Prepared by North Carolina Institute of Medicine Understanding National Health Reform: Focus on Individuals and Families Prepared by North Carolina Institute of Medicine 1

Background The US Census estimates that there were ~1.5 million North Carolinians under age 65 who were uninsured in 2011 (almost one out of every five nonelderly people in the state). Add specific county level uninsured numbers here Being uninsured has a profound impact on a person’s health and financial well being. 2

Who are the Uninsured? Most of the uninsured have low or moderate incomes (below 200% of the federal poverty level). Some people with higher incomes cannot afford coverage because of preexisting health problems. More than three-quarters of the uninsured are in a household where someone is working full-time. Some may have access to employer sponsored insurance, but it may be too expensive to purchase. Others may work for businesses that do not offer coverage, or they may not be eligible. A majority of the uninsured have low or moderate incomes (below 200% of the federal poverty level), but some have much higher incomes. Some people with higher incomes cannot afford coverage because of preexisting health problems. More than three-quarters (77%) of the uninsured have been uninsured for more than one year 19% were uninsured for 1-2 years 17% were uninsured for 3-4 years 41% were uninsured for 5 years or more or never had insurance 200% FPL is $22,980/year for an individual, or $47,100/year for a family of four. In 2013

Who are the Uninsured? More than three-quarters of the uninsured are in a household where someone is working full-time. Many workers are not offered coverage through their job. Even if they are offered coverage, it may not be affordable. More than three-quarters of the uninsured have been uninsured for more than one year. More than three-quarters of the uninsured are in a household where someone is working full-time. Some may have access to employer sponsored insurance, but it may be too expensive to purchase. Others may work for businesses that do not offer coverage, or they may not be eligible. A majority of the uninsured have low or moderate incomes (below 200% of the federal poverty level), but some have much higher incomes. Some people with higher incomes cannot afford coverage because of preexisting health problems. More than three-quarters (77%) of the uninsured have been uninsured for more than one year 19% were uninsured for 1-2 years 17% were uninsured for 3-4 years 41% were uninsured for 5 years or more or never had insurance

Affordable Care Act (ACA) The Patient Protection and Affordable Care Act was signed into law on March, 2010. As enacted, it requires most people to have health insurance coverage or pay a penalty. 5

Coverage Provisions Before Supreme Court Decision ACA would have required most people to have health insurance coverage or pay a penalty. Public coverage: Most low income people with incomes <138% Federal Poverty Levels (FPL) would gain coverage through Medicaid. Employer-based coverage: Most other people would continue to get health insurance through their employer. Individual (non-group) coverage: Some people would qualify for subsidies to purchase coverage on their own through the Health Insurance Marketplace. 138% FPL is $15,028/year for an individual or $30,843/year for a family of four in 2013. 6

Supreme Court Impact on ACA Different groups brought lawsuits challenging the constitutionality of the ACA. Supreme Court, in National Federation of Independent Businesses vs. Sebelius: Upheld the constitutionality of the individual mandate. Struck down the government’s enforcement mechanism for the Medicaid expansion, letting each state decide whether to expand Medicaid. Left the rest of the ACA intact. 7

Basics of National Health Reform--Overview Changes in public coverage Medicaid NC Health Choice Medicare Private coverage 8 8

Medicaid What is Medicaid? Medicaid is a state and federal government-funded health insurance program that covers some individuals and families with low incomes. States have different income eligibility rules depending on whether the person is a child, pregnant woman, the parent of a dependent child, elderly (65 or older), or have a disability. Childless adults who are not elderly or disabled do not qualify for Medicaid in North Carolina regardless of how poor they are. 9

NC Health Choice What is NC Health Choice? NC Health Choice is North Carolina’s child health insurance program. It is funded by the state and federal governments. Who is eligible for NC Health Choice? Children under age 19 whose family income is too high to qualify for Medicaid but less than 200% of the federal poverty level (FPL). In North Carolina, children birth through age 5 qualify for Medicaid with incomes up to 200% FPL. Children ages 6 through 18 qualify for Medicaid with incomes up to 100% FPL, and for NC Health Choice with incomes between 100-200% FPL.

