Category Affordable Care Act

Open enrollment is right around the corner for most people that have health insurance. Most of the employers have a January 1st renewal with the open enrollment period a month prior. The Individual market open enrollment is Nov.1st -December 15th. 

Indiana has become one of the most expensive states for health care; this was revealed by the RAND Corporation study on Hospital Prices in Indiana. From a health insurance standpoint, we have seen the major carriers start to renegotiate their reimbursement prices to all medical providers. This created network disruptions in multiple Insurance carrier networks, and we believe this trend will continue into 2020.

The Affordable Care Act (ACA) small group market will experience a single-digit rate increase. Anthem is increasing 7%, UnitedHealthcare is 9%, and IU Health plan is about 8%. The small group ACA market is now unaffordable for most small employers and employees to carry to dependent coverage.

The level-funded or partially self-funded should stabilize in 2020. In the last couple of years, we have seen many carriers enter the Indiana market. Most of these plans came from smaller companies that did not have a lot of experience in Indiana. They were able to go in, and essential write low-risk groups and small Indiana employers have benefited from the lower rates. Now that these carriers have experience in Indiana, they are not as aggressive, and this has a lot to do with our cost of care.  

With the Introduction on Anthem’s Multiple Employer Welfare Arrangement (MEWA), this adds another option for Indiana small employers that have low risk. Another company called All Savers, which is owned by UnitedHealthcare, offers a small group plan that is also underwritten, which can be very competitive. It’s fair to say that there are multiple options for Indiana small group employers.

The individual market is more of the same under the Affordable Care Act. With just two carriers offering coverage in the Individual market both plans must be purchased through the exchange. CareSource premiums will increase as high as 25% and decrease as low as 15%. Ambetter premiums will have an increase of as high as 28% and a decrease as small at 3.5%. Depending on which county you live in and what plan designs you select will determine what kind of increase you will have for 2020.

One change to the individual market that is worth looking at is the short-term policies. Short term policies have been an option for Hoosiers that needed coverage for a short period, and that was healthy. For 2020, we are now going to have short term health insurance that is has a term of two years. These policies are subject to underwriting, but for Hoosiers that are healthy and not eligible for tax credits on the exchange, this is an option worth looking at.

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Anthem has developed a new Group Health Insurance plan for Indiana small group employers.  This is in direct response to the unintended consequences of the Affordable Care Act (ACA).  

Under the ACA, Indiana small group health insurance rates have doubled, and Anthem has been one of the last large to bring a solution to market. The solution they choose is called a Multiple Employer Welfare Arrangement (MEWA). 

A MEWA allows multiple employers to join for the sole purpose of obtaining health insurance at a more competitive cost. Anthem’s MEWA will offer a Group Health Insurance plan that is self-funded. This allows the plan to operate outside of all the rules and regulations of the ACA. This Chamber care Health Alliance will go back to underwriting for Indiana small group employers. Lower risk groups could see a 40%-50% reduction in health insurance premium vs. the ACA small group market.

MEWA’s are not a new concept and have a lot of history. MEWA’s have been useful tools for companies to reduce their health care costs. They have also gone insolvent due to mismanagement and are prone to adverse risk assessment.

The Indiana Department of Insurance overseas MEWA and has a specific requirement that must be met to prevent insolvency. A board or a trust governs the MEWA itself. Thus, the members of the MEWA are eligible to become board members.

Underwriting is where the ongoing medical history, age, gender, company location, SIC code, and benefit design will determine the rates.  These rating methodologies will deliver significant savings to healthy young groups. The savings could last for years if the Chamber Care keeps a relatively healthy block of business. For a company with less than 50 employees should look at the ChamberCare Health Alliance and Anthem for group health insurance.   

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Indiana was one of six states to file a lawsuit against the Affordable Care Act’s health insurance provider fee (HIPF) for State Medicaid plans.

The U.S. District Judge ruled in favor of the plaintiffs, Texas, Indiana, Kansas, Louisiana, Wisconsin & Nebraska’s that the government must pay back $840 Million in Obamacare fees.

What is the Health Insurance Provider Fee?

