fiduciary rule: Assess the impact on welfare plans with an investment component.
In an unprecedented move, JAMA published President Obama’s status report on the ACA. In it, the President details the impact of the ACA using charts and data from various sources and offers up some suggestions for what should happen next.
The law was passed with three goals – to provide health insurance to those without it, to bring down the cost of care, and to improve healthcare quality. Progress toward the first goal is well documented: nearly 17 million more people have coverage today as a result of the ACA. That is a clear victory. Less clear, however, is the ACA’s impact on cost, at least in employer-sponsored health plans – which still cover more than half of all Americans with insurance. The report asserts that the ACA has slowed cost growth in in private insurance, but hasn’t resulted in a higher out-of-pocket cost share for those enrolled in employer plans.
That improbable combination raised some eyebrows here at Mercer. The report mentions a few of the more popular ACA mandates – preventive care at no charge, eliminating life-time maximum benefits, and expanding dependent eligibility. Those provisions could only increase cost, while at the same time another ACA provision, the excise tax, was established to penalize health plans that cost too much! The President defended the excise tax in his article, but fact is that it has led employers to shift cost to employees, chiefly with high-deductible health plans. Our data shows that fully one-fourth of all covered employees are now in high-deductible consumer-directed health plans, and even deductibles in traditional PPOs have risen at a faster pace than healthcare cost increases. That’s not surprising, given that three years ago, nearly half of employers were on track to hit the excise track threshold in 2018, the year it was first supposed to go into effect. That number has dropped each year as employers have taken steps (often unwanted, as our recent survey found) to shift cost to employees to lower cost. We’ve maintained from the beginning that the “Cadillac tax” was going to unfairly hit plans that had high cost for reasons other than rich plan design, and were pleased to learn yesterday that more than 300 members of the House of Representatives – nearly 70% – have signed onto legislation to repeal the tax.
I will say that I wished President Obama could have given employers a little more credit! Compliance with the ACA has been a huge effort and expense to employers – new fees, communications requirements, reporting requirements and compliance costs – and in the end, they continue to cover all the same people they have always covered. That’s more than half of all Americans with health insurance.
As for the future of the ACA, so much will be determined by what happens in elections and how lawmakers can work together. Will there be a public option? Will Americans age 50+ be able to buy into Medicare? Will employees be taxed on their employer-sponsored health insurance? Time will tell. In the meantime, employers remain committed to providing healthcare benefits to their employees.
Public exchange notices are coming soon to a mailbox near…well, we’re not really sure where they will land, but they are coming soon.
The 38 federally run public health insurance exchanges are preparing to send employer notifications when their employees have enrolled in individual exchange coverage and claimed advance premium tax credits (APTCs) under the Affordable Care Act. To receive APTCs an individual completes an application for health coverage that asks for employment status, employer contact information, and details about employer-provided coverage and how much the employee must pay for the lowest-cost self-only coverage option with minimum value. Where the exchange mails the employer notice depends on the address the applicant puts on the form. If the employee provides an incomplete address, the employer may not receive a notice at all.
The good news is that employers are not required to respond to this notice, but there may be reasons to do so. Appeals may:
- Help employees avoid an accumulating repayment obligation to the IRS for a wrongfully claimed subsidy
- Lead to less interaction with the IRS over 1095-C filings and a smoother reporting process overall
It will be important to consider whether the time, effort, and cost to appeal outweigh these benefits. Unless an employee is enrolled in minimum essential coverage (MEC), it may not be worth it to appeal the notice since you won’t know whether the employee would be eligible for a subsidy. (Remember, employees enrolled in MEC are not eligible for APTCs, regardless of the coverage’s minimum value or affordability.)
If you want to help employees without the time and expense of appealing the notices, consider contacting those who appear to have claimed APTCs mistakenly. But do so with caution. Do not discourage anyone from obtaining an APTC or express a negative view about an employee claiming an APTC. And remember employers cannot retaliate against an employee who obtains an APTC.
Whether you plan to appeal the notices or not, you should prepare for their receipt. Expect employees to make errors in filing out the employer address section of the application, and instruct mailroom staff and other possible recipients to be on the lookout for notices and to forward them to the appropriate location. Recipients should consider exchange notices confidential and handle them appropriately. Having recipients forward them to a central location allows you to anticipate the amount of interaction you may have with the IRS over your 1095-C fillings.
New tri-agency proposed regulations implementing the Expatriate Health Coverage Clarification Act of 2014 (EHCCA) outline the conditions an expatriate medical plan or policy must meet to exempt the plan, sponsoring employer, and expatriate health insurers from certain Affordable Care Act (ACA) requirements. Generally, EHCCA exempts plans or policies that meet the law's definition of an "expatriate health plan" from certain ACA market reforms, fees, and aspects of the "Cadillac" excise tax on high-cost health benefits. The proposal clarifies which individuals are qualified expatriates, which insurers can issue qualified expatriate coverage, as well as other important requirements to take advantage of the EHCCA relief.
