Archive for November, 2013

Companies Prepare to Pass More Health Costs to Workers

The Wall Street Journal  by Theo Francis

Companies are bracing for an influx of participants in their insurance plans due to the health-care overhaul, adding to pressure to shift more of the cost of coverage to employees.

Many employers are betting that the Affordable Care Act’s requirement that all Americans have health insurance starting in 2014 will bring more people into their plans who have previously opted out. That, along with other rising expenses, is prompting companies to raise workers’ premium contributions, steer them toward high-deductible plans and charge them more to cover family members.

The changes as companies roll out their health plans for 2014 aren’t solely the result of the ACA. Employers have been pushing more of the cost of providing health insurance on to their workers for years, and firms that aren’t booking much sales growth due to the sluggish economy are under heavy pressure to keep expenses down.

Some are dealing with rising expenses by making employees pick up a bigger share of the premiums for coverage of family members. Employees this year are responsible for an average 18% of the cost of individual coverage, but 29% of the cost of family coverage, according to a survey of employee health plans by the Kaiser Family Foundation and the Health Research & Educational Trust.

“We have seen employers do more cost-shifting, if you will, for an employee to pay a higher portion of the cost of dependent and spouse coverage,” said Tracy Watts, U.S. health-care reform leader at Mercer, a benefits consulting unit of Marsh & McLennan Cos.

Between 15% and 20% of eligible workers nationwide tend to skip insurance, benefits consultants say.

Towers Watson & Co., a benefits consulting firm, figures that about half of the usual opt-outs will sign up for next year—meaning an enrollment increase of about 7% or 8%, and a corresponding increase in costs of about 5%.

Haverty Furniture, an Atlanta-based retail furniture chain with stores in 17 Southern and Midwestern states, expects health-care costs to rise by about $2 million, or 20%, next year.

The company expects the bulk of that to come from enrollment increases, and it is raising premiums, deductibles and copayments in response, Chief Financial Officer Dennis Fink said.

“We do think our per-capita cost is going up, but the bigger piece is just people who’ve chosen not to have coverage,” he said.

A quirk of the Affordable Care Act could make it more appealing for companies to raise rates for family coverage than for individuals, said Vivian Ho, a Rice University health-care economist.

Starting in 2015, companies employing 50 or more people must offer affordable health-care coverage to anyone working 30 hours a week or more.

But affordability is measured using the cost of individual coverage, capping the cost at 9.5% of income, Ms. Ho said.

Raising family rates could help companies recoup costs without running afoul of that limit, she said. Starting now, instead of next year, would allow a more gradual change.

U.S. Department of Health and Human Services spokeswoman Joanne Peters said that the health-reform law is keeping a lid on health-care costs overall, and makes it easier for employers to offer coverage. “Since the Affordable Care Act became law, health-care costs have been slowing and premiums are increasing by the lowest rates in years,” she said.

Gannett Co., which owns more than 80 newspapers and 23 television stations, expects one factor in its increased health costs to be the addition of more employees to its insurance plans due to the ACA rules, according to a person familiar with the company’s projections.

To address an overall increase in costs, Gannett has replaced the two plans for families it used to offer its workers with a single high-deductible plan that requires employees to pay the first $3,000 of medical costs each year, according to workers at the Indianapolis Star, one of the company’s papers. For those with individual coverage, who make up a little over half of Gannett’s insurance pool, the figure is $1,500.

The company also scrapped a sliding scale that let lower-income workers pay lower premiums. For some employees, the result was a 60% jump in monthly premiums for family coverage, to $575 from about $360.

Gannett said more than half of its employees will see premiums fall by 12%.

United Parcel Service Inc. made headlines in August when it said that it would bar spouses from its nonunion health plan if they could get coverage at their own jobs. The company said it expected to see an increase in its health-care costs in part from adding employees to its plan who currently opt out.

About 6% of employers ban coverage for spouses who can get it elsewhere, and another 6% impose an explicit surcharge for covering a spouse, according to Mercer. American Electric Power Co., for example, began imposing a $50 monthly surcharge this year to cover spouses with access to insurance at their own workplace. AEP said 92% of its employees usually sign up for coverage, so it doesn’t expect a surge of new enrollment.

In another shift this year, companies have become increasingly aggressive about steering employees toward plans in which they pay more of the initial costs for their care in exchange for lower premiums.

Trucking and logistics company Ryder System Inc. has replaced one of its two insurance options with one such high-deductible plan. Ryder is encouraging employees to choose the new option in part by raising the cost of more traditional coverage.

These changes are expected to keep Ryder’s total premium cost lower even as it keeps the share of employee premiums that it pays steady at about 70%, executives said. They accompany earlier decisions to close Ryder’s plan to spouses who can get insurance elsewhere.

“In some ways, the low-hanging fruit has been plucked,” said Boon Ooi, Ryder’s vice president of compensation and benefits. In response, he said, “what organizations frequently do is to look at trying to encourage employees to move into the more efficient plan.”

Health-care cost growth has slowed in recent years, and benefits consultants expect an increase of about 5% for 2014, below recent averages. The ACA isn’t expected to raise health-care costs significantly for most companies in 2014 either.

The employer mandate was postponed until 2015, and other major provisions have already largely kicked in, including a requirement to cover children as old as 26, ending lifetime limits on coverage, and covering preventive care without out-of-pocket charges.

But for industries dependent on hourly workers, including retailers and hospitality companies whose young and low-wage workers more often opt out of coverage, the individual mandate may have an effect.

The problem isn’t per-person costs—indeed, companies’ average costs could fall with an influx of the younger, generally healthier workers who had previously tended to opt out. But adding more enrollees will nonetheless raise a company’s total costs.

