Is your business ready for 2014? The Affordable Care Act Awaits

1. Is your business ready for 2014?The Affordable Care Act Awaits Presented By: Joshua Weinstein, DIA, SVP, Employee Benefits Consultant

2. WELCOME!

4. Agenda • Introductions • ACA Recap • Current Changes • What’s to Come • Our Role as Consultants • Q & A

5. Do you agree or disagree? • Lack of insurance is one of the most significant barriers to healthcare access.

6. Main Affordable Care Act Goals • Access – through job or otherwise • Affordable – help is available • Quality – plans must be “good enough” • Get and Stay Well – new wellness benefits • Reduce Waste • Pay for Performance not Transactions

7. Where won’t we go today… • Small business tax credits – hard to get • Medicare stuff (Part D subsidies, donut holes, employer retiree benefit issues) • High risk pools – ACHIA going away • Pros/Cons of grandfathered plans – fewer and fewer out there… • Wellness programs • MLR rebates – how to process • Changes to HSAs/FSAs/HRAs • Simple cafeteria plans • SBC rules – distribution, timing, formatting • Medicaid expansion

8. What’s happened in 2010? • 2010 • PPACA enacted on March 23, 2010 • Dollar-based lifetime limits were removed (Model Notice) • Essential Benefits Defined • Dollar-based annual limits are allowed until 2014 at which point they are unlimited • Plan could be Grandfathered or Non-Grandfathered (Model Notice) • High Risk Pool Established (ACHIA Fed) • www.healthcare.gov created • Small Business Tax Credits were/are available for those that qualify

9. What happened in 2010? (cont.) • 2010 • Non-discrimination testing for NGF plans (105(h) rules) • Adult children can be covered through age 26 (Model Notice) • No Pre-existing conditions on children under age 19 • Preventive Care Services as defined by USPSTF are covered at 100%, no cost sharing for non-grandfathered plans • No rescissions of coverage (certain exceptions) • Emergency services covered at in-network level regardless of provider • New appeal process

10. What happened in 2011? • 2011 • Minimum Loss Ratio for fully insured plans resulted in some insurers issuing rebates • Some Alaska individuals/groups received them in 2012 & 2013. • Tax penalty for non-qualified HSA distributions increased from 10% to 20% • Reimbursement from FSA, HSA, HRA for OTC medicines not allowed without prescription • Small employers could adopt Simple Cafeteria Plan

11. What happened in 2012? • 2012 • Summary of Benefits & Coverage (SBC) must be distributed for groups with renewals 10/1/2012 forward • W-2 reporting for employers filing 250 or more W-2’s in calendar year (2013) • Expansion of Women’s Health Preventive Services, including no cost-sharing for contraceptives

12. What happened 2013? • 2013 • PCORI Tax on fully insured and self-funded group health plans (HRA’s affected) • FSA medical - employee contributions are capped at $2,500 per year • Medicare payroll tax increases 0.9% for individual filers over $200K and joint filers over $250K • Additional 3.8% Medicare contribution on certain unearned income for high income individuals • Itemization of unreimbursed medical expenses increases from 7.5% of AGI to 10% of AGI • Notice of Exchange/Marketplace by 10/1/2013

13. What’s coming next ?

14. The ACA contains over 20new taxes that provide revenue to fund other components of the bill – estimated at more than $2.6 trillion over 10 years New Taxes & Fees

15. Defining Markets

16. 2014 Market Reforms • Plans are guaranteed-issue • No pre-existing condition limitations for all ages • No annual or lifetime limits on essential benefits • Individual Mandate • Marketplace (Exchange) • Employers getting ready for “Pay or Play”

17. Individual & Family Coverage

18. Individual Mandate • All citizens/legal residents must have a qualified health plan or pay a tax penalty • May be without coverage for three months each year without a penalty • Some exemptions allowed: • Religious • Health care sharing ministry • Illegal aliens • Incarcerated individuals • IHS beneficiaries • Income exemption • Hardship exemption • US citizens residing outside the US • Penalty payable for each month of noncompliance per uninsured • 2014 - >$95 or 1% of annual household income • 2015 - >$325 or 2% of annual household income • 2016 & beyond - >$695 or 2.5% of annual household income • Flat dollar fees above: • Per adult • 50% for child • 3X family cap (i.e. $2,085 in 2016)

