copyright © 2012 by the hartford. confidential. for internal distribution only. all rights...

Copyright © 2012 by The Hartford. Confidential. For internal distribution only. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.

Medicare and the Group Retiree Health Marketplace

Jill M. Cooke, CEBSRegional Sales DirectorApril 4, 2013

These materials have been prepared by the CASBO Retiree Professional Council (or CASBO Associate Member). They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO


2

Medicare and the Group Retiree Health Marketplace

• What is Medicare?

– Medicare Historical Facts

• Medicare Components

– Medicare Part A

– Medicare Part B

– Medicare Part C

– Medicare Part D

• Medicare Coverage Gaps

• The Group Retiree Health Marketplace


3

What is Medicare?



4

What is Medicare?

• Health Insurance for the aged and disabled

– People age 65 and older

– People under the age of 65 with certain disabilities

– People of all ages with End-Stage Renal Disease (ESRD)

• Various components to Medicare

– Original Medicare (Part A and Part B coverage)

– Medicare Advantage Plans (Part C)

– Medicare Prescription Drug Plans (Part D)

– Medigap – Medicare Supplemental Insurance policies that provide additional or enhanced benefits within the gaps of Parts A and B


5

What is Medicare?

• The Centers for Medicare & Medicaid Services (CMS)

– Part of The Department of Health and Human Services (HHS)– HHS is a U.S. governmental agency established to protect the health of

Americans

– Oversees Medicare programs– Establishes Medicare allowable amounts

– Sets Medicare benefit levels and Medigap benchmarks

– Determines premiums and premium subsidies for Medicare programs


6

Medicare History

Medicare and Medicaid enacted as Title XVIII and Title XIX of the Social Security Act

1965

2010

1972 1980

2003

Medicare eligibility extended to < age 65 with long-term disabilities or end-stage renal disease (ESRD)

New Medigap plan designs introduced to modernize offerings

Medicare Modernization Act (MMA) introduced Medicare Part D Prescription Drug benefit, available 1/1/2006.

Medicare supplemental insurance policies (“Medigap”) brought under Federal oversight


7

Medicare Components



8

Medicare Components

• Medicare Part A – Hospital Insurance– Covers hospital inpatient care

– Covers skilled nursing facility, hospice & home health care

– Part A deductible is $1,184 for 2013

– Increases approximately 3-5% annually

– Benefits paid on Benefit Period basis (ex. per hospital admission)

Cost and Eligibility– Premiums typically paid through payroll taxes– Most members automatically enrolled upon turning age 65

– Members can buy coverage if not eligible for premium-free Part A• Medicare Part B – Medical Insurance

• Medicare Part C – Medicare Advantage (MA)

• Medicare Part D – Prescription Drug Coverage


9

Medicare Components

• Medicare Part A – Hospital Insurance

• Medicare Part B - Medical Insurance– Covers doctors’ services and outpatient care

– Covers some preventive services

– Part B deductible is $147 for 2013

– Increases approximately 3-5% annually

– Benefits paid on Calendar Year basis

Cost and Eligibility– Premium for Part B $104.90/mo for 2013

– Higher Premiums if income exceeds $85K (indiv), $170K (joint)

– Automatically enrolled at age 65, w/ option to disenroll

– Premium penalties if late enrollment• Medicare Part C – Medicare Advantage (MA)

• Medicare Part D – Prescription Drug Coverage


10

Medicare Components


• Medicare Part B – Medical Insurance

• Medicare Part C – Medicare Advantage (MA)– Coverage option through private insurers approved by CMS

– Includes Part A and B benefits, may provide additional benefits (Rx, vision, etc.)

– Both CMS and carrier rules apply: not all MA plans work the same way

Cost and Eligibility– Members with Parts A and B generally eligible, but service area

requirements may apply

– Member enrolls in Part C coverage and pay premiums to carrier

– Subsidized by Medicare who pays per member subsidy to MA carrier• Medicare Part D – Prescription Drug Coverage


11

Medicare Components


• Medicare Part B – Medical Insurance

• Medicare Part C – Medicare Advantage (MA)

• Medicare Part D – Prescription Drug Coverage– covers cost of prescription drugs, available through private insurers or

Pharmacy Benefit Managers (PBM) approved by CMS

– Minimum benefit levels for Part D established by CMS

Cost and Eligibility– Members with Part A and B generally eligible

– Member must enroll in Part D and pay premium to the insurer/PBM

– Subsidized by Medicare who pays per member subsidy to insurer/PBM

– Premium penalties may apply to late enrollments

– CMS may provide reduced premiums to low-income members


12

Who pays first?

