The First 100 Days --- American Health Care Act Presentation to the MNGFOA Gayle McCann President, Partner and Risk Advisor May 17, 2017

Agenda Affordable Care Act What provisions increased Group Health Insurance pricing American Health Care Act What provisions will effect Group Health Insurance pricing Advantages for you and your employees Congressional Budget Office/Joint Committee on Taxation Where does the AHCA go from here?  

ACA What provisions increased the fixed costs? Employer group premiums were affected by the taxes and fees imposed directly to the employer or to the employer through the health insurance carriers. These increased costs by ~6% of the total cost/premium. The additional ACA taxes & fees consisted of: Transitional Reinsurance fee PCORI fee Medicaid surcharge increase (0.9%) Federal Insurance industry tax In addition to the above, MN groups continue to pay for MCHA and the conversion fee which was ~4%.

ACA What provisions increased the claim costs? No lifetime or annual limits for essential health benefits Preventive paid at 100% Coverage for adult children to age 26 under any circumstances Medical device tax of 2.3% General ACA implementation and administrative costs

ACA What provisions may have increased employer costs? New employees must be covered no greater than 90 days after DOH Employee contribution must not exceed 9.5% of their income Employer must offer a plan with a ‘minimum benefit.’

ACA Summary Survey Results 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-18 Years 2014-23 Years ACA Cost per employee $267 $329 $362 $377 $487 $576 $682 $804 $951 $1,113 $1,823 $5,948 Percent Increase in Employer Health Care Costs from ACA 3.6% 4.2% 4.3% 5.1% 5.7% 6.3% 6.9% 7.7% 8.4% 5.9%

ACA What provisions may have indirectly increased employer costs? Three insurance carriers offered individual insurance through the MNSure exchange. 2014: PreferredOne announces loss of $139 Million 2015: Blue Cross Blue Shield announces loss of $265 Million 2016: Medica announces operating loss of $270 Million “exceeds any earnings in the history of our business and will diminish Medica’s reserves to unstable levels.

H.R. 1628 - AHCA On May 4, the House of Representatives narrowly passed its version of the American Health Care Act. Title I: Energy and Commerce Primarily public health programs, Medicaid, Individual Title II: Ways and Means We will focus on Title II with respect to Group Health Insurance.

H.R. 1628 - AHCA What provisions in the bill will decrease the fixed costs? Repeals and will end the Reinsurance fee, PCORI, and Medicaid surtax.

H.R. 1628 - AHCA What provisions may reduce claim cost? The bill promotes and supports Health Savings Accounts Since 2010, deductibles have increased 67% Nearly 25% of workers are enrolled in a HDHP* *2016 Henry J. Kaiser Family Foundation

H.R. 1628 - AHCA HDHP, HSA, and cost to a Group Health Plan Increasing plan deductibles has emerged as one potential solution to slowing health care cost growing by reducing use A higher deductible reduces a plan’s monthly premium payment, while increasing the amount consumers are responsible for paying for their care before their insurance pays for benefits This effectively increases the price consumers face when deciding whether or not to seek care and may in turn reduce medical spending

H.R. 1628 - AHCA The bill promotes and supports Health Savings Accounts. Maximum annual contributions increase to $6,550 for singles and $13,100 for families It allows BOTH spouses age 55+ to make a ‘catch-up’ contribution An HSA can be established within 60 days of the HDHP effective date--claims back to the effective date are qualified A distribution for non-qualified expenses were penalized at 20% tax above ordinary income. This will decrease to 10%, ordinary income still applies. Over the counter medications become qualified expenses.

Implementing a HDHP/HSA How to achieve a successful transition from a traditional health plan to a consumer driven plan for your employees Offer 1 or 2 plans as an option in addition to the traditional plan for the first years. Intense educational campaign. Consider contributing to their health savings account. Gradually increase migration to the plan through employer contributions to premium or HSA contribution Private Marketplace. Offer many plans along with other products. Offer a defined contribution to each employee to buy what fits their needs. The majority of employees migrate to the HDHP plans based on cost transparency

H.R. 1628 - AHCA Provisions that will lower costs Hospital Safety Net which restores $79 Billion to hospitals who provide a high proportion of care to vulnerable patients Provides States with $100 Billion to design programs to meet their unique health care needs An additional $15 Billion for maternity, newborn care, mental health and substance use disorders An additional $15 Billion for a federal Invisible Risk Sharing Program to further stabilize markets and lower premiums

H.R. 1628 - AHCA Other notable changes Cadillac tax delayed to after 12/31/25 Repeal of Medical Device tax of 2.3 % effective after 12/31/16 Repeal of additional Medicare surtax to employee wages of 0.9% effective 2023

CBO/JCT Cost Estimate Estimates on effects on the Federal Budget March 23 CBO and JCT estimate that enacting H.R. 1628, with the proposed amendments, would reduce federal deficits by $150 billion over the 2017-2026 period; that reduction is the net result of a $1,150 billion reduction in direct spending, partly offset by a reduction of $999 billion in revenues. The provisions dealing with health insurance coverage would reduce deficits, on net, by $883 billion; the noncoverage provisions would increase deficits by $733 billion, mostly by reducing revenues. The FINAL ‘score’ is due the week of May 22

Where do we go from here? Senate Timing Hard Deadline: The FY17 budget reconciliation instruction will expire at the end of the fiscal year this coming September. However, there probably will be pressure to pass the bill out of the Senate before the August recess, at the latest.

Where do we go from here? Possible Substantive Changes abortion provisions -- planned parenthood funding restrictions and limitations on use of tax credits for abortion-related services risk pool funding and stabilization funding -- could go up, down, criteria could be changed, etc. After the Senate version, both bills then go into conference between the two houses to hammer out differences

Gayle McCann gmccann@johnsonmccann.com 651-486-2181 St. Paul, MN