In part four of our blog series, “Ten strategic considerations of the Supreme Court upholding PPACA,” we assess how the role of the employer may change under PPACA in covering those between the ages of 55 and 65.
PPACA may change the landscape for how employers handle early retiree healthcare coverage. New options emerge for those between ages 55 and 65, with the exchanges becoming very attractive for attaining affordable coverage. The absence of medical underwriting, the limitations placed on age rating (i.e., a maximum 3-to-1 ratio between insurance premiums for the oldest and youngest), and the availability of premium and benefit subsidies make the exchanges an affordable place for people 55-65 years old to purchase coverage.
For more insight into health insurance exchanges and early retiree health coverage read this Benefits Perspectives article.
Milliman today released analysis of the Supreme Court’s 5-4 decision upholding the Patient Protection and Affordable Care Act (PPACA). With the court effectively ruling the individual mandate and other elements of the law constitutional—with the notable and complex exception of certain aspects of Medicaid expansion—healthcare stakeholders can turn their attention to implementing healthcare reform.
“Since 2009, Milliman has been working with its clients to prepare for and implement the healthcare reform law,” said Clark Slipher, Milliman Health Practice Director. “With the law’s constitutionality bound up in court, it’s been an uncertain time for our clients, which include insurers, employers, providers, and state and federal governments. This ruling clarifies the road ahead for American healthcare, and while it is reassuring to know where we are going, healthcare stakeholders face many strategic challenges that will require innovation and sound financial planning in the years ahead.”
Strategic considerations facing healthcare stakeholders include:
- Adverse selection may still be a challenge. Even with the individual mandate in place, the success of many insurers under PPACA will depend on their ability to minimize adverse selection.
- Medicaid expansion just became a far more complex and variable proposition. The court’s decision to allow states to opt out of Medicaid expansion creates dynamic changes across the healthcare system.
- Employers grapple with new options and plan requirements. While reports of the demise of employer-sponsored insurance coverage are premature, these plans still face many potential changes.
- What is the effect on early retirees? The role of the employer in covering those between 55 and 65 may change under PPACA.
- Rate review scrutiny and no risk selection: Something’s got to give. Keeping rate increases under 10% may become more challenging with many of the traditional cost-control mechanisms no longer available to insurers.
- Which states will get on the exchange bandwagon? With the Court decision minimizing uncertainty, there may be increased incentive for states to fast-track exchange planning.
- Minimum loss ratios (MLR) pose an ongoing challenge for insurers. Insurers have struggled to comply with the MLR requirements, and increased volatility in medical costs potentially brought on by adverse selection may compound the difficulty for insurers.
- Risk adjustment is essential. A new reform calculus is required with traditional risk selection techniques such as medical underwriting no longer allowed.
- Will cost shifting hold steady, increase, or decrease? Subsidies, rating restrictions, and an effort to achieve universal coverage all introduce new cost dynamics for insurers, providers, and policyholders.
- The cost problem persists. What can be done about it? Certain aspects of PPACA have the potential to affect costs, but this potential needs to be actualized in order to moderate annual cost increases that regularly exceed other consumer spending.
For more detail on each of these strategic considerations, see the full article. To receive regular updates on Milliman’s healthcare perspective, visit our healthcare reform library or follow us on Twitter.
CNN/Money has published an in-depth article about the future of healthcare from a consumer/patient perspective. Here are a few highlights.
Beyond insurers, there are a few sources of data you can tap on your own.
Medicare publishes hospital readmission rates and patient reviews at Hospitalcompare.hhs.gov and is beginning to build a similar physician site.
In several states — including Massachusetts, Minnesota, and Oregon — nonprofits and government agencies are putting quality data online. Go to informedpatientinstitute.org to discover what’s available in your area.
“If we do it right, doctors should be improving care, but if the payment models are badly implemented, doctors may instead try to skimp on care,” says Elliott Fisher, a Dartmouth medical professor who helped develop the idea of ACOs.
If you hope to quit the daily grind before age 65, be sure to factor in the price of an individual policy when you are calculating how much you’ll need for retirement.
A healthy couple at 61 before 2014 could pay $1,160 a month if both spouses are healthy, or as much as $1,770 if both have a chronic condition, says Jim O’Connor, an actuary at Milliman.
The Early Retiree Reinsurance Program today launched a website: www.errp.gov.
The latest issue of Multiemployer Review examines how healthcare reform will affect multiemployer plans, with particular focus on the timeline of changes, the extension of dependent coverage through age 26, and the early retiree reinsurance program—which begins today. Here’s an excerpt on the early retiree reinsurance program:
The Department of Health and Human Services (DHHS) has issued guidance on how sponsors of multiemployer health plans covering early retirees may apply for $5 billion in federal subsidies available under the reinsurance program created by the Patient Protection and Affordable Care Act (PPACA). The PPACA allows multiemployer plan sponsors to receive a portion of the cost of health benefits provided to retirees who are aged 55 or older and not yet eligible for Medicare.
The DHHS’s interim final rule sets forth most of the requirements that will apply to the new temporary program, effective June 1, 2010 (and making 2010 calendar-year plans eligible). The reimbursement extends to the benefit costs of the early retiree’s spouse, surviving spouse, and dependents, and applies to insured and self-insured plans sponsored by multiemployer trusts, voluntary employees’ beneficiary associations (VEBAs), nonprofit and employee organizations, state and local governments, private employers, and religious entities.
The Department of Health and Human Serices has issued guidance on how sponors of employment-based health plans covering early retirees may apply for the $5 billion in federal subsidies available under the reinsurance program created by the Patient Protection and Affordable Care Act. More here.