—Joann S. Lublin contributed to this article.

Posted in: Business Insurance, Health Care Reform (ACA), Personal Insurance

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Covered California Upholds Original Deadline – Press Release

Dear Colleagues and Interested Parties:

 

FOR IMMEDIATE RELEASE Media Line: (916) 205-8403
Nov. 21, 2013  

COVERED CALIFORNIA UPHOLDS ORIGINAL DEADLINE FOR ENDING HEALTH PLANS THAT DON’T MEET LAW’S STANDARDS

Strong Enrollment in New Health Insurance Marketplace a Factor in Decision

SACRAMENTO, Calif. — As consumer enrollment continues to grow, the Covered California™ Board unanimously voted today to uphold its Dec. 31, 2013, deadline for health insurance companies to discontinue plans that don’t meet basic standards. The board cited that extending the deadline offers no benefit to the consumer and may create confusion about accessing affordable health care coverage through Covered California. 

The board, consistent with President Barack Obama’s recommendations, also urged Covered California staff to implement helpful tools for consumers currently enrolled in affected plans, to better understand their options.

The decision to maintain the original deadline also confirms the state exchange’s commitment to transitioning Californians into plans that are compliant with the reforms of the Patient Protection and Affordable Care Act, protecting consumers from double deductibles and stabilizing the risk pool to control costs for consumers beginning in 2014.

Additionally, Covered California is implementing five key strategies to sustain, if not increase, its enrollment momentum and help affected consumers:

  • Extending the deadline for enrollment for coverage taking effect on Jan. 1, 2014, from Dec. 15, 2013, to Dec. 23, 2013, and extending the deadline for payments due from Dec. 26, 2013, to Jan. 5, 2014. 
  • Establishing a telephone hotline for consumers to resolve enrollment questions. The hotline, (855) 857-0445, will be available beginning Monday, Nov. 25.
  • Sending information directly to nearly 1.13 million affected individuals that provides clear options for coverage. The information will be sent from Covered California and the individual’s current insurance provider.
  • Collecting and reporting data, on a regular basis, showing the impacts of conversion for individuals.
  • Engaging consumers in their communities through the thousands of Certified Insurance Agents, Certified Enrollment Counselors and Certified Educators now deployed statewide.

“The consumer is front and foremost in Covered California’s policy decision process. These new strategies will provide consumers a better enrollment experience, more flexibility in the selection of a plan and, most importantly, increased knowledge with which to make the best health coverage choice possible,” said Covered California Executive Director Peter V. Lee. 

The board and Covered California staff discussed options for maintaining or extending the deadline after President Obama last week gave state insurance exchanges flexibility on when policies that were not grandfathered and are not compliant with the Affordable Care Act could be ended.

About Covered California

Covered California is the state’s marketplace for the federal Patient Protection and Affordable Care Act. Covered California, in partnership with the California Department of Health Care Services, was charged with creating a new health insurance marketplace in which individuals and small businesses can get access to affordable health insurance plans. With coverage starting in 2014, Covered California helps individuals determine whether they are eligible for premium assistance that is available on a sliding-scale basis to reduce insurance costs or whether they are eligible for low-cost or no-cost Medi-Cal. Consumers can then compare health insurance plans and choose the plan that works best for their health needs and budget. Small businesses can purchase competitively priced health insurance plans and offer their employees the ability to choose from an array of plans and may qualify for federal tax credits.

Covered California is an independent part of the state government whose job is to make the new market work for California’s consumers. It is overseen by a five-member board appointed by the Governor and the Legislature. For more information on Covered California, please visit www.CoveredCA.com.

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Posted in: Business Insurance, Covered California, Health Care Reform (ACA), Personal Insurance

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Permission Given by HHS to Renew Policies

 Last week (Nov. 14, 2013) the White House announced that insurers will not be required to meet most of the provisions of the Patient Protection and Affordable Care Act (PPACA) if they renew individual or small group policies that were in effect on Oct. 1, 2013. The Department of Health and Human Services (HHS) concurrently sent a Letter to all Insurance Commissioners that provides additional details on the waiver. Essentially, coverage that does not meet the “insurance market reforms” that are scheduled to take effect in 2014 may still be provided for renewals with policy years beginning between Jan. 1, 2014, and Oct. 1, 2014. All newly issued policies must meet the PPACA requirements.

Because states have jurisdiction over insurance, state insurance commissioners must approve any extension. While most are still reviewing the situation, several states have said they will not permit extensions. In addition, insurers are encouraged but not required to retract previously sent cancellations and provide coverage that does not meet the 2014 requirements, and at this time it is unclear which insurers (if any) will choose to offer current coverage into 2014.

If an insurer chooses to reinstate previously cancelled policies and renew others that are not PPACA-compliant, it appears that the renewed policies will largely follow the current rules.

However, according to the HHS letter, these renewed policies will still need to meet a few of the new requirements:

  • Limit eligibility waiting periods to 90 days (as of the start of the 2014 plan year)
  • Remove pre-existing condition limitations for adults in the group market
  • Satisfy the health non-discrimination rules (which includes the wellness program rules)

Newly issued policies will need to meet all of the PPACA requirements starting in 2014.

The HHS letter only addresses individual and small group policies, so it appears that insured plans in the large group market and self-funded plans will still be required to meet all of the PPACA requirements, including the out-of-pocket limit, maximum waiting period, pre-existing condition limitation prohibition and dollar limit prohibition, as of the start of the 2014 plan year.

There are many unanswered questions, including whether an insurer may provide the option to renew current coverage only to certain policyholders, whether new rate filings will be required (or allowed), whether state laws that now include PPACA requirements would be violated with the extension, and how feasible reversal is so late in the year.

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