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1 Download this presentation on InformedOnReform.com under Reform News Welcome to the Cigna Health Care Reform Webinar May 9, 2012

2 PATIENT PROTECTION AND AFFORDABLE CARE ACT (PPACA) Download this presentation on InformedOnReform.com under Reform News Preparing for the New Exchange Marketplace May 9,

3 Download this presentation on InformedOnReform.com under Reform News AGENDA Preparing for the New Exchange Marketplace Regulatory and implementation update Business perspectives for success in 2013 and beyond Questions Katie Wade Vice President Public Policy and Government Affairs Kathy Vaccaro Vice President Health Care Reform 3

4 Download this presentation on InformedOnReform.com under Reform News EXCHANGES: REGULATORY AND IMPLEMENTATION UPDATE 4

5 Download this presentation on InformedOnReform.com under Reform News EXCHANGES TIMELINE Fall 2013 Exchanges must be operational for Open Enrollment Late 2010 Mid 2013 Exchange Development 1/1/14 Open to Individuals and Small Employers 1/1/17 May Open to Large Employers /1/13 State/ Regional Exchange Certification Some May Receive Conditional Approval 1/1/15 Exchanges Financially Self-Sufficient March 2013 Employee Exchange Notice 5

6 INDIVIDUALS WHO MIGHT USE THE EXCHANGE Download this presentation on InformedOnReform.com under Reform News 25 million Uninsured Unemployed Self-employed in individual market now Of those, 19 million will likely be eligible for a Federal Premium Assistance Tax Credit Individuals/families with incomes between 133% and 400% of the federal poverty level Subsidy will be based on individuals paying premiums equal to 2% to 9.5% of income 2% for those at 133%; rises to 9.5% at 400% 6

7 EMPLOYERS WHO MIGHT USE THE EXCHANGE Download this presentation on InformedOnReform.com under Reform News Groups with 1-50 employees 2016 Groups with employees 2017 May open to employers with 100+ employees Employers with 50+ full-time employees subject to employer mandate Tax credits are available for employers with fewer than 25 employees to incentivize small employers to offer coverage 7

8 Download this presentation on InformedOnReform.com under Reform News EXCHANGES REGULATORY UPDATE Recently published regulations or interim regulations provide additional guidance. Navigator program Agents and brokers Eligibility determinations Enrollment Coverage termination Standalone dental Co-ops 8

9 EXCHANGE READINESS AND ALTERNATIVES Partnership Options Some states may choose to fully operate an Exchange Download this presentation on InformedOnReform.com under Reform News For those who choose not to perform some functions or aren t ready, the federal government can partner with them. States can choose their role in the Partnership Exchange from three basic options: #1 #2 #3 Plan management States work with health plans that want to offer coverage on the Exchange. Selected consumer assistance States help consumers understand their options through outreach and education, provide in-person consumer support for Exchanges, and manage the call center and the consumer website. Both Option 1 and 2 CONTINGENT APPROVAL Another alternative offered by HHS The federal government runs a state s exchange until it is ready to operate on its own States then apply to transition back to their state at least one year in advance and with HHS approval 9

10 STATE EXCHANGE FORECAST: STATE-BASED EXCHANGE VS. FEDERAL EXCHANGE Download this presentation on InformedOnReform.com under Reform News WA CA OR OR NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL IN MI KY OH WV PA VA NY MD VT NH MA CT NJ DE DC ME RI AZ NM OK AR MS TN AL GA SC NC OPERATIONAL (2) HIGH likelihood of exchange in 2014 (14) MODERATE likelihood of exchange in 2014 (18) TX LA LOW likelihood of Exchange in 2014 (18) AK FL PR HI As of 4/25/2012 Disclaimer: Current assumptions indicate that the federal government may implement exchanges in the states categorized as Low Likelihood and possibly in states with Moderate Likelihood. The High Likelihood states have either taken steps or are in the process of laying the groundwork for a state-based exchange through legislative, regulatory, or executive order authority. This forecast is subjective and relies on current data and political assumptions. Several states are borderline; for example: they may have formed study committees and may even file legislation, but the political dynamics will likely prevent passage of enabling legislation. 10

11 EMERGING STATE EXCHANGE OPERATING MODELS Download this presentation on InformedOnReform.com under Reform News Clearinghouse Market Organizers Active Purchaser Open/Competitive Prescriptive/Regulated Employers and individuals find a range of coverage offerings and compare price, quality and service levels Participating plans compete for enrollees based on cost and quality Do not directly negotiate prices or selectively contract May define standard benefit packages, provide some endorsement and encourage plans to offer high-value coverage Negotiate and contract with select insurers to provide coverage 11

12 BUSINESS PERSPECTIVES FOR SUCCESS IN 2013 AND BEYOND Employer commonly asked questions Cigna s preparation 12

13 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #1: WHY NOT JUST PAY THE PENALTY? Company X: 500 employees I m financially strapped. Why wouldn t I pay the $2,000 in 2014 and send my employees to the Exchange? For the Employer COST IMPLICATIONS For the Employee Employer Plan Exchange Plan Employer Plan Exchange Plan $5.2M premium contrib -$1.8M tax credit $3.4M net cost $8.3M grossed up salary* $.6M payroll taxes $ 2.9M tax deduction $.9M penalty $6.9M net cost $3.5M net financial impact Employer premium contribution is nontaxable to employees Same premium for all ages and health status Unaffordable for many without a subsidy Extra salary could decrease or eliminate subsidy Premium may vary up to 3x more by age and health status * In this example, the employer fully replaces the premium contribution with additional wages. Employees would receive $5.2M after taxes. Not all employers may choose to offset by 100%. Example is based on Cigna modeling data, January

