2014 Update of Affordable Care Act Provisions South Dakota Association of School Business Officials Annual Fall Conference September 25, 2013 Lisa Carlson Director of Planning & Regulation

Our discussion today… 2014 Implementation Overview Individual mandate to have health insurance Six Major Changes to Small Group and Individual Insurance The Public Marketplace (insurance Exchange) and how it will work Large Employer “Play or Pay” Mandate (Postponed until 2015) Who’s eligible for subsidies on the exchange? Notice to Employees of Insurance Exchange Options due Oct. 1

The Individual Mandate Starts in 2014

Penalty for Failing to have Insurance If you don’t have insurance in 2014, you will pay a tax penalty (that increases over time) greater of $95 per adult or 1% of taxable income greater of $325 per adult or 2% of taxable income greater of $695 per adult or 2.5% of taxable income After 2016, the tax penalty increases annually based on a cost-of-living adjustment

Penalty for Failing to have Insurance Penalty is pro-rated - a person will only pay one-twelfth of the total annual penalty for each month without coverage The penalty for a child is half that of an adult A maximum penalty would be calculated based on premiums for plans offered through the Exchange

Penalty for Failing to have Insurance There are a few exceptions to the penalty, including: Religious reasons Not present in the United States In prison Not able to pay for coverage that is more than eight percent of the household income An income that is below 100% of the poverty Level Having a hardship waiver Not covered for less than three months during the year

Individual Marketplace Yes, you’ll be forced to have health insurance, but the government will help you pay for it and make it accessible either through… The federal insurance exchange, The Marketplace; or By making large employers offer coverage to all full-time employees, i.e. pay or play mandate – NOTE: this has been delayed until 2015

Individual Marketplace Who can purchase insurance on the exchange? Individuals who do not have access (i.e. part time EEs) to “minimum essential coverage” or “affordable coverage” through their employer (large or small) Who would want to purchase insurance on the exchange? Individuals who are eligible for financial assistance: 1.Advance premium tax credits and/or 2.Cost sharing reductions to out-of-pocket maximums/ Individuals eligible for Medicaid will also be identified through the Marketplace

Individual Marketplace What does “affordable access” to insurance mean? Are you eligible for group-sponsored insurance where your cost for self-only coverage under the lowest cost option plan does not exceed 9.5% of the employee’s income as reported on their W-2, Box 1 or rate of pay? If yes, then neither you nor your family are eligible for subsidies in the Marketplace, regardless of how much you have to pay for family coverage (which may be more than 9.5% of your salary) Assumes the employer offers coverage to spouses and children (permissible for small groups) Even if employer contributes 0% to a family policy, the spouse & dependents would not qualify for subsidies in the Marketplace

South Dakota’s Federally Run Exchange 92,441 (13%) of South Dakota residents are uninsured and eligible (HHS.gov) for insurance coverage through the Marketplace 3 companies licensed to sell in South Dakota’s Marketplace Individual Market Sanford Health Plan Avera Health Plans DakotaCare Small Group Market Sanford Health Plan Avera Health Plans DakotaCare

Six Major Changes to Health Insurance

South Dakota’s Federally Run Exchange

The Public Marketplace An Online Buying Experience! Think “Expedia.com” or “Zappos.com” Facilitate the purchase of Qualified Health Plans (QHPs) Offer similar Plan and Carrier options side by side for enrolling Two Types: Individual and SHOP (small business) In 2017, states may permit employers in the large group (100+) market to buy group insurance inside the Exchange Operate toll-free hotline to provide consumer assistance Identify those eligible for financial assistance Premium Tax Credit MOOP cost-sharing reductions CHIP Medicaid No “wrong door” when purchasing through Marketplace

The Public Marketplace What does covering pre-existing conditions mean? Everyone will have guaranteed access to health insurance, including coverage for pre-existing medical conditions for those who purchase coverage on their own Consumers will be able to purchase health insurance in open enrollment periods even after they become ill or injured No one will be denied health insurance or charged more because of a medical condition

The Public Marketplace What does broader benefits mean? Requiring “Essential Health Benefits” The ACA expands the list of required benefits, many of which are not included in the coverage many people currently choose to purchase today As a result, millions of Americans will have coverage that is more comprehensive and hence more valuable than they have today

Standardized Metal Plans Plan Pays: Bronze = 60% coverage of benefits Silver = 70% coverage of benefits Gold = 80% coverage of benefits Platinum = 90% coverage of benefits Member Pays: Bronze = 40% coverage of benefits Silver = 30% coverage of benefits Gold = 20% coverage of benefits Platinum = 10% coverage of benefits