The HIPF is an annual fee charged to health insurance companies on health insurance premiums. The Patient Protection and Affordable Care Act of 2010 assesses fees on insurance companies that provide fully insured health insurance coverage. 

The fully insured tax/fee is 3% of the total health insurance premium.

Business affected:

  • Individual and small group health insurance plans.
  • Large Group Health plans.
  • Stand- alone, dental & vision plans.
  • Stand-alone, behavioral health, and pharmacy plans.
  • Medicare Advantage plans.
  • Retiree-only plans.
  • Medicare part D prescription plans
  • Taft-Hartley Plans
  • Medicaid and Children’s Health Insurance programs (CHIP). Until recent court ruling!

The purpose of the tax/fee is to help fund federal and start marketplaces/exchange.

The estimated cost is $14 billion a year.

The authors of the ACA & PRACA projected that there was going to be enormous profits for the insurance industry because of the Individual Mandate. Thus, they could tax the industry to fund the law. They also assumed that these profits would create carrier competition.

The reality is the insurance industry passed this cost on to the members, which has led to everyone paying about 3% more to fund health care reform.

The fact that Medicaid plan is now exempt from the ACA tax is a massive blow to the ACA and the funding mechanism.  Indiana alone has over 2 million people on Medicaid, and it’s not clear the government can make up for this loss of funding for the ACA.  $840 Million is a year is just a start, other states will follow and with an estimate of $5.5 billion attributed to the Medicaid tax. 

This is a massive blow to the ACA law, that is has gotten almost no attention!   The funding of Obamacare may have just lost 25% of its funding.  This estimated operating costs for the marketplace is $2.1 billion.

It will be interesting to see if the government adjusts the federally facilitated marketplace. There could be a decision to turn those operations over to a third party. 

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All the health insurance companies that want to participate in Indiana’s small group health insurance has submitted rates & plan designs to the Indiana Department of Insurance for review. These filling are for fully insured groups with less than 50 employees.

As always, it’s going to be an interesting year under the rules and regulations of the Affordable Care Act (ACA).

Under the ACA, small group health insurance plans are changing every year.  This has led to frustration with many Indiana small group employers.  Pre ACA, a company, would purchase a health plan, and that plan did not change until the company chooses to change it.  Now, a company could have a $2,500 deductible silver plan in place, but the renewal is mapping them over to a new Silver plan that has a $4,000 deductible.   It’s difficult for most people to see how a $2,500 deductible silver plan is the same as a $4,000.   

Under the ACA, the insurance company is forced to develop plans that meet an actuarial value that then indicates if they are Bronze, Silver, Gold or Platinum.  That actuarial value changes or is interpreted differently every year. Which leads to plan designs being a change in the small group health insurance.

We can’t put all the blame on the ACA with the forced plan changes in the small group.  I believe that if a carrier has higher claims utilization on certain plan design, they discontinue that plan.

As we review 2019 Indiana’s small group plan submissions, most of the cost information is listed in averages, which does not tell the full story.  If a carrier is introducing new plan designs, it’s difficult to determine what the cost increase or decrease as compared to their prior year’s plans.   When we look at the details, rates are determined by counties.  For example, Boone County could have a rate decrease on all of their Silver plans, while Marion County has a rate increase.   Then each plan design has a different cost, and some carriers will offer seven different silver plans.   The average price does not tell the full story.

2019 Small Group Submission

  • Anthem appears to have an average rate increase of 2.5%.
  • UnitedHealthcare appears to have an average rate increase of 8.14%
  • IU Health Plans seem to have an average rate increase of 7.21%

There are a handful of other companies that have filed, but their small group rates are so high that I don’t think they are worth mentioning. Those companies don’t want to compete in the small group market but submit plans, so should they wish to fight in future years there is less barrio of entry.

Anthem filing has decreased on specific plan designs as high as 9%.  In 2018, Anthem increased the cost of their small group on avg of 17%. That rate increase made them less competitive in the under 50 life market.   For 2019, Anthem is trying to get competitive based on the few small group carriers we have in Indiana.

