Health Reform: Next Steps Where We Go From Here November, 2012

1. Health Reform: Next StepsWhere We Go From HereNovember, 2012

2. Now That The Election is Over… What does four more years mean? How will changes in Congress impact health reform?

3. The Promise “President Obama passed the Affordable Care Act to restore health care as a basic cornerstone of middle-class security in America. The Affordable Care Act will make health care more affordable for families and small businesses and brings much-needed transparency to the insurance industry. When fully implemented, the Affordable Care Act will keep insurance companies from taking advantage of consumers—including denying coverage to people with pre-existing conditions and cancelling coverage when someone gets sick. Because of the new law, 34 million more Americans will gain coverage—many who will be able to afford insurance for the first time. Once the law is fully implemented, about 95 percent of Americans under age 65 will have insurance.” – www.barackobama.com The Reality Struggling Economy Deficit, Tax Issues, Fiscal Cliff Divided Congress Uncertain Employers Approximately half of population has consistently opposed the law since day one. “You don’t get something for nothing. And the president should be more careful about suggesting that is the case, especially when discussing a complex law with still-uncertain ramifications.” Washington Post Political Factchecker

4. More Divided Government The New House The New Senate

5. IS IT AN IMPOSSIBLE DREAM?

6. After the Election In the next few weeks and months expect the release of many PPACA-related regulations Some will be proposed rules, meaning that they may be changed and others will be interim final rules, which means they have the force of law immediately. Congress has an extremely long and significant list of items to address before December 31, 2012 Expiration of Bush tax cuts and other tax extenders AMT Fix Payments for Medicare Providers Budget sequestration/Fiscal Cliff Major changes to PPACA in the lame duck session are unlikely.

7. Next Steps on the Federal Level • Shaping new federal regulations and guidance that will govern health reform implementation for individual consumers and employer clients • Potential Legislative Changes • MLR • Small Group Deductible • Premium Subsidies • Employer Mandate • Rating and Market Reforms • Renewed focus on reforms to address the cost of medical care and improve health care quality, rather than health insurance market reforms

8. Affordable Care Act ImplementationEmployer Mandate Penalties

9. How many full-time employees do you have? If ≥ 50 If less than50 Separate businesses under common control are considered one business if determined so by IRS rules Business is subject to ACA ACA looks to part-time employees to determine full-time employee equivalents. Rules may vary by structure (e.g. corporation or partnership) of business. Generally requires 80% control to be considered common control. Key considerations: How many employees do you have? ACA applicability might be a consideration in determining future hiring decisions in advance of the January 1, 2014 effective date for employer mandate penalties. If total full-time and full-time equivalent employees ≥ 50 If total full-time and full-time equivalent employees ˂ 50 Business is subject to ACA employer mandate penalty and coverage provisions Business is exempt from ACA employer mandate penalty and coverage provisions Slide Courtesy of National Retail Federation

10. A full-time employee is defined under the Affordable Care Act (ACA) as an employee who works 30 hours per week, per month, on average. If an employee is hired for – or promoted to – a full-time position (for an ACA-covered employer), then the employee will be eligible for the employer’s health plan after the employer’s waiting period (maximum 90 days) if applicable. If an employee is hired on other than a full-time basis (e.g. on a part-time , temporary, or seasonal basis), then they need not be offered coverage. But, employers may have to monitor their hours to determine if they become eligible for coverage. The Department of Treasury is considering a method of tracking hours on average to recognize eligible employees without the expense of enrolling and dis-enrolling employees into coverage, as they gain or lose eligibility. Seasonal employees working fewer than 120 days per year are excluded from calculation of whether an employer is an ACA-covered large employer and from penalty calculations. This proposed “look-back” method would allow employers to average hours over a set period (not to exceed 12 months) in exchange for an equal or greater period of stable coverage without regard to eligibility for coverage. Slide Courtesy of National Retail Federation

