All the talk about repeal and replace seems to have lulled many plan sponsors into a false sense of security, thinking that ACA regulations weren’t going to be enforced. Unfortunately, the IRS is preparing to begin penalizing non-compliant plans, which is why we continue to encourage our clients to keep their eye on the ball even though it is easier to follow the media frenzy coming from Capitol Hill.
The Altarum Center for Sustainable Health Spending reports a significant drop in health hiring, pricing and spending during the first five months of this year. On average, 22,000 jobs per month were added by hospitals and ambulatory care facilities, compared to 32,000 per month during the same period in 2016. While the healthcare sector continues to be the biggest contributor to overall U.S. job growth, Founding Director Dr. Charles Roehrig expects the 3-year run of greater than 5% growth in overall health spending to end, mostly due to uncertainty over efforts to repeal and replace ACA and a smaller increase in overall spending by consumers.
While it will take support from Republicans and Democrats to fully replace Obamacare, a simple majority of Republican senators could repeal parts of the law through reconciliation. Here are just a few:
- The individual and employer mandates can be reduced to zero
- The Cadillac tax, currently delayed to 2020, could be repealed
- Individual subsidies to purchase exchange coverage can be reduced to zero
Another welcome step requiring only a simple majority in the Senate would be increasing the limits on FSA and HSA contributions.
In a previous newsletter, we discussed bundling introduced by Medicare which focuses on orthopedic and cardiac procedures. Through the mandatory initiative for comprehensive care for joint replacements (CJR), which became policy in 2016, some 800 hospitals are participating in the program.
While some sources report the results of bundling as mixed, Medicare reports that joint replacement payments increased by approximately 5% nationally, but decreased 8% for BPCI participants. One large health system achieved a 20.8% episode decrease and another reported a significantly shorter prolonged length of stay – a sign of fewer complications resulting from surgery.
Providers, both acute and post-acute, shared in the savings and indications are that post-acute savings were achieved because their care was bundled, placing these providers at risk. Even though efforts to repeal and replace or modify the Affordable Care Act are on hold, more healthcare providers and payers can be expected to embrace bundling going forward.
The article below is from benefitsPro.com, written by Michael Levin on April 18, 2017.
Now that the American Health Care Act has failed to advance, small businesses, and the brokers who serve them, are looking for ways to manage health care costs within the status quo of the Affordable Care Act (ACA).
As it did with individuals, the ACA community rating methodology benefited some while burdening others. The community rating methodology spreads the costs associated with the differing risk of group (or individual) profiles over the entire risk pool. In the case of small groups, older and/or sicker groups benefited from lower rates while younger and/or healthier groups pay more. Those small groups for which this “peanut-buttered” risk solution has resulted in increases to their health insurance may want to look at level-funded plans, an alternative to fully-insured plans.
But what if the group has a really bad year? In a bad year, the stop-loss kicks in to protect the employer. Again, the entire concept of the level-funded plan is that the employer never has to pay more than the level monthly amount. But as an underwritten plan, it is reasonable to expect an increase — perhaps even an untenable increase — in the level-funded plan. Here is where it really gets interesting. Today, in such a situation, the group can simply revert back to a community-rated ACA plan. Here, small groups have an advantage that large groups do not: they can revert back to a non-underwritten plan; one that is likely to be to their financial benefit.
So, for small groups, the question is why not explore a level-funded plan? With savings of up to 30 percent, protection against extraordinary costs, and the ability to fall back on an ACA plan, there is very little reason not to do so.
Press Release from Education and the Workforce Committee Chairwomen Virginia Foxx on April 5, 2017.
The House today passed the Self-Insurance Protection Act (H.R. 1304), legislation that would protect access to affordable health care options for workers and families. Introduced by Rep. Phil Roe (R-TN), the legislation would reaffirm long-standing policies to ensure workers can continue to receive flexible, affordable health care coverage through self-insured plans. The bill passed by a bipartisan vote of 400 to 16.
“By protecting access to self-insurance, we can help ensure employers have the tools they need to control health care costs for working families,” Rep. Roe said. “Millions of Americans rely on flexible self-insured plans and the benefits they provide. Federal bureaucrats should never have the opportunity to limit or threaten this popular health care option. This legislation prevents bureaucratic overreach and represents an important step toward promoting choice in health care.”
“This legislation provides certainty for working families who depend on self-insured health care plans,” Chairwoman Virginia Foxx (R-NC) said. “Workers and employers are already facing limited choices in health care, and the least we can do is preserve the choices they still have. I want to thank Representative Roe for championing this commonsense bill. While there’s more we can and should do to ensure access to high-quality, affordable health care coverage, this bill is a positive step for workers and their families.”
BACKGROUND: To ensure workers and employers continue to have access to affordable, flexible health plans through self-insurance, Rep. Phil Roe (R-TN) introduced the Self-Insurance Protection Act (H.R. 1304). The legislation would amend the Employee Retirement Income Security Act, the Public Health Service Act, and the Internal Revenue Code to clarify that federal regulators cannot redefine stop-loss insurance as traditional health insurance. H.R. 1304 would preserve self-insurance and:
- Reaffirm long-standing policies. Stop-loss insurance is not health insurance, and it has never been considered health insurance under federal law. H.R. 1304 would reaffirm this long-standing policy.