Existing NC Medicaid Income Eligibility (2013) (Percent of Federal Poverty Level) Currently, childless, non-disabled, non-elderly adults can not qualify for Medicaid Because of categorical restrictions, Medicaid only covers 30% of low- income adults in North Carolina Kaiser Family Foundation. State Health Facts. Calculations for parents based on a family of three. Note: 100% of the federal poverty levels (FPL) (2013) = $11,490/yr. (1 person), $15,510 (2 people), $19,530 (3 people), $23,550 (4 people) 11 11

NC Medicaid Income Eligibility if Expanded (2014) Medicaid expansion would provide coverage to low income adults with incomes below 138% FPL, who are not currently eligible for Medicaid. 200% Note: 138% FPL (2013)= $15,856/yr (1 person), $21,404 (2 people), $26,951 (3 people), $32,499 (4 people). 12

Medicaid (cont’d) The ACA would allow states to expand Medicaid to most adults with incomes under 138% of the federal poverty guidelines: Expanding Medicaid coverage would provide coverage to approximately 500,000 uninsured North Carolinians Federal government will pay most of the costs of the Medicaid expansion North Carolina has not chosen to expand Medicaid.

Medicaid (cont’d) Will I qualify for Medicaid under health reform? If you qualify for Medicaid now, you should be able to qualify in 2014 (assuming your income stays about the same). Your children under age 19 may already be eligible for Medicaid or NC Health Choice if your family income is less than 200% FPL. If you are a low income uninsured adult and do not currently qualify for Medicaid, you will probably not qualify for Medicaid under health reform. However, you may qualify for a subsidy to purchase private coverage.

Income Eligibility for Different Programs (2013) Note: This example is based on the 2013 Federal Poverty Levels (FPL). These income limits will be increased by 2014. Family Size Children Medicaid or NC Health Choice (200% FPL) Adults 18-64 (138% FPL) (would be eligible for Medicaid if expanded) Older Adults (65+) or People with Disabilities* (100% FPL) 1 $22,980 $15,028 $11,490 2 $31,020 $20,300 $15,510 3 $39,060 $25,571 $19,530 4 $47,100 $30,843 $23,550 Each add’l person $8,040 $5,272 $4,020 *Most older adults also receive Medicare. Many of the people with disabilities also receive Medicare after 2 years.

Medicare The legislation protects existing Medicare benefits, but made some improvements in coverage: On January 1, 2011, Medicare began covering preventive services with no cost-sharing. In 2011, Medicare beneficiaries will get a 50% discount on any brand name drugs purchased in the “donut hole.” The legislation phases out the Part D “donut hole” by 2020. Medicare Advantage plans cannot charge more in cost sharing (copayments, deductibles, or coinsurance) for Medicare-covered services than is allowed under traditional Medicare. 16

Basics of National Health Reform--Overview Changes in public coverage Private coverage Insurance 101 Employer responsibilities Individual responsibilities 17 17

Insurance 101: Covered Services Most health plans will be required to cover services such as: Doctors visits, hospital visits, maternity care, emergency services, prescription drugs, and services for mental health or substance abuse disorders Oral and vision services for children. More comprehensive coverage for preventive services Health insurance coverage will help protect you against large medical bills if you get sick.

Different Types of Health Plans Insurers can offer different types of health plans: Health Maintenance Organization (HMO): HMOs typically have networks of providers. HMOs will pay if you see a provider in the network, but will usually not pay for services if you see an out-of-network provider. Preferred Provider Organization (PPO): PPOs also have networks of providers, and will pay more of the cost of the services if you see an “in-network” provider. For example, a PPO may pay 80% of the bill if you see an “in-network” provider, but only 60% of the bill if you go outside the network.

