1 ACA Primer for Employers Jay McLaren, Director of Government Relations July 31, 2013

2 Employer Overview of the ACA Core Issues  2014 Employer Penalties  2014 Employer Rating and Product Requirements  Taxes and Assessments  MNsure – Minnesota’s Insurance Exchange  ACA Impact on Minnesota  What You Need to Know

Employer Penalties

4 Employer Play or Pay Recent Developments  One-year delay - Applies to penalties and affiliated requirements - Applies to reporting requirements applied to businesses and insurers - Does not apply to other portions of the ACA that impact group coverage  Delay impacts the penalties and affiliated requirements; examples include: - Coverage for employees working 30 hrs/week or more - Affordability safe harbors (9.5% of employee income) - Report that was to begin January, 2015

5 Employer Play or Pay What Does This Mean?  Wait for the release of regulations to learn details - Full year delay or partial year delay? - How will the delay work? - Which existing requirements will change and how?  Large employers must still implement other portions of the ACA upon renewal in 2014; examples include: - 90-day waiting period maximum - Maximum out-of-pocket requirement - No annual limits on coverage  Employees and their families may still qualify for subsidies through the Exchange

6 Employer Penalties Penalties apply to large employers (> 50 employees)  Penalty for employers who do not offer coverage - $2,000 penalty per employee - First 30 employees exempt from count  Penalty for employers who do offer coverage but have at least one employee certified to access a subsidy - Employees eligible for subsidy if: Plan’s share of the total allowed costs of benefits provided is less than 60 percent of such costs Premium > 9.5 percent of the employee’s household income - $3000 penalty per employee certified to receive a subsidy

7 Employer Penalties Previously Released Information  Employer safe harbor: - Offer coverage to its full-time employees (and their dependents) - Ensure actuarial value of coverage is at least 60% - Ensure employee portion of the self-only premium for the lowest cost coverage does not exceed 9.5% of the employee’s income  Three possible safe harbors for determining how to calculate 9.5% of employee’s income - W-2 - Rate of Pay - Federal Poverty Line

8 Employer Penalties Previously Released Information  Two different employee calculations 1.Employer size Full-time employees, part-time employees, and seasonal employees Does the employer qualify for a seasonal employee exception? 2.“Full-time employees” Generally working more than 30 hours per week Options for determining variable hour employees are complicated, but may be beneficial: Look- back periods, administrative periods, and stability periods

Market and Product Rules

10 Market and Product Rules Guarantee Issue Requires health plans to accept or renew every employer that applies for coverage - Applies to all groups Prohibits any pre-existing condition exclusions or discrimination based on health status - Applies to all groups Small Group Coverage Health plans may apply participation and contribution requirements throughout the year

11 Market and Product Rules Rate Variation  Premiums for small group and individual health insurance may vary only by: - Family structure - Rating area - Age (not more than 3 to 1) - Tobacco use (not more than 1.5 to 1)  Applies to groups beginning in 2016  Applies to larger groups at the discretion of the state beginning in 2017  Does not apply to self-insured groups

12 Market and Product Rules Rate Variation: Tobacco  Use of tobacco on average of four or more times per week within no longer than the last six months  Includes all tobacco products  Limited to legal use of tobacco (18 years & older)  Health plan may retroactively apply the rating factor if an enrollee reported false or incorrect information  Exemptions: - Religious or ceremonial use - Wellness program participation through a small group employer

13 Market and Product Rules Small Group Deductibles Limits  Limited to $2000 for individual coverage and $4000 for family coverage - Exception to meet the metal level coverage - Exception applies at least to the Bronze plan  Remember: “Small Group” expands to include groups in 2016 and may include larger groups beginning in 2017

14 Market and Product Rules Annual Out-of-Pocket Limits  In 2014, limited to the thresholds established by IRS for High Deductible Health Plans  Current limits - Self-only: $ 6,250 ($6,350 in 2014) - Family: $12,500 ($12,700 in 2014)  Applies to all products fully and self-insured  Limits adjusted annually by national per capita premium change

15 Market and Product Rules Actuarial Value  Every individual and small group product must meet one of the following actuarial values. - 60% - Bronze - 70% - Silver - 80% - Gold - 90% - Platinum  Plans can deviate +/- 2% from these levels

