Healthcare exchanges have become an important and visible element of the healthcare delivery system. From the public exchanges (now known as the Health Insurance Marketplace), which are a critical element of the Patient Protection and Affordable Care Act (ACA), to the private exchanges that regularly make headlines, savvy plan sponsors are going to need to understand the purpose and mechanics of the different exchanges in order to evaluate whether they provide opportunities for better or more efficient healthcare delivery to their participants.
In this paper, Milliman’s Robert Schmidt and Suzanne Taranto discuss several factors that employers should consider regarding public and private exchanges.
Milliman publishes blog content addressing complex issues with broad social importance. Our actuaries and consultants offer their perspective on healthcare, retirement plans, regulatory compliance, and more. The list below highlights Milliman’s top 10 blogs in 2013 based on total pageviews:
10. In their blog “Five keys to writing a successful qualified health plan application,” Maureen Tressel Lewis and Bonnie Benson highlight several best practices insurers should consider when submitting a qualified health plan application to the Health Insurance Marketplace.
9. “Understanding ACA’s subsidies and their effect on premiums” offers perspective into the relationship in the Patient Protection and Affordable Care Act (ACA) between healthcare premiums and federal subsidies for low-income individuals.
8. Future funding for the Consumer Operated and Oriented Plan (CO-OP) Program was eliminated as a result of the fiscal deal that was signed in December 2012. Tom Snook takes a look at how the deal affects CO-OPs in his blog “CO-OPs: An endangered species?”
7. Robert Schmidt discusses why the methodology used to determine COBRA premium rates is essential in his blog “The growing importance of COBRA rate methodologies.”
6. A second blog by Maureen Tressel Lewis and Mary Schlaphoff entitled “Five critical success factors for participation in exchange markets” highlights tactics that insurers offering qualified health plans may benefit from implementing.
5. “Pension plans: Key dates and deadlines for 2013” offers Milliman’s three retirement plan calendars (defined benefit, defined contribution, and multiemployer) with key administrative dates and deadlines throughout the year.
4. In her blog “Fee leveling in DC plans: Disclosure is just the beginning,” Genny Sedgwick explains how investment expenses and revenue sharing affect the fees paid by defined contribution plan participants.
3. Maureen Tressel Lewis and Mary Schlaphoff’s blog “Five common gaps for exchange readiness” describes items issuers of qualified health plans have to resolve before their plans can be sold on the Health Insurance Marketplace.
2. In the lead-up to implementation of the ACA, debate often centered on how the law would affect healthcare premiums. Our “ACA premium rate reading list” offers perspective on how rates may be affected.
1. In his blog “Retiring early under ACA: An unexpected outcome for employers?,” Jeff Bradley discusses the impact that the ACA could have on both early retirees and plan sponsors.
This article was first published at Milliman Insight.
The Milliman HCR Dashboard allows carriers, brokers, and advisors to provide their small and mid-size clients with key healthcare reform analytics that will help employers understand the financial implications of the Patient Protection and Affordable Care Act (ACA). The HCR Dashboard can help these small and mid-sized employers develop strategic solutions to optimize benefit spending.
Milliman’s Ryan Hart, Scott Weltz, Robert Schmidt, and Paul Houchens offer their perspectives in this Google+ Hangout.
To learn more about the HCR Dashboard, click here.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) required employers to make health insurance available to employees who lose their coverage because of a variety of events such as termination, reduction in hours, or family status changes. The maximum time periods range from 18 to 36 months, and the cost of COBRA coverage is limited to 102% (or 150% in some circumstances) of the “applicable premium.”i Before the advent of the Patient Protection and Affordable Care Act (ACA), COBRA served the purpose of providing continuity of coverage at critical times when people may not otherwise have been able to obtain coverage. However, the need for COBRA may be reduced once the ACA health insurance exchanges are operational in 2014, because the individual market will offer guaranteed health plan coverage, with premium subsidies available through the exchanges that may reduce out-of-pocket and premium expenses for many low- and middle-income households. For this reason, there may be less of a need for COBRA health insurance after January 1, 2014. Whether or not COBRA remains relevant, the methodology used to determine COBRA premium rates is becoming more important for the following reasons:
1. Form W-2 reporting rules under ACA. Beginning with the 2012 W-2 forms issued in early 2013, employers are required to report the “aggregate cost” of “applicable employer-sponsored coverage” each year on Form W-2.ii The “applicable premium” under COBRA is one of the methods that are often used for this purpose.
2. ACA expansion of wellness incentives. For plan years beginning in 2014, the premium incentives that may be used to encourage participation in wellness programs are being expanded from 20% to 30% of the “cost of individual coverage” (up to 50% for tobacco-related programs). There has not been much explicit guidance on how to calculate the “cost of individual coverage” for self-funded plans. For this reason, it is likely that many will consider using the “applicable premium” method under COBRA.
3. “Cadillac Tax.” For taxable years beginning after 2017, an excise tax of 40% will be payable on the cost of coverage in excess of certain thresholds.iii For this purpose, the cost of coverage is defined with reference to the “applicable premium” used for COBRA purposes.
The expanded usage of the “applicable premium” under COBRA is increasing the importance of having appropriate and up-to-date calculation methods for health plan coverage costs. Employers and plan sponsors should work with their consultants and advisors to make sure that the methodologies used for COBRA rates, W-2 reporting, wellness incentives, and the “Cadillac Tax” are consistently applied on an annual basis and that they are actuarially sound.
iERISA Section 602(3). The applicable premium is generally the premium charged by the insurance company for insured plans. For self-funded plans, special calculations by a qualified actuary are often used.
iiPPACA, Pub. L. No. 111-148, §9002
iiiThe thresholds for 2018 are $10,200 for self-only coverage and $27,500 for coverage other than self-only. These amounts are adjusted in various situations as described in Code Section 4980I.
Employers face changes to their health plans as the Patient Protection and Affordable Care Act (ACA) comes online. Some employers have already taken time to evaluate the strategic implications of reform on their plan, while others have not. With the delay in the employer mandate announced on July 2, employers now have more time for this kind of strategic planning.
This video outlines the benefits of Milliman’s Healthcare Reform Strategic Impact Study. This study gives an employer a customized view of its health plan and highlights the challenges posed by the ACA–and can thereby empower decisions about plan design, long-term cost control, and the overall direction of the health plan.
Although full implementation of Sections 6055 and 6056 of the ACA will be delayed until 2015, certain immediate actions are still required for 2014. Paul Houchens examines these actions in his new Healthcare Reform Briefing Paper.
The delay in the employer mandate gives employers more time to adapt to the ACA, but the need for vigilant management and long-term term planning remains