* If your employer participates in a plan that is sponsored by two or more employers, the rules are slightly different. ** If you originally got Medicare due to your age or a disability other than ESRD, and Medicare was your primary payer, it still pays first when you become eligible due to ESRD.Source: CMS Revised November 2011

If You Situation Pays First Pays Second

Are covered by Medicare and Medicaid

Entitled to Medicare and Medicaid

Medicare Medicaid, but only after other coverage (such as employer group health plans) has paid

Are 65 or older and covered by a group health plan because you or your spouse is still working

Entitled to Medicare Group Health Plan

Medicare

The employer has 20 or more employees

The employer has less than 20 employees*

Medicare Group Health Plan

Have an employer group health plan after you retire and are age 65 or older

Entitled to Medicare Medicare Retiree Coverage

Are disabled and covered by a large group health plan from your work, or from a family member who is working

Entitled to Medicare Large Group Health Plan

Medicare

The employer has 100 or more employees

The employer has less than 100 employees


** Have End Stage Renal Disease (ESRD) (permanent kidney failure requiring dialysis or a kidney transplant) and a group health plan coverage (including a retirement plan)

First 30 months of eligibility or entitlement to Medicare

Group Health Plan

Medicare

After 30 months of eligibility or entitlement to Medicare



13

CMS Medicare Part D Benefit Parameters

Medicare Part D Benefit Parameters for Defined Standard Benefit

2010 2011 2012 2013

$ Amount $ Amount $ Amount $ Amount

Deductible $310 $310 $320 $325

Initial Coverage Limit $2,830 $2,840 $2,930 $2970

Out-of-Pocket (OOP) Threshold $4,550 $4,550 $4,700 $4,750

Total Covered Medicare Part D Drug Spend at OOP Threshold

$6,440 $6,447.50 $6,657.50 $6,733.75

Minimum Cost-Sharing in Catastrophic Coverage Portion of Benefit

Generic/Preferred Multi-Source Drug $2.50 $2.50 $2.60 $2.65

Other $6.30 $6.30 $6.50 $6.60

Medicare Part D Benefit Parameters for Retiree Drug Subsidy RDS

Cost Limit $310 $310 $320 $325

Cost Threshold $6,300 $6,300 $6,500 $6,600

Source: CMS


14

Prescription Options: Individual, EGWP, MAPD

• Prescription Drug Plan (PDP) benefits available through different means

Individual Plans EGWP MAPD Plans

• Insurance carriers and Pharmacy Benefit Managers (PBMs) contract with CMS to offer individual options

• Individual plans offered in 34 different regions that cover the nation; PDP carriers can vary costs and benefits by region

• Approx. half of individual plans provide “basic” PDP benefits and half will enhance the basic benefit

• Available to Medicare-eligible individuals, or an Employer can direct Medicare-eligible individuals to these options.

• Employer Group Waiver Plans (EGWP) are PDP options for Employer Groups and Unions

• Employer contracts with the carrier or PBM for Part D benefits, and can offer to their Medicare-eligible retirees

• Benefits must be at least as rich as CMS basic benefits,

• Typically a wide variety of benefit options are available (deductibles, copays) to fill in gaps of basic plans

• Usually one national benefit plan and premium rate will be available

• Medicare Advantage Prescription Drug (MAPD) plans are pharmacy benefits offered as part of Medicare Advantage coverage

• The Part D benefits are offered by the Medicare Advantage carrier, and Employer can offer retirees a combined medical & Rx plan

• Benefits must be at least as rich as CMS basic benefits

• Some benefit options may be available, but limited to what’s offered with the carrier’s MA plan

• Premium rate bundled with the MA premiums


15

Prescription Options: PDP vs. RDS

Prescription Drug Plan PDP Retiree Drug Subsidy RDS

What is it?

• Insurers contract with CMS to offer qualified Medicare PDP.

• Employers can sponsor group PDP options to provide retirees prescription coverage.

• An alternative to PDPs

• Employer applies for subsidies on retiree Rx benefits

• RDS subsidies taxable (effective 1/1/2013)

Pros • Subsidies more predictable than RDS payments

• Less administrative burden

• Catastrophic benefit included

• No annual creditable coverage notice

• Flexibility in Rx plan design, but must be creditable

• Rx benefits could be same as actives

• Employer receives equivalent to 28% of allowable retiree costs

• RDS Website includes info & online app

Cons • CMS standards for benefit plans and formulary

• Pharmacy benefits different from actives

• Annual changes by CMS to benefits and administration

• Administrative complexities (low-income assistance, late enrollment penalties)

