Healthcare Reform: Patient Protection & Affordable Care Act (PPACA)- FACT.FICTION.FUTURE

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1 Healthcare Reform: Patient Protection & Affordable Care Act (PPACA)- FACT.FICTION.FUTURE Joanna Antongiovanni TX Assoc. of Health Underwriters - Past President

2 2014

3 Embedded Pediatric Dental VS Stand Alone QHP Metallic Plans Subsidies

4 Agenda Common Misperceptions Overview of PPACA Individual Mandate Employer Shared Responsibility The Basics/Exchange Design Options/Intent of the Exchange The Exchange Plans Available/Qualified Health Plans/Essential Benefits Actuarial Value/Levels of Coverage Premium Assistance Tax Credits Product Modifications/Changes What the market will look like Employer Responsibility Compliance Exchange Notices/ regulations and procedures/ employee count Questions 4

5 Fact or Fiction: I m covered through my employer so this doesn t apply to me

6 Individual Mandate

7 Individual Mandate Jan. 1, 2014: American citizens and legal residents must enroll in coverage or pay a penalty. Penalty amount: Greater of $ amount or a % of income: 2014 = $95 or 1% ($47.50 per child- up to $285 for family) 2015 = $325 or 2% ($ per child- up to $975 for family) 2016 = $695 or 2.5% ($ per child- up to $2,085 for family) Family penalty maximum is greater of 2.5% of income or 3X s adult penalty ($2,085 in 2016) Penalties for failure to comply are collected through individual tax filings Exemptions to individual mandate: financial hardship, religious objections, American Indian, w/o coverage for 3 months, undocumented immigrants, incarcerated individuals, income is below tax filing threshold. sadasd 7

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9 Fact or Fiction: All businesses will be required to provide employee health insurance.

10 Employer Shared Responsibility

11 Are you an Applicable Large Employer? Are you an Applicable Large Employer (ALE)? If so, Employers must offer minimum essential coverage at an affordable price to substantially all full time employees. Substantially all means 95% of full time employees (or 5 if under 100). Applies to employers with 50 or more full-time & full-time equivalent employees in prior calendar year Track on monthly basis for 12 calendar months Seasonal employees exception ( if employer is only over 50 for less than120 days or 4 months of the year) Combine control groups & affiliated service groups to determine ALE status (tax ID number and business type are irrelevant). sadasd 11

12 Why is Count Important? Example JAN FEB MAR APR MAY Number employees 30 hrs/wk Total hours worked by all other employees (PT) EEs Part time FTE (hours 120) Monthly Total Total number of all Employees (FT, PT, Seasonal) ALE ATNE 1). Are you an ALE? Applicable Large Employer (may be subject to penalties)- Minimum Essential Coverage (60% MV) Affordable Price (9.5% of ee income) 2). What is your ATNE? Average Total Number of Employees determines carrier group segment 12

13 Getting more complex Employee Name Status HRLY wage Age Alert W-2 Taxable Wage Safe Harbor Hourly Wage Safe Harbor Plan Premium FPL Safe Harbor Sam Adams Full time $11.75 <26 $11,125 $18, 330 $11,490 Arnold Palmer variable $13.35 >65 $12,212 $20,826 $11,490 Average Hour Tracking and Reporting FTE Count Determination (by month) Variable Hour Employee: Measurement periods Stability periods Administrative periods Employee groups Affordability Report W-2 Hourly Wage FPL 13

14 ALE Penalties- DELAYED until 2015 Two different types of employer penalties (the lesser of the two): 1. Employer does not offer minimum essential coverage H(a) Employer does not provide coverage to all FT employees and any FT employee gets subsidized coverage through exchange OR Penalty of $2,000 a year ($ per month) for each full time employee. Excludes first 30 employees HHS recently release a minimum value calculator for large fully insured employers and self-funded plans. 2. Coverage is deemed unaffordable -4980H(b) Employer does provide coverage and any FT employee still gets subsidized coverage through exchange Employee contribution for single coverage cannot exceed 9.5% of wages Penalty of $3,000 a year ($250 per month) for each employee that leaves the employer plan AND purchases subsidized individual health insurance through an exchange sadasd 14

15 Minimum Value- Large Group Minimum Value (MV) of the plan Plans must have a MV of 60% for 4 core services: Physician services Hospital and ER services Pharmacy Lab/ imaging MV can include HRA & employer HSA contributions Out of Pocket maximum may not exceed annual high deductible health plan (HDHP) out of pocket 2014: $6,350 (a $100 increase from 2013) 3 potential approaches to define MV: Calculator, checklist, actuarial certification 15

