Affordable Care Act impact on insurance plans

1

• Affordable Care Act impact on insurance plans

2
Todays topics

• What well cover
• Definitions and employer mandate
• Overview of 2014 changes
• Case examples
• Employer responsibilities
• Tools and resources

3
Definition small and large groups

• Right now, states can define group sizes for
  quoting and rating.
• Small group
• 1 or 2 50 or
• 1 or 2 100employees
• Large group
• 51
• or
• 101
• employees

• Going forward, the state definition of group size
  for quoting or rating will still apply. For the
  purposes of the employer mandate (in 2015), the
  definition of 50 full-time equivalency is used
  for compliance.
• Small group
• 1-99
• full-time equivalency
• Large group
• 100 or more full-time equivalency

4
Employermandate penalty delayed

• Employers have one more year to comply with the
  ACA employer mandate without risk of penalty
  (delayed until 2015).
• Mandate is limited to groups with 50 or more FT
  employees.
• Employers must offer affordable coverage with a
  minimum value (MV) of 60
• Affordable coverage Employees share of premium
  must be less than 9.5 of an employees income.
  
• Minimum essential coverage Plan must pay for at
  least 60 of the cost of all covered services.
• HHS has developed an MV calculator to check if a
  plan provides minimum value.
• If an employer does not meet these standards in
  2014, employees may become eligible for subsidies
  in the Health Insurance Marketplace (until
  employer complies with these standards).

5
Employer mandate

• Affordability safe harbors
• Calculation of affordability based on
  employees household income
• Employee Form W-2 safe harbor
• Rate of pay safe harbor
• Federal poverty level safe harbor

6
Employer mandate

• More about the mandate
• Stay tuned for more details from the IRS.
• Send us any questions we will follow up for
  you.
• To learn more, go to
• MakingHealthcareReformWork.com
• Timeforaffordability.org
• Healthcare.gov

7
Overview of 2014 changes
8
Changes that affect premiums
Guaranteed issue No one can be denied coverage
New taxes and fees Apply to certain plans
Subsidies/credits Help those with low or
moderate incomes pay for coverage
Broader benefits and limits 10 types of
Essential Health Benefits required,
out-of-pocket limits and deductible restrictions
Reinsurance program Insurers / TPAs / self-funded
plans contribute to fund high claims
Change in rating Rates based on age and address
(and tobacco use, in some states), not gender and
health status
New Health Insurance Marketplace (Exchanges)
Offers plans for individuals and small groups
At least 60 actuarial value Plans pay at least
60 of covered services
Not required for large-group and ASO plans
9
How each premiumis affected
Individuals Small groups Large groups
Guaranteed issue
Broader benefits
depending on number of required benefits
included in plan
10
How each premiumis affected
Individuals Small groups Large groups
Change in rating
At least 60 actuarial value
for healthy
for less healthy
for healthy
for less healthy
young men and older women
young women and older men
groups younger than average
groups older than average
young individuals
older individuals
for customers with more cost share than allowed
little change for customers with less cost share
for customers with more cost share than allowed
little change for customers with less cost share
11
How each premiumis affected
Individuals Small groups Large groups
New taxes and fees
Subsidies/ credits
for those who qualify
for those who qualify
12
How each premiumis affected
Individuals Small groups Large groups
Reinsurance program
New Health Insurance Marketplace (Exchanges)
13
Essential health benefits (EHBs)
Plans for individuals and small groups must
cover

• Outpatient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder services
  (including behavioral health treatment)

• Prescription drugs
• Rehabilitative and habilitative services/devices
• Laboratory services
• Preventive and wellness and chronic-disease
  management
• Pediatric services(including dental and vision)

Not required for large-group and ASO plans
14
EHBs and annual/ lifetime dollar limits

• When EHBs are covered, annual/lifetime dollar
  limits cannot apply
• Affects both grandfathered and nongrandfathered
  plans
• Applies for in-network and out-of-network
  services
• Visit limits are allowed on EHBs and can replace
  dollar limits
• Non-EHB annual/lifetime dollar limits are allowed
• Rule All covered EHBs must apply to the OOP
  limit.
• Applies to medical, pharmacy and pediatric vision
  and dental benefits that are part of the plan
• Does not apply to
• Pediatric vision and dental benefits that are not
  part of the plan
• Stand-alone benefits, which are excepted under
  HIPAA

NOTE Medical Policy rules still apply to EHBs
15
Out-of-pocket (OOP) maximum

• 2014 OOP limits for all individual, small group
  and large group nongrandfathered plans
• Individual 6,350
• Family 12,700
• The OOP cap applies for medical and specialty
  EHBs
• Cap is equal to the amount established for
  HSA-compatible plans

• HHS sees the complexity of having one OOP for all
  types of EHBs. So it issued a one-year safe
  harbor for plans with multiple EHB service
  providers.
• During this time, the plan will be considered
  compliant as long as the medical OOP does not
  exceed the maximum.
• If a separate pharmacy OOP was already in place,
  it also must not exceed6,350/12,700.

