40640NYEENEBS 09/13 Affordable Care Act impact on insurance plans

22 What we’ll cover: ▪Definitions and employer mandate ▪Overview of 2014 changes ▪Case examples ▪Employer responsibilities ▪Tools and resources 2 Today’s topics

33 3 Definition : small and large groups Right now, states can define group sizes for quoting and rating. ▪Small group: ▪1 or 2 – 50 or ▪ 1 or 2 – 100 employees ▪Large group: ▪51+ or ▪101+ employees Going forward, the state definition of group size for quoting or rating will still apply. For the purposes of the employer mandate (in 2015), the definition of 50+ full-time equivalency is used for compliance. ▪Small group: ▪1-99 full-time equivalency ▪Large group: ▪100 or more full-time equivalency

44 Employers have one more year to comply with the ACA employer mandate without risk of penalty (delayed until 2015). ▪Mandate is limited to groups with 50 or more FT employees. ▪Employers must offer affordable coverage with a minimum value (MV) of 60%: Affordable coverage: Employee’s share of premium must be less than 9.5% of an employee’s income. Minimum essential coverage: Plan must pay for at least 60% of the cost of all covered services. HHS has developed an MV calculator to check if a plan provides minimum value. If an employer does not meet these standards in 2014, employees may become eligible for subsidies in the Health Insurance Marketplace (until employer complies with these standards). 4 Employer mandate penalty delayed

55 Affordability safe harbors Calculation of “affordability” based on employee’s household income ▪Employee Form W-2 safe harbor ▪Rate of pay safe harbor ▪Federal poverty level safe harbor 5 Employer mandate

66 More about the mandate ▪Stay tuned for more details from the IRS. ▪Send us any questions – we will follow up for you. ▪To learn more, go to: MakingHealthcareReformWork.com Timeforaffordability.org Healthcare.gov 6 Employer mandate

Overview of 2014 changes

8 Changes that affect premiums Guaranteed issue No one can be denied coverage Broader benefits and limits 10 types of Essential Health Benefits* required, out-of-pocket limits and deductible restrictions Change in rating Rates based on age and address (and tobacco use, in some states), not gender and health status At least 60% actuarial value Plans pay at least 60% of covered services New taxes and fees Apply to certain plans Subsidies/credits Help those with low or moderate incomes pay for coverage Reinsurance program Insurers / TPAs / self- funded plans contribute to fund high claims New Health Insurance Marketplace (Exchanges) Offers plans for individuals and small groups *Not required for large-group and ASO plans

Individuals Small groups Large groups Guaranteed issue Broader benefits 9 How each premium is affected ~ ~ ~ ~ depending on number of required benefits included in plan ~ ~ ~ ~ ~ ~ IncreaseDecreaseLittle change

Individuals Small groups Large groups Change in rating At least 60% actuarial value 10 How each premium is affected ~ ~ for customers with more cost share than allowed ~ ~ ~ ~ IncreaseDecreaseLittle change for healthy for less healthy young men and older women young women and older men young individuals older individuals for healthy for less healthy groups younger than average groups older than average little change for customers with less cost share ~ ~ for customers with more cost share than allowed little change for customers with less cost share ~ ~

Individuals Small groups Large groups New taxes and fees Subsidies/ credits 11 How each premium is affected for those who qualify ~ ~ ~ ~ IncreaseDecreaseLittle change

Individuals Small groups Large groups Reinsurance program New Health Insurance Marketplace (Exchanges) 12 How each premium is affected ~ ~ ~ ~ IncreaseDecreaseLittle change

▪Outpatient services ▪Emergency services ▪Hospitalization ▪Maternity and newborn care ▪Mental health and substance use disorder services (including behavioral health treatment) ▪Prescription drugs ▪Rehabilitative and habilitative services/devices ▪Laboratory services ▪Preventive and wellness and chronic-disease management ▪Pediatric services (including dental and vision) 13 Essential health benefits (EHBs) *Plans for individuals and small groups must cover: *Not required for large-group and ASO plans

▪When EHBs are covered, annual/lifetime dollar limits cannot apply Affects both grandfathered and nongrandfathered plans Applies for in-network and out-of-network services ▪Visit limits are allowed on EHBs and can replace dollar limits ▪Non-EHB annual/lifetime dollar limits are allowed ▪Rule: All covered EHBs must apply to the OOP limit. Applies to medical, pharmacy and pediatric vision and dental benefits that are part of the plan Does not apply to: -Pediatric vision and dental benefits that are not part of the plan -Stand-alone benefits, which are “excepted” under HIPAA 14 EHBs and annual/ lifetime dollar limits NOTE: Medical Policy rules still apply to EHBs