Different Types of Health Plans High deductible health plan: An insurer may offer a high deductible health plan. You would be responsible for paying for the amount of the deductible, then the insurance company would pay for most of the rest of the covered services. High deductible health plans may be combined with health savings account. Health savings account: A savings account you set up that is used for health care expenses. Health savings accounts have tax benefits. You can contribute to a health savings account before taxes, and then use this money to pay for the amount you pay in deductibles or other cost-sharing.

Health Insurance Costs Typically, you have to pay a monthly premium to purchase health insurance. In addition, different insurance plans have different out-of-pocket costs: Deductibles: The amount you must pay first, before insurance begins paying for covered services. Co-insurance: The proportion of the health care costs you may need to pay, after you meet your deductible (eg, 30%). Co-payments: A fixed amount of the bill you may need to pay (eg, $40) for certain services. Out-of-pocket maximum: The maximum amount you or your family will have to pay/year for covered services.

Four Different Levels of Plans Offered in Marketplace There will be four different levels of health plans offered in the new marketplace. Bronze: On average, the premiums will cover 60% of the costs of covered services. You would be responsible for the other 40% out-of-pocket (in deductibles, coinsurance, or copayments). Silver: Premiums cover 70% of the costs of covered services (you pay 30%).* Gold: Premiums cover 80% of the costs of covered services. Platinum: Premiums cover 90% of the costs of covered services. *Subsidies tied to the second lowest cost silver plan in the HBE. 22 22

Basics of National Health Reform--Overview Changes in public coverage Private coverage Insurance 101 Employer responsibilities Individual responsibilities 23 23

Employer Mandate Employers with 50 or more full-time employees required to offer insurance or pay penalty. Employers are required to offer coverage to their full-time employees and their dependents (eg, children under age 26). Employers with less than 50 full-time employees are not required to offer insurance coverage. 24

Basics of National Health Reform--Overview Changes in public coverage Private coverage Insurance 101 Employer responsibilities Individual responsibilities 25 25

Individual Mandate (2014) Beginning January 2014, the ACA requires most people to have health insurance coverage beginning or pay a penalty. You can meet this requirement by having: Public health insurance coverage (eg, Medicaid, NC Health Choice, Medicare) Employer-sponsored insurance, or Purchasing coverage in the private insurance market. Certain groups are exempt from the penalties, including those with religious exemptions, prisoners, people who are not lawfully present, or those who would have to spend more than 8% of their income for the lowest cost premium. 26

Individual Mandate (2014) Penalties start low and increase over time: In 2014, penalties are: $95/person or 1% taxable income, whichever is greater. This increases to $325/person or 2.0% (2015); or $695/person or 2.5% (2016). In no event, will you or your family have to pay more in penalties than you would pay to purchase coverage. Certain groups are exempt from the penalties, including those with religious exemptions, prisoners, people who are not lawfully present, or those who would have to spend more than 8% of their income for the lowest cost premium. 27

Individual Mandate Certain groups are exempt from the penalties, including: Those who would have to spend more than 8% of their income for the lowest cost premium. Individuals who would have been eligible for Medicaid (in states that choose not to expand Medicaid). People who do not have to pay taxes because their income is too low. Certain people with religious exemptions. Prisoners, while incarcerated. Certain groups are exempt from the penalties, including those with religious exemptions, prisoners, people who are not lawfully present, or those who would have to spend more than 8% of their income for the lowest cost premium. 28

