Health Reform 2014 Bill Graham VP, Policy & Government Affairs August 17, 2010

© 2010 Harvard Pilgrim Health Care2 Federal Health Reform -- The Basics  Federal Health Reform seeks to: –Insure the uninsured –Reform insurance markets –Control health care costs  According to Congressional Budget Office estimates, over the next 10 years, health reform will: –Extend coverage to 32 million Americans –Cost $938 billion –Result in a $143 billion reduction in the federal deficit

© 2010 Harvard Pilgrim Health Care3 Coverage Expansions and Exchanges  Coverage Expansions –Medicaid Up to 133% FPL –Subsidies 134% - 400% FPL Reduces both premium and out-of pocket costs Cannot have access to “affordable” employer-sponsored coverage. Coverage is not affordable if the employee’s share exceeds 9.8% of income  Exchanges –Open to individuals and small employers (and, potentially, large employers starting in 2017) –Five defined levels of coverage –Can also purchase coverage outside of the Exchange –Must enroll through Exchange to obtain individual subsidies and small group tax credits

© 2010 Harvard Pilgrim Health Care4 Market Reforms Starting in 2014  Guaranteed-issue.  No pre-existing condition exclusions.  Small group expanded to includes groups of  Limits on premium variations for individuals and small employers (3:1 for age).  New coverage sold to individuals and small employers must comply with minimum benefit standards.

© 2010 Harvard Pilgrim Health Care5 Individual & Employer Responsibility  Individual Mandate –Must obtain coverage or pay penalty –Penalty in 2014 is greater of $95 or 1% of income. When fully implemented in 2017, penalty is greater of $695 or 2.5% of income –Exempt if lowest cost option exceeds 8% of income

© 2010 Harvard Pilgrim Health Care6 Individual & Employer Responsibility (cont’d)  Employer Mandate –Employers with 50 or more FTEs who do not offer coverage to their full-time employees must pay a $2,000 penalty per full-time employee. –Employers with 50 or more FTEs who offer coverage must pay a $3,000 penalty for each full-time employee receiving a subsidy (up to a maximum of $750 per full-time employee). –Must provide “free choice” vouchers to employees with income less than 400% FPL and for whom the employee share of premium is between 8 and 9.8% of their income. Vouchers can be used to purchase coverage in the Exchange. –Employers with more than 200 employees must auto-enroll employees into any coverage offered by the employer.

© 2010 Harvard Pilgrim Health Care7 Financing Health Reform  “ Cadillac” tax starting in 2018 –40% excise tax on the value of employer sponsored coverage in excess of: $10,200 for individual coverage $27,500 for family coverage  Premium tax starting in 2014  Taxes on pharma companies starting in 2011  Taxes on medical device companies starting in 2013  Increase in Medicare tax on high income individuals  Medicare payment reductions (and no permanent “doc fix”)

© 2010 Harvard Pilgrim Health Care8 Cost Containment  “Cadillac” tax as an incentive to buy-down.  Medicare pilot programs to encourage delivery system reforms.  Independent Payment Advisory Commission to make recommendations to slow the growth in national health expenditures.

© 2010 Harvard Pilgrim Health Care9 Where Do We Go From Here  Federal regulations implementing the law  Action in the states –Sorting out federal/state law conflicts –Starting Exchanges  Federal reform 2.0 (and 3.0, 4.0….)