Essential Health Benefits 10 Minimum Standards covered as part of the required “Benefit Design”: 1.Ambulatory patient services 2.Emergency services 3.Hospitalization 4.Maternity & newborn care 5.Mental health and substance use disorder services, including behavioral health treatment 6.Prescription drugs 7.Rehabilitative and habilitative services and devices 8.Laboratory services 9.Preventive and wellness services and chronic disease management 10.Pediatric dental and vision care (up to age 19)

Limiting Premium Differences Effective 1/1/2014 for non-grandfathered small group and individual plans Can no longer differentiate rates by gender (male vs. female) In individual market, insurers can no longer underwrite based on health status (known as guarantee issue) Premiums may only vary by: - Age (3:1 maximum) – we’re now at 5:1 in South Dakota - NAIC defined permissible age bands - Tobacco (1:5:1 maximum) – we’re at 1:15:1 now - Geographic rating are determined in each state for all carriers – each carrier currently does their rating regions based on provider contracts - Two coverage tiers (individual or family) using per member rating or community rating Rates for these plans sold inside the exchange or outside the exchange must be the same, whether sold direct or through an agent

South Dakota’s Federally Run Exchange

Limiting Maximum Out-Of-Pocket… Maximum Out-Of-Pocket (MOOP) – For 2014, the annual cost-sharing limits cannot exceed $6,350 for an individual and $12,700 for families. This includes deductible, coinsurance, medical and pharmacy copay amounts. MOOP Tips: - Applies to non-grandfathered individual, small group and large group markets beginning in Out-of-network services do not count towards deductible caps or MOOP - All cost sharing does apply towards MOOP, including medical and pharmacy copays - Medical and pharmacy copay amounts apply towards MOOP, but they do not apply towards the deductible caps

Financial Assistance Available through Marketplace Providing Financial Assistance New expanded benefits and limits on cost-sharing will increase premiums for some, and decrease premiums for some as well But the ACA provider financial assistance for qualifying applicants through the health insurance exchanges Individuals can get premium tax credit and/or cost sharing reductions Small employers may be eligible for small group tax credit

Financial Assistance Calculation Based on 2014 Federal Poverty Levels (FPL) This table shows the maximum percent of income you should have to pay for healthcare premiums according to the ACA When applying for coverage through the Marketplace, the tool will calculate your options for you

Cost-Sharing Reductions Cost-sharing Subsidies are when the government helps pay the costs of deductibles, coinsurance & copayments (does NOT include premiums, out-of- network provider costs) Which Exchange Plans qualify for reductions? Only individual and family Silver plans qualify for cost-sharing subsidies. Who qualifies for Cost-Sharing Reductions? Individuals making less than 250% of the federal poverty line (FPL) How do the Cost-Sharing Subsidies breakdown? The Silver plan is set up so that 70% of medical costs are covered With cost-sharing subsidies the government will pay of out-of-pocket health services based on a sliding scale

Cost-Sharing Reductions If your income is % of the FPL, the actual coverage of a Silver plan is 94% If your income is % of the FPL, the actual coverage of a Silver plan is 87% If your income is % of the FPL, the actual coverage of a Silver plan is 73%

Premium Tax Credits

The Marketplace Initial Open Enrollment Period for Individuals October 1, 2013 – March 31, 2014 Outside the open enrollment period only qualified events will allow an individual to make changes to their plan Small employer groups can continue to have year-round open enrollment periods Individuals and Small employers can continue to shop outside of the Marketplace. But why would you do that? Your small business is not eligible for the tax credit Individuals not eligible for financial assistance Benefits are the same inside and outside the Marketplace Premiums are the same inside and outside the Marketplace

The Public Marketplace How will people know the Insurance Exchange exists? Public awareness campaigns Employers will be required to send a Model Notice to Employees of Coverage Options to their employees by Oct. 1, 2013 Employers that are subject to the Fair Labor Standards Act (FLSA), regardless of size, funding type or if they offer health coverage today or not, must provide a notice of coverage options to each employee. Employees must receive the notice whether or not they are enrolled in a health plan today or if they are part-time or full-time. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.

The Public Marketplace An Online Buying Experience! Initial Open Enrollment Period for Individuals October 1, 2013 – March 31, 2014 Outside the open enrollment period only qualified events will allow an individual to make changes to their plan Small employer groups can continue to have year-round open enrollment periods

Questions? Thank you… Sanford Health Plan is committed to providing information to help you understand the many layers of Health Care Reform and how it may impact your business. We appreciate your time today and please contact our team at any time or visit the Health Care Reform section of our website at sanfordhealthplan.com