16 Market and Product Rules Minimum Value (MV)  Requirement placed on employers to offer coverage that meets a minimum value of benefit (60%)  Determined using tools from federal agencies: - MV Calculator available on the IRS or DHHS website - Checklists approved by the IRS - Actuary certification for plans with non-standard features  Any plan in small-group market that meets any of the metal levels satisfies minimum value  An employer’s Summary of Benefits and Coverage (SBC) will show if the plan meets MV or not

17 Taxes and Assessments

18 Taxes and Assessments Health Taxes  Tax on insurance companies begins in : $8 billion nationally : $11.3 billion per year : $13.9 billion on: $14.3 billion per year  MNSURE – Minnesota’s Exchange - 1.5% premium withhold in Up to 3.5% in 2015 and beyond  Other Taxes (national) - $10 billion transitional reinsurance program payments - $3 billion tax on medications - $2.7 billion tax on medical devices - $300 million for comparative effectiveness research

19 MNsure Minnesota’s Insurance Exchange

20 MNsure – Minnesota’s Exchange What Is It?  Intended to be a Travelocity or Expedia for health insurance; a virtual health insurance marketplace  Delivery system for federal health insurance subsidies in the individual market  Option for small businesses to offer coverage What It Is Not  An insurer with its own health insurance products  A purchasing pool or “active purchaser” entity that negotiates with insurers  A takeover of the health insurance market

21 MNsure – Minnesota’s Exchange Two Exchanges Within the Exchange  Individual - Eligibility determination for subsidies, Medicaid, and MinnesotaCare - Shop for individual coverage - Medica, HP, BCBS, P1, UCare  Small Business Health Options Program (SHOP) - Option for employers to offer coverage to employees - Carrier risk is pooled inside and outside the exchange - Medica, BCBS, and P1  Minnesota insurance regulators have stated nine insurers have applied to participate in MNsure

22 MNsure – Minnesota’s Exchange Exchanges and Group Coverage  Employer Size - Enrollment limited to small groups (<50) in year 1&2 - Employers with up to 100 employees may use the exchange beginning in States can choose to allow even larger groups into the exchange beginning in 2017  Small Business Health Care Tax Credit - Currently offered to small businesses that qualify - Maximum credit increases to 50% in Qualifying employers may only receive it by using the exchange beginning in 2014

23 MNsure – Minnesota’s Exchange Board of Directors  3 consumers, 3 with specific expertise, DHS Commissioner  Appointed to the Board in early May  Prohibited from employment as a health care provider, in health insurance industry, as insurance agent or broker, or Exchange contractors Finance  1.5% premium withhold in 2014  Withhold up to 3.5% in 2015 and beyond  Cost will be spread inside and outside the exchange on individual and small group policies

24 MNsure – Minnesota’s Exchange Plan Participation/Selection  Board may apply selection criteria to insurers and plans in 2015 and beyond Agents/Brokers, Navigators, IPAs, and CACs  Brokers will be available upon completion of MNsure training and certification requirements - Educate on products inside and outside MNsure - May recommend a specific plan  Navigators and others available to educate on offerings inside MNsure

25 ACA Impact on Minnesota

26 ACA Impact on Minnesota The Basics  Relatively low uninsured rate of about 9%  Positive indicators - #4 in % receiving employer-sponsored coverage - Relatively generous coverage through public programs - MinnesotaCare likely to continue into Some elements of the ACA were already in place  Other indicators - #9 in median income for households of 4 - MCHA phase-out plan - 19th highest cost of self-only coverage through a small employer

27 ACA Impact on MN Small Group Market Impact of Community Rating: MN Small Group Market Study by the State of Minnesota Source: “The Impact of the ACA and Exchange on Minnesota,” a study commissioned by the Minnesota Department of Commerce and completed by Dr. Jonathan Gruber and Gorman Actuarial, LLC.; April, 2012.

28 What You Need to Know

29 What You Need to Know All Employers  Employee notice of Exchanges by 10/1  Federal Department of Labor Large Employers  New insurance benefit mandate for fully-insured groups beginning in Intensive services for children with autism - Applies only to the fully-insured large group market  Employer “Pay of Play” delayed one year  Other ACA requirements go into effect in 2014  Advice is available through benefit professionals

30 What You Need to Know Small Businesses  ACA represents a challenge for relatively healthy small businesses  Key target audience for the SHOP  Advice is available through benefit professionals

31 Thank You