The Affordable Care Act

The Changing Face of Health Insurance in the US

PPACA Overview

The Patient Protection and Affordable Care Act is enacted March 23, 2010 (PPACA)

Main Priorities Expansion of access to health care coverage Reduction of premium costs and make

coverage affordable Creation of standardized coverage Guarantee issue & limited pre-existing State/Federal based exchanges where you can

purchase qualified health insurance

PPACA Timeline

2014 Individual Mandate

In 2014 all US citizens and legal residents are required to purchase health insurance or face a tax penalty

Tax in 2014 is: Incomes under $20,000 will pay $95 Incomes over $20,000 will pay 1% of income

The IRS will issue notices and attempt to collect penalties (individuals failing to pay will not be subject to criminal prosecution)

2015 + Individual Penalties In 2015 the tax increases to:

Incomes below $25,000 will pay $325 Incomes above $25,000 will pay 2% of income

In 2016 the tax increases to: Incomes below $37,000 will pay $695 Incomes above $37,000 will pay 2.5% of

income Incomes below the filing threshold of $9,350 in

2010 have no penalty (this threshold will be higher in 2014 but is not known at this time – indexed based on CPI-U each year)

Individual Penalties and Caps

The penalty for an individual will be capped at the national average premium for a bronze-level plan

The CBO (Congressional Budget Office) estimates this amount to be between $4500 and $5000 in 2016

The following two illustrations show these caps for individuals

Figure A-1. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $50,000

Figure A-2. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $500,000

Family Penalties & Caps

In 2014: Incomes below $55,000 will pay $285 Incomes above $55,000 will pay 1% of income

In 2015: Incomes below $75,000 will pay $975 Incomes above $75,000 will pay 2% of income

In 2016: Incomes below $110,000 will pay $2,085 Incomes above $110,000 will pay 2.5% of

income Based on a family of four

Figure A-3. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $125,000

Figure A-4. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $500,000

Affordability

General rule: Employee’s share of the self-only premium for the employer’s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income or the employee may be eligible for a premium tax credit to purchase Exchange coverage

Treasury-proposed safe harbor: No employer penalty if the employee’s share of the self-only premium for the employer’s lowest-cost, minimum value plan does not exceed 9.5% of the employee’s current W-2 wages from the employer

Clarifies that an employer must offer coverage to employees and dependents, but that the affordability test is based on employee contribution to self-only coverage

Affordability

Actuarial Value

The ACA establishes community rates on all qualified health plans which are marketed as tiers with a pre-established Actuarial Value (AV) of the required Essential Benefits

Proposed AV Tiers: Platinum = 90% Gold = 80% Silver = 70% Bronze = 60%

Actuarial Value

Tiers will be based on Actuarial Value (AV) Scores

AV Tiers will have a variation of +/- 2 percentage points For example rates for the Silver tier will

have an AV between 68 and 72% This approach greatly reduces rate

differentials between plans and carriers

Essential Benefits

Recommended set of 10 benefits in each plan which include: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental Health and Substance Abuse

(behavioral health)

Essential Benefits (Cont’d)

Prescription Drugs Rehabilitative and habilitative services

and devices Laboratory services Preventive and wellness services and

chronic disease management Pediatric services, including oral and

vision care

Essential Benefits

No annual dollar limits Maximum deductible of $2000

individual and $4000 familyEmployers with 50+ employees: Employer requirement to offer

essential benefits Penalty of $2,000 per employee for

failure to comply

Large Group Tax Penalty Calculation

Additional 2014 Rules

Small group redefined as 1 to 100 Premium taxes on carriers – can be

passed directly to the fully insured plan

Medicaid Program Expansion – state decision to offer coverage to individuals up to 133% of the Federal Poverty Level

Guarantee Issue No Pre-Existing Conditions for adults

Guarantee Issue

All health insurance plans will no longer be underwritten – coverage is guaranteed regardless of health

No pre-existing condition limitations for adults Children have been exempt since 2010 Must have Creditable Coverage

Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days

No Pre-Existing Conditions

No pre-existing condition limitations for adults Children have been exempt since 2010 Must have Creditable Coverage

Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days

Without Creditable Coverage an adult has a 12 month pre-ex limitation

Exchanges

Mechanism to purchase health insurance for individuals and employer groups with 1 to 100 employees

ACA was drafted for states to run exchanges, but a majority of states have refused to comply and deferred to the Federal Exchange, including Ohio

Exchange Functions

Certify that health plans are ‘qualified’ with Essential Benefits

Operate website for comparisons Operate a toll-free hotline Determination of consumer eligibility

for plans and affordability programs (tax credits, Medicaid, CHIP, etc.)

Facilitation of consumer enrollment

Federal Exchange Rules

Accepts all health insurance carriers Guidance indicates intent to work

with agents and brokers Will not replace a states Department

of Insurance HHS (Health and Human Services)

will manage web site and consumer hotline

Small Business Health Options Program (SHOP)

Exchanges will allow employer groups to enroll Employees allowed choice among plans Coverage from multiple carriers but one

bill Employers can also offer a single plan Includes groups with 1 to 100 employees In 2017 100+ employee groups can

enroll

Role of Brokers

Guidance from HHS suggests a role a ‘Navigators’

Must pass certification Recent proposed legislation on MLR

and commission exclusion passed Senate in September

HHS will integrate link to web portal for certified agents/brokers

Plan Design Strategies

Defined Contribution Health Plans For employers with under 50 employees drop

coverage altogether and fund a fixed dollar amount into individual medical accounts for employees to purchase their own coverage

Eliminates renewals, fiduciary liability and provides employees more choices

ERISA (self-funded plans) are exempt from ACA regulation

Additional exemptions – Unions, MEWA’s, etc.

Questions?

If you want to learn more about PPACA and receive future updates subscribe to our newsletter or call me:

Doug Helser, Life & Health SpecialistMMA Insurance

614-834-6624 or 614-961-0339dough@mmains.net

www.mmains.net