16 Affordability Affordability is based on the EMPLOYEE ONLY cost of the LOWEST COST minimum value plan offered by the employer. unaffordable is charging an employee more than 9.5% of employees household income for the taxable year. 3 types of affordability safe harbors: W-2 (9.5% of box 1)- determined after calendar year ends Rate of Pay (9.5% of hourly rate of pay or monthly salary)-easy for an employer to prospectively determine affordability Federal Poverty Level (9.5% of FPL)-2013 FPL is $11,490*.095= $90.96/mo W-2 $24,000 Household Income $2,000 Month X 9.5% Employee only cost cannot exceed $ Rate of pay $7.25 * 130 hrs of service $ Month X 9.5% Employee only sadasd cost cannot 16 exceed $89.54

17 Fact or Fiction: Texas won t have an exchange

18 The Exchange Exchanges are required as part of PPACA (Section 1301)

19 What is an Exchange? A Marketplace Stock Exchange Farmer s Market Travelocity

20 The Basics: Mechanism for individuals or groups to gain access to health care financing options through a program administered by state and/or Federal government. The Exchange must make qualified health plans available to individuals or employers. Stand-alone Dental Plans may also be offered, if they offer pediatric dental benefits meeting the requirements of the Act. Three kinds of entities may offer coverage on the exchanges: Traditional health insurance issuers Co-OP Plans Multistate Plans 3 Design Options that the states can choose from: State- Created Exchange Partnership Exchange Federally Facilitated Exchange (FFE)

21 Design Options of Exchanges sadasd 21

22 THE EXCHANGE Small Businesses (SHOP) If up to 100 employees, can buy thru Exchange (Some states up to 50 until 2016) A web portal marketplace for health insurance Individuals (no subsidies for ones offered employer-based coverage, unless that coverage is unaffordable ) Federal Government sets criteria for plan participation and purchaser eligibility provides subsidies for small businesses and individuals sets up Exchange if a state fails to Self-insured plans not eligible to Participate States Each sets up own Exchange Will be involved in premium reasonableness reviews; can approve/reject as provided under state law 22

23 Purpose Five Core Functions of the Exchange Consumer Assistance Consumer support assistors; education and outreach; Navigator management; call center operations; website management; and written correspondence with consumers to support eligibility and enrollment. Plan Management Plan selection approach (e.g., active purchaser or any willing plan); collection and analysis of plan rate and benefit package information; issuer monitoring and oversight; ongoing issuer account management; issuer outreach and training; and data collection and analysis for quality. Eligibility Accept applications; conduct verifications of applicant information; determine eligibility for enrollment in a Qualified Health Plan and for insurance affordability programs; connect Medicaid and CHIP-eligible applicants to Medicaid and CHIP; and conduct redeterminations and appeals. Enrollment Enrollment of consumers into qualified health plans; transactions with Qualified Health Plans and transmission of information necessary to initiate advance payments of the premium tax credit and cost-sharing reductions. Financial Management User fees; financial integrity; support of risk adjustment, reinsurance, and risk corridor programs. 23

24 Exchanges- Federal Data Hub Source: The Washington Post, February 14, 2013 Xerox Consultants- Eligibility System Chart 24

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26 What s covered? 26

27 What s covered? Section 1302(b) Of PPACA- Essential health benefits: defined by states based on a benchmark plan, must at least cover the following: TEXAS EHB BENCHMARK SUMMARY INFORMATION Plan Type Plan from largest small group product, Preferred Provider Organization Issuer Name Blue Cross Blue Shield of Texas Product Name BestChoice PPO Plan Name RS26 Supplemented Categories (Supplementary Plan Type) Pediatric Oral (FEDVIP) Pediatric Vision (FEDVIP) Habilitative Services Included Benchmark (Yes/No) Yes 27

28 What will the plans look like in the Exchange? The health care law creates four benefit levels of coverage or metallic tiers based on how much of the cost is covered. The tiers Bronze, Silver, Gold, and Platinum are designed to make it easy to compare different health insurance plans. All plans contain the same core health benefits like doctor visits, prescription drugs, X-rays, and hospital stays, but will differ in what you pay when you need these services, as well as the monthly premium. 28

29 What will the plans look like? In 2014 there will be four types of coverage packages varying in actuarial values: 60%, 70%, 80% or 90% Catastrophic (under 30 may have less than bronze level) Marketplace must offer essential health benefits package with 10 essential health benefit categories Actuarial Value is for individual & small group ( Minimum Value is for large fully insured groups and self funded) HSAs will be the bronze level. Out Of Pocket (OOP) limits will be tied to the HDHP OOP Limit (in 2014 $6,350). sadasd 29

30 Individual Tax Subsidies Advance-able premium tax credit available to individuals with household incomes less than 400% of FPL. Cost sharing reductions (i.e., lower deductibles and out of pocket costs) will be available for individuals with incomes at or below 250% FPL. Premium tax credits and cost sharing are based on the silver plan sadasd No subsidies available if affordable coverage is offered by employer Income Level Premium as a Percent of Income Up to 133% FPL 2% of income 133%-150% FPL 3-4% of income 150%-200% FPL 4-6.3% of income 200%-250% FPL % of income 250%-300% FPL % of income 300%-400% FPL 9.5% of income 30

