The Affordable Care Act: What Happens Now?

1. Kansas Insurance Department The Affordable Care Act:What Happens Now? Kansas State Department Of Education October 18, 2012

2. 2010 Affordable Care Act Provisions—in effect NOW • Federal Pre-existing Condition High Risk Pools (PCIP – KS) • No lifetime limits and phase-out of annual limits • No rescissions, except in cases of fraud • Coverage of preventive health • services with no out-of-pocket costs • “Reasonable” unpaid breaks for • nonexempt, nursing mothers and • private location 2010 ACA Provisions 2014 ACA Provisions Exchanges

3. 2010 Affordable Care Act Provisions—in effect NOW • No pre-existing condition exclusions for children • Dependent coverage to age 26 • Small Business Tax Credit • For businesses with 25 or fewer employees • Average wages less than $50,000 • Employer must contribute at least 50% of premium • Tax credit phases out as number of employees • and wages increases • 2010-2013: Up to 35% of total employer • contribution; 2014-2016 – up to 50% 2010 ACA Provisions 2014 ACA Provisions Exchanges

4. 2014 ACA Provisions • Elimination of pre-existing condition exclusions • Guaranteed issue and renewability of coverage • Rating factors limited to age, tobacco use, geography and family structure • Tax credits and subsidies for individuals to help pay premiums and out-of-pocket costs; up to 400% of the Federal Poverty Level • Employers can offer increased wellness • incentives; permits rewards or penalties • up to 30% of cost of coverage 2010 ACA Provisions 2014 ACA Provisions Exchanges

5. 2014 ACA Provisions • Mandated coverage for “essential health benefits” • Uniform explanation of benefits and standardized definitions • Individual mandate to ensure consumers do not wait until they are ill to seek coverage • You will be penalized for no coverage (with some exceptions) • Establishment of an exchange—federal • or state-run 2010 ACA Provisions 2014 ACA Provisions Exchanges

6. 2014 ACA Considerations • Lawsuit heard by U.S. Supreme Court • during March—June 28th ruling upheld individual mandate as a tax • The law builds on an employer-based system that is intended to standardize and equalize benefit coverages. • The individual market will work better because pre-existing conditions are not an issue. • November general election • considerations still on the table, • definitely affecting exchange activity 2010 ACA Provisions 2014 ACA Provisions Exchanges

7. What’s an Exchange? • An exchange is an online marketplace where individuals and small employers will be able to buy health insurance products sold by insurance companies. • People who apply to buy insurance through the exchange who are eligible for a public program (like Medicaid) will be enrolled in that program. 2010 ACA Provisions 2014 ACA Provisions Exchanges

8. What’s an Exchange? • Under the Affordable Care Act each state shall establish an American Health Benefit Exchange by January 1, 2014 • The Secretary of Health and Human Services must certify by January 1, 2013, if a state will be able to operate a qualified Exchange • If a state does not build an exchange, the federal government will operate it for • the state 2010 ACA Provisions 2014 ACA Provisions Exchanges

9. Attention Small Businesses! • Employers with fewer than 50 workers are exempt from employer responsibility taxes. They don’t have to pay a penalty if their employees get tax credits through a health insurance exchange. • Small employers are exempt from the insurance mandate, but their employees are not. 2010 ACA Provisions 2014 ACA Provisions Exchanges

10. Individual & Small Group Exchange Basics 2010 ACA Provisions • Individuals may enroll in any qualified health plan offered in a state Exchange, with or without subsidy • or tax credits • Employers may choose coverage level OR one or more qualified health plans • Employees choose from carriers offering at that coverage level OR plan(s) selected by employer • Employees individually rated • (limited to the four allowed rating • Factors—age, tobacco use, geography, • family structure) 2014 ACA Provisions Exchanges

11. Levels of Coverage • Bronze – covers 60% of actuarial value of benefits • Silver – covers 70% of actuarial value of benefits • Gold – covers 80% of actuarial value of benefits • Platinum – covers 90% of actuarial value of benefits • Catastrophic – high-deductible plan for • young (under age 30) and those exempt • from individual mandate 2010 ACA Provisions 2014 ACA Provisions Exchanges

12. Essential Health Benefits • “Essential Health Benefits” in health plans must • contain at least the following 10 categories: • --Ambulatory patient services • --Emergency services • --Hospitalization • --Maternity and newborn care • --Mental health and substance use disorder services, including behavioral treatment • --Prescription drugs • --Rehabilitative and habilitative • services and devices • --Laboratory services • --Preventive and wellness services • and chronic disease mgmt. • --Pediatric services, including oral • and vision care 2010 ACA Provisions 2014 ACA Provisions Exchanges

13. Essential Health Benefits • Essential health benefits benchmark election was due September 30, 2012, no election made • States could choose one of the following benchmark insurance plans: • One of the three largest small group plans in the state by enrollment. • One of the three largest state employee health plans by enrollment. • One of the three largest federal employee health plan options by enrollment. • The largest HMO plan offered in the • state’s commercial market by • enrollment. 2010 ACA Provisions 2014 ACA Provisions Exchanges

14. 2014 Implementation Small Group (SHOP) Exchange • States must establish SHOP exchange in 2014 • May be combined with individual market exchange • Until 2016, exchanges may be restricted to employers with 1-50 employees • In 2016, exchanges serve employers with 1-100 employees • States may expand exchanges to larger employers beginning in 2017 • Employees may be given choice of carrier • by their employer • Employer may choose coverage level • Employees choose from carriers • offering at that level 2010 ACA Provisions 2014 ACA Provisions Exchanges

15. Exchange Timeline 2014 2010 2011 2012 2013 Planning & Establishment Grants Federal Policymaking IT Systems Architecture State Legislation and Regulations Federal Rulemaking Federal & State IT Buildouts Secretary Determines if State will Establish Certification of Health Plans Plan Bidding/Contracting Outreach & Education Enrollment Begins Coverage Effective 2014 2010 2011 2012 2013

16. Definition of Full-Time Employee • ACA defines full-time employee as an employee who works 30 hours per week, per month, on average • However, ACA also looks to part-time employees to determine full-time employer equivalent. If total full-time and full-time equivalent employees > 50, business IS subject to employer mandate penalty and coverage provisions • If an employee is hired on part-time, temporary or seasonal basis, need not be offered coverage. • But . . . need to monitor hours 2010 ACA Provisions 2014 ACA Provisions Exchanges

17. Are You a Large Employer? 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. 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

18. Large Employer Responsibility (50 or more FTEs)—difficult formula • If an employer doesn’t offer minimum coverage and one of its employees receives a subsidy through the Exchange, the employer will be subject to a penalty: $2,000 annually, times the number of employees, minus 30. • If an employer does offer coverage, but an employee receives a subsidy through the Exchange to pay for the premium, the employer will be subject to a penalty of $3,000 annually for each • employee receiving a subsidy, up to a • maximum of $2,000 times the number • of full-time employees, minus 30. 2010 ACA Provisions 2014 ACA Provisions Exchanges

19. Employer responsibility penalties 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

20. Employer responsibility penalties 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

21. Employer responsibility penalties 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

22. Kansas Insurance Department goal • in federal health reform: • Do what’s best • forKansas consumers, • Kansas agents • andKansas companies • by keeping reforms at the state level. 2010 ACA Provisions 2014 ACA Provisions Exchanges

23. Kansas Insurance Department 420 SW 9th St. Topeka, KS 66612 www.ksinsurance.org commissioner@ksinsurance.org Phone: 785-296-3071 Consumer Assistance: 800-432-2484 Fax: 785-296-7805