Personal Care Accounts & Healthcare Consumerism under PPACA

1. Personal Care Accounts & Healthcare Consumerismunder PPACA

2. Patient Protection and Affordable Care Act(PPACA) • GET OVER IT! • IT’S THE LAW Now, What Do You Do?

3. What To Do? • Do what is required by PPACA • Do what was needed without PPACA • Recognize that regulations may change initial interpretations of PPACA • Be prepared to change course if PPACA is modified by courts or new legislation • STAY PATIENT & FLEXIBLE Rec: Focus on Healthcare Consumerism

4. Personal Care Accounts • Flexible Spending Accounts (FSAs) • Health Savings Accounts (HSAs) • Health Reimbursement Arrangements (HRAs) Personal Care Accounts are the foundation for Healthcare Consumerism

5. Healthcare Consumerism Healthcare Consumerism is about transforming a health benefit plan into one that puts economic purchasing power—and decision-making—in the hands of participants. It’s about supplying the information and decision support tools they need, along with financial incentives, rewards, and other benefits that encourage personal involvement in altering health and healthcare purchasing behaviors.

6. Megatrends Megatrendsrepresent major movements so powerful that the direction of change cannot be stopped. Federal laws can speed up or slow down megatrend forces. But, like dammed rivers megatrends will redirect themselves to achieve the inevitable result. Healthcare consumerism is such a force.

7. Consumerism Megatrend • Americans: • bank electronically at ATMs, • purchase stocks over the internet, • buy and sell goods through eBay, • maintain their music with iTunes, • keep personal videos on facebook, • seek employment through LinkedIn, and • control television programming with Tivo Caution: Many Ees and Ers wanted reform, but do not want PPACA. 56% still want it repealed.

8. You Can’t Fight Megatrends

9. Healthcare Consumerism Healthcare consumerism is independent of plan design. Healthcare consumerism is a compelling force because it embraces lowering costs, improving quality, enhancing choice, and expanding access by empowering individuals and reinforcing personal responsibility. It is the force operating throughout our economy and is just beginning to be structured into healthcare and insurance.

10. American Academy of Actuaries Consumerism Study • The 2009 AAA multi-year study of healthcare consumerism concluded that 1st year claims could be lowered by 12-20%. • Future cost trends decreased by 3-5%. • More than 50% of employers now offer consumer-driven options.

11. Growth of Healthcare Consumerism • Mercer: 23 million people were enrolled in Healthcare Consumerism plans in 2009, up from 18 million in 2008 – an increase of 27 percent. • Small employers were the major driver for the rise in enrollment from 9% in 2008 to 15% in 2009.

12. Mercer National Survey of Employer-Sponsored Plans

14. PPACA Promotes • Wellness • Prevention • Early Intervention • Rewards & Incentives But, PPACA has mixed messages on Healthcare Consumerism

15. PPACA & Healthcare Consumerism • Under PPACA, financial rewards for health status are increased from 20% to 30%. (1/1/2014) • The Secretary of Health and Human Services has the authority to increase that limit to 50%. • PPACA allows unlimited rewards and incentives for participation.

16. PPACA Restrictions on HSAs PPACA Favors Premiums over Savings • In 2011, HSA eligible plans for singles can have a maximum deductible of $5,950. • PPACA includes a max. deductible for small groups of $2,000 for a single: eliminating lower cost plans with the option of putting the difference into an HSA. • PPACA limits out-of-pocket costs to the same amount as applicable to HSAs (2011: $5,950).

17. PPACA restrictions on HSAs Excise Tax Limits Potential of HSAs • H.H.S. regulations will determine “essential benefits” and coverage requirements for all plans, including HSAs. • A 40% excise benefits tax applies if health plan costs exceed $10,200 for an individual. If one puts the maximum $4,050 into an HSA (including a $1,000 catch- up provision for ages 55 and older), that leaves $6,150 regardless of age to purchase medical and any other federally designated health coverage.

18. PPACA Restricts HSAs Regulations May Stifle HSAs • In the proposal, broad categories of healthcare are listed without any specifics on treatment or financial limits that may apply. • Regulations are to ensure that coverage is “equal to the benefits provided under a typical employer plan.” • By definition, HSA eligible plans are not “typical.” A one size fits all government approach that regulates, restricts, and approves only a narrow range of “typical” products will stifle creative solutions.

