HSAs on the Rise, but Employees Need to Know More About Them

Are your employees aware of the many benefits and features associated with HSAs? Check out this great article by Marlene Y. Satter from Benefits Pro on why it is important employees are knowledgeable about HSAs, so they can prepare for their health care expenses while planning for retirement.

According to Fidelity Investments, health savings accounts — and the assets within them — are rising quickly, as both employers and employees try to find ways to pay for health care. Still, a number of the features of HSAs are still underutilized.

While Fidelity says that assets in its HSAs rose 50 percent in the past year, now topping $2 billion, and the number of individual account holders rose 46 percent during the same period to 657,000, it points out more work still needs to be done on showing employees the advantages of such accounts.

Since it’s estimated that couples retiring today could need $260,000 — perhaps even more — to cover their health care costs during retirement, the need for a way to save just for health care expenses, aside from other retirement expenses, is becoming more urgent.

HSAs offer a tax-advantaged way to set aside more money than a retirement account alone provides — and people who have both tend to save more overall, with 2016 statistics indicating that people who had both defined contribution and HSA accounts saved on average 10.7 percent of their annual income in the retirement account. Those with just a DC account saved on average 8.2 percent in it.

People are mostly satisfied with HSAs — 80 percent say they are, while 76 percent are satisfied with the ease of using it HSA for medical expenses, 77 percent with the quality of their health care coverage and 77 percent with how the plan helps them manage their health care costs.

But that doesn’t mean they’ve got all the ins and outs figured out yet; 39 percent mistakenly believe that they’ll lose unspent HSA contributions at the end of the year. Yet unlike contributions to health flexible spending accounts (FSA), unspent contributions to HSAs roll over from year to year.

Still, employees are learning that HSAs can provide them a means of saving that’s not restricted to cash. While it’s still not common, more people are putting HSA money into investments that can then grow toward covering longer-term health expenses, but employers, says Fidelity, can do more to educate workers on such an option. Nationally, only 15 percent of all HSA assets are invested outside of cash.

See the original article Here.

Source:

Satter M. (2017 May 26). HSAs on the rise, but employees need to know more about them [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/05/26/hsas-on-the-rise-but-employees-need-to-know-more-a?ref=hp-news


State Flexibility to Address Health Insurance Challenges under the American Health Care Act, H.R. 1628

Great article Kaiser Family Foundation about how states's health insurance markets will be impacted with the passing of the American Health Care Act (AHCA).

The American Health Care Act, as passed by the House, (HR 1628 or AHCA) would make significant changes to the insurance market provisions established by the Affordable Care Act (ACA) and to the financial assistance provided to people who purchase non-group coverage.  The proposal would reduce the federal role in health coverage and devolve authority to states over key market rules and consumer protections affecting access and affordability, albeit with federal back-up provisions if states fail to take action.  This brief outlines the provisions in the AHCA providing flexibility for states and addresses some of the issues and tradeoffs they could face.

The AHCA would dramatically reduce federal spending on health coverage between 2018 and 2026, lowering federal contributions to Medicaid by $834 billion and subsidies for non-group health insurance by an additional $290 billion.1  The AHCA also would eliminate the tax penalty for people who do not have health insurance, replacing it with a premium surcharge (30% for up to one year) for non-group enrollees who have a gap of insurance of at least 63 days in the previous year. The tax penalty for employers that do not offer coverage to full-time workers also would be repealed.  Overall, CBO estimates that the AHCA changes would result in an additional 23 million people being uninsured in 2026.2

To offset a portion of the federal spending reductions, the AHCA would create a federal fund called the Patient and State Stability Fund (“Fund.”) The bill appropriates up to $123 billion between 2018 and 2026 that states could use for a number of designated purposes related to coverage and the costs of care, plus an additional $15 billion for a federal invisible risk sharing program that states would have the option to administer.  States also would have flexibility to modify important insurance provisions: through waivers, they could extend rate variation due to age, modify the essential health benefits, or permit insurers to use an applicant’s health as a rating factor for individuals applying for coverage if they have had a coverage gap in the year prior to their enrollment.

In the next sections, we describe the Fund and the waiver authority in the AHCA.  After that, we discuss some of the issues and tradeoffs that states would need to address with the flexibility and funds provided.

Patient and State Stability Fund

The AHCA creates a new grant program that makes up to $123 billion available to states between 2018 and 2026.  Of that, $100 billion ($15 billion for each of 2018 and 2019 and $10 billion each year from 2020 to 2026) would be available for a number of purposes described below, although in its estimate, CBO assumed that most of the funds would be used to reduce premiums or increase benefits in the non-group market.3  An additional $15 billion would be available in 2020 for maternity coverage and newborn care and prevention, treatment, or recovery support services for individuals with mental or substance use disorders.  An additional $8 billion would be available between 2018 and 2023 to reduce premiums and other out-of-pocket costs for individuals paying higher premiums due to a waiver permitting insurers to use health status in setting premiums (discussed below).

Funds would be allocated among states through a formula that considers the total medical claims incurred by health insurers in the state, the number of uninsured in the state with incomes under poverty, and the number of health insurers serving, for 2018 and 2019, the state’s exchange, and for 2020 to 2026, the state’s insurance market.

States could apply for funding for any of the permitted purposes under an expedited process, with applications automatically approved unless the federal government denies the application within 60 days for cause.  Starting in 2020, state matching funds would be required to draw down the allocated federal funds: states would be required to match 7% of the federal funds in 2020, phasing up to 50% in 2026.4  No funds would be appropriated for years after 2026.

States could seek funds for one or more of the specified purposes:

  • Providing financial assistance to high-risk individuals not eligible for employer-based coverage who enroll in the individual market.  The bill language is vague, but this provision appears to permit states to use their allocation to set up a high-risk pool or other mechanisms to provide or subsidize coverage for individuals with preexisting conditions without access to employer-sponsored coverage. By covering high-cost people in a separate pool, their costs are removed from the premium calculations of non-group insurers, lowering the premiums for other enrollees in private insurance.  The AHCA does not address how people with preexisting conditions might be encouraged or required to participate in separate high-risk pools in states without waivers, because people with preexisting conditions generally would have access to non-group coverage at a community rate during open and special enrollment periods.  A high-risk pool could be an option in states with a waiver to use health as a rating factor, where the pool could provide coverage to people with preexisting conditions who are offered coverage at very high premiums due to their health.
  • Providing incentives to entities (e.g., insurers) to enter into arrangements with the state to stabilize premiums in the individual market.  This provision appears to permit states to use their allocation for a reinsurance program. Reinsurance programs lower premiums in a market because they reimburse health insurers for a portion of the claims for people with high-costs, reducing the premiums they need to collect from enrollees.  A reinsurance program operated during the first three years of the ACA; the Congressional Budget Office  estimated that the reinsurance program ($10 billion in 2014) reduced non-group premiums by about 10% in 2014.
  • Reducing the cost of providing non-group or small-group coverage in markets to individuals facing high costs due to high rates of utilization or low population density. Premiums vary significantly across and within states.  This provision would allow states to use resources in higher cost or rural areas.
  • Promoting participation in the non-group and small-group markets and increasing options in these markets. In the past, for example, state based marketplaces that devote resources to outreach and enrollment assistance have been able to help more applicants during open enrollment periods.
  • Promoting access to preventive, dental and vision care services and to maternity coverage, newborn care, and prevention, treatment and recovery support services for people with mental health or substance disorders. This purpose was added to the bill as the House considered changes to the ACA essential health benefits standard.  Fifteen billion dollars in Fund resources are dedicated for spending on maternity, newborn, mental health, and substance abuse services in the year 2020.
  • Providing direct payments to providers for services identified by the Administrator of the Centers for Medicare and Medicaid Services (CMS). For example, states might use Fund resources to expand services provided by public hospitals, free clinics, and other safety net providers that offer treatment to residents who are uninsured or under-insured.
  • Providing cost-sharing assistance for people enrolled in health insurance in the state. The AHCA would repeal current law cost sharing subsidies ($97 billion between 2020 and 2026), which pay insurers for the cost of providing reduced cost sharing to low-income marketplace enrollees.  States could use their fund allocation to offset some of this reduction or assist others with private health insurance (such as those with employer-based coverage) who have high out-of-pocket costs.

These categories are quite broadly specified, providing states with discretion about what policies they may want to pursue and how to how to design programs to address different health care needs in their state.  The options include ways to reduce premiums (through reinsurance, for example), to make direct payments to health care providers, or to help insurance enrollees with high out-of-pocket costs.  States could pursue one or more of these approaches, although they are constrained by the amount of funds available and by their need to match the federal funds after 2020.

CBO estimated that $102 billion of the $123 billion provided to states would be claimed by states by 2026. CBO assumed that states would use most of their Fund allocations to reduce premiums or increase benefits in the non-group market; it assumed $14 billion of the available $15 billion available for maternity coverage, newborn care, and mental health and substance abuse care would be used for direct payments for services.5

Federal default program.  In states without an approved application for monies from the Fund for a year, the bill would authorize the CMS administrator, in consultation with the insurance commissioner for the state, to operate a reinsurance program in the state for that year.  The program would reimburse insurers 75% of the cost of claims between $50,000 and $350,000 for years 2018 and 2019; the CMS Administrator would adjust these parameters for 2020 through 2026.  To receive funds through the default program, the state would be required to match the federal funds, with matching rates starting at 10% in 2018 and increasing to 50% by 2024, remaining at 50% through 2026.

