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Healthcare Visions, Inc. Creating the Possible…

The Pros and Cons of President Bush's 2nd Term: Prescribing Private Solutions for the Nation's Healthcare Problems. Healthcare Visions, Inc. Creating the Possible…. Ronald E. Bachman FSA. MAAA President & CEO Healthcare Visions, Inc. 404-697-7376 ronbachman@healthcarevisions.net

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Healthcare Visions, Inc. Creating the Possible…

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  1. The Pros and Cons of President Bush's 2nd Term: Prescribing Private Solutions for the Nation's Healthcare Problems Healthcare Visions, Inc. Creating the Possible… Ronald E. Bachman FSA. MAAA President & CEO Healthcare Visions, Inc. 404-697-7376 ronbachman@healthcarevisions.net www.healthcarevisions.net Sr. Fellow - Center for Health Transformation Sr. Fellow - Georgia Public Policy Foundation Fellow - Wye River Group on Health

  2. The Ownership Society • 2nd Term Agenda Theme – The Ownership Society • Home Ownership • Business Ownership • Pension Ownership • Social Security Ownership • Healthcare Ownership

  3. The President’s Stated AgendaHealthcare – a Part of the Ownership Society • A market-based consumer-driven plan to address the problems of rising health care costs and the uninsured, which: • Makes health care coverage more affordable for Americans at all income levels; • Provides new coverage options, targeted to those who need it most -low-income children and families, employees of small businesses, and the self-employed; and • Provides real help to small businesses that are struggling with the high cost of health insurance.

  4. Affordable Health Care for all Americans • Medical Liability Reform • Health Information Technology • Cross-state selling of Health Insurance Policies (Shadegg Bill) • Establish a health center in every poor county in America.

  5. Help for Low Income Families Too Little Too Late? Too Costly?How Many Helped? • HSA subsidy for Low-Income Families - $1,000 directly to their HSA. • Premium Tax Credit for Low-Income Families - $2,000 refundable tax credit to help them buy a HDHP. • HSA subsidy for Low-Income Individuals- $300 directly to their HSA. • Premium Tax Credit for Low-Income Individuals - $700 refundable tax credit to help them buy a HDHP. • Non-HSA Premium subsidy for Families - $3,000 tax credit to buy standard medical coverage instead. • Non-HSA Premium subsidy for Individuals - $1,000 tax credit to buy standard medical coverage instead. • The low income health care credits will be advanceable and available immediately to qualifying families.

  6. Assistance to Self-Employed and Small BusinessCost? Impact? Large Business? • Top-line deductibility of HDHP premiums. • Tax credit for contributions to the HSAs of small business employees - small business owners to get a tax credit on HSA contributions for the first $500 per worker with family coverage and the first $200 per worker with individual coverage. • $4 billion in grants to encourage states to create state run insurance pools to make sure low-income Americans get the most out of the credit. • Allow Cross State selling allowing individuals to buy the best coverage they can find anywhere in the country.

  7. Estimated Budget Effects Of The Revenue Provisions Contained In The President's Fiscal Year 2006 Budget Proposal. • Included are the JCT 10-year (2006-2015) estimates for the Administration's health care proposals: • * refundable tax credit for purchase of health insurance… $64.1 billion • * above-the-line deduction for certain high deductible insurance premiums…………………………………………. $32.8 billion • * refundable tax credit for contributions of small employers to employee HSAs…………………………………………… $20.3 billion • Total Proposed Budget Amount ……………………... $117.2 billion

  8. Health Policy Outlook 2005 – Top 10* • Tax Credits for the Uninsured for HSA and other Plans • Individual Deductibility of Premiums for HSA-qualified plans • Small Business Tax Credits for HSAs ($200/ind and $500/fam) • Association Health Plans (AHPs) • Cross-state purchasing of health insurance • Implementation of Medicare Drug Benefit • Medicaid Reform • Medical Liability Reform • Health IT • FDA Reform • Other: Patient Safety, LTC Tax break, FSA rollover • * Center for Health Transformation