16
Community rating

• Premiums for small groups and individuals are
  not based on gender or health, but on
• Family size
• Age with maximum 31 rating bands
• Where people live
• Tobacco use
• no more than 50 more for users
• exceptions may apply in some states

17
Studies on premium impact

• Center Forward
• Increases likely in the individual and small
  group markets
• Some groups up by 49, others down by 39
• American Action Forum
• Increase in costs for young, healthy people in
  the individual and small group markets
• Costs for older, less healthy would drop about
  22
• Milliman actuarial firm
• 75 to 95 rise in premiums in the individual
  market
• Rates for others would drop
• Jonathan Gruber of MIT
• Premiums in individual market may increase as
  much as 85
• Small group market may increase more than 20

18
Case examples
19
Case exampleLarge groups

• Health coverage options for groups with 50 or
  more full-time equivalency

• 2014 Options
• A fully insured plan
• An ASO plan
• A defined contribution plan (e.g. private
  exchange)
• No coverage let employees buy through the
  individual market (on or off the Marketplace)

20
Case example Large group Affordability tests

• Steve owns an auto body business with 120
  employees. He will offer minimum value minimum
  essential coverage to all full-time workers in
  2014 (even though its not required until 2015).

• His reasons
• Benefits are important to attract and retain
  employees.
• Most of his employees would not benefit from tax
  credits available in the Health Insurance
  Marketplace.
• The business wont incur employer penalties in
  2015.

• How it works
• Add essential health benefits at plan anniversary
  in 2014.
• Ensure the plan meets minimum value and
  affordability requirements.

21
Case example Large groupAffordability tests

• Kevin, an employee at Steves Auto Body, makes
  37,000 a year as reported on his W-2. He pays
  3,500 a year for self-only medical coverage.
• Kevin does not qualify for a premium tax credit
• The cost of his employer-sponsored coverage is
  3,500.
• 3,500 is less than 9.5 of his 37,000 income
  (9.5 of 37,000 3,515).
• Steves company is not liable for an employer
  penalty
• The company offers minimum essential coverage
  (that is minimum value) to at least 95 of all
  full-time workers and dependents, and
• Kevins required contribution toward health
  insurance is not more than 9.5 of his W-2 wages
  (3,515), and is considered affordable

22
Case examples Individuals

• Health coverage options for individuals
• People not already on a government plan
• Employer-sponsored coverage
• Individual coverage through Health Insurance
  Marketplace (the Exchange) or a plan outside
  the Marketplace
• No coverage pay the penalty

23
Case exampleShop in the Marketplace

• Melanies employer has decided to quit offering
  coverage. Melanie needs coverage for her family
  and herself, so shes going to shop in the
  Marketplace.
• Her reasons
• She can compare plans side by side from
  different insurers.
• She wants to explore the new Marketplace to find
  coverage that meets her needs.
• She can work with her producer to find out if
  she qualifies for a subsidy or tax credit when
  she buys a plan in the Marketplace.

24
Case exampleNo coverage

• Mandy is 27 and recently aged off her parents
  plan. She has opted not to buy any coverage.
• Her reasons
• She thinks the cost is too high.
• She can always go to the ER if she needs to.
• Mandy may save money on premiums, but shell pay
  a penalty for not having insurance. The penalty
  goes up each year

2014
2015
2016
Penalty is 95or 1 of taxable earnings
Penalty is 325 or 2 of taxable earnings
Penalty is 695 or 2.5 of taxable earnings
whichever is larger
Mandy should work with her producer to see if she
qualifies for a subsidy or a tax credit before
deciding to go without insurance.
25
Employer responsibility
26
Notice of options for coverage

• All employers whether they offer health plans
  or not are required to tell employees

• Coverage is available through the new Health
  Insurance Marketplace.
• Employees may be able to get a tax credit or
  subsidy through the Marketplace.
• Employees may lose employercontribution if they
  buy a plan through the Marketplace, and this may
  have a tax impact to employees.

Employers must provide the notice to employees by
October 1, 2013
27
Tools to help you
28
HCR website and tools

• Redesigned site for producers and employers
  www.makinghealthcarereformwork.com
• With a new suite of tools and resources such as
• Interactive decision support
• Educates on the basics of ACA impact
• Provides recommendations
• ACA financial calculator
• Online interview gathers plan and employee
  information
• Provides a customized report showing the
  financial impact of ACA on employer plans

29
Legal

• Services provided by Empire HealthChoice HMO,
  Inc. and/or Empire HealthChoice Assurance, Inc.,
  licensees of the Blue Cross and Blue Shield
  Association, an association of independent Blue
  Cross and Blue Shield plans.