• Annual application and attestation needed

• Employer contributions required to pass attestation

• Manage eligibility, claim, and rebate data

• Annual creditable coverage notice required for members and CMS


16

Closing the Donut Hole by 2020

Beneficiary Carrier/PBM Medicare Reinsurer Manufacturer Discount

79%

75%

$325

25%

50%

21%

47.5%

15%80%

2.5%

5%

25%

75%

TBD

25%

50%

75%

25% 25%

15%80% 5%

2013 Basic Benefit Plan 2020 Basic Benefit PlanPhase

Catastrophic Phase

Coverage Gap (Donut Hole)

Initial Coverage Phase

Deductible

Bra

ndG

ener

ic

Source: 2012 SilverScript


17

Part D Coverage Restrictions

• Coverage restrictions: tools that Part D plans can use to limit use of drugs on their formularies.

• Plans can deny coverage of drugs on its formulary that have these restrictions on them:– Beneficiary or Physician can request exceptions

Source: Medicare Rights Volume 11, Issue 7

Prior Authorization Quantity Limits Step Therapy

When plan requires you ask for permission before it will cover the drug

When plan covers only a certain amount of prescription per month or per refill

Plan requires you try a different formulary drug before it covers the drug your doctor prescribed


18

Medicare Coverage Gaps



19


• Original Medicare (Parts A and B) may not cover all expenses in full. Here are some examples:

• Expenses incurred in a foreign country • Private duty nurses

• First 3 pints of blood (in or out patient) • Vision or dental

• Some preventive care expenses

• Preventive Care services with an A or B rating from the U.S. Preventive Services Task Force are covered at 100% as of 1/1/2011

• A few services, such as Ovarian Cancer Surveillance Tests, are not

• Annual Physicals

• Medicare covers an initial “Welcome to Medicare” visit and yearly wellness visits, but additional tests and services may not be covered

• Charges above Medicare Allowed amount


20


• How to cover Medicare Gaps?

1. Medigap Plans (Individual or Group) 2. Private Medicare Supplement policies

Medicare Supplement policies that cover some gaps

• Individual policies sold through private insurance companies

• Standardized Medigap plan designs established by CMS

• Plans A through N introduced in June 2010, updating previous A through L plans

• Medigap policies sold with Original Medicare (Parts A and B) but not needed with MA plans (Part C)

Private insurers may sell health coverage that coordinates with original Medicare

• Available plan designs are more flexible than the Standard Medigap designs

• Insurer may offer on a group and/or individual basis

3. Medicare Advantage Plans (Part C) (Individual or Group)

•Will often provide coverage beyond Parts A and B


21


Source: Choosing a Medigap Policy 2012, CMS Publication.

Medigap Plans

Medigap Benefits A B C D F G K L M NPart A Coinsurance & hospital costs to 365 days after exhaustion of Medicare benefits

Part B Coinsurance/Copayment 50% 75% Blood (First Three Pints) 50% 75% Part A Hospice Care Coinsurance/Copayment

50% 75%

Skilled Nursing Facility Care Coinsurance

50% 75%

Part A Deductible 50% 75% 50% Part B Deductible

Part B Excess Charges

Foreign Travel Emergency (to plan limits)


22


*Source: Kaiser Family Foundation Medicare Advantage Fact Sheet, Nov 2011

• Background on Medicare Advantage (MA) Plans– Previously known as Medicare + Choice

– Plan availability and membership fluctuates annually

– Largest impact to MA is government subsidy levels – Subsidy reduction higher premiums, lower benefits

– Health Care Reform introduced payment reductions in 2012

Total Medicare Private Health Plan Enrollment*

6.86.2 5.6 5.3 5.3 5.3

6.1

8.39.6

10.811.4 11.9

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

En

roll

men

t in

Mil

lio

ns


23

Differences: Medicare & Medicare Advantage

Source: 2012 Medicare Rights Center

Original Medicare Medicare Advantage Plans

Costs You pay Medicare premiums, deductibles, and coinsurances (usually 20% of the Medicare-approved cost for outpatient care)

You pay Medicare premiums and your plan’s premium, if it charges one. Your plan sets its own deductibles and copays (usually a fixed cost for each office visit). You may pay the full cost if you don’t follow your plan’s rules.

Supplemental Insurance

You can buy a Medigap policy. (But only at certain times depending on where you live.)

You can’t buy a Medigap policy to help pay your out-of-pocket costs in a Medicare Advantage plan.

Covers extra services like vision and dental

No. Covers medically-necessary inpatient and outpatient health care. Doesn’t cover certain services such as routine vision, hearing, or dental care.