UnitedHealthcare filling is difficult to read because it appears most of their 2018 small group plan designs will be discontinued.  New plan designs will be introduced, which could be a good thing. Last year, UHC offered plans that created many confusions.  They had Silver plans that 80% coinsurance but had different coinsurance levels for specific procedures like outpatient surgeries.  One had to dig deep into the summary of benefit chart to find these carve-outs.  As with Anthem, specific metallic level plans and counties have a different rate increase, so again the plans must analyze for costs and coverages. 2018 UHC was anywhere from 17%-8% cheaper than Anthem.  This led them to pick up a much more significant market share in Indiana small group.   UHC also offered a true multiple-choice option for the small group. This strategy appealed to a lot of small companies, where their employee had different health insurance needs.   With 8% average rate increase, Anthem & UHC should be comparable from a price standpoint.

IU health plans are the HMO which IU health has ownership in. With their average rate increase, they should be below both UHC & Anthem.  In 2018, IU health plans have cost about 7% less than the competition, but that is for a health plan with access to only IU providers.  Indiana small group employers have shown some reluctance to move to a true HMO. The 7% saving has not been enough.

Under the ACA, we see a reluctance from many carriers to compete for small group business. This lack of competition has led to just a few fully insured options. It’s not usually for a small group to switch back and forth between UHC and Anthem. With network access being similar along with plan designs, a small group should take advantage of saving 7%. This back and forth strategy are simplified by using benefit administration platform, which streamlines the enrollment process with the least amount of employee disruption. 

Indiana along with the rest of the country has seen a considerable influx of level-funded/partially self-funded plans enter the marketplace. These options have created substantial cost saving for small groups that are overall healthy.  Level funded allows a group to get lower health insurance costs by going through underwriting.  Groups with as few as five employees are eligible.  The level funded option on average saves a group around 20%. That savings can be even higher if the group has a high amount of dependent participation.   

2019 will be another challenging year for small group health insurance.  An owner will wont to be proactive with their insurance offering by starting their benefits review at 90 days before the renewal. 

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It was reported that the Trump administration has reinstated the risk adjustment program of the affordable care act.

The risk adjustment program redistributes funds from carriers with lower risk members to plan with higher risk member.  The reason this was witten in the ACA was to protect against adverse selection in the marketplace by spreading the financial risks across the markets.  Authors of the ACA through this program would prevent insurance companies trying to attract healthier members and compete based on the value of product offering. 

The risk adjustment program was a failure because more insurance companies were requesting payment, than paying into. This was the legal argument on why the current administration suspended payments based on the law being deficit neutral.

How this Impacts Indiana?

In the individual market, we only have the two insurance companies offering coverage. Both Ambetter and CareSource included receiving risk adjustment payments in their 2019 filings with the Indiana Department of Insurance.  Had the payments for Risk adjustment not been reinstated, then these two insurance companies would have had to raise their premiums.

Ambetter would have had to raise premiums by an average of $23.03 per member per month ($276.36 yr.)

CareSource would have had to increase premiums by an average $65.22 per member per month ($782.64yr.)

The administration had to reinstate the payment, even if they don’t believe in it. The few insurance companies still participating in the individual markets, were developing products based on the existing rules.  When reviewing the insurance company’s filings which justifies the premium they intend to charge, the risk adjustment receivables can determine if the company will be profitable.  The individual plans are operating on less than 5% profit margin, and if receivables represent more than 10% of the premium, without out it,  those companies could lose money and decide to withdraw altogether.

Contact Us if you are interested in learning more!

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The Department of Labor released their final rule on the creations of Association Health plans.

There has been a great deal of criticism and misinformation in the media.   

The DOL final rules provide the guideline for setting up association health plans.  These plans would be governed by both State and Federal guidelines.  The Employee Retirement Income Security Act of 1974 (ERISA) would be just one of the laws that the AHP’s would have to follow.

