1. The Politics and Impact of PPACA on Brokers and Employers Janet Trautwein, CEO National Association of Health Underwriters

2. The New Political Dynamics Changes to Congress – Factors to Consider: Very conservative Republican base in the House Desire to repeal rather than fix Election Results—Changes to States – New Governors – Impact of Tea Party – Desire to wait on Supreme Court – Decision to do nothing

3. The Unintended Consequences Dependents to Age 26 and lifetime and annual limits – Popular but at a cost – waivers required on limits Medical Loss Ratios – Devastating to Brokers Grandfathered plan issues – Very few employers can meet grandfathering requirements Pre-existing conditions limitations for children – Child only coverage unavailable in many states Restrictions on OTC medications – Encourages use of more expensive medications and physician visits

4. Limited Benefits Plan Waivers These plans typically offered to part-time employees or others that may not have access to or be able to afford other coverage. Initial waivers were granted in September 2010 if it could be demonstrated that it would cause a significant number of people to lose access to any coverage prior to 2014. The initial waivers were granted for one year.

5. Current Status On June 17, 2011, CMS issued a notice that plans that had received waivers already could extend their waiver through 2013. The waiver extension request must be submitted by September 22, 2011. Any plan offered prior to September 23, 2010 that intends to file an initial waiver must file by September 22, 2011. The guidance also includes new disclosure requirements regarding communication to plan participants.

6. Status of MLR HR 1206 now has 107 bipartisan cosponsors Senate legislation to be introduced soon NAIC broker task force has endorsed HR 1206 Further NAIC action expected by September NCOIL (National Conference of State Legislators) has also endorsed HR 1206

7. Key Health Care Reform Bills 112 th Congress Overall Repeal – H.R. 2 – Cantor (R-VA) – Repealing the Job Killing Health Care Law Act – S. 192 – DeMint (R-SC) – Repealing the Job Killing Health Care Law Act Health Insurance Tax – H.R. 1370 – Boustany (R-LA) – Health insurance tax repeal

8. Key Health Care Reform Bills 112 th Congress Employer Mandate Repeal – H.R. 1744 – Boustany (R-LA) – American Job Protection Act – S. 20 – Hatch (R-UT) – American Job Protection Act Individual Mandate Repeal – S. 19 – Hatch (R-UT) – American Liberty Restoration Act

9. Key Health Care Reform Bills 112 th Congress Medical Malpractice Reform – H.R. 5 – Gingrey (R-GA) – Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act – S. 1099 – Blunt (R-MO) – Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act

10. Key Health Care Reform Bills 112 th Congress FSA Over-the-Counter – H.R. 1004 – Boustany (R-LA) – Medical FSA Improvement Act HSA Reform – S. 1098 – Hatch (R-UT) – Family and Retirement Health Investment Act – H.R. 2010 – Paulsen (R-MN) – Family and Retirement Health Investment Act

11. Key Health Care Reform Bills 112 th Congress MLR Repeal – H.R. 1206 – Rogers (R-MI) – Access to Professional Health Insurance Advisors Act – H.R. 2077 – Price (R-GA) – MLR Repeal Act

12. PPACA Requirements in 2014

13. PPACA in 2014 – Individual Mandate Requires all American citizens and legal residents to purchase qualified health insurance coverage Legal challenges to the constitutionality of this requirement will take this case to the Supreme Court. In 2014, those without insurance will pay the greater of $95 or 1% off household income that exceeds personal exemption for that year Starting in 2016, the penalties rise, to the greater of $695 or 2.5% of income. These penalties apply to EACH family member without coverage

14. PPACA in 2014 – Individual Mandate Exemptions to individual mandate for: – financial hardship – religious objections (see for reference IRC Sec. 1402 (g)(1)) – American Indians – those without coverage for less than three months – undocumented immigrants, incarcerated individuals – those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold

15. Current Status of Individual Mandate On June 29, 2011, the U.S. Court of Appeals for the 6th Circuit ruled that the individual mandate is constitutional. This ruling affirms an October 2010 U.S. District Court decision. Two other U.S. Courts of Appeal (4th and 11th Circuits) have decisions pending. The June 29 th ruling moves the process one step closer to Supreme Court review. Meanwhile, the Republican majority in the House continues to push for repeal of the provision.