Maybe. May cover some services Original Medicare doesn’t cover such as routine vision, hearing and dental care. All plans must cover the same inpatient and outpatient services Original Medicare covers.

Lets me see providers nationwide

Yes. You can go to any doctor or hospital in the U.S. that accepts Medicare.

Usually not. Most people have HMOs, which typically have local networks of providers you must use for the plan to cover your care. PPOs and PFFS plans should cover care you get outside the network, but you will pay more.


24

Differences: Medicare & Medicare Advantage

Source: 2012 Medicare Rights Center

Original Medicare Medicare Advantage Plans

Need referrals to see specialists?

No. You don’t need a referral. Maybe. You often need to get a referral from a Primary Care Physician if you want to see a specialist.

Covers drugs? No, but if you want Medicare prescription drug coverage, you can buy a separate Part D plan.

Usually. Most plans include a Part D drug coverage. You usually can’t get a separate Part D plan if you have a Medicare Advantage plan (some exceptions).

Out-of-pocket limit?

No. There’s no cap on what you spend on health care.

Yes. Plans must have an annual out-of-pocket limit, which can be high but protect you if you need expensive care. The plan pays the full cost of your care after you reach the limit.


25

Differences: Fully Insured & Self Insured

• What should an employer consider when making funding decisions for retiree health plans?

– Predictable Claim Costs– Health care costs increasing

– Larger numbers of retirees with baby boomers moving to 65+ segment

– Motives for providing same coverage for retirees and actives

– Stop Loss insurance costs

– Administrative complexity of Retirees– Tracking location

– Longer than average call times

– Tracking/Coordinating Medicare claims


26

The Group Retiree Health Marketplace



27

• Size of Group Retiree Market– Approximately 10 million retirees in employer sponsored plans– Retiree population is growing

– First Baby Boomers turned 65 in 2011, continuing through 2025– Increased life expectancy

Medicare Beneficiaries(1)

(2010-2035 projection, in millions)

47.7

55.7

64.0

73.2

81.0

85.6

25.030.035.040.045.050.055.060.065.070.075.080.085.090.095.0

100.0

2010 2015 2020 2025 2030 2035

(1) Source: 2012 Medicare Trustees Report, CMS; Table V.B3 Medicare Enrollment.


estimated


28

• In the state of California there are _______ Part D beneficiaries in the Donut Hole?1

– Answer: • The average discount per beneficiary is $____ compared to the

national average of $657. 1

– Answer: • California has a total of _________ Medicare beneficiaries. 2

– Answer: • Average Medicare hospital spending amount per enrollee in the state

of California is $_____. 2

– Answer: • Average Medicare physician spending amount per enrollee in the

state of California is . 2

– Answer: $

(1) Source:. Medigap Savings 2012(2) Source: www.statehealthfacts.org 2012

California Regional Data – Did you know?

http://www.statehealthfacts.org/


29


• Employers that commonly offer retiree health coverage:

– “Older” industries, i.e., the manufacturing sector

– Union groups

– Employers reducing retirees’ costs or eliminating coverage

– Employers looking to relieve HR staff of administrative burden

– Self-funded plans trying to manage liability

– utilities, universities, hospitals, financial institutions, public entities, religious organizations

– Among large firms (200+) who cover active workers, 25% offer retiree health benefits in 20121

– Stable since 2008 (29%), large drop from 1988 (66%)

• Why reassess retiree health coverage now?

– Health Care Reform (Patient Protection and Affordable Care Act)

Source: Kaiser Family Foundation & Health Research Educational Trust, 2012 Annual Survey.


30


Health Care Reform– Patient Protection and Affordable Care Act (PPACA )

– Retiree only plans not subject to PPACA insurance reforms– Will apply to retirees if included under employer “active” medical plan

• Medicare Impacts

– Medicare Part B updated to cover many preventative benefits (2011)

– Medicare Advantage: some reforms apply– Minimum Loss Ratio requirement (2014)

– Government subsidy methodology changes

– Guidelines for plan quality ratings by CMS

– Part D: Some reforms apply– Coverage for 50% of brand prescriptions in “coverage gap”

– Retiree Drug Subsidy (RDS) amounts no longer tax-free– As result, by 2013, 73% of RDS clients expected to change pharmacy plan1

1 Aon Hewitt Survey: “Most Employers Say They Plan to Alter Retiree Drug Plans”


31


Health Care Reform– What is “Grandfathering?”