  9. Senate Bill S.4. – Healthy America Act in 2005, and • Making Health Care More Affordable • Reforming the medical liability system • Promote Rapid adoption and widespread use of individually owned, privacy–protected EHRs • Improving patient safety and reducing medical errors • Reducing waste, fraud, and abuse in public & private heath programs • Establish a Mandate Review Commission • Expanding Access to Affordable Health Coverage • Above the line tax deduction for HDHP premiums and support for low income • Provide tax credits and for those not qualifying for er-provided health coverage • Above the line tax deduction for LTC insurance and support for family care givers • Increasing availability & options for health coverage under Trade Adj. Assist. Act • Allow health insurance costs of self-employed to be a business expense • Reward states for signing up eligible low income children in public health programs • Support association health plans (AHPs) • Provide support for state high risk pools

  10. HR 1872 - Health Coverage for the Uninsured Act of 2005 • H.R. 1872 has three main parts: • Premium deductibility. The legislation would allow an individual who purchases a high-deductible health plan to deduct from his or her taxable income the amount of the premium.  • Small business tax credit. Under this proposal, small businesses of up to 100 employees would receive a refundable tax credit for contributions they make to their employees' health savings accounts • Low-income tax credit for the purchase of health insurance. This credit would be refundable, advancable, and assignable - meaning the money would go straight to the insurer of their choice to pay for their health care, on a monthly basis. 

  11. HR 1872 and S.4. (As of 8/2005) • The bill (HR 1872), aimed at expanding health savings accounts, is no longer on the July “to-do” list because party leaders have concluded it is too expensive, sponsor Sam Johnson, R-Texas, said Thursday. • “They have decided not to do it this year. The score was too big,” Johnson said. A House GOP aide said the measure was scored to cost the Treasury an estimated $124 billion over 10 years. • **************************************************************************** • The White House states that this bill will resurface in September 2005. The program is included in the Senate version S.4. that is proceeding through Committees.

  12. HR 2355 and Senate 1015Health Care Choice ActAvoidance of State Laws and Mandates? NAIC?Loss of Regulatory Oversight? • Allows individual and small-group health policies to be sold across state lines. • allows an insurance company to go through one process in one state and sell to people in all 50 states. • Empowers individuals to make the best choice for themselves and their families • Health Insurer or Health Plan would: • choose a "primary" state of domicile for licensure. • sell in any secondary state nationwide any health policies that met the primary domiciliary state's laws • pre-empt any mandates imposed in the policyholder's home state • Must file the policy form in any secondary state in which it will be used • policies could be sold over the Internet, by telephone or by agents

  13. Public Opinion on Cross-State Selling • The Zogby International Poll: • 72% think people should have the option of buying a policy that is approved and available in another state. • 86% of Hispanics, and 85% of African Americans, were greatly in favor of this option. • 80% of single adults and low income families support crossing state lines.

  14. Basic Principles • Personal Responsibility • Self-Help, Self-Care • Individual Ownership • Portability • Transparency (the Right to Know) • Consumerism (Empowerment)

  15. 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.

  16. What Is a 21st Century Intelligent Health System? • In a 21st Century Intelligent Health System, the individual has: • Accurate, timely knowledge of personal health needs, • Access to the best information about how to maintain personal health, • Knowledge of whom to see and where to go for health services, • And confidence that health providers are practicing medicine using best practices based on the most up-to-date understanding of outcomes-based medicine. • In a 21st Century Intelligent Health System, the individual has the right to know the price and quality information about health services in the most accurate, least expensive, and most convenient manner possible. • In a 21st Century Intelligent Health System, the individual is the center of knowledge and decision-making and has responsibility for his or her own health.

  17. The Evolution of Healthcare and ConsumerismFuture Generations of Consumer Directed Healthcare 2nd Generation CDHC Focus on Behavior Changes Traditional Plans with ConsumerInformation 1st Generation CDHC Focus on Discretionary Spending 4th Generation CDHC Personalized Health & Healthcare 3rd Generation CDHC Integrated Health & Performance Traditional Plans Behavioral Change and Cost Management Potential Low Impact ---- ---- ---- ---- ---- ---- ---- ---- ---- High Impact

  18. Major Building Blocks of Consumerism Personal Accounts It is the creative development, efficient delivery, efficacy, and successful integration of these elements that will prove the success or failure of consumerism. Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

  19. 2nd Generation CDHC Focus on Behavior Changes 1st Generation CDHC Focus on Discretionary Spending 4th Generation CDHC Personalized Health & Healthcare Summary – A peek into the future of Consumerism 3rd Generation CDHC Integrated Health & Performance Personal Accounts Wellness/Prevention Early Intervention Disease Management Information Decision Support Incentives & Rewards

