40640NYEENEBC 09/13 Affordable Care Act impact on insurance plans

40640NYEENEBC 09/13

Affordable Care Act impact on insurance plans

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What we’ll cover:

▪ Definitions and employer mandate ▪ Overview of 2014 changes▪ Case examples▪ Employer responsibilities▪ Tools and resources

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Today’s topics

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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 – 100

employees▪ 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

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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: Employee’s share of premium must be less than 9.5% of an employee’s 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).

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Employermandate penalty delayed

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Affordability safe harbors

Calculation of “affordability” based on employee’s household income

▪ Employee Form W-2 safe harbor

▪ Rate of pay safe harbor

▪ Federal poverty level safe harbor

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Employer mandate

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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

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Employer mandate

Overview of 2014 changes

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Changes that affect premiums

Guaranteed issueNo one can be denied coverage

Broader benefits and limits 10 types of Essential Health Benefits* required, out-of-pocket limits and deductible restrictions

Change in rating Rates based on age and address (and tobacco use, in some states), not gender and health status

At least 60% actuarial value Plans pay at least 60% of covered services

New taxes and feesApply to certain plans

Subsidies/credits Help those with low or moderate incomes pay for coverage

Reinsurance programInsurers / TPAs / self-funded plans contribute to fund high claims

New Health Insurance Marketplace (Exchanges) Offers plans for individuals and small groups

*Not required for large-group and ASO plans

IndividualsSmall groups

Large groups

Guaranteed issue

Broader benefits

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How each premiumis affected

~~ ~~

depending on number of required benefits

included in plan

~~ ~~

~~Increase Decrease Little change


Large groups

Change in rating

At least 60% actuarial value

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~~

for customers with more cost share

than allowed

~~


for healthy

for less healthy

young men and older women

young women and older men

young individuals

older individuals

for healthy

for less healthy

groups younger than average

groups older than average

little change for customers with less cost

share

~~for customers

with more cost share

than allowed

little change for customers with less cost

share

~~


Large groups

New taxes and fees

Subsidies/ credits

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for those who qualify~~for those who qualify



Large groups

Reinsurance program

New Health Insurance Marketplace (Exchanges)

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~~


▪ 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)

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Essential health benefits (EHBs)

*Plans for individuals and small groups must cover:

*Not required for large-group and ASO plans

▪ 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

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EHBs and annual/ lifetime dollar limits

NOTE: Medical Policy rules still apply to EHBs

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 exceed$6,350/$12,700.

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Out-of-pocket (OOP) maximum

Premiums for small groups and individuals are not based on gender or health, but on:

Family size Age – with maximum 3:1 rating bands Where people live Tobacco use

• no more than 50% more for users

• exceptions may apply in some states

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Community rating

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%

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Studies on premium impact

Case examples

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

Case example

Large groups

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)

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2020

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 won’t incur employer penalties in 2015.

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 it’s not required until 2015).

Case example

Large group Affordability tests

How it works:

▪ Add essential health benefits at plan anniversary in 2014.

▪ Ensure the plan meets minimum value and affordability requirements.

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Case example

Large groupAffordability tests

Kevin, an employee at Steve’s 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).▪ Steve’s 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

• Kevin’s required contribution toward health insurance is not more than 9.5% of his W-2 wages ($3,515), and is considered affordable

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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

Case examples

Individuals

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Melanie’s employer has decided to quit offering coverage. Melanie needs coverage for her family and herself, so she’s 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.

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Case example

Shop in the Marketplace

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Mandy is 27 and recently aged off her parent’s 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 she’ll pay a

penalty for not having insurance. The penalty goes up each year:

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Case example

No coverage

Penalty is $95or 1% of taxable earnings*

2014: 2015: 2016:

Mandy should work with her producer to see if she qualifies for a subsidy or a tax credit before deciding to go without insurance.

Penalty is $325 or 2% of taxable earnings*

Penalty is $695 or 2.5% of taxable earnings*

*whichever is larger

Employer responsibility

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

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Notice of options for coverage

Employers must provide the notice to employees by

October 1, 2013

▪ 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.

Tools to help you

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

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HCR website and tools

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.

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Legal

Documents

40640NYEENEBC 09/13 Affordable Care Act impact on insurance plans