Invisible risk sharing program.  The AHCA also would create a separate reinsurance program as part of the Fund, called the Federal Invisible Risk Sharing Program (FIRSP).  The FIRSP is not a grant program, but would make payments to health insurers in every state to offset a portion of the claims for eligible individuals (e.g., enrollees with high claims or with specified conditions).  The CMS Administrator would determine the parameters of the program and would administer the program, although states would be authorized to assume operation of the program beginning in 2020.  The bill appropriates $15 billion to the FIRSP for 2018 through 2026.  Additionally, at the end of each year, any unallocated monies in the Fund (which could occur if a state did not agree to match the federal funds) would be reallocated to FIRSP as well.

The AHCA does not specify how FIRSP would be coordinated with states that adopt a reinsurance program or for which the CMS Administrator is operating a federal default program.  These issues could be addressed as the Administrator specifies the parameters of the FIRSP.  CBO assumed that all of the $15 billion in FIRSP funding would be used over the period.6

State Waiver Options

The AHCA would permits states to seek waivers to federal minimum standards for non-group and small-group coverage to (1) modify the limit for age rating,7 (2) modify the essential health benefit package, and (3) permit insurers to consider the health status of applicants for non-group coverage if they have had a coverage gap in the past year.

To obtain a waiver, state must show that the waiver would do one or more of the following: reduce average premiums, increase health insurance enrollment, stabilize the market for health insurance, stabilize premiums for people with preexisting conditions or increase choice of health plans. The waiver permitting health as a rating factor has an additional requirement, discussed below.

WAIVER TO PERMIT RATING BASED ON HEALTH

The AHCA generally would require non-group insurers to assess a premium surcharge of 30% to all applicants (regardless of their health) who have had a coverage gap of at least 63 consecutive days in the 12 months preceding enrollment. The surcharge would apply during an enforcement period (which ends at the end of a calendar year).

In lieu of the 30% premium surcharge, the bill also authorizes states to seek a waiver that would permit insurers to consider an applicant’s health in determining premiums.  Health status rating could apply for people with a coverage gap in the year preceding enrollment.  States could seek a waiver for enrollments during special enrollment periods for 2018 and beyond, and for signups during open enrollment periods for 2019 and beyond.  Insurers would not be permitted to deny coverage to an applicant based on their health, but the bill does not limit the additional amount that an applicant can be charged based on their health (the state could limit the amount of the health surcharge but is not required to do so).  Similar to the rules regarding the 30% surcharge, insurers would be able to apply the health status rating through December 31 of the plan year for which the individual enrolled.

To be eligible for a community-rating waiver, in addition to the general waiver requirements, the state must have in place a program that either provides financial assistance to high risk individuals (e.g., a high risk pool) or provide incentives to help stabilize premiums in the individual health insurance market (e.g., reinsurance payments to insurers) or it must participate in the FIRSP.  Because the FIRSP would operate in all states, with no requirement for state matching funds, it would appear that all states would be eligible for the community-rating waiver without having to set up a separate high-risk pool or reinsurance program.  The bill imposes no additional requirements for the state programs. The bill would provide $8 billion to the Fund over five years (2018 through 2022) for states with these waivers to help reduce the premiums out-of-pocket costs for people who have higher premiums due to waiver.  State matching funds would seem to be required to draw down funds starting in 2020. CBO estimates that $6 billion of the $8 billion would be used.

Because there is no limit on the amounts by which insurers could vary premiums based on health, a premium surcharge for people with pre-existing conditions who have had gaps in coverage could provide a stronger incentive for people to maintain continuous coverage than the 30% surcharge that would otherwise apply. Before passage of the ACA, insurers declined applicants frequently, even when they could have charged a higher premium instead, suggesting that insurers would likely assess very high health premium surcharges for people with potentially costly preexisting conditions.  While not an actual denial, very high surcharges would likely have in practice the same effect for many people subject to surcharges based on their health.

Under the bill, states with a waiver could also permit insurers to use health rating to charge healthy applicants with a coverage gap a lower than standard premium available to people with continuous coverage.  Under this approach, healthy applicants would have an incentive to submit to health rating, even if they had continuous coverage.  This could have a destabilizing effect on the market because healthy people could have an incentive to switch to new coverage at renewal, without submitting proof of continuous coverage, in hopes of finding a lower premium based on their good health, which would cause the standard rates generally available for people with continuous coverage to increase.

As a condition of receiving a community-rating waiver, the AHCA does not require that a state must assure access to non-group coverage or make an alternative source of coverage available to people subject to health rating if the rate they are offered is very high.  For example, a state participating in the FIRSP is eligible for this waiver, and that program reimburses health insurers for people that become enrollees; a person offered a very high health status rate might never become covered.  It is unclear how much authority the Secretary of Health and Human Services (HHS) would have to address this issue in the waiver process, given the expedited waiver approval provisions in the bill.

WAIVER TO MODIFY THE ESSENTIAL HEALTH BENEFITS PACKAGE

Under current law, insurance policies offered in the non-group and small-group markets must cover a fairly comprehensive list of defined essential health benefits: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care.  The essential health benefits are a minimum that must be offered; insurers may offer additional benefits as well.

In addition to the list of essential health benefit categories, a number of constraints and consumer protections apply to their definition by the Secretary of HHS, including:

  • that the scope of the essential health benefits offered in these markets is equal to the scope of benefits provided under a typical employer plan;
  • that coverage decisions, determination of reimbursement rates, establishment of incentive programs, and design benefits cannot be made in ways that discriminate against individuals because of their age, disability, or expected length of life;
  • that essential health benefits take into account the needs of diverse segments of the population, including women, children, and people with disabilities;
  • that essential health benefits not be subject to denial to individuals against their wishes on the basis of the individuals’ age or expected length of life or of the individuals’ present or predicted disability, degree of medical dependency, or quality of life;
  • that emergency services provided by out-of-network providers would be provided without prior authorization or other limits on coverage, and would be subject to in-network cost sharing requirements;

Current law also prohibits insurers from applying annual or lifetime dollar limits to essential health benefits.

The AHCA would authorize states, for years 2020 and beyond, to seek a waiver to modify the essential health benefits that insurers would need to offer in the non-group and small group markets.  States also could seek to modify the provisions relating to the scope of the benefits and to their definition.  There are no limits or parameters in the AHCA regarding the changes a state could make to the essential health benefit list or its definitions, although several provisions of current law could limit their discretion.  For example, the current prohibition on applying annual and lifetime maximum dollar limits to essential health benefits may prevent states from using dollar limits in defining the scope of benefits they include as essential health benefits, and the application of mental health parity rules to qualified health plans may prohibit a state that includes mental health or substance abuse services as an essential health benefit from applying limits to the scope of those benefits that are not applicable to other benefits.

The waiver authority gives states wide latitude in defining essential health benefits that would be required in non-group and small group coverage.  A state could remove one or more benefits from the list, which would mean that insurers could offer plans without those benefits or could offer them as an option in some policies or with limits.  Maternity benefits, for example, were often not included in non-group policies prior to the ACA.  A state also could limit the scope of a benefit; for example, determine that only generic drugs were essential health benefits or limit the scope of hospitalization to 60 days per year.  Insurers would then be required to offer at least the limited scope of the benefit, with the option to cover a broader scope of the benefit (in our example, hospital coverage without no day limit) in some or all of their policies in the state.  A state could also eliminate the standard, defining essential benefits to mean whatever insurers in a competitive market offer.  As discussed below, however, adverse selection concerns would make it difficult for insurers to offer coverage that is much more comprehensive than the defined minimum at a reasonable premium.

WAIVER TO MODIFY THE LIMIT ON AGE RATING

The AHCA would generally amend current law to expand the permissible premium variation due to age from 3 to 1 to 5 to 1, or any other ratio a State might elect.  States also would be authorized to seek a waiver, for years 2018 and beyond, to put in place a higher rate permissible ratio. There are no limits in the AHCA on the ratio that a state could permit insurers to use.  The waiver authority here appears to be redundant, as the underlying bill would authorize states to elect different ratios without seeking a waiver.

Issues and Tradeoffs that States May Need to Resolve

The AHCA would reduce the federal role and resources in providing health insurance coverage, particularly for people who are lower and moderate income and are covered though the Medicaid coverage expansion or through the non-group market.  States would assume an expanded role, both financially and in making key decisions about the access and scope of benefits available to these people.

States would undertake this role facing some significant challenges.

