1. Future Healthcare Marketplace Post-ACA
Alaska State Hospital & Nursing Home Association Annual Meeting
Jim Grazko
Premera Blue Cross
September 11, 2014

2. Exchange Implementation
Majority of states are implementing Federally-Facilitated Marketplaces *

3. State Medicaid Expansion
28 states are moving forward to expand Medicaid with a couple of states still debating

4. Metallic Products (inside/outside Exchange) Non-Metallic Products
Premera Membership
Individual membership as of August 24, 2014; 99% of our membership have paid premium
Metallic Products (inside/outside Exchange)
Non-Metallic Products
Total
7,096
6,003
13,099
Bronze
Silver
Gold
2,375
3,703
1,018
Bronze plans are the most popular in our other markets
Source: Premera Blue Cross

5. Small Risk Pool States – Individual
Alaska and a few other states have Individual market risk pools that are arguably too small to absorb all risk under Guarantee Issue
High Risk Pools like ACHIA are dissolving, sending high cost risk into carriers’ Individual pools with Guarantee Issue in place
Pools are too small to absorb the cost associated with risk at the highest cost end of the claims distribution
ACA risk mitigation program (“3 Rs”) are not sufficient at the highest cost end of the claims distribution – and 2 programs sunset after
Risk mitigation strategy is needed and Premera is working with policymakers to help accomplish that
Group coverage largely unaffected although some self-funded employers could be sending high cost individuals to the Exchange – NOT the government’s intent!

6. National Market Estimated Market Size (Population in millions)
Nationally, employer-sponsored insurance is, and is expected to remain, the most common source of health insurance coverage
Estimated Market Size (Population in millions) 49
(16%)
27 (8%)
149 (49%)
59 (18%)
51 (17%)
157 (47%)
60 (18%)
40 (13%)
15 (5%)
31 (9%)
Total: 304 M
Total: 334 M
Source: Kaiser Family Foundation (2011 actual) and The Boston Consulting Group (2019 estimate)

7. Impacts of Reform on Premiums
Reform will increase access to coverage, but changes to benefit plans and new taxes and fees have already driven costs higher
Near Term Provisions (2010)
2014 Provisions
● No dollar lifetime maximums
● Restrictions on annual limits
● Preventive care with no cost sharing
● No pre-existing condition exclusions for enrollees under age 19
● Dependent age extension to age 26
● Mandated “Essential Health Benefits” package
● Guaranteed issue with weak individual mandate
● Adjusted community rating
● Health insurer tax

8. Rate Impact (% of Premium)
New Taxes and Fees
Additional costs to individuals and employers have resulted from new taxes and fees
ACA Taxes and Fees
Rate Impact (% of Premium)
Pharmaceutical Manufacturer Tax
Pass through via higher claims cost
Medical Device Manufacturer tax on durable medical equipment
Comparative Effectiveness Research Fee
$2 Per Employee per year
Health Insurer Tax
2% rising to 3% of premium; does not expire
Exchange Assessment
3.5% of premium; does not expire
Reinsurance Program Fee
$3.67 PMPM for 2015, expires in 2016
Cadillac Plan Tax (2018)
40% excise tax on employer sponsored plans that exceed $10,200 a year and $27,500 for families; does not expire – BIG DEAL for Alaska
Source: Premera Underwriting

9. Implementation Effort and Employer Market Impacts

10. Individual and Small Employers
Biggest impact is due to new federal rating rules
Federally mandated “metallic” benefits – Bronze, Silver, Gold, Platinum and Catastrophic
Rate build up from member level – huge change!
Compressed age slope at 3:1 ratio – must use mandated federal age factors (no gender)
Wellness program with deep discounts for participation
Tobacco usage load – if used in small group market, carrier must offer a wellness program to provide opportunity to offset the load
State defined rating region (no more than 7 regions unless State filed and approved by HHS) – Premera used 3 regions:
Area 1 (Anchorage)
Area 2 (Rural Alaska)
Area 3 (Southeast Alaska)

