Healthcare Reform What To Expect in 2014 Presented by: Scott Bolitho Sponsored by: Glenwood Insurance Glenwood Springs Chamber Association

Agenda Goal – We want to make you aware of the requirements and implications of the Affordable Care Act Overview and a look back What’s ahead in 2014 – Benefits – Pricing – How does it apply Employer obligations Individual Mandate Exchanges Q & A

Myths As an employer, I have to provide coverage to my employees Premiums paid by the employer are shown on the W-2 and are taxable to the employee The penalties for individuals who do not purchase insurance are very high Truths Businesses under 50 Full Time Equivalents (FTE’s) do not Only those employers who issue 250 or more W-2’s must disclose this. It is not taxable Minimal penalties, not enforceable

Cost of Healthcare $2.5 Trillion spent on healthcare in 2011 One sixth of the US Gross Domestic Product $8,000 per person in the US

Health care reform timeline *Dependent coverage to age 26 *No lifetime max *Pre-ex eliminated for children *Guaranteed issue plans for children to age 19 *Preventive Care fully covered *Small business tax Credit *Emergency services paid as in-network

Health care reform timeline *Dependent coverage to age 26 *No lifetime max *Pre-ex eliminated for children *Guaranteed issue plans for children to age 19 *Preventive Care fully covered *Small business tax Credit *Emergency services paid as in-network 2012 *60-day advance notice of material Modifications *Accountable Care Org requirements *Appeals provision fully implemented *First MLR rebates to be paid by Aug. *New women’s preventive services *Patient-center Outcomes Research Institute Fee ($1) *Quality bonus begins for Medicare Advantage *Summary of Benefits & Coverage and Uniform glossary

Health care reform timeline *Dependent coverage to age 26 *No lifetime max *Pre-ex eliminated for children *Guaranteed issue plans for children to age 19 *Preventive Care fully covered *Small business tax Credit *Emergency services paid as in-network 2012 *60-day advance notice of material Modifications *Accountable Care Org requirements *Appeals provision fully implemented *First MLR rebates to be paid by Aug. *New women’s preventive services *Patient-center Outcomes Research Institute Fee ($1) *Quality bonus begins for Medicare Advantage *Summary of Benefits & Coverage and Uniform glossary 2013 *Administrative simplification begins *Annual fee on medical device sales *Deduction for expenses allocable to the Part D subsidy for “qualified drug plans” is eliminated *Employee notification of access to Exchanges *FSA contributions limited to $2,500 *High earner tax begins *PCORI fee to increase to $2 per member/year *W-2 reporting on the value of employer- sponsored health benefits

Health care reform timeline *Dependent coverage to age 26 *No lifetime max *Pre-ex eliminated for children *Guaranteed issue plans for children to age 19 *Preventive Care fully covered *Small business tax Credit *Emergency services paid as in-network 2012 *60-day advance notice of material Modifications *Accountable Care Org requirements *Appeals provision fully implemented *First MLR rebates to be paid by Aug. *New women’s preventive services *Patient-center Outcomes Research Institute Fee ($1) *Quality bonus begins for Medicare Advantage *Summary of Benefits & Coverage and Uniform glossary 2013 *Administrative simplification begins *Annual fee on medical device sales *Deduction for expenses allocable to the Part D subsidy for “qualified drug plans” is eliminated *Employee notification of access to Exchanges *FSA contributions limited to $2,500 *High earner tax begins *PCORI fee to increase to $2 per member/year *W-2 reporting on the value of employer- sponsored health benefits 2014 *Health Benefit Exchanges *Guaranteed issue and renewability *No pre-existing condition exclusions *No annual dollar limits *Waiting period limits *Deductible caps cannot exceed $2k for individual and $4k for family for small group Fully Insured plans *Essential health benefits required for small employers *OOP limits must comply with OOP limits for HSA qualified plans ($6,250/$12,500)