14 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #1: WHY NOT JUST PAY THE PENALTY? Family of 4 Illustration of how Exchange premiums may vary up to 3x more by age Income: $ 48,850 $ 70,275 $ 93,700 $ 93,934 %Federal Poverty Level (FPL): 200% 300% 400% 401% Age Max Premium %: 6.3% 9.5% 9.5% n/a Max Premium $: $ 2,952 $ 6,676 $ 8,901 n/a Unsubsidized Estimated Premium Premium After Credit Premium After Credit Premium After Credit Premium After Credit 30 $ 10,108 $ 2,952 $ 6,676 $ 8,901 $ 10, $ 12,130 $ 2,952 $ 6,676 $ 8,901 $ 12, $ 16,858 $ 2,952 $ 6,676 $ 8,901 $ 16, $ 24,042 $ 2,952 $ 6,676 $ 8,901 $ 24,042 Source: Henry J. Kaiser Family Foundation Health Reform Subsidy Calculator 14

15 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #1: WHY NOT JUST PAY THE PENALTY? Company X: 500 employees I m financially strapped. Why wouldn t I pay the $2,000 in 2014 and send my employees to the Exchange? HEALTH, PRODUCTIVITY AND OTHER IMPLICATIONS For the Employer For the Employee Employer Plan Exchange Plan Employer Plan Exchange Plan Active involvement in employee health and well-being Maintains talent acquisition and retention tool May be a less productive workplace Challenging to run a wellness program without claims data Talent acquisition and retention challenges Administrative challenges during transition Personalized wellness program Helps attract and retain employees Employer narrows the field of plans available Those without coverage are at higher risk for disease and less productive Cultural/mindset change with new decisions and a new tool Wellness program lacks personal incentive 15

16 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #2: WHY CARE ABOUT EXCHANGE PLANS? Company Y: 1,000 employees It s a long time until 2014 and I plan to stay in the game. Why should I care what Exchange plans look like? Exchange plans Coverage level options Affordability varies Essential health benefits No lifetime or annual limits on essential health benefits 100% preventive care What Exchange Plans Might Look Like Actuarial Value OOP Max Deductible Coinsurance 60% $6,350 $4,500 20% 70% $6,350 $2,700 20% Subsidies Income 133%-400% FPL ($15,000 - $44,000/individual; $30,000 - $93,000/family of 4) Each employee subsidy triggers a $3,000 penalty Based on actuarial analysis as prepared for the Henry J. Kaiser Family Foundation, April

17 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #2: WHY CARE ABOUT EXCHANGE PLANS? Company Y: 1,000 employees It s a long time until 2014 and I plan to stay in the game. Why should I care what Exchange plans look like? Company Y analysis Company Y makeover Prefers employees stay on its plan 30% of employees eligible for subsidy Two plan options with 80% and 90% actuarial value Premiums 8% - 25% of employee income (15%-25%, on average, for the 30% eligible for subsidy) Three plan options with 60%, 70% and 85% actuarial value Premiums 5% - 20% of employee income (5%-10%, on average, for the 60% plan for those eligible for subsidy) TIPS Develop your strategy now will be here soon Ease in change in 2013 instead of waiting for big impact in 2014 Communicate year-round with employees and their families 17

18 Download this presentation on InformedOnReform.com under Reform News EMPLOYER QUESTION #3: WHAT ARE THE PRIVATE EXCHANGES? Company Z: 3,000 employees I ve been hearing about private Exchanges. Are they part of the state Exchanges? What s the difference? State Health Benefit Exchanges Private Exchanges Operating Model Information Aggregator to Market Negotiator Private label offering to employers with participating carriers Oversight Stated Objective Subsidy Availability Eligibility Rate Negotiation Marketing Employer Size Example Government agency, quasi-governmental agency or not for profit Assist individuals, families and small employers to purchase health insurance Provide assistance to those who qualify for enrollment in state Medicaid programs (incomes below 138% of the federal poverty level) Yes, for those individuals and families between % of FPL Intended for individuals and small employers looking to purchase healthcare coverage Will vary by state with some states allowing any willing carrier meeting QHP requirements Predominantly through Navigators and State Exchange Small employers as defined by state, either 1-50 or until 2016 when all states go to 100 Massachusetts and Utah, plus the others in development as required by PPACA Privately owned and operated Offer services to the various individuals and groups in the purchase of healthcare coverage Defined Contribution No Employers choosing to participate and their eligible employees Negotiated with private Exchange Through private Exchange Any size employer Some targeting larger employers initially Bloom Health and Aon Hewitt (1/1/13) 18

19 CIGNA S EXCHANGE PREPARATION Download this presentation on InformedOnReform.com under Reform News STRATEGIC READINESS Enterprise strategy principles and prioritization Competitive evaluation market position and impact Growth and profitability opportunity and ROI MARKET READINESS Market entry investment and impacts Distribution channels Exchange versus off Exchange Product design and marketing brand, product and balance OPERATIONAL AND TECHNICAL READINESS Operational impact operating model impact on value chain Technology alignment of IT strategy Capital investment human, intellectual and financial 19

20 NEXT STEPS AND QUESTIONS Download this presentation on InformedOnReform.com under Reform News The next webinar in our awardwinning series will take place in July. Topics will include the Supreme Court rulings. Visit our award-winning website, InformedOnReform.com 20

21 "Cigna" is a registered service mark and the "Tree of Life" logo is a service mark of Cigna Intellectual Property, Inc., licensed for use by Cigna Corporation and its operating subsidiaries. All products and services are provided by such operating subsidiaries and not by Cigna Corporation. Such operating subsidiaries include Connecticut General Life Insurance Company, Cigna Health and Life Insurance Company, and HMO or service company subsidiaries of Cigna Health Corporation and Cigna Dental Health, Inc. All models are used for illustrative purposes only. 03/12. Some content provided under license. 21