Small employers could join in an association to purchase a group health insurance plan under as a large group entity.  Previously small employers were unable to do this because they were governed under small group laws. This prevents small employers from being treated as a large employer from a health insurance standpoint.  Under a small group, a company must have at least two employees to be eligible for benefits.  This has created an obstacle for most owners who have no employees.  Under the new AHP guidelines, the working owner with no employees can now be eligible for a group health plan.

In Indiana, we saw a large number of business consultants leave employers and operate as a sole proprietor with no employees. At the beginning of the ACA, there were multiple individual health insurance companies that provided decent coverage at a somewhat fair cost.  This allowed these consultants to operate as self-employed.  We fast forward to 2018, the individual market has collapsed, and the policies left are very expensive with limited network access. Thus, most of the Indiana business consultants have rejoined corporation because of the health benefits.  With a properly formed AHP, Indiana consultants will have the option of returning to be self-employed without a lack of insurance options preventing them.

There has been much criticism about the AHP’s offering limited benefit or being subject to fraud.  The DOL’s final rule clearly states the guidelines the health plans must follow.  The plans will have the ability to limit coverage that has been required by the affordable care act, but it’s a very fine line.   The rule states if an AHP covers one of the essential benefits, it cannot limit that coverage.  The AHP could exclude coverage for one of the essential benefits.  There are still multiple safeguards that the plan must go through to be approved.  The AHP still must meet state guidelines to be approved, and the state is not going to approve a plan that may be questionable coverage.   What could be excluded is pediatric dental & vision which could reduce the cost by 3.5%.   The members of the associations must control the group health plan. This could lead to the members voting on what benefits to cover.  Even with membership control, the state Department of Insurance would still have to approve the plan.

An AHP that operates in multiple states is allowed but only if the association is in a tri-state type of situation. Realistically, let’s say we have an association of Light Bulb distributors located in Evansville Indiana, that association could have members in Missouri, Kentucky & Maybe Illinois or Ohio. In that situation, you could have AHP in multiple states.  If that were to happen, the AHP would have to be approved by multiple Departments of Insurance.   The DOL Final ruling appears to be more favorable to AHPs operating in single states and providing a health plan to certain industries. AHPs are prohibitive of offering blanket coverage to any industry.

The AHP must not be sponsored by an Insurance company.  This means that an insurance company can have little to do with the development of the AHP outside of providing coverage and administration services. This can create a barrier to starting a new AHP. It will take someone that has specific knowledge and experience to launch a new AHP. 

How much savings could an AHP deliver vs. the ACA Market?

This is the big question that as of now there is no answer.  Many variables would impact the cost of an AHP.  For an Indiana AHP to honestly be success full, I think the price should be that of pre-ACA, which would be about 50% less than the current small group and Individual plans. 

Here at Nefouse & Associates, we have decided to explore setting up an association plan for Indiana business consultants.

Contact Us if you are interested.

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Indiana Challenging the Affordable Care Act

Indiana has joined 19 other states in a coalition to challenge the constitutionality of the Affordable Care Act (ACA).   The suit was filed in federal court in Texas and is led by Texas and Wisconsin.

December 2017 the tax bill was signed into law which eliminated the individual mandates financial penalties staring in 2019. Without the tax penalty, it is being argued that the ACA will fail.

The reality is the ACA has already failed from controlling health care cost and health insurance premiums. The ACA did accomplish one of it’s goals by expanding Medicaid coverage, where Indiana has seen HIP 2.0 go from 60 members to over 400K.

The Indiana health insurance market has transformed under the ACA. The Individual market has two insurance companies offering coverage. (Caresource & Ambetter) The medical community has already started to limit the amount of patient from these providers. This has caused serious disruption in care for Hoosiers in need of a high level of medical services.

We have witnessed most carriers withdraw from the Indiana individual and small group markets. Humana, UnitedHealthcare, IU, MDwise, Assurant, & Anthem have all exited the individual markets. These companies had large losses in the individual market and had challenges working with the government. Under the Obama administration, there was a huge reluctance to admit the ACA had any problems. There was also an inconsistency in the interpretations of the rules of the ACA. Under the Trump administration, it was made clear the failures of the ACA were beyond repair.