The same regulatory project contains proposals on several types of insurance that may qualify as excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA). Excepted benefits are exempt from many of the ACA’s plan design requirements that otherwise affect plans and policies. These proposed regulations describe requirements for exempt status of travel, group hospital indemnity or other fixed indemnity, specified disease or illness, and supplemental health insurance. Also proposed is restricting short-term limited duration coverage to policies with a maximum duration of less than three months; it’s thought this will avoid the use of short-term policies to circumvent ACA requirements while still permitting short-term coverage to assist individuals transitioning from one plan to another.
The proposals — issued jointly by the departments of Labor, Treasury, and Health and Human Services — are proposed to be effective for plan or policy years beginning on or after Jan. 1, 2017. Comments are due August 9. The proposed regulations can be relied on until final regulations take effect. If final guidance is more restrictive it will apply prospectively with time to come into compliance.
Final Department of Labor rules explain the nonretaliation protections for employees seeking subsidized health coverage from a public exchange, reporting certain ACA violations by an employer's group health plan, cooperating in ACA investigations or enforcement proceedings, or refusing to engage in activities that could violate the ACA. The rules leave intact interim regulations from 2013, with a few clarifications about complaint procedures and the scope of the law's protections.
IRS has released final instructions and forms for 2016 minimum essential coverage (MEC) reporting (Forms 1094-B and 1095-B) which health insurers and some self-insured employers will use to report MEC provided to individuals in 2016. IRS uses MEC reported on the forms to determine whether individuals owe assessments under the ACA's shared-responsibility provisions. IRS has apparently made only minor changes to the 2016 instructions from the version used for 2015 reporting. Drafts of the 2016 employer shared-responsibility forms and instructions that applicable large employers will use to report on coverage offered to employees and their dependents came out earlier this summer.
The reports of steep premium hikes in the public exchanges keep rolling in, raising concerns about their long-term viability. But should we really be worried? Two recent news items make the case for and against a pessimistic view.
Let’s start with the good news, which came in the form of an analysis conducted by the Urban Institute of the actual cost of coverage in public exchanges across the country. The headline? After adjusting for actuarial value and enrollee age, individual unsubsidized premiums on the public exchanges are about 10% lower than the average premium in an employer-sponsored plan. In head-to-head comparisons, the exchange plans cost less in 80% of the markets examined. While the study adjusted for actuarial value, it did not address such differences as network size or provider participation and we know that narrow networks are one of the ways exchange plans are keeping prices low. It does explode the myth that exchange premiums are sky high, because, of course it's all relative -- compared to employer plans, they're not. But compared to the deal that most people get in an employer plan – a 75% to 80% premium subsidy – unsubsidized coverage will seem extremely expensive to anyone who has been covered through an employer plan, or anyone buying coverage for the first time. (And the lack of any tax break for obtaining coverage – only the threat of a tax penalty for not doing so – is not going to help that perception.)
So maybe many exchange plans were priced too low to begin with and increases will stabilize once premiums reach a certain level, closer to that of group plans. The argument against this view was presented in a New York Times article that addressed the pent-up demand for services of many exchange enrollees, comparing it to a high-school football team at a buffet table. Whatever you might think about that metaphor – I can’t quite equate seeking diabetes treatment with seeking a third plate of baked ziti! – the exchange risk pools do present serious challenges. My colleague Tracy Watts had this to say about that: “Everyone knew that the people who really needed access to care would be the first to sign up and use healthcare services. The assumption was that over time, as the individual mandate penalty increased, more healthy people would join. Unfortunately, they have not. While employers experience turnover and changes in the workforce, the risk pools are much more stable than the public exchange.”
Proposed IRS regulations address several Affordable Care Act (ACA) reporting issues for group health plan sponsors and other providers of minimum essential coverage (MEC). The proposals give more detail on MEC providers' obligations to request covered individuals' taxpayer identification numbers (TINs), explain when supplemental MEC doesn't need to be reported, and address the use of truncated TINs, among other things. Employers that sponsor self-funded health coverage and have MEC reporting responsibilities will want to review the proposed rules, particularly the provisions on TIN solicitations.
New Health and Human Services (HHS) FAQs offer guidance on the non-English taglines required under final rules implementing Section 1557 of the ACA. Employers and employer-sponsored group health plans covered by the rules -- which appear to include most hospitals and health systems, as well as entities receiving retiree drug subsidy payments from HHS -- must comply with notice and tagline requirements by Oct. 16, 2016.
A federal court in Wisconsin has ruled that an employer may not rely on the Americans with Disabilities Act (ADA) safe harbor for bona fide benefit plans to justify incentives under its wellness program. But the court still decided the wellness program met the ADA exception for voluntary medical exams, even though employees who declined to participate in a health risk assessment had to pay the full cost of their health coverage. This is the first ruling to find the ADA safe harbor for bona fide benefit plans does not apply to wellness programs under the final Equal Employment Opportunity Commission rules. The court did not apply the 30% limit on incentives in the EEOC rules as it concluded that component of the rule does not apply retroactively (the case involved incentives offered in 2009).