Health Care Reform Presented by Barb Gerken, Regional Sales Manager

1. Health Care Reform Presented by Barb Gerken, Regional Sales Manager

2. Definitions • PPACA – Patient Protection and Affordable Care Act • ACA – Affordable Care Act • Grandfathered – those plans that existed on March 23, 2010, when the Patient Protection and Affordable Care Act (PPACA) was enacted with no “substantial changes” • HHS – Department of Health & Human Services

3. General Overview • Federal law enacted on March 23, 2010 • Expected Benefits • Expansion of access to health care coverage • Reduce premium costs and make coverage affordable • Prevent denials of care and coverage • State or federal based mechanism for purchasing insurance • Create standards in coverage

4. Grandfathering • Grandfathered – those plans (group and individual) that existed on March 23, 2010, when the Patient Protection and Affordable Care Act (PPACA) was enacted with no “substantial changes” • Grandfathered plans are permitted to make “routine” changes and still remain exempt from some of the provisions in PPACA.  • “Routine” changes include adding new benefits; or making modest adjustments to employer contributions, premiums, co-payments and deductibles.

5. Grandfathering A health plan can lose its grandfathered status if it: • Eliminates all or substantially all benefits to diagnose or treat a particular condition. • Increases deductibles or out-of-pocket limits by more than the rate of medical inflation plus 15 percentage points. Example: Current deductible of $500, 15% change would be $575 • Increases fixed copayment by more than the greater of medical inflation plus 15 percentage points or $5.

6. Grandfathering A health plan can lose its grandfathered status if it: • Reduces the employer’s contribution rate so that the employer’s share of the total cost of coverage declines by more than 5% points below the contribution rate on March 23, 2010 • Increases a percentage cost-sharing requirement above the level at which it was on March 23, 2010 • Reduces the overall annual limit on the dollar value of benefits paid for covered services

7. Grandfathering Grandfathered Plan MUST comply with the following reforms: • Summary of Benefits and Coverage • Reporting of Medical Loss Ratio and premium rebates if minimum loss ratio has not been met. • Prohibition on lifetime limits on essential benefits • Prohibition on health plan rescissions

8. Grandfathering Grandfathered Plan MUST comply with the following reforms: • Dependent coverage offering to child until age 26 • Prohibition on waiting periods greater than 90 days • Prohibition on coverage exclusions for pre-existing conditions

9. Grandfathering Grandfathered Plan WILL NOT be required to comply with the following reforms: • Preventive care and immunization coverage at 100% • Cover emergency services without pre-authorization or increased cost-sharing out of network • Eliminate discrimination in favor of highly compensated employees

10. Grandfathering Grandfathered Plan WILL NOT be required to comply with the following reforms: • Apply federal rating limitations (community rating) • Provide essential benefits in small group market • Cost Sharing and deductible limits

11. Grandfathering Special Notes • New employees and members may add on to a plan without loss of grandfathering. • Union contracts in place as of March 23, 2010 will be considered grandfathered until the contract is renewed. • Groups changing insurance carriers between March 23, 2010 and November 15, 2010 lost grandfathered status.

12. Grandfathering Special Notes • As of November 15, 2010 a change in carriers would not result in loss of grandfathering as long as all other criteria is met. • A change from self-insured to fully-insured will result in the loss of grandfathering.

13. Additions/Changes to Benefits

14. Effective with Plan Year on or afterSeptember 23, 2010 • No lifetime dollar limits on benefits • Restricted annual dollar limits on essential health benefits • No pre-existing condition exclusions for children under 19 • 100% coverage for preventive services covered in network • (not required for grandfathered group health plans)

15. Effective August 1, 2012Expanded Coverage for Women’s Services • Effective with new business and renewals after 8/1/2012 • Includes expanded coverage for FDA-approved contraception methods • Initial guidance allowed a narrowly defined group of religious employers to choose not to cover contraceptives/sterilizations • Updates in 2012 allowed religiously affiliated groups allowed a one-year safe harbor for non-profit groups currently excluding contraceptive coverage

