Health Care Reform: 2014 Overview and Implications

3 In this presentation, we’ll cover:  Health Care Reform at a glance  Impacts to individuals  Impacts to employers  Exchange overview  Market impacts and implications

4 Health Care Reform at a glance  Focuses on coverage expansion and insurance market reform  Largely maintains the employer-based system  Changes purchasing model for individuals and small groups  Financial implications for individuals, employers, providers and insurers

: What has been implemented?  Mandated Benefit Changes  Women’s Preventive  Grandfathering  Small Group tax credit began in 2010  Summary of Benefit Coverage (SBCs)

6 Benefit and Coverage Changes for 2013 and 2014  2013  W-2 reporting requirements for groups filing >250 W2s  FSA contribution limited to $2,500 as of 1/1/13  Employers required to notify employees of Exchanges  2014  No exclusions for pre-existing conditions  Remove dollar annual and lifetime limits  No waiting periods greater than 90 days  Maintaining coverage for clinical trials

Impacts to Individuals

8 Individuals must buy coverage or pay penalty  Individuals must purchase qualified coverage or pay a penalty  Coverage options:  Medicare  Medicaid, Child Health Plus, Family Health Plus  Health care exchanges  Employer based coverage Penalty: greater of flat dollar amount or percentage of income  Starts at $95 maximum in 2014; scales up to $695 in 2016

9 Individuals can receive subsidized coverage  Income-based tax credits for purchasing coverage from a health care exchange  Cost sharing subsidies available on a sliding scale between 100% and 400% of federal poverty level (FPL) Medicaid expansion* 100% FPL 133% FPL 200% FPL 300% FPL 400% FPL 500+% FPL Subsidized private coverage through exchanges Unsubsidized private coverage 400% FPL = $92,200 for a family of 4 Tax Credit *Tax credit in % FPL range only available to non- Medicaid eligible legal aliens

Impacts to Employers

11 Small Group SHOP Opens in 2013  Small employer groups (<50 employees) able to purchase coverage from SHOP exchange 10/1/2013 for 1/1/14 effective date  If coverage obtained from SHOP exchange, eligible for a tax credit up to 50% of the premiums paid for their employees  Must meet specified requirements including <25 employees, average salary of <$50,000, at least 50% employer contribution to premium  Tax credit sunsets in 2016  Penalties do not apply to groups with <50 employees

12 Small Group Benefit Changes for 2014  Small groups must meet Essential Health Benefits on and off exchange  NYS announced that the Oxford Small Group EPO will be used as the model  Small group packages will need to be modified to meet the new standards

13 Large Group Requirements in 2014  All full time employees must have affordable coverage  Full time = 30 hours a week or more  Equivalency formula will be available to determine how many part-time and seasonal workers equal full time  Essential Health Benefits do not apply to large/self- funded groups

14 Large Group Affordability and Coverage Requirements  Must offer coverage that meets affordability and coverage requirements or pay penalty  Coverage requirement is at least one plan offered to all employees at minimum 60% actuarial value  Employee premium contribution at <9.5% of employee income

15 Large employers begin paying penalties  Penalty paid if at least 1 employee purchases subsidized coverage on the exchange in lieu of employer coverage  Extensive reporting requirements to the IRS Penalty if coverage not offered Penalty if coverage requirements not met  $2,000 per full time employee, first 30 employees are exempt  $3,000 for each full time employee purchasing subsidized exchange coverage OR  Capped at $2000 per full time employee (first 30 exempt)

16 Health Care Exchanges

17 Health care exchanges are effective January 1, 2014  Online health care marketplaces – think Expedia  Individuals and small groups can purchase coverage  Individuals can purchase subsidized coverage if they meet criteria  State administered  Health plans that meet qualifying requirements may offer products on the exchange  RFI process beginning in January 2013

18 Exchanges have four primary roles  Establish web portal for purchasing and enrollment  Manage subsidies and eligibility  Approve health plans for participation  Assist in outreach and education

19 Exchange products must meet specific requirements  All plans must cover essential health benefits  Core service categories established by federal Department of Health and Human Services  Plans may offer up to four coverage tiers  Platinum, gold, silver and bronze  NYS requiring all metal levels for exchange participation  Optional catastrophic policy for certain individuals Young adults (under 30) Anyone for whom employer-based coverage does not meet affordability requirements

