Healthcare Reform

Archie AbramsMay 2014

Health Plans and

Employers

PPACA imposed several significant new requirements effective for plan years in 2012 – 2013

New Plans Grandfathered PlansInsured Self-

FundedInsured Self-

FundedIndiv. Group Indiv. Group

Preventive Services √ √ √

W-2 Reporting √ √ √ √

Summary of Benefits and Coverage √ √ √

√

√

√

Notice of Mid-Year Changes √

√ √ √ √ √

Comparative Effectiveness Fee √

√ √ √ √ √

Medical Loss Ratio √ √ √ √

2012 – 2013Insurance Reforms

New Plans Grandfathered Plans

Insured Self-Funded

Insured Self-Funded Indiv. Group Indiv. Group

Flexible Spending Account Limitations √ √

Hospital Insurance Tax ($200,000 Individual; $250,000 Married)

√ √ √ √ √ √

Healthcare Exchange Notice √ √ √ √

2012 – 2013Insurance Reforms

PPACA imposed several significant new requirements effective for plan years in 2012 – 2013

New Plans Grandfathered Plans

Insured Self-Funded

Insured Self-FundedIndiv. Group Indiv. Group

Annual Dollar Limits on EHBs √ √ √ √ √ √

No Pre-existing Condition Exclusions

√ √ √ √ √

New Hire Waiting Periods Limited to 90 Days

√ √

√

√

Essential Health Benefits √ √

Automatic Enrollment>200 Employees

√ √ √ √

2014Insurance Reforms

PPACA imposed several significant new requirements effective for plan years beginning in 2014

New Plans Grandfathered PlansInsured Self-

FundedInsured Self-

FundedIndiv. Group Indiv. Group

Minimum Essential Coverage √ √ √ √

Cost-sharing Limits √ √ √

Reinsurance Fee √ √ √ √ √ √

Insurer Tax √ √ √ √

2014Insurance Reforms

PPACA imposed several significant new requirements effective for plan years beginning in 2014

EHBs must be included in Individual and Small Group plans.

Essential Health BenefitsThe EHB

benchmark for

Alabama is the Blue

Cross Small Group

320 Plan (Plus

FEDVIP Pediatric

Dental and

Vision).

Each state’s

base-

benchmark plan

selection will be

applicable for at

least the 2014 and

2015 benefit years, after

which HHS may modify

the process

for determining EHB.

What Payments Are Due Under PPACA

• Health Insurance Tax• Comparative Effectiveness Fee• Reinsurance Fee• Exchange User Fee• Risk Adjustment Fee

Assessed on

Insurer

• Comparative Effectiveness Fee• Reinsurance Fee

Assessed on Self-insured

Groups

5 New Fees/Assessments

Pay or Play – Employer Shared

Responsibility

4980H IntroductionEmployer Mandate Requires large employers (with at least 50 employees)

to either offer minimum essential coverage to full-time employees

(average of 30 hours per week) and their dependents or

pay an excise tax if at least one full-time employee receives federal assistance to purchase health coverage on an Exchange.

The excise tax is eliminated if the minimum essential coverage is affordable and provides minimum value.

4980H Overview Two penalties:

IRC 4980H(a) – “The Big Penalty” Penalty for large employers that fail to offer minimum

essential coverage to full-time employees and their dependents and at least 1 employee receives tax credit/cost sharing subsidy

$2,000 x every full-time employee (minus 30) IRC 4980H(b) – “The Lesser Penalty”

Penalty for large employers that offer minimum essential coverage to full-time employees and their dependents, but an employee receives tax credit/cost sharing subsidy because the coverage is either not affordable or does not provide minimum value

Generally, $3,000 x each full-time employee receiving premium assistance

4980H Transitional Issues

NEW! No 4980H penalty for all of 2015for employers with <100 FT and FTEemployees in 2014NEW! No 4980H(a) penalty if offers

covers to 70% of FTE (andfor each calendar month infrom 95%)NEW! For 2015, 4980H(a)

dependents)2015 (down

penaltycalculated by reducing number of FTemployees by 80 (not 30)

Health Insurers and

Third-Party Administrators (TPA)

2014 Reform Requirements

• Essential Health Benefits

• Health Insurance Exchanges

• Guaranteed issue

• No pre-existing waiting period

• Age-rating ratio limited to 3:1

• Plans must meet benefit and actuarial value rules

• Gender rating goes away

• Tobacco rating (1:1.5)

• Rate review

• Dual reporting to DOI and HHS

2014 Reform Requirements

Composite Rating

CURRENT

METHOD

2014

Family $800 FAMILYContract holder $400

Spouse $300Dependent 1 $100Dependent 2 $100Dependent 3 $100

TOTAL FAMILY$1,000

Member Build Up

New Billing Method for Families

On and Off Exchange

Family #1Subscriber, 45 $ 400Spouse, 40 $ 300Dependent, 12 $ 100Dependent, 8 $ 100Dependent, 4 $ 100