  20. Important Differences between Use of HRAs and HSAs for Supporting Behavioral Change Personal Care Accounts Health Reimbursement Arrangements Health Savings Accounts

  21. Divergent / Convergent Futures ?HRAs – Best for Larger Groups?HSAs – Best for Individuals and Small Groups? Current State Combination Accounts FSAs HRAs HSAs Employer-based Healthcare Traditional (Ltd Carry-over?) Special Purpose Non-Plan Employer-based healthcare Special Purpose Accounts Incentive Matching Employer-based Healthcare with Individual Accountability Individual-based Healthcare Employer-based Defined Contribution Developments

  22. Growth of Personal Care Accounts • HRAsHSAs • 2000* None None • 2001* 19,000 None • 2002* 53,000 None • 2003* 394,000 None • 2004(est) 1-1.5M 400,000 • 2005(est) 3.2 M 1.0-1.5M • 2006(est) 6.0+M ??? • 2007(est) 12-15M ??? • * Deliotte Consulting

  23. Incentive Awards - Three Very Different Personal Care Accounts • FSAs – Traditional Group Plans • Health Reimbursements Arrangements (HRAs) – Employers’ choice for cash flow flexible incentive based medical plan benefit designs (best suited for self-insured groups) • Health Savings Accounts (HSAs) – Employees’ choice for funded portable triple tax advantaged with “High Deductible Health Plans” (best suited for individuals and small groups) • Combination Accounts – creative but confusing

  24. The Answer ? Flexible Health Savings Accounts (FHSAs) • FHSAs would have the tax advantages of HSAs and the key flexibilities of HRAs. • Basic Principles: • Retain personal responsibility goal of HSA/HDHPs • Focus on Behavior Change • Recognize value of Pay for Compliance as a driver for behavior change and shared savings with personal responsibility • Expand adoption and funding of HSAs by large employers

  25. Flexible Health Savings Accounts (FHSAs)The Next Generation • Four needs that would allow FHSAs the flexibility to: • 1. Provide financial Rewards and Incentives for Behavioral Change. • 2. Encourage Employer/Carrier FHSA contributions towards healthcare • 3. Be provided with plan designs other than HDHPs • 4. Address FHSA/HSA Technical Issues

  26. FHSA Flexibilty to Provide Financial Rewards and Incentives for Behavioral Change • 1.  Allow for compliance incentives under disease management programs (e.g. diabetes, asthma, CHF) and wellness initiatives (e.g. wellness assessments, smoking cessation, etc.). • 2. Change Comparability Rule to mean all members under a given program of care or treatment, such as, a disease management or wellness program. • 3. Rewards and/or incentives should not be limited by the deductible limit, but should be consistent with expected savings from programs for which participation is being rewarded.

  27. FHSA Flexibility to Encourage Employer Contributions to Healthcare • 1. Allow employers/carriers to voluntarily contract with employees to require employer/carrier funded FHSAs to be used only for healthcare expenses while employed and covered under the plan. • 2. Remove cap on employer/carrier funded FHSA contributions or expand to at least the plan’s Maximum Out-Of-Pocket total exposure in a given calendar year. 

  28. FHSAs Flexibility to be Provided with Plan Designs Other than HDHPs • 1. Preventive drugs include maintenance drugs. Drugs now defined as preventive by the Treasury Dept. can be covered below the deductible, while the cost of maintenance drugs is now included in the deductible. • 2. Allow Rx to exist as carve out benefits at least for prescription drugs associated with chronic and persistent disease states • 3. Allow “incentive only based” FHSAs for employer/carrier only funding under non-HDHPs (i.e. no initial FHSA funding or employee funding) • 4. Allow some mental health and substance abuse benefits (besides EAPs) to be included under preventive care.

  29. FHSA Flexibility - Technical Issues • 1. Allow FHSA/HSAs to go into effect on the first day of coverage is effective. • 2. Allow FHSA/HSA contributions for a full calendar year regardless of when a plan is effective. • 3. Allow FHSA/HSAs to be used to pay for health coverage premiums (other than current limited use for (1) Premiums for coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), and (2) premiums for HDHP coverage for those who receive federal or state unemployment compensation). • 4. Allow Flexibility to "post-date" the FHSA/HSA effective date so that FHSA/HSA dollars can cover expenses incurred before the account was established. Allow the account to be opened under a "provisional status" until the necessary paperwork is filed, at which time the account becomes active.

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