COMPETING DEMANDS FOR REDUCED FEDERAL FUNDING

The AHCA, by reducing the overall amount of federal premium tax credits, eliminating cost-sharing subsidies, and reducing federal contributions for the Medicaid expansion population and overall, would significantly reduce federal health care payments received by insurers, providers and people, leaving fewer people covered and more people with higher out-of-pocket costs.  CBO estimates that, between 2018 and 2026, the AHCA would reduce federal Medicaid spending by $834 billion and federal spending on subsidies for non-group health insurance by $290 billion (Figure 1).8 By 2026, 23 million fewer people would have health insurance.  States would have access to grant money through the Fund to try to address some of the issues, but the resources available through the Fund would be far less than the spending reductions. CBO estimates that states would use $102 billion from the Fund, with an additional $15 billion being spent by the FIRSP.9 States would be faced with a number of competing demands for the federal grant money, including lowering premiums, helping people with high cost sharing, and helping people and providers address access and financial issues resulting from the greater number of people without insurance.

CHALLENGES IN REDUCING PREMIUMS AND MAINTAINING COVERAGE

A second challenge for states relates to the cost of non-group health insurance premiums.  Proponents of the AHCA have identified lowering the cost of non-group health insurance as a significant goal of the proposed law, but the underlying federal portions of the bill do not really do that.  In fact, replacing the individual requirement to have health coverage with the continuous coverage provision would initially increase premium rates as compared with current law.10 A few provisions, including the elimination of the health insurance and the medical device taxes, the FIRSP, and the elimination of standard cost-sharing tiers would offset some of the increase from repealing the individual coverage requirement. The most significant tools to potentially lower premiums, however, would be under state discretion: using Fund dollars for reinsurance to offset premiums and seeking waivers to modify the essential health benefits and to permit the insurers to use health as a rate factor for applicants with a coverage gap.  Each of these options, however, would involve significant policy and political tradeoffs.

Applying the grant dollars from the Fund could have a significant additional impact on premium rates, particularly because fewer people would likely be covered than under current law. CBO has assumed in its cost estimates of the AHCA that states would use most of their grants from the Fund to reduce non-group premiums or increase benefits.11 Based on a previous CBO cost estimate for the AHCA, researchers at the Brookings Institution estimated that the AHCA increased average premiums by about four percent when age is held constant (see box below). This suggests that states would need to use most of their grant Funds to bring premiums back to current levels. As just discussed, however, applying all or a large percentage of the grant funds to reduce premiums would mean that other potential needs might remain unaddressed.

Measuring Premium Change

Determining how much premiums would change due to changes in law is complicated because a number of factors affect what people pay and who would actually buy coverage.  There are a few ways to look at this.  One is the change in the average premium; this is the change in the average amount that people are expected to pay under current law and under the change.  This is a good measure of how overall costs will change, but not a very good measure of how a particular person might see their premium change.  Because premiums vary by things, such as where people live and what age they are, the average can change just because the distribution of enrollees changes; for example, if more young people enroll, the average premium goes down, but the premium that a person at any given age sees might remain the same.  Looking at changes for people in certain rating classes, such as by age, comes closer to looking at what particular people may see, although the changes still may vary by location or by health status if insurers can use them in rating.  Premiums for a person of a particular age or health also could vary due to changes in benefits or to the cost sharing they face.

WAIVING ESSENTIAL BENEFITS COULD REDUCE PREMIUMS BUT ALSO LIMIT AVAILABILITY

The waiver options would also pose difficult decisions for states.  For example, a state could lower premium rates by using an essential health benefits waiver to reduce the required benefits in non-group or small-group policies.  The argument for this approach is that some people could choose policies that cost less because they cover less, and others who want additional benefits could pay more for policies that covered those benefits.  There are several difficulties with this, however.

One is that most claims costs fall into the basic insurance categories that would be hard to exclude.  A recent report from Milliman based on their commercial claims database, found that claims from hospital care, outpatient care including physician costs, and prescription drugs accounted for around 70% of claims costs; adding emergency care and laboratory services brings that to over 80%.  Redefining essential health benefits to meaningfully lower premiums would require either placing meaningful limits on these categories (for example, only including generic drugs as an essential benefit) or eliminating whole other categories.  Looking at some of the categories that were sometimes excluded prior to the ACA: maternity coverage accounts for 3.4% of claims, mental health and substance abuse accounts for 4.2% of claims and preventive benefits account for 5.6% of claims.12 To obtain policies with lower premiums, people would need to choose policies with important limitations.  CBO also notes that, should such categories be dropped from the definition of essential health benefits, non-group enrollees who need such care could see their out-of-pocket medical care spending increase by thousands of dollars in any given year.

A second difficulty is that this approach would lead to significant adverse selection against plans with benefits that were more comprehensive than the minimum required.  Because market rules permit applicants to choose any policy at initial enrollment, and change their level of coverage annually at renewal, people who have or develop higher needs for a benefit that is not a defined essential health benefit can enroll or switch a plan that covers it without any impediment.  For example, if a state were to determine that prescription drugs were not an essential health benefit, people without current drug needs would be more likely to take policies that did not provide drug coverage while people with current needs would be more likely to take policies that did.  This would increase premiums for policies covering prescriptions to relatively high levels, discouraging people without drug needs from purchasing them, which would lead to even higher premiums. While the risk adjustment program could offset some of the impacts of selection, developing a risk adjustment methodology where there is substantial benefit variation is difficult.13  This dynamic would discourage insurers from offering coverage for important benefits not defined as essential health benefits, or if they were to offer it, they would do so at high premiums.  People at average risk would likely not have reasonable options if they wanted to purchase coverage with significant benefits beyond those that were required for all policies.  CBO also estimates that insurers generally would not want to sell policies that include benefits that were not required by state law.

The AHCA requires that $15 billion of the money in the Fund be used for maternity coverage, newborn care, and prevention, treatment and recovery support services for mental health and substance abuse disorders.  States that chose not to include any of these services as essential health benefits could use these funds to make these services available, for example, by subsidizing optional coverage or providing direct services.  The funds would only be available in 2020, although it might be possible for a state to use them over a longer period.  The $15 billion was added to the Fund along with the authority to waive essential health benefits, which suggests that the sponsors may be anticipating that these services are at risk of not being defined as essential health benefits by states.

The second significant waiver option for states in the AHCA, allowing insurers to use health as a rating factor for applicants with a coverage gap within the previous year, would put states in the middle of one of the most contentious issues in this debate: how to provide access to coverage for people with preexisting health conditions.  There are few specifics in the bill, but generally, as discussed above, a state could seek a waiver to allow insurers to use health in rating applicants with a coverage gap and to apply the health rate until the end of the calendar year (their enforcement period).

WAIVING COMMUNITY RATING VS. PROTECTING ACCESS FOR PEOPLE WHO ARE SICK

This provision has the potential to reduce non-group premiums overall because permitting health-based rates that exceed 30% penalty that otherwise would apply to applicants with a coverage gap rating would make it more expensive for them to buy non-group plans, either generating more premiums from them or, more likely, diverting them from enrolling in the non-group market. If the permitted health surcharges were sufficiently high, the effect would be very close to a denial.  As noted above, the AHCA does not require states seeking this waiver to have any alternative method of access for people facing very high premiums based on their health.  The state would at least have to participate in the FIRSP (and it appears that the program operates in all states), but that mechanism only assists insurers when high-risk or high-cost people enroll, and people assessed a very high premium might not have an opportunity to enroll.

States electing this waiver would have tools to protect access for people with coverage gaps and preexisting conditions.  One option that has been mentioned by supporters would be to create a high-risk pool that could offer coverage to people facing a high health surcharge.  The bill would permit states to use monies from the Fund to support a high-risk pool, and the bill would appropriate an additional $8 billion for 2018 through 2023 that could be used to reduce premiums or other out-of-pocket costs for people assessed a higher premium because of the waiver to use health status as a factor.  States could use their share of the $8 billion to reduce premiums for high-risk pool coverage as an alternative for people who could not afford the health status surcharge for non-group coverage, and could use their general allocation from the Fund to support the costs of the pool if the $8 billion were to be insufficient or when it ends in 2023.

For states, the tradeoff would be balancing providing reasonable access to people with coverage gaps and preexisting conditions against the goal of lowering premiums for others.  A state could have the biggest impact on premiums for non-group coverage by permitting insurers to assess a health surcharge without limits and not providing an alternative means of access.  This would result in many people with coverage gaps and preexisting conditions being priced out of the market, which would not only lower claims costs immediately, but would also prevent them from establishing continuous coverage and migrating to non-group plans at regular rates after their enforcement periods end.  Possibly more likely is that states would take some steps to assist people subject to health rating from being effectively declined through high premiums.  Options could include establishing a high-risk pool with premiums that are more affordable than the health adjusted premiums people would be assessed under the waiver, limiting the health surcharges that insurers could assess, or using a portion of their share of the $8 billion to reduce premium costs to a more affordable level.  For states weighing these choices, as they improve access and affordability for people who would be subject to the health adjusted rates, they generally lessen the impact that the waiver would have on premiums overall.

Likely, the high-risk pool option would have the largest impact on non-group premiums of these options, because it would move the claims for some high-risk people outside of the non-group market, at least until the people established continuous coverage and moved to non-group plans with premiums not adjusted for their health.  The bill does not establish any parameters for a high-risk pool, such as the premiums that could be charged, what the coverage and cost sharing would be, and whether there would be any limits on coverage.  For example, it is not clear if a high-risk pool would need to offer essential health benefits, would be subject to provisions prohibiting dollar limits, or would be considered coverage for which people could receive a premium tax credit.  States would need to establish parameters in all of these areas.