Subsidies to Individuals Financial help will be available for many North Carolinians to help them buy insurance. The amount of financial help will vary, based on the amount of money the family makes. You will be eligible for financial help if: You do not qualify for public coverage (eg, Medicaid, NC Health Choice, or Medicare) You do not have access to affordable employer-based coverage. Your income is between 100-400% of the federal poverty level. Family Size 1: $11,490/yr. (100% FPL) - $45,960/yr. (400% FPL)* Family Size 2: $15,510 - $62,040 Family Size 3: $19,530 - $78,120 Family Size 4: $23,550 - $94,200 Employees are eligible for the premium credit if offered coverage by an employer that does not meet requirements for minimum essential benefits (60% actuarial value) or if the premium for employee-only coverage exceeds 9.5% of the employee’s annual income. (Sec. 1401(c)(2)(C) as amended by Sec. 1001 of Reconciliation; Sec. 1501 creating 5000A of Internal Revenue Code of 1986) 29 29

Income Eligibility for Different Programs (2013) Note: This example is based on the 2013 Federal Poverty Levels (FPL). These income limits will be increased by 2014. Family Size Eligible for Subsidies in Marketplace (100-400% FPL) 1 $11,490 -$45,960 2 $15,510 - $62,040 3 $19,530 - $78,120 4 $23,550 - $94,200 Each additional person $4,020 - $16,080

How Will People Shop for Coverage? The federal government will create a Health Insurance Marketplace for individuals and a separate one for small businesses. Marketplaces will: Provide standardized information (including quality, costs, and benefits) to help you choose a qualified health plans. Have information about available doctors and other providers covered under the plan. Determine your eligibility for financial help. Determine if you are exempt from the insurance coverage requirement.

Navigators The Marketplace will contract with “navigators” to help you understand your insurance options and help you enroll. Add specific county level information about navigators here You do not need to work with a navigator, but a navigator will be available if you want help. Agents and brokers can also help individuals and/or small employers enroll in coverage.

Plans Offered in Marketplace All the health plans will cover similar services. Bronze or silver plans will generally have lower monthly premiums than gold or platinum plans, but will have higher out-of-pocket costs. Young adults (under age 30), or those who would have to spend more than 8% of their income to purchase the lowest cost health plan can also purchase “catastrophic” plans. Catastrophic plans will have much higher deductibles, but lower monthly premiums. 33 33

Simplified Application and Enrollment Process Step 2: Verify income, citizenship, and immigration status through online data from federal and state agencies Step 4: Pick an insurance plan Step 1: Person can apply in person, by phone, or online Step 3: Eligibility determined for public or private insurance coverage and subsidies 34

Initial Enrollment Period Initial enrollment period will run from October 1, 2013 through March 31, 2014. If you fail to enroll during open enrollment period, you are not eligible until next open enrollment period. Certain exceptions: If you are eligible for Medicaid or NC Health Choice, you can apply at any time during the year. If you meet other “qualifying event” can apply for coverage in the Marketplace. Examples: birth of child, divorce, loss of job or change in hours that would make person eligible for subsidy (or change in subsidy level) 35

Other Questions Will health reform make it easier for me to get health insurance in the private market? Yes, especially if you have a health problem that has made it hard for you to buy health insurance. Beginning in January 2014, health insurers cannot charge more, exclude you from coverage, or rescind your policy if you have a pre-existing health problem. The available subsidies will make health insurance coverage more affordable to many North Carolinians who do not qualify for public coverage or for employer-sponsored insurance. Beginning in 2014, insurers may not deny coverage or charge people more because of their pre-existing health status. (Sec. 1201) Premiums can only vary based on age (3:1 difference for adults), geography, family composition, and tobacco use (1.5:1 difference) for individual and small group plans. Cannot impose annual or lifetime limits in health plans. (Sec. 1001, 10101) 36

Other Questions Will health reform change the coverage I get? Depending on your current plan, you might get some expansion in your health insurance coverage. For example, you might get coverage for preventive services with no cost sharing. The new law also protects you against really high out of pocket expenses. There is a limit on how much you will have to pay out of pocket in any given year. Also, the insurance plan cannot impose annual or lifetime limits on how much they will pay for covered services.