Health care reform timeline *Dependent coverage to age 26 *No lifetime max *Pre-ex eliminated for children *Guaranteed issue plans for children to age 19 *Preventive Care fully covered *Small business tax Credit *Emergency services paid as in-network 2012 *60-day advance notice of material Modifications *Accountable Care Org requirements *Appeals provision fully implemented *First MLR rebates to be paid by Aug. *New women’s preventive services *Patient-center Outcomes Research Institute Fee ($1) *Quality bonus begins for Medicare Advantage *Summary of Benefits & Coverage and Uniform glossary 2013 *Administrative simplification begins *Annual fee on medical device sales *Deduction for expenses allocable to the Part D subsidy for “qualified drug plans” is eliminated *Employee notification of access to Exchanges *FSA contributions limited to $2,500 *High earner tax begins *PCORI fee to increase to $2 per member/year *W-2 reporting on the value of employer- sponsored health benefits 2014 *Health Benefit Exchanges *Guaranteed issue and renewability *No pre-existing condition exclusions *No annual dollar limits *Waiting period limits *Deductible caps cannot exceed $2k for individual and $4k for family for small group Fully Insured plans *Essential health benefits required for small employers *OOP limits must comply with OOP limits for HSA qualified plans ($6,250/$12,500) *Individual & employer mandates *Coverage for all adult children until age 26 even those with employer coverage *Insurer fee – permanent *Mandatory coverage for clinical trials *Quality of Care reporting Requirements *Rating restrictions/Adjusted community rates *Tax credits & subsidies for individual and small employers *Transitional reinsurance fee ( ) *ICD-10 code adoption *Wellness Programs

What happens in 2014? *Expanded Benefits *Rating Changes *Taxes and Fees *Reporting Requirements As a result we will see:

What happens in 2014? *Expanded Benefits *Rating Changes *Taxes and Fees *Reporting Requirements *Fees/taxes and benefit requirements and rating will affect the cost of health care for employers during the next several years As a result we will see:

What happens in 2014? *Expanded Benefits *Rating Changes *Taxes and Fees *Reporting Requirements *Fees/taxes and benefit requirements and rating will affect the cost of health care for employers during the next several years As a result we will see: *2013 will be the transitional year – portfolio changes, renewal packages and quoting are undergoing system development work now to be ready for January 2014

What happens in 2014? *Expanded Benefits *Rating Changes *Taxes and Fees *Reporting Requirements *Fees/taxes and benefit requirements and rating will affect the cost of health care for employers during the next several years As a result we will see: *2013 will be the transitional year – portfolio changes, renewal packages and quoting are undergoing system development work now to be ready for January 2014 *Many of the 2014 provisions take effect on a group’s first renewal or new business effective date on or after 1/1/14

Benefit Changes

Expanded Benefits Reform provisions impacting product and plan design Individual and small group plans must provide Essential Health Benefits Package Four components of package: 1. Essential Health Benefits * 10 Required coverage categories 2.Out of Pocket Maximum 3.Small Group deductible ceiling * $2,000 single/$4,000 family 4. Limited to “Metallic” coverage levels * Bronze, Silver, Gold, Platinum

Expanded Benefits Components impacting plan designs 1.Essential Health Benefits 10 Required Coverage Categories – Most already provided in prevailing plans – Pediatric dental and vision not typically covered in small group market – Practical impact – State mandates will be required by EHB – Pricing impact varies by market – All plans, including self-funded, that contain any EHB are required to remove annual and lifetime dollar limits for those services EHB Categories 1.Ambulatory patient services 2.Emergency services 3.Hospitalization 4.Laboratory services 5.Maternity & newborn care 6.Mental health and substance abuse services, including behavioral health treatment 7.Prescription drugs 8.Rehabilitative and habilitative services & device 9.Preventive and wellness services and chronic disease management 10.Pediatric services, including oral and vision care

Expanded Benefits Components impacting plan designs 1.Essential Health Benefits (cont.) Prescription drug requirements: plans must cover the greater of one drug in every therapeutic class, or the same number of drugs as set forth in the EHB plan. Special rules for pediatric dental: On Exchanges – Qualified Health Plan (QHP) may exclude coverage of the pediatric dental if stand-alone plans are available. Groups/individuals are NOT required to buy the stand-alone coverage. Off Exchange – health plans may exclude pediatric dental IF they are “reasonably assured” that “individuals” have purchased Exchange-qualified stand-alone dental plan. Groups/individuals MUST buy stand-alone coverage (even if there are no covered children) Cost-sharing limitations do NOT have to cross-accumulate between a medical plan and stand-alone dental plan. Cost-sharing has to be “reasonable” in the stand-alone plan. Maternity Coverage: Coverage must include coverage for dependent children.