CBO estimated that about one-half of people live in states that would seek a waiver to modify the essential health benefits, use health as a rating factor, or both.  About two-thirds of these people would live in states that would choose to make moderate changes to market regulations, which would result in a modest reduction in premiums. One-third of these people live in states that CBO assumed would choose to substantially modify the essential health benefits and allow health status rating in their non-group markets.14  In these states, CBO estimated that people in good health would face significantly lower premiums while people less healthy people would be unable to purchase comprehensive coverage at premiums similar to current law and might not be able to purchase coverage at all.15  Although the additional grant funds for states with waivers to use health status rating would lower premiums and out-of-pocket premiums, CBO found that the premium effects would be small because “. . . the funding would not be sufficient to substantially reduce the large increases in premiums for high-cost enrollees”16 .  CBO did not produce illustrative premiums for this scenario.

ADDRESSING FUNDING LIMITATIONS OVER TIME

A third challenge for states is that the annual appropriations to the Fund do not grow over time and end entirely after 2026, even though the underlying health care needs continue to grow.  For example, the cost of health care would continue to increase over the period, while the number of uninsured would also increase.  Adding to the increasing cost burden, the federal premium tax credits would grow more slowly than premium over time, shifting more costs to enrollees and reducing their impact on affordability.  The appropriations for the Fund also end in 2023 (for the $8 billion) and 2026 for the rest of the Fund.  At the same time, the state matching requirements for money from the Fund grow over time, from 7% in 2020 to 50% in 2026.  This means that states would need to invest an increasing amount of resources on policies and programs for which federal funds may end, perhaps abruptly, in the foreseeable future. Unless the federal government would agree to commit to appropriate funds several years in advance, states might be reluctant to make budget or program commits to programs that they may be unable to maintain without significant federal assistance.

Discussion

Overall, the AHCA would present states with a number of difficult problems and choices, and with limited resources with which to address them.  The bill would reduce federal contributions for Medicaid and federal payments to subsidize non-group insurance by about $1 trillion dollars, while repealing the federal tax penalty for not having health insurance would increase non-group premiums significantly above current levels.  These provisions would disproportionately affect the affordability of coverage and care for lower income and older people, and would cause millions of people to become uninsured.

States would be eligible for $123 billion in grant funds to help offset these impacts, but would face difficult tradeoffs. If states use most of their grant funds to reduce premiums, as CBO has assumed, there would not be funds left to address other needs, such as helping lower income and older people facing higher premium and out-of-pocket costs and health care providers who would be serving a growing number of uninsured people.  States also would have the options of reducing covered benefits or allowing insurers to increase premiums for applicants with pre-existing conditions, each of which would lower premiums but would raise out-of-pocket costs for people with health problems.

State also would need to find an increasing amount of matching state funds to be eligible for the federal grant fund, and could face uncertainty if federal funds are not appropriated in advance.  States choosing not to participate (by not providing matching funds) would be left without resources to address the higher premiums and affordability issues that would arise.

See the original article Here.

Source:

Claxton G., Pollitz K., Levitt L. (2017 June 5). State flexibility to address health insurance challenges under the american health care act, h.r. 1628 [Web blog post]. Retrieved from address http://www.kff.org/health-reform/issue-brief/state-flexibility-to-address-health-insurance-challenges-under-the-american-health-care-act-h-r-1628/


HSAs vs. HRAs: Things Employers Should Consider

Great article from our partner, United Benefit Advisors (UBA) by Bob Bentley on what employers should know about choosing between HSAs and HRAs.

With health care costs and insurance premiums continuing to rise, employers are looking for ways to reduce their insurance expenses. That usually means increasing medical plan deductibles. According to the latest UBA Health Plan Survey, the average in-network single medical plan deductible increased from $2,031 in 2015 to $2,127 in 2016. But shifting costs to employees can be detrimental to an employer’s efforts to attract and retain top talent. Employers are looking for solutions that reduce their costs while minimizing the impact on employees.

One way employers can mitigate increasing deductibles is by packaging a high-deductible health plan with either a health savings account (HSA) contribution or a health reimbursement arrangement (HRA). Either can be used to bridge some or all of the gap between a lower deductible and a higher deductible while reducing insurance premiums, and both offer tax benefits for employers and employees. However, there are advantages and disadvantages to each approach that employers need to consider.

Health Savings Account (HSA) General Attributes

  • The employee owns the account and can take it when changing jobs.
  • HSA contributions can be made by the employer or employee, subject to a maximum contribution established by the government.
  • Triple tax advantage – funds go in tax-free, accounts grow tax-free, and withdrawals are tax-free as long as they are for qualified expenses (see IRS publication 502).
  • Funds may accumulate for years and be used during retirement.
  • The HSA must be paired with an IRS qualified high-deductible health plan (QHDHP); not just any plan with a deductible of $1,300 or more will qualify.

HSA Advantages

  • Costs are more predictable as they are not related to actual expenses, which can vary from year to year; contributions may also be spread out through the year to improve cash flow.
  • Employees become better consumers since there is an incentive to not spend the money and let it accumulate. This can result in an immediate reduction in claims costs for a self-funded plan.
  • HSAs can be set up with fewer administration costs; usually no administrator is needed, and no ERISA summary plan description (SPD) is needed.
  • The employer is not held responsible by the IRS for ensuring that the employee is eligible and that the contribution maximums are not exceeded.

HSA Disadvantages

  • Employees cannot participate if they’re also covered under a non-qualified health plan, which includes Tricare, Medicare, or even a spouse’s flexible spending account (FSA).
  • Employees accustomed to copays for office visits or prescriptions may be unhappy with the benefits of the QHDHP.
  • IRS rules can be confusing; IRS penalties may apply if the employee is ineligible for a contribution or other mistakes are made, which might intimidate employees.
  • Employees may forgo treatment to avoid spending their HSA balance or if they have no HSA funds available.

Health Reimbursement Arrangement (HRA) General Attributes

  • Only an employer can contribute to an HRA; employees cannot.
  • The employer controls the cash until a claim is filed by the employee for reimbursement.
  • HRA contributions are tax deductible to the employer and tax-free to the employee.
  • To comply with the Patient Protection and Affordable Care Act (ACA), an HRA must be combined with a group medical insurance plan that meets ACA requirements.

HRA Advantages

  • HRAs offer more employer control and flexibility on the design of the HRA and the health plan does not need to be HSA qualified.
  • The employer can set it up as “use it or lose it” each year, thus reducing funding costs.
  • An HRA is compatible with an FSA (not just limited-purpose FSA).
  • Depending on the employer group, HRAs can sometimes be less confusing for employees, particularly if the plan design is simple.
  • HRA funds revert to the employer when an employee leaves – which might increase employee retention.

HRA Disadvantages

  • Self-employed individuals cannot participate in HRA funding.
  • There is little or no incentive for employees to control utilization since funds may not accumulate from year to year.
  • More administration may be necessary – HRAs are subject to ERISA and COBRA laws.
  • HRAs could raise HIPAA privacy concerns and create the need for policies and testing.

Both HSAs and HRAs can be of tremendous value to employers and employees. As shown, there are, however, a number of considerations to determine the best program and design for each situation. In some cases, employers may consider offering both, allowing employees to choose between an HSA contribution and a comparable HRA contribution, according to their individual circumstances.

For a comprehensive chart that compares eligibility criteria, contribution rules, reimbursement rules, reporting requirements, privacy requirements, applicable fees, non-discrimination rules and other characteristics of account-based plans, request UBA’s Compliance Advisor,  “HRAs, HSAs, and Health FSAs – What’s the Difference?”.

For information on modest contribution strategies that are still driving enrollment in HSA and HRA plans, read our breaking news release.

For a detailed look at the prevalence and enrollment rates among HSA and HRA plans by industry, region and group size, view UBA’s "Special Report: How Health Savings Accounts Measure Up", to understand which aspects of these accounts are most successful, and least successful.

See the original article Here.

Source:

Bentley B. (2017 May 12). HSAs vs. HRAs: things employers should consider[Web blog post]. Retrieved from address http://blog.ubabenefits.com/hsas-vs.-hras-things-employers-should-consider


HSAs and Employer Responsibilities

Do you know all the responsibilities an employer will face when dealing with HSAs? If not, take a look at this great article from our partner, United Benefit Advisors (UBA) by Vicki Randall and find out about all the HSA responsibilities facing employers.

It’s no secret that one of the primary agenda items of the new Republican administration is to repeal the Patient Protection and Affordable Care Act (ACA) and to sign into law a plan that they feel will be more effective in managing health care costs. Their initial attempt at a new plan, called the American Health Care Act (AHCA), included an increased focus on leveraging health savings accounts (HSAs) to accomplish this goal. As the plan gets debated and modified in Congress, we do not know whether the role of HSAs will be expanded or not, but they will continue to be a part of the landscape in some shape or form.

