Presented by Jennifer KlugeMichigan Business and Professional Association

The Purpose of the Act is to:◦ Establish American Health benefit exchange to

facilitate the purchase and sale of qualified health plans for both individual and small group markets

◦ Intent is to reduce the number of uninsured, provide transparency, consumer education, assist individuals with access to coverage

◦ Goal for cost is premium assistance tax credits and cost sharing reductions

A state may choose to participate in either the Federal Exchange or may create their own.

State Exchanges have richer goals such as increasing competition, reduce health care costs, portability and simplicity of products

The State of Michigan is planning on creating its own exchange; one for individuals and one for small groups

Work group discussions held in March and April on the formation of the exchanges by experts, health industry, consumers and business groups

MBPA served on these workgroups and provided critical data to assist in the discussions of a State Exchange.

The workgroups made suggestions to the State through a facilitation company. A summary of those suggestions are being compiled to be presented to key state departments:

OFIR Department of Community Health Budget and Finance Governor’s office

Exchange is expected to be up and running by 2014

Until then rates will continue to rise as carriers comply with provisions and requirements of the law

Plan designs will be overhauled to be compliant with the law. HHS has not yet released the minimum requirements of plans inside the exchange

Insurance carriers are making changes now to predict these changes required by HHS

Plans inside the Exchange may or may not be more affordable to small business compared to the non exchange market.

The type of Exchange implemented is critical to determine the market changes

Individuals/families can receive premium credits in the exchange

Employers can receive tax credits Employers will most likely have penalties These in combination create incentive for

individuals and employers to purchase insurance through an exchange.

Individuals are ineligible for premium credits who are enrolled in the exchange through an employer that contributed toward that coverage. (small group exchange products)

No individual or family will pay more than 9.5% of their income for a health insurance plan with an actuarial value of 70% (silver plan design)

PPACA will extend Medicaid coverage to 133% of poverty, which will permit individuals to enroll with relatively little or no premiums and cost sharing

Families with incomes 400% of poverty and above ($80K) will be ineligible for premium subsidy support and their premiums will be the same as they would have faced before PPACA

Employers who provide coverage through an exchange will be provided a tax credit for up to 50% of their premium contribution for the first two years of coverage. The full 50% credit is provided to employers with ten or fewer employees and phases down by firm size.

Assume the second-lowest-cost silver plan in an area charged a premium of $12,000 for family coverage and that premium credits were currently available. A family of four at 100% Federal Poverty Level (FPL) ($22,050) in that plan would be required to pay no more than $441 per year toward the $12,000 premium and would therefore receive a credit of $11,559.

A family of four just below 400% Federal Poverty Level ($88,200) would be required to pay $8,379 toward their premium and would therefore receive a credit of approximately $3,621 (i.e., $12,000-$8,379).

Employers with at least 50 full time equivalent employees will most likely face penalties beginning in 2014

Equivalent to 50 full time employees can be comprised of hours of part-time employees, For example 35 full time employees and 20 part time employees will most likely pay penalties

Those with 50 full time employees must pay penalties only if at least one of its full-time employees obtains coverage through an exchange and receives a premium credit. (which is likely for many employers)

In 2014, a penalty of $3000 per year paid monthly for each full time employee that receives a premium credit.

The total penalty cap would be limited to the total number of full time employees minus 30 multiplied by $2,000 per employee.

For those firms with more than 200 full-time employees that offer coverage, they must automatically enroll new full-time employees in a plan and continue enrollment of current employees. (this provision might start before 2014 with a legislative change.)

The Company does not offer coverage, but no full-time employees receive credits for exchange coverage-No penalty (highly unlikely)

They do not offer coverage and one or more full-time employees receive credits for exchange coverage. The penalty is the number of full time employees minus 30 times $2,000. (50-20 x$2k= $40,000)

They offer coverage and no full-time employees receive credits for exchange coverage. No penalty would be assessed.

The employer offers coverage but one or more full-time employees receive credits for exchange coverage. The number of employees receiving the credit IS used in the penalty calculation for an employer that offers coverage

The penalty is the lesser of:◦ 50-30 multiply by 2K $40,000or◦ The number of full-time employees who receive

credits for exchange coverage multiplied by $3,000

For 10 employees on credits $30,000For 30 employees on credits it calculates to

$90,000 which exceed $40,000 cap. So it would be $40,000.

There are no penalties for employers with less than 50 employees

Active Purchaser: Exchange purchases insurance and negotiates price on behalf of members (like a large employer)

Market Organizer: Marketing portal of products; impartial source of information (Utah)

Selective Contracting Agent; Controls the vendors, products offered, cost, quality (Mass.)

Multi-state, Regional, State Exchange options

Multiple Exchanges within one State (individual and group)

Monitor their own risk, selection and actuarial functions

Determine their own governing structure

Through the state legislature a bill must be made into law to establish an exchange

The governor must sign this bill into law The Department of Community Health will

be leading the development of this law OFIR will be regulating the Exchange once it

is implemented If a law is not implemented by Jan 2013,

Michigan will be forced to the Federal Exchange

The State of Michigan led by the Department of Community Health is determining how to implement the Michigan Exchange

No legislation has been presented Governor is not focused on issue until the

Fall of 2011

Individual and Small Group Exchanges Must be operational by January 2014

By January 2013 states must demonstrate sufficient progress towards implementation or the Federal government will oversee the exchange.

Exchanges must be self-sufficient by 2015

By 2016, small group expansion to coverage to 100 employees from 50 employees

After 2017, states have the option of expanding the exchange to employer with more than 100 employees

Long term financial viability of exchanges The ability to choose coverage that is right

for your employees/company The risk pools within the exchange could be

adversely selected against which could cause problems with rising costs

Product benefits within the exchange have not been released by Health and Human Services

Deadlines are closing fast and the amount of work necessary to comply with these dates is unrealistic

Companies tax penalties essentially fund the credits for poverty level, but is it enough?

The costs involved in setting up the exchanges

Poverty levels include $80K household income

Tax Penalties on Employers