19. Individual & Family Coverage • Market for people without job-based coverage • Alaska has chosen to have a Federally Facilitated Marketplace (FFM) • Marketplace = Exchange • No denials. No pre-ex. • No lifetime limits. No annual limits. • Essential Health Benefits package • Old to young rate ratio 3:1 (i.e. $600:$200) • Plans must have qualifying Actuarial Value (AV) • Copper -50% (only for under age 30) • Bronze – 60% • Silver – 70% • Gold – 80% • Platinum – 90% (doubtfully…)

20. Individual & Family Coverage • No gender rating • Tobacco rating allowed (up to 50%) • Geographic rating allowed (AK is more than AL) • Caps on out-of-pocket maximums ($6,350 individual / $12,700 family)

21. Individual & Family Coverage • Advanced Premium Tax Credit (subsidy) available to pay premiums for those who qualify: • No access to job-based coverage that is “good” and “affordable” • Good means of “minimum value” • Affordable means less than 9.5% of household income (MAGI) for self-only coverage • 100%-400% of Federal Poverty Level (FPL for AK is higher than L48) • Cost-sharing subsidies apply (deductible, copays, out-of-pocket maximums for 100%-250% of FPL) • Under 100% of FPL is Medicaid or….the “gap”, if AK doesn’t expand Medicaid eligibility

22. Alaska 2013 FPL & Variable Subsidies

23. Subsidy Examples: • #1 • Family of four. • Two 35yo adults and two children. All non-tobacco. • $44,160 household income. • 150% of FPL for AK. • 4% of income limit for second “cheapest” silver plan = $147/mo. • Subsidy can be applied to any plan, though. • Bronze plan = $0/mo.

24. Subsidy Examples: • #2 • Family of two. • 58yo and 50yo adult. Both non-tobacco. • $58,140 household income. • 300% of FPL for AK. • 9.5% of income limit for second “cheapest” silver plan = $460/mo. • Subsidy can be applied to any plan, though. • Bronze plan = $227/mo.

25. Pros and Cons of the FFM • Pros • Individuals • It is the only marketplace to apply and receive the immediate tax credits/subsidies if you qualify based on status and income. • Cons • If you don’t qualify for the tax credit or subsidy, there is no benefit to using the FFM. You may have additional options outside of the FFM, but plans sold both on and off of the FFM must have the same rate.

26. Employer Sponsored Coverage

27. First Step: Are you Small or Large? • Counting employees for the ACA is fun and important. • In general, small employers have less than 50 full-time “equivalents”. • While the markets are different, some rules are applicable to all employers offering coverage: • No waiting periods exceeding 90 days. • 30 hours per week is full-time. • Part-timers don’t need to be offered coverage. • Variable hour employees can be “measured” for 12 months to determine if they average 30 hours/week and coverage needs to be offered for the subsequent “stability period”. (More on that later…) • Bona fide seasonal employees don’t need to be offered coverage. If they work too much or too long, an offer may need to be made. Guidance is forthcoming…

28. Calculating FTEs FTE = Full Time Equivalent Full time is defined as average of 30+ hours/week Seasonal workers exempt (≤120 days per year) Part-time workers included for eligibility but not fine calculation. Total full-time employees + (total aggregate hours by part-timers) 120

29. 7 part time X 20 hrs X 4 wks = 560 5 part time X 10 hrs X 4 wks = 200 560 + 200 = 760 hrs/month by non FTs 760 ÷ 120 = 6.3 FTE Example: Skipper’s Fish Shop 45 Full time employees (30-40 hrs/wk) 7 Part time employees working 20 hours per week 5 Part time employees working 10 hours a week 45 Full time + 6.3 FTE = 51.3 Full Time So Skippers DOES fall under this law

30. So, You’re a Small Employer: • Grandfathered? – You can keep your coverage. Sometimes… • Non-Grandfathered – Here’s what’s coming: • Community Rating model (Some groups will get decreases, but most will get increases.) • Much like individual markets • No claims rating • No health forms (Don’t jump up and down just yet.) • 3:1 age bands (like individual markets) • No gender rating • No industry rating • Tobacco rate-ups of up to 50% • Metallic plans (Bronze, Silver, Gold, and maybe Platinum) • Essential Health Benefits • Deductible and out-of-pocket maximums

31. So, You’re a Small Employer: • What about the Small Business Health Options Plan (SHOP)? • Delayed for picking multiple plans to offer your employees at once. • Only reason to apply here is to get small business tax credit. Good luck. • Fortunately, many existing carriers will remain in the market. • Offering an HSA, HRA, or FSA? You can continue provided the rules are followed. • Compliance is important. The DOL is stepping up audit frequency and intensity. • Health benefits continue to provide a significant value proposition in recruiting, retaining, and rewarding employees. • Dropping coverage may or may not make sense. • Seek professional counsel to walk through the process.