11. What are the employer responsibility penalties? Applicable employers can be penalized for : Failing to offer coverage to full-time employees Offering coverage to full-time employees where the cost of the coverage exceeds 9.5% of family income Key considerations: What is your mix of full and part-time employees? Could an adjustment of employee status reduce your penalty exposure? If you provide coverage today, how does the cost of that coverage compare to your total penalty exposure? Consider all options, including non-monetary concerns. The penalty for the failure to offer coverage is $2,000 x full-time employees not covered, minus the first 30 employees, i.e. your first 30 full time employees are exempt from the calculation. The penalty for the failure to offer “affordable” coverage is the lesser of two penalty calculations: $3,000 per applicable employee or $2,000 times every full-time employee, minus the first 30 employees. At least one employee must receive subsidized coverage in the exchange to trigger penalties. NRF maintains a Health Mandate Cost Calculator at www.retailmeansjobs.com/healthcare which can model the penalty effect on your business. Slide Courtesy of National Retail Federation

12. An applicable employer who offers qualifying coverage to full-time employees can still be penalized if that coverage fails a two-part “affordability” and “minimum value ” test Coverage must be “affordable.” The employee’s cost for coverage (self-only coverage) must not exceed 9.5% of family income. Coverage must also be of “minimum value.” The plan’s share of total allowed benefit cost must be more than 60 percent. A potential regulatory safe harbor under consideration for employers would base this on 9.5% of the employee’s current W-2 wages. This is generally understood to be a 60% actuarial value test. The Departments of Treasury and Health and Human Services are considering several approaches to defining the standard, including: a minimum value calculator; a safe-harbor checklist; and actuarial certification. Actuarial value is based on plan payments for a standard population and charges minus individual share of premiums, co-insurance and co-pays. Low-income employees not eligible for Medicaid or Exchange tax credits may be able to access catastrophic or limited benefit coverage. The question of dual income/coverage households has not yet been addressed. Slide courtesy of National Retail Federation

13. Preceding Slides courtesy of National Retail Federation

14. Age 33, $36,000, Family 4 137% FPL, No ESI Unsubsidized Premium: $13,026 Maximum % income 4.17% Person pays for subsidy Actual required premium $ 1,501 3.21% income , covers 8% prem. Government Tax Credit $11,525 ** Assumes in Higher regional cost, in 2014 dollars & paid with after tax dollars Age 57, $95,000, Family 4 406% FPL, No ESI Unsubsidized Premium: $25,193 Maximum % income None Person pays for subsidy Actual required premium $25,193 0% income Government Tax Credit $0 ** Assumes in Higher regional cost, in 2014 dollars & paid with after tax dollars Exchange & Subsidies – NO Employer Sponsored Ins. Kaiser Family Foundation – Health Reform Subsidy Calculator

15. Health Insurance Exchanges

16. Health Insurance Exchanges The Affordable Care Act (ACA) depends on states to establish Health Insurance "Exchanges," which are virtual marketplaces intended to make it easier for individuals and small employers to shop for, compare, and enroll in health insurance coverage. Individuals and certain businesses (100 or fewer employees) can purchase health insurance coverage through exchanges beginning in 2014 States will establish both an individual exchange (Exchange) and a small business exchange (SHOP Exchange) The federal government will establish a default exchange or hybrid federal-state exchange Private exchanges may also be available for employers of all sizes. OR OR Some states may combine the individual Exchange and SHOP Exchange, though these markets are quite different. Coverage offered in the Exchange and SHOP Exchange (and surrounding small group insurance market) will be based on the state-selected essential health benefits coverage benchmark plan. Insurance premiums and out-of-pocket responsibility are varied along a “metal” scale: Platinum, Gold, Silver, and Bronze. For example, Platinum coverage will have the most expensive insurance premium but the least amount of out-of-pocket financial responsibility. Individuals and small businesses2can select from a variety of competing carriers and plans offering different levels of coverage. In most states, health insurance coverage will continue to be available outside of the Exchange.  Individuals and businesses may continue to use agents and brokers to assist them with their health plans.  Slide Courtesy of National Retail Federation

17. Key Regulations Outstanding How will non-discrimination mandate actually work? What are the actual requirements for Essential Benefits and what constitutes minimum value? What will specific states do about their exchanges? How will auto-enrollment work? What changes will we see moving forward?