TOTAL $1,000

Family #2Subscriber, 45 $ 400Spouse, 40 $ 300Dependent, 12 $ 100Dependent, 8 $ 100Dependent, 4 $ 100Dependent, 2 $ 0

TOTAL $1,000

Family #3Subscriber, 45 $ 400Spouse, 40 $ 300Dependent, 12 $ 100Dependent, 8 $ 100Dependent, 4 $ 100Dependent, 2 $ 0Dependent, 21 $ 200TOTAL $1,200

Family Premium CalculationIndividual & Small Group / On and Off

Number of Plans OfferedIndividual Small Group

Metal Level Exchange Off Exchange SHOP Off

SHOP

Platinum 1 1 1 1

Gold 2 2 2 2

Silver 2 3 1 1

Bronze 1 1 1 1

Catastrophic 1 n/a n/a n/a

2014 Plans …Individual & Small Group

Purpose • Protect against effects of adverse selection• Increase competition by lowering costs and

providing security around pricing risk

1) Risk Adjustment2) Transitional Reinsurance3) Risk Corridors

3R’sThree Risk Mitigation Programs for

Insurance Companies

Contributions ($63 PMPY) RecoveriesIndividual

Large Group UW

Self Insured Groups

Small Group

Individual

3R’s: Transitional Reinsurance

Temporary 2014 ─ 2016

Individuals

Marketing

Individual MandateA non-exempt individual must have minimum essential coverage for each month during the taxable year or pay the shared responsibility payment. Minimum essential coverage is defined as:

• Government-sponsored program

• Employer-sponsored plan

• Plan in the individual market

• Grandfathered health plan

Individual Mandate

Individual Mandate Penalty Tax is the greater of $95 per individual (capped at 300% of the relevant amount for a family) or 1% of household income.

Rises to $695 or 2.5% of income by 2016.

Members of recognized

religious sects or divisions

Non-citizens

Incarcerated individuals

Individuals with income below

the filing threshold

Individuals with short coverage

gap

Individuals who experience a

hardship

Coverage is not affordable

ExemptIndividuals

Individual Mandate

•

The Exchange

A New Consumer Market

Oct 1, 2013

Open enrollment

began

Jan 1, 2014

First policy effective

date

Subsidy Eligibility

Incomes between 100% and 400%

of Federal Poverty Level

(FPL)

Subsidies

Fixed-dollar amount (not impacted by plan selected

or carrier chosen)

% Gross Yearly IncomeFamily Size 100% 200% 300% 400%

1 $11,490 $22,980 $34,470 $45,960

2 $15,510 $31,020 $46,530 $62,040

3 $19,530 $39,060 $58,590 $78,120

4 $23,550 $47,100 $70,650 $94,200

2013 Federal Poverty Level48 Contiguous States & the District of

Columbia

HCR ExchangePlatinum 90%

Gold 80%

Silver 70%

Bronze 60%

All Exchange products must comply with one of 4 benefit tiers with specified actuarial values• Individual catastrophic

products may be offered to individuals under 30 or eligible for certain mandate exemptions

• QHP issuer must offer at least one Silver level and one Gold level plan

Receiving Premium Subsidies Consumer

Goes on Exchange website• Uses calculator to estimate subsidy• Chooses a plan• Applies for subsidy

1

• Federal government receives application• Reviews eligibility

2

• Government sends subsidy directly to insurer on monthly basis

4

• Government informs Exchange and Insurer of subsidy amount (tied to 2nd lowest Silver Plan)

3

• Insurer adjusts premium and cost-sharing and charges individual the reduced price

5

The ExchangeA New Consumer Market

Example for family of 4

at 150% FPL ($34,575 annual

income)

Carrier A Carrier B Carrier C

Total Premium $7,400 $9,900 $11,400

Subsidy ($6,100) ($6,100) ($6,100)

Member Premium $1,300 $3,800 $5,300

3-Month Grace PeriodHealth Insurance Marketplace

Must pay claims for the first month

May pend claims for months 2-3

Providers will be notified of delinquent status beginning the second month

Must pay all premiums due by the end of the 3r

d

month or will be cancelled

2014 FF-SHOP• Employer choice of a single QHP• Still eligible for small business health insurance

tax credit• Postponement of requirement for employee choice in

SHOP until 2015

State-based SHOP

• In 2014, flexibility to offer either employer or employee choice

Small Business Health Options Program (SHOP)

Healthcare Reform Microsite

Phase II – Site Enhancements