16. PPACA in 2014 Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable Rates are restricted to 3 to 1 for age and no health status Exclusions based on preexisting conditions would be prohibited in all markets Redefines small group coverage as 1-100 employees.

17. PPACA in 2014 Creates sliding-scale tax credits for non-Medicaid eligible individuals with incomes up to 400% of FPL to buy coverage through the exchange The requirement that the subsidies are only available through the exchange is significant It is a particular threat to employer plans due to other provisions that allow employees to opt out of employer sponsored coverage

18. Essential Benefits Defined in 2014 Section 1302(b) defines essential health benefits to include: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and Substance use disorder services Prescription drugs Rehabilitative and habilitative services and devices; Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care

19. Institute of Medicine Recommendations on Preventive Care for Women – Screening for gestational diabetes – Human Papilloma virus DNA testing – Annual counseling and screening on STDs & HIV – FDA approved contraceptives, sterilization procedures, and counseling – Lactation support and equipment rental – Screening and counseling for domestic violence – At least one well-woman preventive visit annually

20. Health Insurance Exchanges

21. The establishment of health insurance exchanges is one of the most significant and far-reaching aspects of the private health insurance reforms contained in the federal Patient Protection and Affordable Care Act (PPACA). Decisions state and federal policymakers will be making over the next few years regarding design will be critical.

22. ©2010 Steptoe & Johnson LLP Exchanges - 2014 A web portal “marketplace ” for health insurance Federal Government Sets criteria for plan participation and purchaser eligibility Provides subsidies for individuals Manages state Exchange if a state fails to Individuals No subsidies for ones offered employer-based coverage, unless that coverage is “unaffordable” or doesn’t meet quality test Small Businesses Groups of up to 100 employees, can buy unsubsidized coverage through the Exchange States Each sets up own Exchange structure and governance Will be involved in premium rate reviews; can approve/reject as provided under state law Grandfathered, self- insured and large fully insured plans not eligible to participate

23. Exchanges—Who Has Access PurchaserTypes of Coverage Individual Coverage Group Coverage Income-Eligible Subsidized Coverage Individuals without access to employer coverage (U.S citizens and legal residents only) Individuals whose employer coverage doesn’t meet the affordability or quality tests Individuals previously covered by the Pre-existing Condition Insurance Plan Small employers and their employees Congress and Congressional Staff

24. Groups With No Access and the Potentially Uninsured PurchaserNo Exchange Access Potentially Uninsured Any size employer who wants to maintain a grandfathered plan Employer with more than 100 employees (by 2017 states could allow) Any size employer who wants to offer a self-funded product People of all income levels who have qualified group coverage that meets the affordability and quality tests People eligible for Medicaid/S-CHIP but not enrolled People the choose to ignore the individual mandate/pay penalty Individuals who are not U.S. Citizens or Legal Residents

25. Exchanges – Inside and Outside Markets Congress specifically provided that individual and group health insurance markets are to exist outside of the exchanges. The law specifies that “grandfathered” plans will continue to exist outside the exchange. Other plans are also permitted to exist outside of the exchange, and from experience in Massachusetts and Utah, some individuals and businesses will continue to purchase coverage there.

26. Employers and Exchanges Making sure exchanges provide a benefit for employers and do not in any way undermine the ability or willingness of employers to provide coverage is a top priority. Although PPACA allows the state the option of expanding the exchange to serve as a potential coverage option for larger groups beginning January 1, 2017, this could result in unintended consequences. – The large employers that would be attracted to the exchange would be those with an older and sicker employee population that would benefit from the exchange’s modified community rating structure. – This would increase the cost of coverage for other participants.

27. Questions Employers Are Asking Will the exchanges really save us money ? How will tax credits /subsidies or vouchers be administered and tracked back to employers? What is considered in determining “household” or family income to determine if coverage “unaffordable” ? Exchanges are a somewhat new idea – and we are hearing problems with the Massachusetts exchange – what if they fail? Can we as a country afford all these new subsidies?