Other Questions What if I am already enrolled in a health plan that I like? Will I need to change health plans? No. As a general rule, you can continue to stay in your existing health plan. If you were enrolled in your plan on or before March 23, 2010, and stay in that plan, you are in a “grandfathered” health plan. What does it mean to be in a “grandfathered” health plan? Grandfathered health plans do not need to follow all the same rules as new health insurance offered after March 23, 2010. Thus, people enrolled in a grandfathered health plan may not get all the same covered services.

Other Questions Can I continue to see my same doctor? That depends on what health plan you choose. Some health plans have “networks” of providers. You should check to see if your doctor is in the health plan’s network of providers. Will I still be able to cover my children under my health plan: Yes, insurers must offer parents the choice of covering their children up to their 26th birthday through the parent’s health insurance coverage.

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Extra Slides More detailed slides, if needed

Sliding Scale Subsidies Individual or family income Maximum premiums (Percent of family income) Out-of-pocket cost sharing:* Out-of-pocket cost sharing limits (2014)** 100-133% FPL 2% of income 6% $2,250(ind)/$4,500 (more than one person) (1/3rd HSA limits) 133-150% FPL 3-4% $2,250 / $4,500 150-200% FPL 4-6.3% 13% 200-250% FPL 6.3-8.05% 27% $5,200 / $10,400 250-300% FPL 8.05-9.5% 30% $6,400/ $12,800 300-400% FPL 9.5% 400% + FPL No limit $6,400 / $12,800 *Out-of-pocket cost sharing includes deductibles, coinsurance, and copays, but does not include premiums, noncovered services, or services obtained out of network. Out-of-pocket costs limits in proposed rule Dec. 7, 2012. 42

Subsidies to Individuals and Families: Example How do premium subsidies work? Assume the Smith family has four people and a family income that equals $35,325/year (150% FPL in 2013). They want to purchase a family policy with a premium cost of $15,000/year. They would pay $1,413/year (or $118/month) for insurance coverage for their four family members. The federal government would contribute $13,587/year for their insurance, and would make the payments directly to the insurer. 43 43

Subsidies to Individuals and Families: Example How does the out-of-pocket cost sharing work? Instead of paying for 30% of the costs out of pocket, the Smiths would only pay 6% of the costs of medical care out of pocket (in deductibles, co-insurance, or co- payments). Once the Smiths pay $2,250 (per individual) or $4,500 (per family) in deductibles, co-insurance and co- payments, the insurance company would pay 100% of the costs of covered services for the rest of the insurance year. 44 44

Insurance 101: Premiums Insurance coverage helps you pay your health care bills. However, there are certain costs you will incur, including premiums and other out-of-pocket costs: Premiums: the monthly amount you will pay for health insurance coverage. Your monthly premium will vary based on the number of people you want to cover, whether you are buying insurance yourself or through a group (eg, employer), your age, where you live, and the type of plan you pick.

Insurance 101: Cost Sharing Deductibles: A deductible is the amount of health care charges that the member must pay out of their own pocket before the insurance plan begins to pay. A deductible is for a 12 month period. Example: If the plan has a $1,000 deductible, the member will be responsible for paying the first $1,000 in medical expenses out of pocket before insurance starts paying. Co-pays: A co-pay is a fixed amount that the patient must pay for a health care service covered under a health insurance plan. For example, a patient may have to pay $40 when they go to see their doctor.

Insurance 101: Cost Sharing Co-insurance: The part of the health care bill that you are responsible for paying. For example, in a 70/30 plan—the insurer would pay 70% of the covered charges (after you reach the deductible), and you would be responsible for paying 30% of the bill.

Insurance 101: Cost Sharing Out-of-pocket maximums: The maximum amount that the member has to pay per year in cost sharing for covered services. This amount is a combination of the deductible, the co-pays and the co-insurance. After the member reaches this out of pocket maximum amount, the insurance plan will pay all of the rest of the member’s health care costs during that plan year for covered services.