- Protect access to affordable health care coverage. By preserving self-insurance, workers and employers will continue to benefit from a health care plan model that has proven to lower costs and provide greater flexibility.
- Prevent bureaucratic overreach. Clarifying that regulators cannot redefine stop-loss insurance would prevent future administrations from limiting a popular health care option for workers and employers.
For a copy of the bill, click here.
For a fact sheet on the bill, click here.
Instead of preparing for the changes that were expected from the American Health Care Act (AHCA), employers now need to continue or resume their efforts to maintain compliance with the ACA. As House Speaker Ryan said, “I don’t know what else to say other than Obamacare is the law of the land. It’ll remain law of the land until it’s replaced,” he said. “We’re going to be living with Obamacare for the foreseeable future.”
Determining where we go from here seems to be anyone’s guess, but after watching the industry ebb and flow for decades, our best advice is to stay calm and carry on as self-funded health plans continue to cover an estimated 75% of the U.S. workforce.
ACA The Law of the Land
Until the Republican majority decides to try again or Obamacare implodes, as President Donald Trump and others say is inevitable, individuals and employers with 50 or more full-time employees will have to live with the Affordable Care Act. Many who thought the American Health Care Act (AHCA) meant the certain loss of coverage made possible by the ACA can breathe easier. Providers and employer groups, many of which have adopted self-funding in order to better cope with the added regulations of Obamacare, can take comfort in the fact that drastic change has been avoided, at least for the foreseeable future.
EBSO will be monitoring the events on Capitol Hill and will continue to provide updates as things arise. As always, thank you for being a valued Client and/or Business Partner.
Several proposals have recently circulated regarding alternatives to the ACA. But, last week the House of Republicans proposed legislation intended to repeal and replace certain elements of the Affordable Care Act, also known as Obamacare or the ACA. Their proposal has been named the American Health Care Act (AHCA).
The Health Care Administrators Association (HCAA) released an in-depth update late last week that details the changes the AHCA would impose as well as the aspects of the ACA that would remain unchanged. This overview was provided by the law firm of Quarrels & Brady LLP.
The American Health Care Act:
What It Means for Employers and Health Insurers
Employee Benefits Law Update | 03/09/17 | John L. Barlament, William J. Toman, Cristina M. Choi
After months – or maybe years – of speculation, on March 6 the House Republicans released proposed legislation intended to repeal and replace certain aspects of the Patient Protection and Affordable Care Act, known affectionately as Obamacare or the ACA. The proposal, somewhat generically named the American Health Care Act (AHCA), is trimmed down to fit into the Congressional reconciliation process to avoid a Senate filibuster. As the President tweeted the next day, there is more to come “in phase 2 & 3 of healthcare rollout.”
The AHCA proposes some major changes for the individual market and Medicaid, substantial changes in the employer market, and some minor changes to Medicare. Most prominently, the AHCA does away with the most controversial aspects of Obamacare, the individual and employer mandate. It also repeals the cost sharing and income-based premium subsidies available on the Obamacare exchanges, and replaces them with age-based tax credits designed to help individuals pay for coverage.
Almost more notable is what the AHCA does not repeal, presumably due at least in part to use of the reconciliation process. The AHCA does not repeal many of the more popular patient protections, such as the prohibition on pre-existing condition exclusions. It also doesn’t repeal many of the market reforms: the guaranteed issue and guaranteed renewal requirements, community rating rules (although there is a loosening of the age rating limitation), essential health benefit rules (other than for Medicaid), or the health insurance exchanges….
Click the image below to read the full article, which explains how this proposed legislation would impact employers, plan sponsors and health insurers.
When Congress delayed the Cadillac Tax until 2020, the same law placed a one-year moratorium on the annual fee the ACA imposes on health insurance carriers. While the fee does not have a direct impact on TPAs or self-funded plans, it does sometimes impact stop loss premiums.
Since this fee applied to insurance carriers and not the majority of self-funded plan costs claims, some small group plans that moved to level funding may experience a slight cost increase in 2017. When the tax returns in 2018, the revenue targets are expected to increase. If the tax increases from its previous levels of 3% to 4%, the potential savings available to self-funded and level-funded plans will increase as well.
If you’re in an industry with significant turnover and varied work schedules, a Minimum Value Plan may be an affordable way to meet the requirements of the Affordable Care Act.
A Minimum Value Plan is one that pays at least 60% of the total allowed cost of benefits expected under the plan. And while a traditional fully insured plan might cost $300 per month for employee-only coverage, a minimum value plan may cost just over $100 while still providing ACA-mandated care and coverage for inpatient hospitalization.
Determining Minimum Value
Businesses may need help determining that their plan reaches “minimum value” under the ACA. To meet this standard, the plan must pay at least 60% of the total allowed cost of benefits, which can be a moving target. Recent regulations also require that minimum value plans must offer substantial coverage for both inpatient hospitalization and physician services.
It should also be noted that minimum value plans must still offer “minimum essential coverage” and coverage that is considered “affordable” under the ACA. Offering such a plan, without meeting these requirements, may still expose your organization to liability under ACA employer shared responsibility rules.
Though minimum value plans can be an affordable solution, future growth may be a concern, since only organizations with fewer than 50 full-time employees and full-time equivalents are exempt from ACA coverage requirements.