HSAs first came into existence in 2003 and they have been gaining momentum as a way to deal with increasing health care costs ever since. If you, as a plan sponsor, do not already offer a health plan compatible with an HSA, chances are you’ve at least discussed them during your annual plan reviews. So, what exactly is an HSA and what is an employer’s responsibility relating to one?

An HSA is a tax-favored account established by an individual to pay for certain medical expenses incurred by account holders and their spouses and tax dependents. Anyone can make a contribution to an eligible Individual’s HSA. This includes the individual’s employer. However, if employers contribute to participant HSAs, employers must:

  1. Ensure their health plan meets high-deductible health plan (HDHP) requirements,
  2. Determine eligibility,
  3. Establish contribution method,
  4. Provide W-2 reporting, and
  5. Confirm employer involvement in the HSA does not create an ERISA plan, or cause a prohibited transaction.

High-Deductible Health Plan Requirements

Plan sponsors should make sure their plan meets certain HDHP requirements before making contributions to participants’ HSAs.

Characteristics of an HDHP

An HDHP is a health plan that has statutorily prescribed minimum deductible and maximum out-of-pocket limits. The limits are adjusted annually for inflation.

For example, for 2017, the limits for self-only coverage are:

  • Minimum Deductible: $1,300
  • Maximum Out-of-Pocket: $6,550

The limits for family coverage (i.e., any coverage other than self-only coverage) are twice the applicable amounts for self-only coverage. The limits are adjusted annually for inflation and, for a given year, are published by the IRS no later than June 1 of the preceding year. In addition, an HDHP cannot pay any benefits until the deductible is met. The only exception to this rule is benefits for preventive care.

Eligibility

Eligible Individuals can make or receive contributions to their HSAs. A person is an eligible individual if he or she is covered by an HDHP and is not covered by any other plan that pays medical benefits, subject to certain exceptions.

Employer Contribution Methods

Employers that contribute to the HSAs of their employees may do so inside or outside of a cafeteria (Section 125) plan. The contribution rules are different for each option.

Contributions Outside of a Cafeteria Plan

When contributing to any employee’s HSA outside of a cafeteria plan, an employer must make comparable contributions to the HSAs of all comparable participating employees.

Contributions Made Through a Cafeteria Plan

HSA contributions made through a cafeteria plan do not have to satisfy the comparability rules, but are subject to the Section 125 non-discrimination rules for cafeteria plans. HSA employer contributions will be treated as being made through a cafeteria plan if the cafeteria plan permits employees to make pre-tax salary reduction contributions.

Employer HSA Contribution Amounts

Contributions from all sources cannot exceed certain annual limits prescribed by the IRS. Although employer contributions cannot exceed the applicable limits, employers are only responsible for determining the following with respect to an employee’s eligibility and maximum annual contribution limit on HSA contributions:

  • Whether the employee is covered under an HDHP or low-deductible health plan, or plans (including health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) sponsored by that employer; and
  • The employee’s age (for catch-up contributions). The employer may rely on the employee’s representation as to his or her date of birth.

When employers contribute to the HSAs of their employees and retirees, the amount of the contribution is excludable from the eligible individual’s income and is deductible by the employer provided they do not exceed the applicable limit. Withholding for income tax, FICA, FUTA, or RRTA taxes is not required if, at the time of the contribution, the employer reasonably believes that contribution will be excludable from the employee’s income.

Employer Reporting Requirements

An employer must report the amount of its contribution to an employee’s HSA in Box 12 of the employee’s W-2 using code W.

Design and Operational Considerations

Employers should make sure that their involvement in the HSA does not create an ERISA plan, or cause them to become involved in a prohibited transaction. To ensure that contributions will not cause the health plan to become subject to ERISA, certain restrictions exist that employers should be aware of and follow. Employer contributions to an HSA will not cause the employer to have established a health plan subject to ERISA provided:

  • The establishment of the HSA is completely voluntary on the part of the employees; and
  • The employer does not:
    • limit the ability of eligible individuals to move their funds to another HSA or impose conditions on utilization of HSA funds beyond those permitted under the code;
    • make or influence the investment decisions with respect to funds contributed to an HSA;
    • represent that the HSA is an employee welfare benefit plan established or maintained by the employer;
    • or receive any payment or compensation in connection with an HSA.

See the original article Here.

Source:

Randall V. (2017 May 25). HSAs and employer responsibilities [Web blog post]. Retrieved from address http://blog.ubabenefits.com/hsas-and-employer-responsibilities


Kaiser Health Tracking Poll - May 2017: The AHCA's Proposed Changes to Health Care

Find out how the American public feels about the American Health Care Act in this great article by Kaiser Family Foundation.

KEY FINDINGS:
  • With Congress currently discussing the American Health Care Act (AHCA), a plan that would repeal and replace the 2010 health care law, this month’s Kaiser Health Tracking Poll finds that more Americans have an unfavorable view of the plan than a favorable one (55 percent vs. 31 percent, respectively). The share with favorable views of the AHCA is about 20 percentage points lower than the share with favorable views (49 percent) of the 2010 Affordable Care Act (ACA). The majority of Republicans (67 percent) have a favorable view of the AHCA.
  • This month’s survey finds the public has increasingly negative views of how their health care will be affected by proposed changes. In December 2016, after the presidential election but before the release of the Republican plan, less than one-third of the public thought their health care would get worse if the 2010 health care law was repealed. This month’s survey, fielded after House Republicans passed the AHCA, finds larger shares say the cost of health care for them and their family (45 percent), their ability to get and keep health insurance (34 percent), and the quality of their own health care will get worse if Congress passes the AHCA (34 percent).
  • About one in ten (8 percent) think the Senate should pass the AHCA as is, without making any changes to the plan passed by the House. Similar shares – about one-fourth of the public – think the Senate should make either major changes to the legislation (26 percent) or minor changes to it (24 percent), while about three in ten (29 percent) say they do not think the Senate should pass this bill.

The American Health Care Act

On May 4, 2017, the U.S. House of Representatives passed the American Health Care Act (AHCA), the House Republicans’ plan to repeal and replace the Affordable Care Act (ACA).1 With the Senate currently debating the plan and discussing their own approach, the most recent Kaiser Health Tracking Poll finds more Americans have an unfavorable view of the AHCA than a favorable one (55 percent vs. 31 percent, respectively). There is also a considerable enthusiasm gap with a larger share saying that they have a “very unfavorable” view (40 percent) than saying they have a “very favorable” view (12 percent).

MAJORITY OF REPUBLICANS HOLD A FAVORABLE VIEW OF THE AHCA

The AHCA has solid support among the Republican base. Two-thirds of Republicans say they have a favorable view of the plan including three in ten (29 percent) who say they have a “very favorable” view.

FEW SEE AHCA AS FULFILLING PRESIDENT TRUMP’S PROMISES ABOUT HEALTH CARE

Three-fourths (76 percent) of the public thinks the health care plan recently passed by the House does not fulfill most of the promises President Trump has made about health care while 14 percent say it fulfills most or all of his promises.

This viewpoint is shared regardless of party identification with majorities of Democrats (86 percent), independents (79 percent), and Republicans (59 percent) saying the AHCA fulfills some or none of the promises President Trump has made about health care.

MORE AMERICANS VIEW THE ACA FAVORABLY THAN THE AHCA

The Kaiser Family Foundation has been tracking public opinion on the ACA since its passage in 2010. This month’s survey continues to find the public leans more favorable than unfavorable in their views of the 2010 health care law, with 49 percent expressing a favorable view of the ACA compared to 42 perecent expressing an unfavorable view.

In fact, more of the public is favorable in their overall views of the ACA than in their views of the Republican plan to replace the 2010 health care law. About half of Americans have a favorable view of the ACA compared to about three in ten who have a favorable view of the new Republican plan.

Partisanship is the main driver behind support for either the ACA or the AHCA, with a majority of Republicans viewing the AHCA favorably (67 percent), while a majority of Democrats view the ACA favorably (78 percent). More independents view the ACA favorably (48 percent) than view the AHCA favorably (30 percent).

Despite the lack of support for the House Republican plan, a majority of the public (74 percent) say they think it is either “very likely” (37 percent) or “somewhat likely” (36 percent) that the president and Congress will repeal and replace the ACA. About one-fourth of the public say it is either “not too likely” (15 percent) or “not likely at all” (9 percent).

MOST AMERICANS WANT CHANGES TO THE AHCA BEFORE SENATE PASSES THE BILL

About one in ten (8 percent) think the Senate should pass the AHCA as is, without making any changes to the plan passed by the House. Similar shares – about one-fourth of the public – think the Senate should make either major changes to the legislation (26 percent) or minor changes to it (24 percent), while about three in ten say they do not think the Senate should pass this bill.

Attitudes toward what the Senate should do when it comes to the AHCA are largely driven by partisanship with most Republicans (60 percent) saying they think it should pass as is (15 percent) or with minor changes (45 percent) while half of Democrats (51 percent) say the Senate should not pass this bill. Independents are more divided but one-third (34 percent) say the Senate should make major changes to the bill.