11. Alaska Rating Regions

12. Large Employers (51+ Employees)
Mandates
$6,450 out-of-pocket maximum with new definition
Prohibition on lifetime and annual dollar maximums
Preventive care paid at 100%
Employer mandate to provide minimum and affordable coverage (2015)
Contraceptive coverage for all, including religious organizations
Small group definition change to employees (2016)
Administrative Requirements
Prohibition on pre-existing condition exclusions and waiting periods
Maximum employee probationary waiting period
Dependents covered to age 26
Provide notice to all employees about the exchanges
Auto-enrollment
Medical copays accrue to out of pocket max
ACA guidelines requires “under 90 days max waiting period. PBC/LW chose 60 days
 Dependents to age 26 are eligible even if the dependent has other coverage available including foster children
Unaffordability = premiums exceeds 9.5% of employee’s household income
Employer may use W-2 wages (Box 1) instead of household income
Rate of pay and federal poverty line provide safe harbors
Minimum value
Coverage provides minimum value if the plan’s share of the total allowed cost of benefits is at least 60%
IRS proposed approaches to determine minimum value
Minimum value calculator
Design-based safe harbor checklists
Actuarial certification
Provide Notice to all new hires and current employees about the Exchanges and consequences of purchasing coverage instead of accepting employer-provided coverage
The disclosure requirement was to be effective March 1, 2013, and distribution is likely to coincide with Exchange open enrollment
Prohibition on excessive waiting periods that exceed 90 days
Waiting period is the period before individual is eligible to be covered
Does not apply to excepted benefits
Auto-enrollment
Certain large employers must automatically enroll new full-time employees in one of employer’s group health plans
Applies to employers who 1) are subject to FLSA, 2) have more than 200 full-time employees, and 3) have one or more health benefits plans

13. Implementation Activities
Interpretation of rules and internal analysis
Product compliance
Network re-contracting
System configuration
Contract and rate filings
Operational process and procedure changes
Communication and education

14. Implementation Challenges for Health Plans
Extremely late finalization of federal/state requirements; FFM obligations becoming health plan issuer obligations
Inability to complete desired level of automation for deliverables leading to many manual work-arounds
Implementation of new product design very complex and resource-intensive
Beginning-of-year filing requirements by regulators for rates and contracts causing work load congestion

15. What’s Ahead?

16. “Like every major piece of legislation– from Social Security to Medicare– the law is not perfect. We’ve had to make adjustments along the way, and the implementation… has had its share of problems… But this law is doing what it’s supposed to do. It’s working.”
President Obama
April 1, 2014

17. Employer Reporting and Penalty (2014)
W-2 Reporting
Issuer Reporting
Federal Basic Health Plan Option
FF-SHOP Employee Choice and Billing Aggregation
Auto-enrollment provision for employers > 200 employees
Contraception for Religious Organizations
Essential Health Benefits Package
Out-of-pocket Max for Pharmacy
51-99 Employer Penalty (2015)
Repeals, Modifications, and Delays of Key ACA Provisions… that have Already Occurred
CO-OP (partial)
Federal Preexisting Condition Insurance Pool
Public Health and Prevention Fund (partial)
Independent Payment Advisory Board (partial)
1099 Reporting Requirement
CLASS Act
Free Choice Vouchers
State Partnership Exchanges
Medicaid expansion
Transition relief: early renewals and grandmothered policies
Repeal Modify Defund Delay

18. What’s Ahead? 2016 2014 2013 2012 2010 Presidential Election
Major ACA and Exchange Go-live
Mid-term elections
Exchange implementation
Supreme Court ruling
Presidential election
Initial ACA implementation
Mid-term elections

19. What’s Ahead?
Continued implementation of federal regulations and provisions, including provisions that were delayed
States’ implementation experiences, including fiscal pressures
Impacts to delivery system
Long term financial sustainability

20. Thank you!
Jim Grazko
Senior Vice President of Underwriting and President of Blue Cross Blue Shield of Alaska