Health Care Reform Taking Action in 2014 and Beyond

True or False What I tell you today may not be true tomorrow, or next week or next year Health Reform is more complicated than shipping through the U.S. Postal Service 40 will be the last time Republicans vote to repeal Health Reform If you’re over 40 and eat and drink considerably more than you exercise, you will gain weight

What are we dealing with? 4 in 10 Americans (42%) are unaware that ACA is still the law of the land, including 12% that believe the law has been repealed by Congress, 7% that believe is was overturned by the Supreme Court and 23% that say they don’t know enough to speculate on the current status of the law Close to have of the population (49%) say they don’t have enough information about health care reform to understand how it will impact their own family When it comes to where they are getting information about the law, Americans most commonly cite friends and family (40%), newspapers, radio or other online news sources (36%), and cable news (30%). About 1 and 10 report getting information from a health insurer, a doctor, an employer, or a non-profit organization

Delaying that “part” will cost the American taxpayer $12 billion Roughly amounts to $160 per household assuming ½ the population pays taxes Source: Congressional Budget Office

What exactly is delayed? For large employers they will not have to consider whether they employ 50 or more FTEs or equivalents (part time) during the previous calendar year No longer have to count employees hours to determine if they average 30 or more hours per week Don’t have to offer minimum essential coverage next year or offer coverage to employees averaging 30 or more hours per week Offer coverage that is of “minimum value” nor does it have to be “affordable”

How could the delay affect you? If employers are not reporting, how will HHS know whether coverage is “affordable”? If employers offer a substandard plan (less than 60%), will an individual still be liable for a penalty for not having health insurance? The exchanges can dispense benefits “based on an applicant’s attestation” about employment insurance and income without verification Does this create an unintended consequence of migration from group coverage to the exchange?

What you do need to worry about

Many Provisions Still in Play No Annual Limits on Essential Health Benefits No Pre-Existing Condition Exclusions for Anyone! Maximum 90-day waiting periods on all plans Notice of Public Exchange New requirements for wellness programs

Many Provisions Still in Play The individual mandate Limits on cost-sharing (some of which is delayed) and deductible limits for small employers Rating restrictions for small employers Subsidies for low-income individuals for Exchange coverage

Maximum 90 Day Waiting Period Waiting periods for enrollment must shorten to 90 days. Recent guidance allows 1 st of the month IF enrollment occurs by 91 st day. This means 1 st of the month after 60 days is okay Small Group Fully Insured Large Group Fully Insured Self Funded Individual Yes Applies to grandfathered plans

Notice of Public Exchange Employers must provide written notice to: Existing employees by October 1, 2013 Annually (presumably March, but awaiting guidance) New employees upon date of hire o Includes info about the local State Exchange, possible subsidies, and ineligibility for employer contributions if covered through Exchange o Model notice available in English and Spanish (located on DOL website) o Same delivery rules as SPDs

Changes to Wellness Programs Maximum incentive increases from 20% to 30% Additional 20% (up to 50% total) if to prevent/ reduce tobacco use (apparently delayed on exchange coverage in 2014) Additional administrative rules will apply – particularly to outcomes based programs. Consult you benefits or legal advisor

The Individual Mandate Individuals must have insurance or pay a penalty YEARPENALTY 2014Greater of $95 per person (cap of $285 per family) or 1% of household income 2015Greater of $325 per person (cap of $975 per family) or 2% of household income 2016Greater of $695 per person (cap of $2,085 per family) or 2.5% of household income Family members under 18 receive 50% penalty reduction

Limits on Cost Sharing Out-of-pocket limits must comply with OOP limits for HSA plans. Copays for EHB services must count toward the OOP max. Small Group Fully Insured Large Group Fully Insured Self Funded Individual Yes Not required for grandfathered plans