ATTITUDES TOWARDS AHCA PROVISIONS

The AHCA – like other health care plans – includes complex policies that the public may not fully understand or pay attention to. In an effort to examine general attitudes towards several of the more well-known provisions, we ask respondents whether after hearing about the specific provision they are “more likely” or “less likely” to support the plan. Much like overall attitudes towards the AHCA, various provisions of the law asked about in this survey do not garner large levels of support from the public. When asked whether individual elements of the Republican replacement plan would make them “more likely” or “less likely” to support the plan, none of the elements receive a majority of the public saying it would make them “more likely” to support it.  The only provision that has a larger share of the public saying it makes them “more likely” than say it makes them “less likely” to support the law is allowing states to implement a Medicaid work requirement (42 percent compared to 28 percent).

There are several provisions currently included in the plan that a majority of the public say makes them “less likely” to support the legislation. These include allowing states to decide if health insurance companies can charge sick people more than healthy people if they haven’t had continuous coverage (65 percent), eliminating the individual mandate and instead allowing insurance companies to charge people 30% higher premiums for a year if they haven’t had continuous coverage (62 percent), allowing states to eliminate the essential health benefit requirement (60 percent), and making changes that would generally decrease what younger people pay for insurance and increase what older people pay (58 percent).

REPUBLICAN SUPPORT FOR SOME ASPECTS OF THE AHCA

There is some support for aspects of the AHCA among Republicans. For example, a majority of Republicans say that the Medicaid work requirement (75 percent) and federal funding for states to set up high-risk pools (59 percent) makes them more likely to support the plan. In addition, about four in ten Republicans say the same about the provisions which stop federal Medicaid payments to Planned Parenthood (45 percent), change Medicaid funding to a per capita cap or block grant system (45 percent), allow states to change the essential health benefits (42 percent), and end the funding for Medicaid expansion (40 percent).

PERCEIVED EFFECTS OF THE AHCA

Overall, about half of Americans say the quality of their own health care (48 percent) and their own ability to get and keep health insurance (47 percent) will stay about the same if the president and Congress pass the health care plan currently being discussed. When it comes to the cost of health care for them and their family, almost half say it will get worse (45 percent) while about one-third say it will stay about the same (36 percent) and 16 percent say it will get better.

Immediately following the 2016 presidential election and prior to the release of the Republican plan, most Americans thought that their health care would stay about the same if the 2010 health care law was repealed. Yet, in this month’s survey which was fielded after House Republicans passed the AHCA, larger shares say the cost of health care for them and their family, their ability to get and keep health insurance, and the quality of their own health care will get worse if Congress passes the AHCA.

See the original article Here.

Source:

Kirzinger A., Dijulio B., Hamel L., Sugarman E., Brodie M. (2017 May 31). Kaiser health tracking poll - may 2017: the AHCA's proposed changes to health care [Web blog post]. Retrieved from address http://www.kff.org/health-costs/report/kaiser-health-tracking-poll-may-2017-the-ahcas-proposed-changes-to-health-care/


Insurer Participation on ACA Marketplaces, 2014-2017

Have you wondered how the health insurance marketplace has fared since the passing of the ACA. Here is a really good article by Ashley Semanskee and Cynthia Cox highlighting the impact the ACA has had on insurance marketplaces across the country.

Since the Affordable Care Act health insurance marketplaces opened in 2014, there have been a number of changes in insurance participation as companies entered and exited states and also changed their footprint within states. Our earlier analyses of insurer participation and some notable company exits can be found here.

In 2014, there were an average of 5.0 insurers participating in each state’s ACA marketplace, ranging from 1 company in New Hampshire and West Virginia to 16 companies in New York. 2015 saw a net increase in insurer participation, with an average of 6.0 insurers per state, ranging from 1 in West Virginia to 16 in New York. In 2016, insurer participation changed in a number of states due to a combination of some new entrants and the failure of a number of CO-OP plans. In 2016, the average number of companies per state was 5.6, ranging from 1 in Wyoming to 16 in Texas and Wisconsin.

In 2017, insurance company losses led to a number of high profile exits from the market. The average number of companies per state in 2017 was 4.3, ranging from 1 company in Alabama, Alaska, Oklahoma, South Carolina and Wyoming to 15 companies in Wisconsin. In 2017, 58% of enrollees (living in about 30% of counties) had a choice of three or more insurers, compared to 85% of enrollees (living in about 63% of counties) in 2016.

Insurer participation varies greatly within states, and rural areas tend to have fewer insurers. On average, metro-area counties have 2.5 insurers participating in 2017, compared to 2.0 insurers in non-metro counties. In 2017, 87% of enrollees lived in metro counties.

There are a number of areas in the country with just one exchange insurer. In 2017, about 21% of enrollees (living in 33% of counties) have access to just one insurer on the marketplace (up from 2% of enrollees living in 7% of counties in 2016). Often, when there is only one insurer participating on the exchange, that company is a Blue Cross Blue Shield or Anthem plan. Before the ACA, many state individual markets were often dominated by Blue Cross Blue Shield plans.

See the original article Here.

Source:

Semanskee A., Cox C. (2017 June 1). Insurer participation on ACA marketplaces, 2014-2017 [Web blog post]. Retrieved from address http://www.kff.org/health-reform/issue-brief/insurer-participation-on-aca-marketplaces-2014-2017/


Why and How to Avoid High-Risk Pools for Americans with Preexisting Conditions

With the passing of the AHCA many people with preexisting conditions can now be put into a high-risk pool by insurers. Here is a great article by Jean P. Hall from Common Wealth Fund on how Americans with preexisting conditions can avoid being put into a high-risk pool.

The American Health Care Act (AHCA)—the U.S. House of Representatives’ bill to repeal and replace the Affordable Care Act (ACA)—would allow states to apply for waivers to reduce existing consumer protections and provide funding for states to set up high-risk pools or other mechanisms for people with preexisting conditions who have lapses in their coverage. In previous posts, I have talked about the high costs and meager coverage associated with high-risk pools that operated before the ACA and the fact that their use did not significantly reduce costs for other people who buy their own health plans in the individual market. Moreover, the Congressional Budget Office analysis of the AHCA finds that the funding it makes available to states for the high-risk pools is inadequate.

In a recent commentary for Annals of Internal Medicine on high-risk pools, I note that people with preexisting conditions constitute roughly 51 percent of Americans. Here, let’s explore who might end up in a high-risk pool, what their experiences might be, and policymakers’ alternative options for stabilizing the marketplaces.

The U.S. Department of Health and Human Services (HHS) estimated that 23 percent of Americans with preexisting conditions had a period of uninsurance in 2014, often because of job changes or periods of financial instability. Young people reaching age 26 who transition off their parents’ coverage also sometimes experienced gaps in coverage—and some of them have preexisting conditions. Should the AHCA become law, individuals with preexisting conditions and lapses in coverage who live in states that obtain waivers to allow insurers to charge people based on their health would likely end up in high-risk pools.

Research has shown that the greater out-of-pocket costs and limited coverage associated with high-risk pools led to enrollees forgoing needed care and experiencing worse outcomes. In fact, before the ACA, high-risk pool enrollees in Kansas were eight times more likely to transition to federal disability programs than members of the general population with these conditions.

Current Medicaid beneficiaries also would be affected. The Congressional Budget Office analysis of the AHCA estimated that 14 million fewer people would have Medicaid coverage as a result of the federal funding cuts. Many of them would be forced to look to the individual insurance market to gain coverage, yet half of these former Medicaid beneficiaries would have serious preexisting conditions. Given the historically very high costs for consumers associated with high-risk pools, the majority of these individuals would likely go uninsured instead. Many would end up using the emergency room to access care once their needs become urgent, and their uncompensated health care costs would be borne by others with insurance. Some would likely suffer serious health consequences, even preventable deaths.

Supporters of the AHCA suggest that the legislation gives states more options to design coverage for their citizens, thereby better meeting their needs. Section 1332 of the ACA, however, already gives states a great deal of flexibility in designing their marketplaces while still providing comprehensive and affordable coverage. Indeed, both Alaska and Minnesota are pursuing 1332 waiver programs to specifically address concerns about high-risk individuals by implementing reinsurance programs, rather than segregating people with preexisting conditions into high-risk pools. These programs would maintain the overall larger pool of insured people in the state while protecting insurers against catastrophic costs. Reinsurance programs, such as the one temporarily instituted under the ACA for its first three years, have historically been proven to bring down premium costs for everyone. Given that reinsurance programs are a more effective and evidence-based mechanism for stabilizing the individual insurance market, state policymakers should strongly consider pursuing these programs under the existing ACA rules instead of establishing high-risk pools. And, federal policymakers should acknowledge and support this mechanism to strengthen the marketplace, bring down costs, and encourage participation by insurers.

See the original article Here.

Source:

Hall J. (2017 June 5). Why and how to avoid high-risk pools for americans with pre-existing conditions [Web blog post]. Retrieved from address http://www.commonwealthfund.org/publications/blog/2017/jun/how-and-why-to-avoid-high-risk-pools


What Challenges Could State Insurance Markets Face Under the House’s American Health Care Act?

Here is a great article by Kaiser Family Foundation on how states' insurance markets will be impacted with the passing of the American Health Care Act (AHCA).