20 How Exchanges Work American Health Benefit Exchange American Health Benefit Exchange Small Business Health Options Program (SHOP) Exchange Small Business Health Options Program (SHOP) Exchange Platinum Gold Silver Bronze Catas- trophic Catas- trophic Platinum Gold Silver Bronze Carrier A Carrier B Carrier C Carrier D Product Levels Carriers Purchaser Carrier A Carrier B Carrier E Carrier F Member Selects Employer Selects Member Selects Tax Credit/ Subsidy Members below 400% FPL Employers below 25 EEs Individuals Small groups

21 The following considerations apply to the three-month grace period: – Individuals must have paid at least one month’s premium – The issuer is only obligated to pay claims during the first month of the grace period The rule says that during the grace period, the issuer: – May pend claims during the second and third months of the grace period – Must notify IRS/HHS of non-payment of premium – Must notify providers of the possibility for denied claims during the second and third months  Must notify members when their payment is late  Must notify members if their coverage is terminated If an individual enrolled in an Exchange product receives a premium tax credit, the issuer must allow a three-month premium grace period. Exchange Individual Grace Period: Background

22 Individual Grace Period Requirements and Design: How The Grace Period Works Once a member makes a full month’s premium payment, the Grace Period will begin if the member misses a monthly premium payment. Three months of “Grace” must be given prior to termination. For example, the member paid premiums on January 1 st and the Plan never receives payment February 1 st. The grace period begins February 1 st and goes for 3 months. If the member does not pay premium February 1 st, March 1 st, or April 1 st then on May 1 st you can terminate since the 3 month grace period has expired. In the above example, the Plan would pay claims for January since the member is covered as they paid their premium. The Plan would then be required to pay all claims with a date of service in February because that is the first month of the 3 month grace period. The Plan would pend claims with dates of service in March and April. If the member is terminated on May 1 st due to no payment received, the Plan would finalize the pended claims from March and April to deny as not a covered member. Premium month is not included in the Grace Period because the member is covered for the month they paid. For example, the member paid their premium on January 1 st and would be covered the entire month of January. If the member does not pay their premium on February 1 st then the Grace Period starts. The Grace Period is a “rolling” Grace Period based on the member’s last paid date.

23 Exchange Regulatory Status

24 Legislative Updates – Health Care Reform  Supreme Court decision that individual mandate is constitutional under “tax” law  Multiple attempts at repeal with no success  New York state updates  Executive order passed in April establishing NYS Exchange  Multiple studies underway to determine exchange structure and operations  Current Medicaid vendor (CSC) announced as Exchange vendor  Regional advisory committees and CEO meetings underway

25 Market Impacts and Implications

26 Estimated Market Shifts (National) Individual Medicaid Medicare Self-funded Large group Small group Uninsured  Individual market growth  Medicaid growth based on increase in eligibility  Medicare growth due to population increase  Relatively stable large group market  Small groups most likely to drop coverage  Uninsured movement into exchanges

27 Shift to retail market will occur  Employers  Possible reduced incentive to offer – but, must weigh costs and benefits  Perceived justifiable alternative for employees  Individuals  Influx of previously/newly uninsured buying direct  Affordability increased through subsidies  Directly making cost and coverage decisions

28 Resulting changes in the market landscape  Diminished barriers to entry  Emerging individual market  Population with unique and diverse segments  Widely available products with price as focal point  Shift from traditional sales channels to retail  Adverse selection threat/difficulty managing risk

29 Stakeholder Implications

30 Implications for Individuals  Coverage vs. penalty decisions  Will need to assume greater control over their health care spending and decisions  Will need to navigate exchanges vs. private insurance  Will need to understand subsidy impacts and processes

31 Implications for Employers  Large employers must make “play or pay” decisions  Small employers must decide if and where to purchase coverage  Must understand qualified coverage requirements and whether they meet them  Must collect and report data and information that they may not currently have

32 Implications For Physicians and Hospitals  New health plans and/or increased price sensitivity may bring new risk to reimbursement  Credit and collection challenges with high cost share  Capacity to meet increased demand  Care delivery models are evolving (e.g., Accountable Care Organizations)  Reimbursement arrangements moving to pay for quality vs. pay for service  Possible reimbursement cuts looming from Medicaid and Medicare  Need to also make decisions as employer group offering coverage to employees

33 Implications for Insurers  Emerging consumer segments  Changes in group purchasing dynamics  Reduced predictability in competitive landscape  Limited product and benefit differentiation  Challenges in managing risk  Direct-to-consumer focus

34 Thank You