2014 OOP limits for all individual, small group and large group nongrandfathered plans: Individual: $6,350 Family: $12,700 ▪The OOP cap applies for medical and specialty EHBs ▪Cap is equal to the amount established for HSA- compatible plans HHS sees the complexity of having one OOP for all types of EHBs. So it issued a one-year safe harbor for plans with multiple EHB service providers. ▪During this time, the plan will be considered compliant as long as the medical OOP does not exceed the maximum. ▪If a separate pharmacy OOP was already in place, it also must not exceed$6,350/$12, Out-of-pocket (OOP) maximum

Premiums for small groups and individuals are not based on gender or health, but on: Family size Age – with maximum 3:1 rating bands Where people live Tobacco use no more than 50% more for users exceptions may apply in some states 16 Community rating

Center Forward ▪Increases likely in the individual and small group markets ▪Some groups up by 49%, others down by 39% American Action Forum ▪Increase in costs for young, healthy people in the individual and small group markets ▪Costs for older, less healthy would drop about 22% Milliman actuarial firm ▪75% to 95% rise in premiums in the individual market ▪Rates for others would drop Jonathan Gruber of MIT ▪Premiums in individual market may increase as much as 85% ▪Small group market may increase more than 20% 17 Studies on premium impact

Case examples

19 Health coverage options for groups with 50 or more full-time equivalency: Case example Large groups 2014 Options ▪A fully insured plan ▪An ASO plan ▪A defined contribution plan (e.g. private exchange) ▪No coverage – let employees buy through the individual market (on or off the Marketplace) 19

20 His reasons: ▪Benefits are important to attract and retain employees. ▪Most of his employees would not benefit from tax credits available in the Health Insurance Marketplace. ▪The business won’t incur employer penalties in Steve owns an auto body business with 120 employees. He will offer minimum value minimum essential coverage to all full-time workers in 2014 (even though it’s not required until 2015). Case example Large group Affordability tests How it works: ▪Add essential health benefits at plan anniversary in ▪Ensure the plan meets minimum value and affordability requirements. 20

21 Case example Large group Affordability tests Kevin, an employee at Steve’s Auto Body, makes $37,000 a year as reported on his W-2. He pays $3,500 a year for self-only medical coverage. Kevin does not qualify for a premium tax credit: ▪The cost of his employer-sponsored coverage is $3,500. ▪$3,500 is less than 9.5% of his $37,000 income (9.5% of $37,000 = $3,515). ▪Steve’s company is not liable for an employer penalty: The company offers minimum essential coverage (that is minimum value) to at least 95% of all full-time workers and dependents, and Kevin’s required contribution toward health insurance is not more than 9.5% of his W-2 wages ($3,515), and is considered affordable 21

22 Health coverage options for individuals: ▪People not already on a government plan: Employer-sponsored coverage Individual coverage through Health Insurance Marketplace (the Exchange) or a plan outside the Marketplace No coverage – pay the penalty Case examples Individuals 22

23 Melanie’s employer has decided to quit offering coverage. Melanie needs coverage for her family and herself, so she’s going to shop in the Marketplace. Her reasons: ▪She can compare plans side by side from different insurers. ▪She wants to explore the new Marketplace to find coverage that meets her needs. ▪She can work with her producer to find out if she qualifies for a subsidy or tax credit when she buys a plan in the Marketplace. 23 Case example Shop in the Marketplace

24 Mandy is 27 and recently aged off her parent’s plan. She has opted not to buy any coverage. Her reasons: ▪She thinks the cost is too high. ▪She can always go to the ER if she needs to. ▪Mandy may save money on premiums, but she’ll pay a penalty for not having insurance. The penalty goes up each year: 24 Case example No coverage Penalty is $95 or 1% of taxable earnings* 2014:2015:2016: Mandy should work with her producer to see if she qualifies for a subsidy or a tax credit before deciding to go without insurance. Penalty is $325 or 2% of taxable earnings* Penalty is $695 or 2.5% of taxable earnings* *whichever is larger

Employer responsibility

All employers – whether they offer health plans or not – are required to tell employees: 26 Notice of options for coverage Employers must provide the notice to employees by October 1, 2013 ▪Coverage is available through the new Health Insurance Marketplace. ▪Employees may be able to get a tax credit or subsidy through the Marketplace. ▪Employees may lose employer contribution if they buy a plan through the Marketplace, and this may have a tax impact to employees.

Tools to help you

Redesigned site for producers and employers: With a new suite of tools and resources such as: Interactive decision support ▪Educates on the basics of ACA impact ▪Provides recommendations ACA financial calculator ▪Online interview gathers plan and employee information ▪Provides a customized report showing the financial impact of ACA on employer plans 28 HCR website and tools

Services provided by Empire HealthChoice HMO, Inc. and/or Empire HealthChoice Assurance, Inc., licensees of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield plans. 29 Legal