Expanded Benefits Components impacting plan designs 2.Out of Pocket Maximum New Accumulation rules and ceiling OOPM Ceiling at HSA level: likely $6,400/$12,800 in 2014 All cost-sharing (for essential health benefits) must accumulate to OOPM Applies to small and large fully insured plans and self-funded plans Transition rules give flexibility for “separate service providers” for one year Does not apply to out of network benefits

Expanded Benefits Components impacting plan designs 3.Small Group Deductible Ceiling $2,000 single / $4,000 family Indexed to inflation Exception for leaner plans if the insurer cannot “reasonably” design one to hit approved actuarial values with a $2,000 deductible Applies to small group fully insured only; NOT to individual, large group, or self- funded Does not apply to out of network benefits

Expanded Benefits Components impacting plan designs 4.Limited to Metallic Coverage Levels Bronze, Silver, Gold, Platinum Apply on and off Exchange Defined by actuarial value (plus/minus 2%): Bronze/60%, Silver/70%, Gold/80%, Platinum/90% Federal requirement to offer one Silver, one Gold plan on Exchanges

New Benefit and Coverage Rules

Employer obligations Employer Mandate Applies to employers with 50+ FTEs Must provide Minimum Essential Coverage  Medical plan offered in small group or large group health insurance market  Can not be a cafeteria, flex, disability, accident, critical illness, or indemnity plan Uses IRS aggregation rules to determine if subsidiaries are jointly owned companies treated as one Applies to both fully and self insured groups Applies to grandfathered groups Must offer coverage to dependents up to 26, but not spouses Effective on first new plan year or on or after January 1, 2014 If employer does not offer coverage at all, the penalty is $2,000 per full-time employee, less the 30 employee buffer

Employer obligations Coverage Requirements Must be affordable  Single employee contribution for lowest cost plan must not exceed 9.5% of employee’s W2 income Box 1 Must provide minimum actuarial value  Plan pays more than 60% of medical cost across a typical population Applies to the same population as the Employer Mandate If coverage fails these tests, the penalty is $3,000 per employee receiving a subsidy in the exchange

When does pay or play apply? All of the following must be true – The employer is an applicable Large Employer – At least one full-time employee received a subsidy from the Exchange; and – – The employer either: Did not offer coverage; or Offered coverage that: – Was not “affordable”; or – Did not provide “minimum value” of 60%

Applicable Large Employer Who is an Applicable Large Employer? – To be an Applicable Large Employer, employer must employ an average of at least fifty (50) full- time employees on business days during the preceding calendar year – The calculation includes both full time employees and full time equivalents (FTEs)

A.L.E. – The Basics A Full-Time Employee is: – A person employed, on average, at least 30 hours of service per week. (Determined on a monthly basis.) A Full-Time Equivalent (FTE) is: – A calculation based on the number of hours worked by all non full-time employees.

Did NOT Offer Coverage Pay a penalty of $ multiplied by the number of FULL-TIME employees The first 30 employees are exempt from the calculation This is a non-deductible fee

DOES Offer Coverage Applies when coverage offered is deemed “Not Affordable” – Employee pays no more than 9.5% of W-2 income for employee only coverage Penalty is $250 per month for each Full-Time employee who receives a subsidy Penalty will not exceed the amount that would have been paid if the employer did not offer any coverage

Discrimination Rules Employers of all sizes cannot offer plans that discriminate in favor of “Highly Compensated” individuals Management Carve-Outs are no longer allowed Discrimination testing will apply Potential penalty: $100 per day, per affected individual

The Five Key Employer Questions

Individual Mandate Qualify for an exemption based on income, religion or status (Native American, undocumented immigrant, or incarceration) Obtain coverage through government program/Exchange, employer or individual insurance market Pay a penalty or Individual Exchange subsides are available if no other available coverage is affordable or meets minimum value requirement Penalties phase in beginning in 2014 as part of tax return: 2014: Greater of $95 (adult)/$47.50 (child) or 1% of family income 2015: Greater of $325/$ or 2% of family income 2016: Greater of $695/$ or 2.5% of family income IRS cannot use normal enforcement mechanisms to force people to pay