28. Current Status On July 11, HHS released a proposed rule on establishment of Exchanges. The rule includes the minimum requirements for carriers to offer qualified plans in an Exchange It also includes the requirements employers must meet to participate in the SHOP exchange.

29. Current Status The proposed rule theoretically gives states more flexibility in implementing Exchanges. The rule indicates that a state may receive “conditional approval” if they are making progress even if they can’t demonstrate full operational status by January 1, 2013. The regulations also allow states to develop to partner with the federal government and use the systems being developed there.

30. Current Status The regulation does not address: – premium subsidies – the process for receiving an exemption from the individual mandate – The definition of essential health benefits – Quality standards for Exchanges and QHPs Comments on this proposed rule are due by September 28, 2011. The remaining items are expected to be addressed by June of 2012.

31. Other Newly Released Regulations and Developments Proposed Rule on Reinsurance and Risk Adjustment Proposed Rule on Cooperatives OPM Request for Information on Multi-State Plans Pre-existing conditions plan now using agents after low initial enrollments in the program.

32. Employer Responsibilities

34. Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees – Certain seasonal workers are not counted in determining if employer has 50 workers – Full-time = 30 or more hours per week, determined on a monthly basis The definition of full-time employee is a major topic of discussion on Capitol Hill Penalties assessed for “no coverage” or coverage that is not “affordable”

35. No Coverage If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage,” and One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then Employer penalty = $2,000 for each of its full-time employees in the workforce

36. Unaffordable Coverage If employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because – The employee’s share of the premium exceed 9.5% of income, or – The actuarial value of the coverage was less than 60%, then Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction

37. Summary of Potential Employer Penalties under PPACA, Cong. Research Service May 14, 2010

38. Some Good News! The provision on free-choice vouchers was removed in the budget act agreement. The requirement that businesses issue 1099’s for vendor payments exceeding $600 has been repealed.

39. Other Responsibilities Employers must automatically enroll “new full-time employees” in employer-sponsored coverage – Must provide adequate notice and opportunity to opt out – Applies to employers with “more than 200 full-time employees” Notice to current employees and new hires about exchange and subsidies – Existence of exchange, services and how to obtain assistance – Availability of subsidies if employer coverage is unaffordable or below minimum benefit level.

40. More Employer Responsibilities New rules are out relative to the reporting on W-2s the value of employer provided health insurance A new four-page summary of benefits must be provided to employees beginning in 2012 Completion of form 5500 will become more complex New requirements on claims and appeals will be in place

41. More Employer Responsibilities Tracking and notification of number of months employees covered by minimum required coverage. A variety of new reporting requirements for self-funded plans must be provided to the government and employees.

42. Summaries and Related Requirements Effective for plan years beginning on or after March 23, 2012, both insured and self-funded plans will be required to provide new summaries of benefits before and after enrollment. Failure to provide required information will result in a fine of not more than $1,000 per enrollee. HHS guidance for this provision was due on March 23, 2011. However, as of July 21, 2011, guidance has not been issued.

43. What is Included in this Section A glossary of standard medical and insurance terms A four-page Benefit Summary describing plan benefits, cost sharing and limitations A “Coverage Facts Label” with an example of costs based on the specific plan’s benefits for three conditions: maternity, breast cancer treatment and diabetes management Online availability of Certificates, SPDs and policies Notification of material modifications at least 60 days before their effective date

44. Pending or Watch Listed 105(h) non-discrimination rules Accountable Care Organizations Specific process of auto-enrollment Information Sharing for Subsidies Class Act MLR and Essential Benefits on Ex-Pats Medicare Secondary Payer and potential expansion of employer ESRD responsibility

45. Employer Decisions How to budget for increased plan costs What will the new compliance costs be? Can I afford to continue to offer coverage to employees? What are the implications if I drop coverage for employees? What is my communication strategy?

46. Moving forward MLR is our top immediate priority Exchanges are critical Business friendly initiatives to keep employers engaged in providing health plans Focus on real issues – the cost of health care Press initiatives Broker role in the spotlight NAHU visibility is high Grassroots efforts HUPAC