16. Effective August 1, 2012Expanded Coverage for Women’s Services • February, 2013 – HHS released additional guidance broadening definition of “religious” employers to include houses of worship, dioceses and affiliated organizations to be completely exempt using IRS tax code definition • Also allowed other “faith-based” employers to transfer the cost and administrative tasks of the birth control policies to insurance companies • Costs incurred by carriers and third party administrators would be offset by reduction in exchange fees

17. Effective August 1, 2012Expanded Coverage for Women’s Services • Following services covered at no-cost share when in-network:

18. Effective in 2014Essential Benefits • Essential Benefits: A set of health care service categories that must be covered by certain plans beginning in 2014 • Will apply to all non-grandfathered plans in the individual and small group market • Effective with plans year starting on or after January 1, 2014

19. Effective in 2014Essential Benefits • Recommendations based on a report released by the Institute of Medicine in October of 2011 • Cited affordability and value as core concerns • Recommended that coverage be limited/excluded if following tests were not met: • Safe • Medically effective • Shows meaningful improvement • Medical service • Cost effective

20. Effective in 2014Essential Benefits • States had the option of choosing one of the following benchmark plans • one of three largest small group plans in the state • one of three largest state employee health plans • one of the three largest federal employee health plan options • largest HMO plan offered in the state’s commercial market

21. Effective in 2014Essential Benefits • Ohio’s largest three small group products in descending order are as follows: • Anthem PPO – Blue Access PPO Option D4RXG • Medical Mutual of Ohio SuperMed • Anthem Lumenos • State benchmark plan selection in 2014 would be applicable for 2014 and 2015 benefit years • All state benchmark plans with full set of benefits can be found at www.cciio.cms.gov

22. Effective in 2014Essential Benefits • PPACA requires that Essential Health Benefits include items and services in the following 10 categories

23. Effective in 2014Essential Benefits • Pediatric dental/vision • Services for children under the age of 19 years • Carriers may not add coverage for routine non-pediatric services • Not covered in most benchmark plans • Benchmark plans will be supplemented with Federal Employee Benefit plans for both dental and vision • will not include non-medically necessary orthodontics

24. Effective in 2014Essential Benefits • Mental Health • Benchmark plans must comply with mental health and substance abuse parity standards outlined in 45 CFR 146.136 • States will not be required to defray cost of this parity

25. Effective in 2014Essential Benefits • Prescription Drug Benefits • Will require at least one drug in every United States Pharmacopeia’s (USP) category and class or • The same number of prescription drugs in each category and class as the benchmark plan • Does not require that drugs be covered in a particular tier • Will require a procedure for enrollees to request clinically appropriate drugs not covered by the health plan

26. Effective in 2014Essential Benefits • Carriers will be require to submit drug lists to: • Exchange – plans sold in the public exchange • State – plans sold in the private market • Office of Personnel Management – multi-state plans

27. Effective in 2014Essential Benefits • No annual dollar limits • applies to all plans except grandfathered individual plans • Stand-alone dental plans would have separate annual limitations on cost sharing from qualified health plans covering the remaining Essential Health Benefits • plan must demonstrate that separate limit is reasonable for coverage of the pediatric dental plan

28. Effective in 2014Essential Benefits • Maximum deductible of $2,000/$4,000 - small group only • does not apply to individual, large group or self-insured markets • cannot use FSA, HRA or HSA dollars to offset this maximum • carriers may exceed the annual deductible limit if they cannot reasonably reach a given level of coverage without doing so

29. Effective in 2014Essential Benefits • Maximum out-of-pocket (cost-sharing) tied to the annual limitation on cost sharing for high deductible plans ($6,250/$12,500 – 2013) • does not apply to grandfathered health plans • will apply to large groups and self-insured plans • Carriers would be prohibited for any plan design that would discriminate based on age, life expectancy, disability, medical dependency, quality of life or other health condition

30. Effective in 2014Essential Benefits • States may require a qualified health plan to cover additional benefits • States will be required to defray the cost of these additional benefits if enacted after December 31, 2011 • Will allow states to base payment on either statewide average or each issuer’s actual cost • Payments will be made to either the enrollee or to the carrier

31. Effective in 2014Essential Benefits • Network adequacy requirements are not in the scope of this regulation • Carriers may use prior authorization and other medical management techniques as long as they are not used to discriminate

