Well, let me say this - you should care a lot! We spoke about the Medicaid programs (remember state level oversight); Medicare (Federal Oversight) & the individual markets. Now let's talk about the employer market.
The employer market is quite a complex program offering depending on the state your contract is written out of; the size of your employer (yes, size does matter in this case) and how your contract is financially funded.
Pre-ACA -
Employers were defined as Small Group: 2-50 Employees; Large Group: 51+ Employees. In most states, an employee was considered someone who worked full-time hours, as defined by the state and were a W2 employee. Meaning, they were on payroll and were not a contract worker (i.e. 1099 recipient).
Small Group: States directed how cases would be rated. Some states took a community rating approach which means, it didn't matter if you were young, old, sick or healthy, you got a rate from a carrier, and that rate was the same rate, regardless of your group make up. If you were 25/M/Healthy, you pay the same rate as someone who is 52/M/Chronic Condition. (Let's just say - YIKES - EXPENSIVE)
Some states rated based on age; zip codes and gender - but you would still have the same rate based on that gender, zip & date of birth. So for example - if you were two 25/Male/ZipCode12534 - you got the same rate. (So - less expensive for some and more expensive for others - or ANA - Affordable/Not Affordable)
Then some states would use your age, zip code & gender and provide a preliminary rate. Then you would pick a plan, have employees fill out their applications with health underwriting questionnaires and the employer would get a final rate that could be either less expensive or far far away, in another galaxy, to the dismay of their purse strings. (I like to call this, what the hell did I get myself into effect - as you might have to pull the offering and revert to the original carrier or just fill out new paperwork and find a carrier that was more affordable.)
Large Group: Large group employers had the opportunity to be rated in various ways. The most common were (and this did vary by state, so I am using general definitions): 51-99 Employer was mainly manually rated - they would look at the industry; where the employees lived (zip codes); the average males versus females & the average age. They would then apply medical/pharmacy trend (no, not the fashion type of trend; the medical trend is inflation - or the cost of care based on contracts held with insurance companies and providers (doctors; labs; pharmacy; hospitals)). Then you would be provided rates.
100 + groups (again depending on the state) - would throw in claims data - or the MLR - Medical Loss Ratio. The MLR is a simple calculation of the claims paid out by the insurance company versus the premium received by the insurance company. So an MLR of 75% was much better than an MLR of 105%. 75% means, simplicity, for every dollar paid by the employer to the insurance company, $.075 was used to pay out claims. 105% means for every dollar paid by the employer in premium to the insurance company, $1.05 was used to pay out claims. And these claims costs were applied at a higher percentage based on a larger employer. So a 200 life group could use 80% manual rating and 20% claim data, and a group of 500 lives could use 40% manual rates and 60% claims data.
You then can get into funding vehicles, which I won't do today, in detail. But you have FULLY INSURED - where the employer pays a fixed cost monthly, and the insurance company takes on the full risk. If the group runs well (75% example), the carrier keeps the savings & if the group runs poorly (105% example), the carrier takes the hit but hopes to offset it with the well-running groups. This funding the employer has the least skin in the game - think wool head to toe bathing costumes. SELF-FUNDED - here the employer becomes the plan where they fund claims; they pick the provider network; they choose the carrier or third party administrator to process claims; provide medical management and customer service. Here the employer has the most skin in the game - like literally skinny dipping - They fund the claims as they come in. They have to protections built in, the individual deductible Individual Stop Loss - ISL) and the group deductible (Aggregate - ASL). The ISL would kick in at a predetermined level, say $75K per member enrolled and the ASL would kick in based on a total claim dollar amount for all members enrolled, perhaps $1M. In this funding, the employer could have a claim hit at any time for $75K and have to fund it immediately. But if they run well, they enjoy the claim savings, and under this contract, they are not required to pay state premium tax or implement state mandates, only federal mandated benefits. Level Premium - this is a hybrid of self-funded and fully insured. It is still a self-funded contract, but there are other built-in protections for the employer. They employer will pay their fixed cost premiums, of which, a portion of them are used to pay fixed costs (network access/customer service/claim processing), and the remaining amount is set aside for claims. At the end of the 12-month contract, the group would be reviewed, and if the group ran better than expected, the employer received a refund, and if they ran worse, they were not on the hook for claims over the Aggregate, but they also were probably not renewing with that carrier.
Now, how has this all changed in the Post-ACA world?
1. ACA initially mandated that states change their small group definition from 2-50 to 2-100 as of 1/1/2016. So the groups that were being rated by their specific group demographics were now thrown into one of rating models mentioned above in the pre-ACA world. The carriers had to adjust and reprogram their systems; new rating models had to be created, and the industry had to adjust and learn the new way to provide this programming. And this didn't happen by the flick of a wand from a Hugglepuff wizard. It cost money, time, and a huge amount of investment. It also caused sheer panic and chaos. State rates rose drastically - poor Uncle Sal - carriers that exited the small group market (i.e. CIGNA) were no longer able to sell to the 51-99 market, so the market shrank, and there was just a sense of the market not being sustainable. In comes the PACE Act, from the Obama administration - which gave each state the flexibility to example the group size if they wanted to. And boy howdy, did they! EXCEPT for California; Colorado; Maryland; New York; Vermont. Yeah - that purple issue again! And specifically to speak to NY for a moment, NYer's have a smaller number of options in the 2-100 market to choose from; rates skyrocketed (yeah they are not cheering this one on); self-funding and level premium were off the table as NY law states that small group employers (however that is defined) were not able to self-fund. The fact that NY Governor and legislature did not adopt the PACE Act is STILL an issue in NY and needs to be addressed in Albany. Oh - and all that programming and investment by the market; had to be undone, so more money was spent.
2. We were introduced to the new glitzy plan offerings called the Metallics (no they are not a singing group): Platinum (90%); Gold (80%); Silver (70%) and Bronze (60%) - a way to easily identify the product type and the average percentage that the insurance company would pay in versus what you would pay, in a typical population. You are protected with a total out of pocket so you cannot pay as an individual more than for 2017: $7,150 for an individual & $14,300 for families. All costs covered under the policy applied towards this: deductibles; copays for doctors and medication; co-insurance (%). If you had a catastrophic event or chronic disease, the out of pocket limits your payments and kicks in and the coverage moves to 100% paid by the carrier.
3. The 10 Essential Health Benefits: in the small group market (depending on the state) you were required to offer ten essential health benefits. 8 of which, were already normally included in an insurance contract, two of which were new: Pediatric Vision & Dental Coverage - for children up to age 19.
4. Employer Mandate: yes, it sounds scary - the MANDATE! So let's make this even more complicated - if you were an employer with 50 or more FTEs - hold up - "What the heck is an FTE? An FTE is a full-time equivalent employee, not to be confused with a full-time employee. I will spare you the details. But if you had more of these FTEs, you were mandated to provide health insurance coverage or risk a penalty - to balance out the risk pool, remember that risk pool? Not only did you have to offer coverage but you had to offer minimum value of 60%, enter Miss Bronze AND it had to be affordable - as of 2017: the lowest cost single rate, annually, could not cost more than 9.66% of the employee's annual income.
So - I'm going to stop there as by now, your coffee must be cold and your eggs like rubber for a Saturday morning read.
We will pick this up later with break news - the Collins/Cassidy bill has a name, and Rand Paul R-KY has an idea too!
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