A new brief from the Kaiser Family Foundation outlines options for state insurance markets and challenges that states could face under the House’s replacement for the Affordable Care Act (ACA).

Passed by the House on May 4 and now under consideration by the Senate, the American Health Care Act (AHCA) would reduce the federal government’s role and resources in providing health insurance coverage – particularly for people with low or moderate incomes — while expanding authority and financial responsibility of the states.

The new brief describes provisions of the AHCA over which states have discretion, and it discusses challenges that the bill presents states by significantly reducing both federal payments to Medicaid and funding for subsidies in the non-group insurance market, and by repealing the requirement that individuals have health insurance, a move that could drive up premiums.

The House health bill establishes two main ways for states to address these issues. States may use money from a new Patient and State Stability Fund to offset a portion of the federal spending reductions, and they may obtain a waiver to modify important insurance provisions.

According to the brief, issues and tradeoffs states could face under the AHCA include:

  • Competing demands for reduced federal funding. Resources available through the Patient and State Stability Fund would be less than the spending reductions called for in the House bill.
  • Funding limitations over time. Annual appropriations to the Patient and State Stability Fund don’t grow over time and end entirely after 2026.
  • Waiving essential health benefits vs. limiting availability of coverage. States could lower premium rates in the individual market by using an essential health benefits waiver to reduce the benefits that policies are required to cover. However, insurers may then choose to charge higher premiums to cover important benefits that are no longer defined as essential health benefits, or they may choose not to cover those benefits.
  • Waiving community rating vs. protecting access for people who are sick. A waiver to allow insurers to use health in rating applicants with a coverage gap is another way that states could seek to lower premiums. The bill provides states with options for covering individuals with pre-existing conditions and a gap; however, states would risk some individuals being priced out of the market.

See the original article Here.

Source:

Author (2017 June 5). What challenges could state insurance markets face under the house's american health care act [Web blog post]. Retrieved from address http://www.kff.org/health-reform/press-release/what-challenges-could-state-insurance-markets-face-under-the-houses-american-health-care-act/


Gaps in Coverage Among People With Pre-Existing Conditions

The passing of the American Care Act (ACA) in 2010 brought many changes to the healthcare marketplace. One of the most important changes that this legislation brought was coverage for people with pre-existing conditions. This legislation allowed people with pre-existing conditions to gain access to health care without facing higher premiums. But with the passing of the AHCA the market for pre-existing conditions is on the verge of changing. Check out this great article from Kaiser Family Foundation on how the AHCA will effect people with pre-conditions.

The American Health Care Act (AHCA), which has passed the House of Representatives, contains a controversial provision that would allow states to waive community rating in the individual insurance market. In this brief we estimate the number of people with pre-existing conditions who might be affected by such a policy.

How the State Waiver Provision Works

Under the provision, insurers in states with community rating waivers could vary premiums by health status for enrollees who have had a gap in insurance of 63 or more consecutive days in the last year. The higher (or lower) premiums due to health status would apply for an entire plan year (or the remainder of the year in case of people signing up during a special enrollment period), at which point enrollees would be eligible for a community-rated premium unrelated to their health.

States waiving community rating would be required to set up a mechanism to subsidize the cost of high-risk enrollees, such as a high-risk pool, or participate in a reinsurance arrangement that makes payments directly to insurers. States are not required to set up an alternative source of coverage for people who face higher premiums based on their health.

The bill makes $100 billion available to all states for a variety of purposes, including high-risk pools, reinsurance programs, and cost-sharing subsidies. An additional $15 billion is made available for a federal invisible risk-sharing program, which would be similar to a reinsurance arrangement. Another $15 billion is earmarked for spending on maternal and newborn care, mental health, and substance abuse services for the year 2020.  The AHCA also allocates $8 billion over five years to states that implement community rating waivers; these resources can be used to help reduce premiums or pay out-of-pocket medical expenses for people rated based on their health status.

Premiums varied significantly based on health status in the individual market before the Affordable Care Act (ACA) prohibited that practice beginning in 2014. Insurers in nearly all states were also permitted to decline coverage to people with pre-existing conditions seeking individual market insurance. We estimate that 27% of non-elderly adults have a condition that would have led to a decline in coverage in the pre-ACA market. While insurers would have to offer insurance to everyone under the AHCA, people with declinable pre-existing conditions would likely face very large premium surcharges under an AHCA waiver, since insurers were unwilling to cover them at any price before the ACA.

How Many People Might be Affected by Community Rating Waivers?

The effect of a community rating waiver would depend crucially on how many people with pre-existing conditions have gaps in insurance that would leave them vulnerable to higher premiums.

Using the most recent National Health Interview Survey (NHIS), we estimate that 27.4 million non-elderly adults nationally had a gap in coverage of at least several months in 2015. This includes 6.3 million people (or 23% of everyone with at least a several-month gap) who have a pre-existing condition that would have led to a denial of insurance in the pre-ACA individual market and would lead to a substantial premium surcharge under AHCA community rating waiver.1

Among the 21.1 million people who experienced a gap in coverage and did not have a declinable pre-existing condition, some also had pre-existing conditions (such as asthma, depression, or hypertension) that would not have resulted in an automatic denial by individual market health insurers pre-ACA but that nonetheless could also result in a premium surcharge.

In many cases, people uninsured for several months or more in a year have been without coverage for a long period of time. In other cases, people lose insurance and experience a gap as a result of loss of a job with health benefits or a decrease in income that makes coverage less affordable. Young people may have a gap in coverage as they turn 26 and are unable to stay on their parents’ insurance policies. Medicaid beneficiaries can also have a gap if their incomes rise and they are no longer eligible for the program.

Through expanded Medicaid eligibility and refundable tax credits that subsidized premium in insurance marketplaces, the ACA has substantially reduced coverage gaps. In 2013, before the major provisions of the ACA went into effect, 38.6 million people had a gap of several months, including 8.7 million with declinable pre-existing conditions.

Some people with a gap will ultimately regain coverage through an employer-based plan or Medicaid, and would not be subject to premium surcharges based on their health. However, anyone who has been uninsured for 63 days or more who tries to buy individual market insurance in a state with a community rating waiver would be subject to medical underwriting and potential premium surcharges based on their health.

Uncertainty Around the Estimate

There are a variety reasons why our estimates might understate or overstate number of people with pre-existing conditions who could be subject to premium surcharges under the AHCA.

People with health conditions would have a strong incentive under an AHCA waiver to maintain continuous coverage in order to avoid being charged premiums that could potentially price them out of the insurance market altogether. The question is how many would be able to do so, given the fact that the premium tax credits provided for in the AHCA would be 36% lower on average for marketplace enrollees than under the ACA and would grow more slowly over time. In 2013, before tax credits for individual insurance were available and the ACA’s Medicaid expansion took effect, the number of people with pre-existing conditions who experienced a gap in coverage was 41% higher. Among people with individual market insurance in 2015, we estimate that 3.8 million adults (representing 25% of all adult enrollees) had a pre-existing condition that would have led to a decline before the ACA. These individuals would not be subject to premium surcharges under AHCA community rating waivers, so long as they maintain continuous coverage.  Because individual market subsidies would be significantly reduced under the AHCA, these individuals could face added challenges remaining continuously covered.

About 49% of people with pre-existing conditions who had a gap in coverage in 2015 had incomes at or below 138% of the poverty level, and some of them could be eligible for Medicaid (depending on whether their state has expanded eligibility under the ACA and what eligibility rules are in states that have not expanded). They would not face any coverage restrictions associated with their health status in Medicaid. However, under the AHCA enhanced federal funding for expanding Medicaid would be repealed, and federal matching funds would be capped. The Congressional Budget Office projects that 14 million fewer people would be enrolled in Medicaid by 2026. So, while some people we identify as having a coverage gap would be eligible for Medicaid under the AHCA, many more people currently enrolled in Medicaid would lose that coverage under the AHCA and be uninsured. They would be eligible for premium tax credits, but the AHCA’s subsidies do not scale by income so individual market insurance would likely be unaffordable for people who are poor, including those with pre-existing conditions.

There is also significant uncertainty surrounding how many states would seek to waive community rating under the AHCA. Some states might do so to roll back what they consider to be excessive regulation of the insurance market initiated by the ACA and preserved under the AHCA. Other states might come under pressure to implement waivers from insurers who believe the market would be unstable, given that the AHCA repeals the ACA’s individual mandate. What states decide to do may ultimately have the greatest effect on how many people with pre-existing conditions face potentially unaffordable insurance premiums.

 

See the original article Here.

Source:

Levitt L., Damico A., Claxton G., Cox C., Pollitz K. (2017 May 17). Gaps in coverage among people with pre-existing conditions [Web blog post]. Retrieved from address http://www.kff.org/health-reform/issue-brief/gaps-in-coverage-among-people-with-pre-existing-conditions/?utm_campaign=KFF-2017-May-Pre-Ex-AHCA-Coverage-Gap&utm_medium=email&_hsenc=p2ANqtz-927vhm-poW6B4a5Qht6venQyS6-j9mRL1ecYqhgHd3bWp8UT-yBNineOJVRUwxXkUvJ3TalIEo_JBE9QE5o-n_pzrwyA&_hsmi=52007627&utm_content=52007627&utm_source=hs_email&hsCtaTracking=148c8fd6-8ba2-4f02-a508-45b17365a226|3ae33023-7ef1-44a9-a84c-b2a8d055e6bd


Compliance Recap May 2017

Make sure to stay up-to-date with the most recent rules and regulations from May regarding healthcare legislation thanks to our partners at United Benefit Advisors (UBA).