Individual Subsidy Household Size % of Poverty Level Annual Household Income Annual Premium Monthly Premium 1150%$16,700 Annually or $8/hour $668 or 4% of Annual Income $ %$37,825 Annually or $18/hour $3,045 or 8.05% of Annual Income $ %$57,625 Annually or $27.75/hour $4,638 or 8.05% of Annual Income $ %$92,200 Annually or $44.30/hour $8,759 or 9.5% of Annual Income $730

Pricing changes and Adjusted Community Rating (ACR)

Adjusted Community Rating Small Group Definition will be changing Small Group definition is < 50 until 2016, unless the state defines differently Counting methodology is average total number of employees (ATNE). However, there is some uncertainty regarding counting methodology over the next couple of years for several of the ACA provisions, including adjusted community rating, small group deductible ceiling, metallic level requirement, Essential Health Benefits, and eligibility for SHOP Exchanges. Price Restrictions – Fair Health Insurance Premiums Plan years (or policy years for individual market) on or after January 1, 2014 Applies to Individual and fully insured small group health insurance Group Rate Factors are limited to: Geographic Area Age (3:1 Limit) Tobacco Use (1.5:1 limit) Rates may not vary by: Gender, Health Status, Claims History, Medical Underwriting, Group Size, Industry

Pricing today and beginning 2014 Additional Rating Factors Being Eliminated or Changed Size Factors (eliminated) Gender Differentiation (eliminated) Typically 10-1 Age Slope (changed/reduced)

Rate Changes – Small Groups <50 Colorado currently rates at the subscriber level. In 2014 all policies will be rated at the member level. Family members age 21 and older are age and tobacco rated separately The next oldest three children (0-20) are rated individually under the child age band Any additional children are not rated

Rating Methodology Current Employee age 50 Employee Only Employee + Spouse Employee + Child(ren) Family

Rating Methodology New Method Employee age 50 – Rated by age + Spouse age 47 – Rated by age + Child (adult) age 23 – Rated by age + Child age 19 – Rated as a child + Child age 16 – Rated as a child + Child age 13 – Rated as a child + Child age 9 – No charge

Rating Methodology New Method Employee age 50 – Rated by age + Spouse age 47 – Rated by age + Child (adult) age 23 – Rated by age + Child age 19 – Rated as a child + Child age 16 – Rated as a child + Child age 13 – Rated as a child + Child age 9 – No charge + Dog age 7 – Not covered

Rating Methodology New Method Applies to small group only As a member’s age changes in the plan year, the rates will be adjusted at that time. No age bands, each age has its own rate Each child 21 and over is rated Only first 3 children under 21 are rated, 4 th child has no charge

2014 reform premium impact Consumers (both group and individual buyers) will face substantial price increases, further pressuring the system New pricing rules and new product design mandates will have a significant impact on the price consumers pay for insurance in 2014 and beyond

Things you need to know Small Groups 2014 – SG Definition may be different by state (50 vs. 100) No pre-ex Guaranteed issue applies 2014 – No medical underwriting and moving to adjusted community rating (ACR) 2014 – SHOP Exchange available Essential Health Benefits (EHB) applies to non-grandfathered groups Women’s Preventive, FSA limits and OOP max changes apply New taxes and fees apply Large Groups 2014 – guaranteed issue applies No pre-ex Women’s preventive, FSA limits and OOP max changes apply Deductible limits and EHB do not apply New taxes and fees apply

Taxes and fees overview

State Activity on Exchanges

Using the Exchange Will your agent be able to guide you through the Exchange beginning October 1 st, 2013? Are you eligible for a subsidy? Which insurance plan fits you best? Do you have to buy through an Exchange? Glenwood Insurance is prepared to help you navigate the Exchange!

What’s Next?

What you should know 2014 Expanded Benefits Adjusted Community Rating Pricing Impacts and Market Changes Taxes and Fees Employer Mandate What you should do Inform your employees of availability of Exchanges in late summer or fall as required by ACA Review employer mandate, premium changes and develop strategy for your business Prepare for potentially more individuals needing coverage, more fees and potentially premium increases due to expanded coverage and fees and fewer eligibility restrictions

Talk to us, we have solutions to help you be compliant in the new world! Thank you! If you have further questions please us at