32. Large Group Coverage • In many ways business as usual regarding rate-setting process. • Rate reforms do not apply, so claims impact renewals. • No 3:1 age bands. • Gender rating allowed • EHB not required, but plan must be of “minimum value”. • Out-of-pocket maximums still apply

33. Employer Responsibility(Pay or Play) • Employers with 50 or more FTEs must offer affordable and qualified coverage or pay up. • Not offering? - $2,000 per full time employee (first 30 are free) • Example: if 53 employees, you pay for 23 ($46,000) • If offering coverage, and at least one employee receives a subsidy in the FFM, employer pays $3,000 per full time employee receiving tax credit. • Penalty capped at the lesser of the above calculations.

34. Employer Responsibility(Pay or Play) • Penalties are calculated monthly ($2,000/12=$167) but paid annually. • Enforcement delayed until 2015 • If less than 50 FTEs, no tax penalty is payable but all other rules apply

35. In Summary:

36. Safe Harbors for Applicable Employers – 30 hour rule • Safe harbor rules are available if you want to examine your employee population to determine more precisely who should be deemed full time under the proposed regulations. • You do not have to use these safe harbors but they are available. • The basic concept of the safe harbor is to utilize both a look back or measurement period and a look forward or stability period. • Utilization of the safe harbor may be a good idea for your ongoing employees if you are uncertain on average how many hours per week your non-exempt employees actually work.

37. Auto-Enrollment • Employers with 200+ employees • Auto-enroll all new employees in employer plan • Waiting period 90 days or less okay • Employees may opt out if other coverage NOTE: Effective date is unclear – may be sooner or later…or never.

38. Self-Funded Plans • Expected growth area for group health plans • Available to groups with at least 5 employees • Escape some (but not all) taxation versus fully insured plans • Allows greater customization of plan design • State mandates are optional. • Use of stop-loss coverage to insure large claims and manage financial exposure. • Offers potential for savings with known “maximum costs”. • Not subject to new rating rules of small group markets

39. Cadillac Tax • 2018 • All group plans, including self-funded • Paid by insurer or TPA, but passed on to employer • 40% excise tax on plans with value exceeding: • $10,200 for individual coverage • $27,500 for family coverage • Higher thresholds for retirees over 55 & high risk professions • Tax indexed annually for inflation (CPI) • Not very popular provision and most likely will be modified

40. Who is NBG? • Full service agency providing insurance solutions for both individuals and businesses • Alaskan owned and operated • Alaskan-based businesses with 2-1,000 employees • In business for over 35 years • Affiliate of Northrim Bank since 2005 • Customer Service • Wide variety of products and services • On-site consultations and education meetings • Transparency regarding all fees and costs • Creative • Fully licensed firm and staff For a more details visit our website: northrimbenefits.com

41. What about Alaskans without Job-Based Coverage? • Historically, individual markets have been “tricky” due to denials of coverage and a challenging underwriting process. • The challenges change in 2014. • While coverage is guaranteed, main hurdles to overcome are: • Getting education about the ACA • Figuring out subsidy eligibility (i.e. “Can I get financial help?”) • Working with new Marketplace • Sorting through multiple plans (Bronzes, Silvers, Golds…) • Going through the cumbersome application process

42. NBG saw a huge opportunity… • We can help individual markets, but how do we go about it? • Build a new division of NBG! • Say a Welcome to:

44. Enroll Alaska is a division of NBG Focused on individual health coverage for ALL uninsured and underinsured Alaskans. Goals • Enroll the 66,000 uninsured Alaskans without access to other coverage. • Identify those who qualifying for help paying for premiums • For example, a family of 4 making $44,000 will pay no more than $147/month for a “silver” plan and $0 for a “bronze” plan with a higher deductible.

45. How are we getting it done? • Teaming with Health Care Facilities • Enroll Alaska will have presence in most major hospitals and clinics. • State-wide Marketing/Education/Advertising Campaign • Massive media campaign to launch August 19th and run until March 31st. • Support from Northrim Bank • Presence in the branches with educational material and teller communications to individuals.

46. Thank you for your time.What’s on your mind?