31 More Changes Credit amount is determined by HHS, based on the amount the premiums exceed a threshold amount. sadasd 31

32 Financial Calculators There are a number of online calculators out there that can tabulate potential penalties and also potential individual exchange subsidy awards. NRF maintains a Health Mandate Cost Calculator at which can model the penalty effect on your business The Kaiser Family Foundation maintains the most accurate subsidy calculator available, although it has its limitations 32

33 Employers are Required to give an Exchange Notice Employer Notification: Employers must notify employee of existence and services of the exchange Must be notified by October 1, In 2014, New hires must have notice within 14 days of employee s start date Must indicate how to contact the exchange to request Must inform employees that they may be eligible for a tax credit if the employer s plan is not minimum essential coverage or affordable That if employee purchases a health plan through the Exchange they would lose any employer contribution DOL model notice Employers who do offer a health plan; and Employers who do NOT offer a health plan. 33

34 Exchange Notice (10/1/13)

35 Exchange Marketplace - Enrollment Initial Open Enrollment: October 1, March 31, 2014 (6 months) Future Open Enrollment: October 15- December 17 Coincides with Medicare open enrollment HIPAA Special enrollment provisions allowed Individuals will NOT be allowed to enroll whenever they want. Must wait until open enrollment OR have HIPAA special enrollment event

36 Multiple Exchanges Nothing in the new law precludes the sale of insurance products outside the Exchange.

37 Who will buy What and Where? Public Exchange Individual: Individuals and families without affordable employersponsored coverage who earn between 100% and 400% of FPL. SHOP: Small employers receiving the small group tax credit (groups with 10 or fewer EEs and $25kor less in average wages receive full 50% credit, groups with 25 or fewer EEs and $50k or less in average wages receive partial credit). Outside Market Everyone else: the majority of individuals and employers not receiving a tax credit or subsidy will purchase coverage in the outside market.

38 What will the private exchanges look like? Source:

39 Fact or Fiction: I m a small business employer so the Affordable Care Act doesn t apply to me and my employees

40 Product Modifications

41 Small Group Coverage Changes Modified Adjusted Community Rating (Individual and Small Group) No rate based on claims experience Community rating rules: Age (rate spread of no more than 3:1 ratio) Tobacco Use (allowed to vary by 1.5 to 1 ratio) Family Status Geographic area Wellness Discounts No medical underwriting or pre-ex limitations Cost Sharing Limits Beginning 2014, small group plan design deductibles may not exceed a $2,000 (self) / $4,000 (family) annual max. (except when needed to meet bronze level plan) Actuarial Value requirements apply out-of-pocket expenses and cost-sharing maximums requirements apply Dental and vision for children covered under medical plan Coverage of clinical trial participation Discriminating in favor of highly-compensated employees (HCEs) will be prohibited- plans must meet the substantive requirements of IRC105(h).

42 Overview of Taxes & Fees Patient- Centered Outcomes Research Institute Fee (PCORI) $2 per covered life in 2nd yr ($1 1 st yr), medical inflation thereafter Fully insured plans pay. Self funded plan sponsors must pay. (HRA- Health Reimbursement Arrangements count!) All plans renewing after 1/1/13, the fee will be due on July 31, Reinsurance Fee insurers finance reinsurance for individual coverage fee is based on per capita (estimated 3-4% increase per yr) New guidance for $5.25 per covered life per month ($63 per year) Insurance Fee (Health Insurance Tax)- collected from insurers based on net premium revenues for fully insured groups approx. 2.3% of premiums for fully insured plans including dental and vision Medicare Payroll Tax- from 2.9 percent to 3.8 percent incomes over $200,000 or $250,000 filing jointly Pharmaceutical Manufacturers Annual fee (2011) $4 per covered life Excise tax on medical devices (2013) $2 per covered life Cadillac Tax- Effective % excise tax on plan administrators and employers with aggregate values exceeding $10,200 indiv./ $27,500 family

43 Summary Large Employer Groups (50+) Determine Applicable Large Employer status Offer minimum value, affordable coverage to avoid penalties in 2015 To employees who average 30 hrs/wk Small Employer Plans (under 50 until 2016 then under 100) Must enhance benefits Rates will change with the new community rating Employers must offer coverage within 90 days of eligibility Recommendation: first of month following 60 days Variable Employee allows 13 month waiting period Increased Employer Notices/Compliance Exchange Notice Individual Mandate starts in 2014 so we need to be resource for individual insurance. Pay required taxes Product Modifications Prepare for more regulation and changes 43

44 Additional Resources Wortham Insurance and Risk Management Joanna Antongiovanni Joanna. Kaiser Family Foundation- Dept of Labor Employee Benefits Security Administration Centers for Medicare & Medicaid Services cciio.cms.gov Dept. Health and Human Services Healthcare Reform sadasd 44

45 Enjoy the ride!