Essential Health Benefits (EHB) Metallic/ Actuarial Value Essential Health Benefits must be offered by individual policies and small group non- grandfathered insured plans at 4 levels of coverage: Actuarial value: The average percentage a health plan will pay of an enrollee’s health care expenses. Level of CoverageActuarial Value Platinum88%-92% Gold78%-82% Silver68%-72% Bronze58%-62%

Essential Health Benefits (EHB) Health Plans must provide Essential Health Benefits for individual and small group Small Group Fully Insured Large Group Fully Insured Self Funded Individual YesNo Yes

Adjusted Community Rating Rate factors are limited to geographic area, age (3:1 limit) and tobacco use. Rates may not vary by gender, health status, claims history, group size or industry Small Group Fully Insured Large Group Fully Insured Self Funded Individual YesNo Yes Not required for grandfathered plans

Impact on Small Employers Rating Factors TODAYRating Factors 2014Range of Potential Rate Change Health StatusTobacco use-25% to +25% Age and genderAge only (3:1 max range for adults -10% to +10% IndustryNot applicable-15% to +15% Group sizeNot applicable-10% to +10% Geography/ RegionDefined by State-5% to +5% Family composition 0%

Subsidies for Low-Income Individuals Income LevelPremium as a Percent of Income Up to 133% FPL2% of income 133 – 150% FPL3 – 4 % of income 150 – 200% FPL4 – 6.3% of income 200 – 250% FPL6.3 – 8.05% of income 250 – 300% FPL9.05 – 9.5% of income 300 – 400% FPL9.5% of income

Things to Think About … If you’re a Small Employer Are you really a large employer subject to the mandate? Measured over prior calendar year: Employers with 50 FTEs on average Measured by looking at entire controlled group/ affiliate service group A special transition rule allowing a shorter look-back may be available for 2015 but we don’t know yet

Things to Think About … If you’re a Small Employer Should you remain grandfathered with an older employee demographic? Consider self-funding if you have a younger, healthier demographic? Should you renew early (December) to avoid Community Rating and “rate compression”?

Things to Think About … If you’re a Small Employer Drop coverage and send your employees to the exchange? o How will you make employees “whole”? o How will it impact your ability to attract/ retain? Offer coverage through the SHOP exchange? o Only one option offered in 2014

Things to Think About … If you’re a Large Employer Pay or Play is delayed but not dead. Still need to determine “eligible” employee and offer plans that meet minimum value/ affordability requirement. Weigh your options for eliminating employer- sponsored health insurance and sending employees to the Exchange.

Things to Think About If considering dropping coverage, these are some things to consider: – Based on contributions today, how will I make employees “whole”? Current contributions are tax deductible, compensation is not. – How will this impact the employer – employee relationship? – How will this impact my ability to attract a quality workforce?

Things to Think About Consider self-funding – Review of premium increases by HHS doesn’t apply to self-funded plans – Greater flexibility in plan design – Avoid 2.3% of premium Insurer Fee associated with fully insured plans – Avoid mandated services for fully insured plans, estimated to increase premiums by as much as 15%

Things to Think About Self-funding – More transparent. Self-funded plans allow employers to determine what true costs of coverage are. – Obtaining better data, employers can address high-cost services more directly and future premium increases are tied specifically to the employer population

Things to Think About Be aware of the new “aggregator rule” – Office visit copays now apply to out-of-pocket maximums – For low deductible plans with low OOP max, adjust those maximums now to account for the additional exposure Auto enrollment for employers with 200+ employees Non-discrimination rules for fully-insured plans (effective dates TBD)

Pay or Play Mandate 2015 Forecast for Employers MOST Employers will avoid the penalty and Exchanges Meet minimum plan design and contribution requirements Keep EEs in employer risk pool and out of Exchanges Avoid employer tax penalties Variation #1: Enable Access to public programs Set “affordable” EE premium levels to allow lower wage EEs to qualify for tax credits to purchase coverage through the Exchange Variation #2: Take proactive steps to limit liabilities Limit scheduled hours for part-timers Adopt measurement periods for variable hour EEs Restructure entities

The End Questions??