32. Effective in 2014Actuarial Value (AV) • Refers to value of coverage in the SMALL group market • Measure of % of expected health care costs a health plan will cover • Will use national calculator with a single standardized dataset for 2014. Will revert to state data in 2015

33. Effective in 2014Actuarial Value (AV) • Will use value of in-network services only • Deductible, co-insurance, out-of-pockets to have large impact on actuarial value • Cost-sharing for emergency rooms, inpatient admissions and diagnostic imaging to have smaller impact on actuarial value • Benefits not compatible with the calculator will provide documentation of actuarial certification

34. Effective in 2014Actuarial Value (AV) • Annual employer contributions to HSA account will be included in the AV calculation • Amounts newly made available under an HRA for the current year will be included in the AV calculation • Value will be based on in-network utilization only

35. Effective in 2014Actuarial Value (AV) • Plans sold in individual and group markets after 1/1/2014 be sold and marketed by tiers • Tiers to be based on actuarial value scores • Bronze – 60% • Silver – 70% • Gold – 80% • Platinum – 90%

36. Effective in 2014Actuarial Value (AV) • Will allow for variations of +/- 2 percentage points • i.e. Silver plan may have actuarial value of 68-72%

37. Effective January 1, 2014 • Guarantee Issue • Considering “Mandate Plus” language to encourage enrollment at time of first eligibility • No Pre-Existing Conditions Clause for Adults • Removal of annual and lifetime dollar limits on ALL plans (including grandfathered)

38. Administrative Changes

39. Effective with Plan Year on or afterSeptember 23, 2010Dependent Age • Adult children coverage to age 26, end of birth month. • Dependent: • May be eligible for their own employer sponsored plan • May be eligible for Medicare/Medicaid • May be married • Many carriers allowed early adoption of provisions

40. Effective with Plan Year on or afterSeptember 23, 2010Dependent Age • Not required for grandfathered groups before 2014 if the dependent is eligible for employer-sponsored coverage • Employer may not charge more or have different benefit structure for dependents based on age

41. Effective with Plan Year on or afterSeptember 23, 2010Dependent Age – Ohio Law • Adult children coverage to age 28, end of birth month. • Dependent: • Unmarried • Resident of Ohio or full-time student • Not eligible for employer-sponsored coverage • Not eligible for government-sponsored coverage • Additional costs may be charged to the employee

42. Effective with Plan Year on or afterSeptember 23, 2010Dependent Age – Ohio Law • State law does NOT apply to self-insured plans governed by ERISA • Will apply to non-ERISA self-funded groups (public employers, government entities, etc.) • Most carriers will require an affidavit

43. Effective with Plan Year on or afterSeptember 23, 2010 • No discrimination in favor of highly compensated employees • Delayed until further notice

44. Effective in 2014 • Small group redefined as 1-100 • State have option of leaving as 2-50 for 2014 & 2015 • Mandated as 1-100 as of 2016

45. New Taxes / Rating Changes

46. Effective October 1, 2012 Fees for Comparative Effectiveness Research • ACA established non-profit organization • Patient-Centered Outcomes Research Institute (PCORI) • Study of effectiveness, risk and benefits of medical treatments • Known as comparative effectiveness research

47. Effective October 1, 2012 Fees for Comparative Effectiveness Research • Supported by a trust fund • Financed in part from fees from health issuers and plan sponsors • Fees to be collected for plan and policy years that end after September 30, 2012 and before October 1, 2019 • Calculation of fees based on average # of lives covered by accident and illness insurance during year

48. Effective October 1, 2012 Fees for Comparative Effectiveness Research • Does not apply to dental and vision plans • Applies to individual and group plans regardless of funding • Carriers will pay fee for fully insured customers • included as part of medical premium

49. Effective October 1, 2012 Fees for Comparative Effectiveness Research • The fee is considered an excise tax and will be filed on IRS Form 720 • Carriers will pay fee for fully insured customers included as part of medical premium • Self-insured (ASO) groups will file the Form 720 and pay the appropriate fee • Fee is due by July 31 of calendar year immediately following last day of plan year

50. Effective October 1, 2012 Fees for Comparative Effectiveness Research