– If “Grandfathered,” employers do not need to implement all of PPACA mandated benefits for 2011

– Employers lose grandfathered status by making changes to their plan, such as benefits and contributions/costs

– Employers retain grandfathered status if not significantly changing plan

– This gives employers more flexibility in changing carriers

– Legislation continues to evolve

– Specifics of tax reforms TBD, not effective until 1/1/2018


32

Milestones of Health Care Reform

• $250 rebate to members reaching Part D coverage gap

2010

2014

2011

• Introduce medical loss ratios for insurers• Eliminate deductibles/coinsurance for many preventive services• Fill-in Part D coverage gap by covering 50% of brand drugs

• Health insurance exchanges

implemented & U.S. citizens

required to obtain coverage

• Supreme Court reviews PPACA• Reduce Medicare payments for preventable hospital readmissions

2012

2013

• Eliminate tax deductions for employers participating in RDS• Adjust Medicare Part A payroll tax for high-income employees


33

The Future of Medicare

• Q1: How many people oppose Medicare reductions to solve budget deficit issues?

a. 41% b. 50% c. 65% d. 77%

• Q2: Compared to non-Medicare members, do Medicare members pay a larger or smaller percentage of household expenses towards health care costs?

• Q3: Over the next ten years, is Medicare spending expected to grow at a faster or slower rate than private insurance?

• Q4: Medicare solvency: How long is Medicare expected to be able to fully pay on claims?

a. 2013 b. 2017 c. 2021 d. 2024


34

The Future of Medicare

• Answer to Q1 = d. 77%– In a recent national poll, most people - 77 percent of those polled -oppose cutting

Medicare to reduce the nation’s budget deficit.1

• Answer to Q2 = Medicare members pay larger % of expenses towards care– In 2009, people with Medicare paid 15% of household expenses towards health care

costs, compared with only 5% for those not yet on Medicare.2

• Answer to Q3 = Medicare spending to grow slower than private insurance– Over the next 10 years, Medicare spending is expected to grow 3.1% per enrollee per

year compared to 5% for private insurance.1

• Answer to Q4 = Medicare to fully pay claims until 2024. – ACA addresses waste, fraud and abuse, which is expected to add 8 years of solvency

to the Medicare trust fund. 3

(1) Source: [email protected], November 8, 2012(2) Source: Kaiser Family Foundation. “Health Care on a Budget: The Financial Burden of Health Spending by Medicare Households” (March 2012)(3) Source: The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. “The 2012 Annual

Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds” (April 2012)

mailto:[email protected]


35


• Common challenges to offering retiree health coverage

Increasing overall medical costs putting pressure on retiree plans

Continued economic pressure on employers to reduce contributions due to increasing costs

Growing retiree population

– Larger number of retirees

– Ratio of retirees to active employees growing

Health Care Reform

– Future of Medicare Advantage

– Changes to prescription options due to health care reform

– Impact of Health Care Exchanges

– What will open market offer post-reform?

Legacy costs; honoring promises made to retirees

Requirements of Union plans

Increased administrative burden on HR staff from retirees

– Difficult to track retirees no longer on payroll or in office location

– Longer avg. call times for retirees

Changes in FASB & GASB*

– Accounting standards now require future costs of retiree benefits to be recognized in advance

– Larger costs on an employer’s balance sheet

* FASB = Federal Accounting Standards Board, GASB = Governmental Accounting Standards Board


36


• Some Employer Options and Desired Impact

Take retirees out of active medical plan

– Improves claim experience on active plan

– May not impact Employer’s “Grandfathered” status

Provide employer-sponsored group retiree health insurance that wraps around Medicare

– Integrates with Medicare, taking advantage of the Medicare cost containment

Provide fully insured group health insurance plan

– Can better predict FASB 106 or GASB 45 liability

– May reduce FASB 106 or GASB 45 liability and limit employer’s balance sheet impact

Shift from employer-paid plans to contributory or voluntary plans

– Reduces financial burden on employer

Introduce member cost-share through benefit changes

– Reduces overall premium cost of coverage


37

Knowledge Check - Crossword

Questions & Resources



39

Resources for Medicare Information

• U.S. Government Site for Medicare http://www.medicare.gov/

• Centers for Medicare and Medicaid Serviceshttp://www.cms.gov/

• National Medicare Training Program (Part of CMS)

http://www.cms.gov/Outreach-and-Education/Training/NationalMedicareTrainingProgram/index.html?redirect=/NationalMedicareTrainingProgram

• Medicare Rights Centerwww.medicarerights.org

• Kaiser Family Foundation – Medicarehttp://www.kff.org/medicare/index.cfm

copyright © 2012 by the hartford. confidential. for internal distribution only. all rights...

Documents

medicare original medicare

medicare history medicare

b medicare

medicare programs

medicare eligibility

d medicare coverage

medicare benefit levels

medicare allowable amounts