State, small businesses weigh in on health care strategies
While the battle over the Affordable Care Act had the federal government shut down, health care industry experts and affected groups gathered in Anchorage Oct. 4 to the future of discuss health care in Alaska.
The State of Reform health policy conference began with an overview of the state’s AlaskaCare and Union Health Trust insurance plans for its employees by Department of Administration Commissioner Becky Hultberg.
In total, Hultberg said the State of Alaska has spent approximately $700 million annually to fund health insurance plans for its active and retired workers in recent years. The cost of providing coverage to the state’s roughly 17,000 active employees and their families has more than doubled over the past decade from $117 million in fiscal year 2003 to $256 million in 2012, she said.
In fiscal year 2014, which began July 1, Hultberg said the state is expected to spend $16,600 per employee on health care.
Part of that cost, she said, is due to the benefits some state workers receive under their insurance plans.
Nationwide, private employers pick up about 70 percent of the health insurance cost burden for their employees. For public employers the number is near 80 percent, according to health insurance studier and nonprofit the Kaiser Family Foundation. For some State of Alaska employees, it’s even higher.
“Our employees on a basic plan have no premium share,” Hultberg said.
As Baby Boomers continue to retire the cost to Alaska will grow as well. The number of retirees insured by the state is expected to increase 50 percent from 40,000 to nearly 60,000 over the next 10 years.
Hultberg said the final tally for the state’s retiree insurance bill this calendar year will likely exceed the half-billion dollar mark for the first time. That cost multiplies over time.
“(Alaska) has a $12 billion — that is billion with a ‘B’ — unfunded pension and health insurance liability for our retiree pension and health plans,” she said. “Of that $12 billion liability, $4 billion is related to our health plan.”
The state is looking at ways to curb those costs down the road, Hultberg said, by revamping portions of the health plans it provides.
Beginning in January 2014, the state will be working wellness and disease management programs into its health insurance plans in an effort to reduce high-cost claimants and those individuals who need extensive medical care. Hultberg said the state experienced a roughly 20 percent spike in claims in the thousands of dollars in 2012, and with an aging population, that is not viewed as a fluke.
The wellness program will encourage healthy lifestyle choices for plan participants common to such programs. Ending tobacco use, well-rounded diets and stress and weight management, among other areas of health will be emphasized, Hultberg said. Wellness is seen as a form of preventative care, she said.
The disease management program will offer help in dealing with 42 long-term conditions, including prolific types of cancer, arthritis and other health challenges often incurred later in life.
To further educate state plan participants on how to best spend their health care dollars, Hultberg said the health insurance call center’s role would gradually be expanded to a “concierge services approach.”
The goal is to help callers make cost-effective decisions regarding their medical care providers by having trained staff with easy access to participants’ profiles, she said.
“We want to transform our call center from just being a place where you call and get answers to questions to really a decision support tool,” Hultberg said.
Also in January, the state will offer use of the iTriage smartphone app to its health coverage participants. Hultberg said the app provides information that can help users identify symptoms and take the appropriate treatment measures, as well as highlighting in-network doctors and medical facilities.
By providing individuals with as much information as possible, iTriage will help those with questions make the most informed, cost-conscious decision they can, she said.
“We need members to have really good tools right at the point where they’re making that decision about what care to seek,” Hultberg said.
Looking ahead, the state wants to offer a consumer-driven health plan, or CDHP, by early 2015, she said. The hope is that by changing health plan designs and giving plan participants more direct control over their health care dollars individuals will be more aware of the money they’re spending at the doctor, according to Hultberg.
While the details are still in flux, she said the outline of the plan comes with a higher deductible, but allows plan-provider money to be “banked” by participants in health savings accounts.
“We’re going to give (participants) the resources to pay for a higher deductible, but then we’re going to ask them to be accountable because those dollars can carry over,” Hultberg said. “Those dollars are in their hands and those dollars can be saved.”
According to the Department of Administration, the “Economy” health care plan offered by the state for the 2013 fiscal year, which ended June 30, had a $500 deductible for an individual plan and a $1,000 deductible for families.
Hultberg said Alaska may look to model its CDHP after one Indiana first implemented in 2006. Per Indiana’s plan, the state contributed 45 percent of a $2,500 deductible for individuals and $5,000 deductible for families to a health savings account. By 2010, she said Indiana’s yearly savings averaged 10.7 percent, employees were collectively saving up to $10 million, and health savings accounts had an average balance of about $2,000.
Small business strategies
As the Jan. 1, 2014, full-implementation date for the Affordable Care Act draws closer, Josh Lewis, senior manager for the Seattle-based accounting firm Moss Adams, said there are opportunities for small employers to take advantage of the complex law.
Some small business owners may try to save money by actually dropping insurance and incurring the subsequent penalty, he said.
“If you currently have health insurance and you decide to drop it, you will likely save money, whether that’s the right decision or not,” he said.
Employers with 50 or more full-time equivalent employees, those that work an average of 30 hours or more per week, are mandated to provide health care to full-time workers under the law, although that requirement has been delayed until 2015. The penalty for not buying a group health plan often calculates out to be less than the insurance, Lewis said.
The tax for not offering coverage for up 95 percent or more of a qualified workforce is $2,000 per full-time employee, minus the first 30 employees. For instance, a business with 100 employees and no insurance plan on Jan. 2 would incur a $2,000 penalty for 70 employees totaling $140,000.
While the penalty is $2,000 per employee, the national average employer premium contribution for a basic family health insurance plan in 2012 was $10,700, according to The Kaiser Family Foundation.
The charge is similar for non-qualifying health plans where the employer covers less than 60 percent of the premium or an employee must pay at least 9.5 percent of their income towards their health insurance premium. Under the non-qualifying plan penalty, the per employee charge increases to $3,000 for every worker that receives a subsidy through a state or federal exchange.
Terry Allard, a senior advisor for the benefits consulting firm The Wilson Agency said some employers who are choosing not to enroll in a health plan may rather offer a stipend to employees for purchasing individual insurance. In most cases, the money would be a portion of the difference saved by not offering health insurance and instead incurring a penalty.
In January, “you don’t have the risk as an employer of having someone with a preexisting condition that can’t get coverage,” Allard said.
Not offering coverage may be a money-saver in 2014, but increasing penalty charges could change that in future years, Lewis said.
Very small businesses could benefit from a tax credit that is already in place, but will be adjusted after the New Year.
The small business tax credit has been available since 2010 and offers up to a 35 percent credit this year on health insurance costs for employers with less than 25 full-time equivalent employees. In 2014, the available credit increases to 50 percent. Further, those employees must have an average salary of no more than $50,000 and half of the insurance premium must be paid by the business.
Also, next year a health plan must be purchased through the federal small business health option, or SHOP exchange to qualify for the tax credit.
Elwood Brehmer can be reached at [email protected].