Health Care Reform: The Journey Continues

Areas of Expected Employer Impact (18:48)


So, now sort of turning to specific areas of impact for the employers, so we’ll go through employer impacts, giving you some insight into each of these areas. Then we’ll move on to taxes and fees and those impacts and then comments on exchanges, both strategies related to the public exchange and the private exchange and some insights into how we’re evaluating each of those.

And then we’ll finish up with some of the premium rate shock impacts that we have been sharing both at the state and federal level as well as other key constituents, and then we have a checklist at the end - key points for a large group employers and how, you know, what they should be aware of and how Aetna can help them.

So with that I’m going to transition over to the employer impacts and responsibilities. There are, in the product and plan area, there are four key areas of interest. Three of these apply to employers of all size. That’s the definition of a full-time employee, wellness incentives, and the 90-day maximum waiting period. The auto-enrollment provision applies to employers with 200-plus full-time equivalents. So the 90-day waiting period, I think, is pretty clear that beginning in 2014 the employers have to be compliant that waiting periods cannot exceed 90 days regardless of the size.

On the auto-enrollment area, the technical guidance, you know, has stated that final regulations really won’t emerge until later this year or early 2014; so with the auto enrollment provision, we fully expect that will sort of defer to more later into 2014, or even the third and fourth quarter of 2014 before it’s fully effective and we have all of the necessary guidance.

The wellness incentives is one of the very positive areas of the health care reform and one we strongly encourage employers to really fully capitalize on with the regulations. You know some of the things that we’re doing in this area, particularly from an advocacy effort, is really preserving the existing wellness advances in the individual marketplace, not linking the wellness incentives to the pricing roles, and that’s really critical, and then maintaining the flexibility to create programs that work for the actual enrollees; so the people who use the service.

And just on preserving the existing, you know, incentives related to having them treated outside the pricing rules, what we don’t want to have occur is the true value to be diminished of these programs and make it very complex for the employers to understand and then actually execute on opportunities here. So a lot more will continue in that area.

The final provision is the definition of a full-time employee, and this has some material ramifications for employers. With the definition of now a full-time employee being 30 hours or greater employers are having to reassess whether some of the their part-time population moves to full-time or whether they adjust that, there are different definitions, and they are going to reduce hours so that some of the people right around that threshold move to part-time.

So that’s something critical from an overall benefit decision process and strategy as well as the, just overall, the operation of the business. And as you might expect, groups in the hospitality, retail area are going to be even more impacted. It’s something we’ve been assisting a lot of our customers with over the past weeks and months.

If you move on to Slide 8, you know, again areas of employer impact here; again we’re continuing to really look at the frequently asked questions that were released on February 20 of this year related to cost sharing and preventive provisions. Aetna is assessing these impacts on what it means from a claim administration and benefit policy, and we’ll be sharing additional information in the very near future.

But again, it’s related to the out-of-pocket maximum applicability and transition relief, how you handle over-the-counter items, including aspirin and other preventive measures, as well as further guidance on coverage of contraceptive methods and related devices.

So again, we’ve got the frequently asked questions; we’re continuing to assess what the impacts are from both a benefits standpoint and an operational standpoint and will be sharing more information with you in the very near future.

If you move to Slide 8, when you get into the areas of employers’ shared responsibility, what we’re really looking at here are a number of key provisions of the law. The first is providing minimum value as far as the plan design. This impacts those employers having 50 or more full-time employees, and sort of the headline here is you have to have a minimum value of 60 percent and that the coverage needs to be affordable for the full-time eligible employees.

On the transactional - transitional relief - excuse me - for non-calendar years, this was some favorable findings that some relief was given, but for employers there are still detail reporting requirements. Even though they actually do not have to have the provisions in place, the IRS has given them some leeway here, but they do have to report on these requirements for the entire 2014 calendar year.

Coverage of dependents - the guidance clearly articulated the definition of covered dependents. One of the very important considerations here is it did not include employees’ spouses. So how employers will look at spouses from a covered standpoint will be a very critical consideration. Will they continue to provide coverage for spouses? Will that coverage be - will there be any contribution support or will it be more dependent pay all for the spouse? Again, a number of areas that employers need to be looking into and determining what their strategy should be.

And finally, there are a number of safe harbors that were deployed as part of the recent IRS guidance and the three in particular were a W-2 safe harbor, the rate-of-pay safe harbor, and the federal poverty line safe harbor; so again, some favorable relief in the interim as part of the guidance.

You move on to Slide 10; this sort of takes you through how large employers need to assess, you know, their benefit plans if an applicable large employer does not provide adequate coverage, and it’s really the two-prong test, it will be responsible for paying penalties starting in 2014. And really the way these provisions go, the first test is whether, you know, you are providing, you know, coverage that meets the appropriate definition and level of minimum value as well as whether that coverage is also deemed affordable.

And again, this comes under the employer mandate, and then it is handled in conjunction with the individual mandate. And we provide additional details in the materials as to what’s considered the appropriate level of minimum essential coverage for full-time employees that has a penalty associated if you’re not in compliance of $2000, divided by 12, times the number of full-time employees employed during the period but excluding the first 30.