19. PPACA Restrictions on HSAs Regulatory Powers Can Make HSAs Illegal • Broad regulatory powers can easily outlaw HSA eligible plans by requiring essential health benefits to include coverages that violate HSA eligibility. • For example, in the proposed bill a special low cost non-group catastrophic plan is allowed for individuals under age 30. Rather than designating an HSA eligible plan, the proposal requires three primary care visits that disqualify the plan from being HSA eligible.

20. PPACA Restrictions on HSAs Restrictions on Use of HSAs • New HSA restrictions limit paying for over-the-counter medications. • The penalty for non-medical HSA withdrawals is increased from 10 to 20 percent.

21. PPACA Restrictions on HSAs HSA Rewards Left Out • New generation consumer-driven plans include rewards and incentives for healthy behaviors. • PPACA outlaws health status rewards and incentives in determining premium rates. The proposal does include certain “wellness program” rewards based on health status. • However, employer and insurer HSA contributions are not listed in the allowable uses of rewards.

22. PPACA Restrictions on HSAs Price Controls • The PPACA proposal limits young adult premiums to 33% of older adult premiums. • Actuarially, young adult claims are about 20% of older adults. • This restrictive price control will substantially raise the cost of premiums by 50 to100 percent or more for younger population a key market for HSAs.

23. Individual Experience Rating • Single Risk Pool A health insurance issuer shall consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer in the individual market, including those enrollees who do not enroll in such plans through the Exchange, to be members of a single risk pool.

24. Group Experience Rating • Single Risk Pool A health insurance issuer shall consider all enrollees in all health plans (other than grandfathered health plans) offered by such issuer in the small group market, including those enrollees who do not enroll in such plans through the Exchange, to be members of a single risk pool.

25. The Power of The Consumerism Megatrend • Insurance with personal savings accounts (HSAs. and FSAs) are not killed, but may be limited. • But these are not the only forms of healthcare consumerism. • In 2002, health reimbursement arrangements (HRAs) were established by the Treasury Department. • HRAs are very flexible and can be used with any plan that the Secretary mandates.

26. The New Direction of Consumerism • The real world has moved to next generation healthcare consumerism with member engagement, rewarding healthy behaviors, and promoting personal responsibility. • Plans are now focusing on rewards and incentives. Health Incentive Accounts (HIAs) are a special form of HRA that builds value only from rewards and incentives. There are many other special use HRAs that may become the channels for healthcare consumerism.

27. Rewards & Incentives Rewards can include activities such as: • Participation in a wellness assessment, • Compliance with a condition management program (e.g. taking medications, diet, exercise, office visits), and • Maintenance of good health characteristics (e.g. blood pressure, cholesterol, nicotine use, body mass index) using bio-metrics.

28. Four Phases • Legislation • Regulation • Compliance • Litigation

29. Legislation • PPACAwilllikely require a large “technical corrections” bill. • Politicians and special interests can use a technical corrections bill to pass new provisions and mandates. • A technical corrections bill could include entirely new provisions not a part of the original law. • For example, the public option could return as a “technical correction

30. Regulation • The regulatory process is likely to be a nightmare of delays, missed deadlines, and confusing interpretations. • In the bill there are scores of references to decisions to be made by the Secretary of H.H.S. • Major areas of implementation and coverage determinations for “essential benefits” are left to the discretion of the Secretary. • Lobbyists from every provider and self-interest group will converge on the bureaucracies to have their services included through regulation. • Ultimate coverage mandates are likely to go beyond what employer plans typically consider as medical/surgical benefits.

31. Compliance • Consultants and lawyers will find expanded needs for their services. • Insurers will need to determine if they are in compliance. • Employers not in compliance will be subject to large penalties and fines. • Self-insured employers will require compliance audits to assure required essential coverages and mandates are included. • Each employee contribution will need to be measured against the government affordability standard. • Each year will likely produce new regulations and changes that must meet with compliance standards or employers will suffer penalties and fines.

32. Litigation • Courts will decide what the language of the laws 2700+ pages mean. • New laws require a period of adjustment that can take decades to sort out the meanings and conflicts of legal interpretations. • Given the national impact and financial consequence of any single coverage requirement, every self-interest group wanting to be included in the essential benefits package will push litigation to add or solidify their coverage demands.

33. The Circle of Life The never ending cycle will then repeat itself, as new laws will be passed to respond to court decisions and off it goes again to repeat the four phases of legislation, regulation, compliance and litigation.