The ACA is already in a death spiral that is called adverse selection. The ACA failed to control the cost of care through multiple ideas like the Accountable Care Organizations (ACO). There was also a failure to deliver the original estimated amounts of members to the insurance pools. The unintended consequences of the Medicaid expansion, was one of the leading reason of lack of enrollments. Indiana is a perfect example, it was ordinally predict that we would have 900K Hoosiers insured through the marketplace. 2017 enrollment numbers, were less than 160K and to make matter worse, half of those members would drop off by mid-year. Medicaid & Chip membership is over 1.4 million for Indiana which has had a huge impact on market place enrollments. When Insurance companies developed products based on a pool of 900K and the reality was just 18% of that, it led to large insurance losses.

Unless you are receiving Medicaid benefits, the ACA has failed. It will be interesting to see if the law is overturned. If the law is not overturned, Indiana along with 20 other states, will see health insurance products that are offered that do not meet the requirements of the ACA.

Recently, we have seen the development of short term health insurance that offers a 12-month term. These policies do not meet that ACA requirements and can result in a tax penalty. Here is the reality, the short-term policy cost 65% less than an ACA policy. If your income is over the 400% of Federal Poverty Level and you don’t receive tax credits, on a family of four that could represent a saving of $10K a year. The tax penalty could be 2.5% of household income, which could result in a $9,000 penalty. If you are healthy and willing to take risk, this insurance solution could appeal to you.

For 2019, the tax penalty will be removed, there will be a huge migration to the short-term policy market. With no tax penalty, saving $10K will appeal to most middle-class families. This will have a huge negative impact on the ACA market because this will represent the low risk members exiting the marketing and will result in high premiums. (Adverse Selection). 2018 is really the last year for the ACA in the current form.

The small group health markets have also seen the development of group health plans outside of the ACA. These are the partially self-funded or full funded group health plans. These are plans that underwrite for ongoing health conditions. They have started to pick up tracking in 2018. This will have adverse impact on the small group ACA rates. Again, the good risk is leaving the pool.

The 20 states that are challenging the ACA may be correct in doing so. For the Hoosiers/employers that pay the full cost of the premiums, something must change, or this segment of the population will go uninsured. For the Hoosiers that are receiving Medicaid or assistance with health insurance, these programs need to continue. Otherwise this segment of the population will go uninsured.

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Employer Shared Responsibility Payment (ESRP)

If you are researching this topic, then you may have received a letter from the Department of Treasury Internal Revenue Service with regards to Employer Shared Responsibility Payment (ESRP).

Under the Affordable Care Act’s employer shared responsibility provisions, large companies are required to offer affordable health insurance coverage that meets the requirements of the ACA. This rule is also referred to at the employer mandate, which applies to companies with 50 full time employees or the full-time equivalence for the previous calendar year.

The employer shared responsibility penalty took effect in 2015, but there were multiple delays to give businesses time to comply.

An employer may be subject to ESRP, if one or more full time employees obtained a tax credit through a state or federal market place. The employee was eligible for the tax credit because the employer did not offer a group health plan, or the plan was deemed unaffordable. The IRS started to issue these letters the 4th quarter of 2017.
The letter states, under section 1411 of the ACA, that for at least one month of the year, one or more of your full-time employees was enrolled in an individual health plan that was eligible for tax credits or subsidies.
In the letter, it will state which employee/s had the tax-credit and for how many months. In that summary table, it will indicate the penalty.

At this point, take a deep a breath if you did offer a group health insurance plan. You have the right to appeal! One thing to keep in mind, during years 2015 & 2016, the marketplaces were slow to verify eligibility for tax credits. It was more like a “free for all” as the marketplace was unable to certify a employers group health plan meeting ACA requirements. Another issue was these were the first years some employers starting to file ACA reporting requirements. It is very possible that an employer or the firm they hired made an error on the filing. It’s also quite possible that the filing was missing information, so the ESRP is being sent as default letter.

Since these letters are just now starting to hit Indiana businesses and the rest of the country, it should be interesting how many appeals win.

One thing is for certain, the IRS is going to hold business accountable for employer shared responsibility tax.

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