The penalty for providing a minimal essential coverage that’s not affordable and that’s based upon the 9 ½ percent sort of contribution limit and the considerations of the federal poverty limit as defined and for purposes of this, you know, the federal poverty limit at 400 percent relates to $44,000 for an individual and $92,000 for a family of four. So even in a full-time population of many employers, there are complements of employees that could fall into those areas from a wage standpoint.

If you don’t meet the affordability provision there is a $3,000 penalty tax divided by 12 for each employee receiving subsidized coverage through an exchange. So again, if they forego the coverage of the employer and go on to the exchange and receive subsidization and coverage through the exchange, the penalty would then apply to the employer. And it’s sort of capped at the level based upon the first calculation of the $2000 per 12 divided by, with exclusive of the first 30 employees. So again, the two work in tandem; you have to pass the first prong test and then move into the affordability component.

Moving on to Slide 11, this is providing just a summary checklist based upon the insured plan sponsor, a self-funded plan sponsor, and a health plan carrier such as Aetna and similar to other carriers out there, of who is responsible for providing each of these reporting requirements starting with summary of benefits and coverage through the W-2 reporting notice of coverage options, and then in 2014 the reporting on health care coverage that we are doing further analysis on, which is called 6055 as well as the 6056 provisions. And again, more details will be following on all of those.

If you move on to Slide 12, this is where we transition into the areas of taxes, fees, and penalties. So I think you’re all very familiar with the patient-centered outcomes research, the PCORI fee tax that’s been in place. You know, a dollar per individual in the first year increasing to two dollars. The two we wanted to focus on now were the health insurer fee as well as the transitional reinsurance contribution.

The HIF, as it’s known, the health insurer fee, is something that is applied to all fully insured business. It is - includes Medicaid and Medicare programs as well. It’s based upon a market share analysis and assessment; so Aetna and other health care companies will receive an overall assessment of what we need to reimburse based upon our market share as determined by an external source from - that the government is utilizing. And we have worked with that entity as part of our analysis and find it to be a fairly good representation of our market share.

So the health insurer fee is an ongoing assessment. It’s not for a limited period. It is into the future as opposed to the reinsurance contribution, which is a three-year assessment tax. The health insurer fee ranges roughly for most of the large insurance health care companies of - in the mid 2 ½ percent range. It can be from 2.3 to 2.6 percent.

Again, some of that is based upon the market share as well as your tax status. Some of the not-for-profit companies, such as a Tufts or Harbor Pilgrim or a Kaiser, have a different tax status; so their ability - what they need to recoup from their insured customers is more of a one to one. Whereas the major carriers based upon their for-profit status have to collect something more akin of a $1.50 or slightly more than that for every dollar of tax that they need to remit.

Again, the other area here is we have an individual in our Government Affairs monitoring and scanning each of the states because the law provides the ability for states to add their own assessment on top of this. It’s not an exchange fee. It’s more of an assessment related to the risk mechanisms, but they do have that capability. Our first several initial scans of legislation budget requests or other areas has not shown that any of those states have anything currently pending, but we’re watching that very closely.

On the transition of reinsurance contribution, or the RC, this is a defined tax assessment for a three-year period on a decreasing scale. It’s a $25 billion assessment that applies to fully insured customers and self-insured employers. So the tax rate that was recently shared was a fee of $5.25, and that will be collected in the first year. For both of these areas, Aetna is collecting them on a graded basis, meaning that starting with February 1, 2013 renewals, which would have one month in 2014, we’ve collected one-twelfth of the HIF and the RC.

And, we will be fully transparent on these on new business opportunities or on renewals so that all of our customers would see what the particular assessment or tax is as part of their renewal calculations. So we’ll go through the standard renewal, show these as separate line items, and be able to fully disclose that to you. So the goal here and the approach we’re taking is to be very transparent and only collect what we need to collect to meet the obligation that has been created by the regulations.

For the self-insured customers, it’s the employers’ responsibility. Aetna has created the capabilities to collect this on the employers’ behalf through a claim wire and then remit it. With the updated guidance where the payment of the tax can be handled in one, sort of, lump sum, some employers are considering just funding it internally and paying it on their own.

But we do have and have established the capabilities to collect this through the claim wire on a quarterly basis, being the standard approach, with some potential other alternatives based upon the employers’ need. So again that’s for the reinsurance contribution. Together these two new taxes represent about 4 percent of premium.

The fourth component - the high-value plan tax is effective in 2018. It’s sometimes affectionately called the Cadillac tax. When I meet with labor leaders, they prefer that we call it the Chevy tax. It is something that is out there. Aetna is advocating very aggressively for changes, including, you know, the reversal of the tax, but if they’re going to move forward the way it’s currently structured on a national basis without indexing, is really not a fair way to deploy this type of assessment.

Quite honestly they’re at this point in time with exchanges and everything else going on, there is very little discussion or interest in discussion with the administration and the regulators on this particular tax. So I think what we’re seeing is they want us to get through 2014 and into 2015 and then they feel they’d be at a place where we can have further conversations on this.