May was an active month in the employee benefits world. On May 4, 2017, the U.S. House of Representatives passed a bill titled the “American Health Care Act of 2017” (AHCA) to repeal and replace the Patient Protection and Affordable Care Act (ACA).

The Internal Revenue Service (IRS) released its Employer Shared Responsibility affordability percentage indexed for 2018. The U.S. Citizenship and Immigration Services (USCIS) issued redesigned permanent resident cards and employment authorization documents. The USCIS also issued a warning about phone scams targeting immigrants. The Occupational Safety and Health Administration (OSHA) announced that it will delay electronic submission of injury and illness records.

The IRS released dollar limits for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2018. The IRS released guidance confirming that health flexible spending arrangements (health FSAs) cannot reimburse Medicare premiums. The IRS also released a memo regarding tax treatment of benefits paid under an arrangement that combines a self-funded fixed indemnity heath plan and wellness program.

The Centers for Medicare & Medicaid Services (CMS) announced that it will end the Federally Facilitated SHOP Exchange (FF-SHOP) at the end of 2017. The U.S. Department of Labor (DOL) issued an advisory opinion on an employee welfare benefit plan maintained by an association of employers. The U.S. Supreme Court declined to take an opt-out arrangement case, leaving intact a lower court’s decision that opt-out payments must be included in overtime calculations under the Fair Labor Standards Act (FLSA).

UBA Updates

UBA released three new advisors in May: • House Passes AHCA Bill in

  • House Passes AHCA Bill in First Step to Repeal and Replace the ACA
  • Frequently Asked Questions About Employees’ Reduction in Hours
  • What Qualifying Events Trigger COBRA?

The House Passes AHCA Bill in First Step to Repeal and Replace the ACA

On May 4, 2017, the U.S. House of Representatives passed House Resolution 1628, a reconciliation bill aimed at "repealing and replacing" the ACA. The AHCA will now be sent to the Senate for debate, where amendments can be made, prior to the Senate voting on the bill.

It is widely anticipated that in its current state the AHCA is unlikely to pass the Senate. Employers should continue to monitor the text of the bill and should refrain from implementing any changes to group health plans in response to the current version of the AHCA.

IRS Releases Employer Shared Responsibility Affordability Percentage Indexed for 2018

The Internal Revenue Service (IRS) released its Revenue Procedure 2017-36 that sets the required contribution percentage to determine whether employer-sponsored health coverage is affordable at 9.56 percent for calendar year 2018.

USCIS Issues Redesigned Green Cards and Employment Authorization Documents

The U.S. Citizenship and Immigration Services (USCIS) began issuing the new Permanent Resident Cards (also known as Green Cards) on May 1, 2017. The new cards incorporate enhanced graphics and fraud-resistant security features. These new cards are also part of an ongoing effort between USCIS, U.S. Customs and Border Protection, and U.S. Immigration and Customs Enforcement to enhance document security and deter counterfeiting and fraud.

The new Green Cards and Employment Authorization Documents (EADs):

  • Display the individual’s photos on both sides • Show a unique graphic image and color palette:
    • Green Cards will have an image of the Statue of Liberty and a predominately green palette
    • EAD cards will have an image of a bald eagle and a predominately red palette
  • Have embedded holographic images
  • No longer display the individual’s signature

Also, Green Cards will no longer have an optical stripe on the back.

Some Green Cards and EADs issued after May 1, 2017, may still display the existing design format as USCIS will continue using existing card stock until current supplies are depleted. For more information about the Green Card application process, please visit USCIS.gov/greencard.

USCIS Issues a Warning on Phone Scam Targeting U.S. Immigrants

U.S. immigrants have been targeted by a phone scam that appears as if it is from the Canadian government’s Immigration, Refugees, and Citizenship Canada (IRCC) call center (1-888-242-2100). Recipients of these calls are advised to hang up immediately and check their status by:

  • Making an InfoPass appointment at http://infopass.uscis.gov, or
  • Using myUSCIS to find up-to-date information about their application, or
  • Calling the USCIS National Customer Service Center at 1-800-375-5283.

Scam email or phone calls should be reported to the Federal Trade Commission at http://1.usa.gov/1suOHSS. Suspicious emails may be forwarded to the USCIS webmaster at uscis.webmaster@uscis.dhs.gov. The USCIS will review the emails received and share them with law enforcement agencies as appropriate. Visit the Avoid Scams Initiative at www.uscis.gov/avoid-scams for more information on common scams and other important tips.

OSHA Proposes to Delay Electronic Submission of Injury and Illness Records

In 2016, the Occupational Safety and Health Administration (OSHA) announced that certain high-risk employers of 20 or more employees and employers with 250 or more employees must electronically file Form 300A for workplace illnesses and injuries that occurred in calendar year 2016.

OSHA recently posted a notice on its website stating that “OSHA is not accepting electronic submission of injury and illness logs at this time and intends to propose extending the July 1, 2017 date by which certain employers are required to submit the information from their completed 2016 form 300A electronically.” It should be noted that the requirement to keep records has not changed; only the method in which they are submitted is under scrutiny.

IRS Releases 2018 Amounts for HSAs 

The IRS released Revenue Procedure 2017-37 that sets the dollar limits for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2018. For

For calendar year 2018, the annual contribution limit for an individual with self-only coverage under an HDHP is $3,450, and the annual contribution limit for an individual with family coverage under an HDHP is $6,900. For

For calendar year 2018, a “high deductible health plan” is defined as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,650 for self-only coverage or $13,300 for family coverage.

IRS Releases Information Letter to Confirm that FSAs Cannot Reimburse Medicare Premiums

The IRS released its Information Letter Number 2017-0004 to confirmed that a health flexible spending arrangement (health FSAs) cannot reimburse Medicare premium expenses. The IRS cited its Publication 969 which states that an FSA cannot reimburse health insurance premium payments. Because Medicare premiums are premiums for other health coverage, Medicare premiums are not FSA-reimbursable expenses.

IRS Releases Memo Regarding Tax Treatment of Benefits Paid by Self-Funded Health Plans

On May 12, 2017, the IRS released a Memorandum to address the taxability of benefits paid under an arrangement that combines a self-funded fixed indemnity heath plan and wellness program. The IRS specifically refutes the claim that these arrangements provide nontaxable cash payments to employees and employment tax savings for the employer and employees.

The IRS concluded that benefits paid under a such an employer-provided self-funded health plan should be included in an employee’s income and wages if the average amounts received by the employee for participating in a health-related activity predictably exceed the employee’s after-tax contributions.

CMS Plans to End SHOP Exchange

On May 15, 2017, the Centers for Medicare & Medicaid Services (CMS) announced that it will issue rules to essentially end the Federally Facilitated SHOP Exchange (FF-SHOP) at the end of 2017.

Under the rules that CMS intends to propose, HealthCare.gov will continue to make FF-SHOP participation eligibility decisions for small employers regarding the Small Business Health Care Tax Credit, but the FF-SHOP will stop handling SHOP functions, such as processing premium payments or handling employer or employee enrollment, for SHOP plans taking effect on or after on January 1, 2018. CMS intends to allow employers to directly enroll with insurers offering SHOP plans or through FF-SHOPregistered brokers or agents.

DOL Issues Advisory Opinion on Employee Welfare Benefit Plan Sponsored by a Group of Employers

On May 16, 2017, the Department of Labor (DOL) issued its Advisory Opinion to address whether a membership-based organization could fall within ERISA’s definition of “group or association of employers” who sponsor an ERISA employee welfare benefit plan.

Based on the facts presented to the DOL, the DOL concluded that the organization’s membership is comprised of employers engaged in the same industry and that the employers have a genuine organizational relationship unrelated to the health plan through their membership in the organization. The DOL determined, based on the proposed arrangement’s facts, that the participating member employers would be a bona fide group or association of employers under ERISA and that the health plan would be an ERISA employee welfare benefit plan.

U.S. Supreme Court Declines to Take Opt-Out Arrangement FLSA Case

Last year in court case Flores v. City of San Gabriel, the 9th Circuit Court of Appeals (which covers several western states including Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) determined that when an employer pays cash to an employee for opting out of its health plan, the payment must be considered part of the employee’s “regular rate of pay” under the Fair Labor Standards Act (FLSA). This means that the adjusted rate of pay must be used in calculating compensation for overtime hours.

The City of San Gabriel appealed the 9th Circuit’s decision to the U.S. Supreme Court. On May 15, 2017, the Supreme Court declined to take the case, essentially leaving the decision intact.

Practically speaking, if an employer is in one of the states covered by the 9th Circuit and if the employer calculates compensation for overtime hours, then it should consider this additional FLSA aspect to offering cash in lieu of benefits.

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