The Affordable Care Act

1. The Changing Face of Health Insurance in the US The Affordable Care Act

2. PPACA Overview • The Patient Protection and Affordable Care Act is enacted March 23, 2010 (PPACA) • Main Priorities • Expansion of access to health care coverage • Reduction of premium costs and make coverage affordable • Creation of standardized coverage • Guarantee issue & limited pre-existing • State/Federal based exchanges where you can purchase qualified health insurance

3. PPACA Timeline

4. 2014 Individual Mandate • In 2014 all US citizens and legal residents are required to purchase health insurance or face a tax penalty • Tax in 2014 is: • Incomes under $20,000 will pay $95 • Incomes over $20,000 will pay 1% of income • The IRS will issue notices and attempt to collect penalties (individuals failing to pay will not be subject to criminal prosecution)

5. 2015 + Individual Penalties • In 2015 the tax increases to: • Incomes below $25,000 will pay $325 • Incomes above $25,000 will pay 2% of income • In 2016 the tax increases to: • Incomes below $37,000 will pay $695 • Incomes above $37,000 will pay 2.5% of income • Incomes below the filing threshold of $9,350 in 2010 have no penalty (this threshold will be higher in 2014 but is not known at this time – indexed based on CPI-U each year)

6. Individual Penalties and Caps • The penalty for an individual will be capped at the national average premium for a bronze-level plan • The CBO (Congressional Budget Office) estimates this amount to be between $4500 and $5000 in 2016 • The following two illustrations show these caps for individuals

7. Figure A-1. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $50,000

8. Figure A-2. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $500,000

9. Family Penalties & Caps • In 2014: • Incomes below $55,000 will pay $285 • Incomes above $55,000 will pay 1% of income • In 2015: • Incomes below $75,000 will pay $975 • Incomes above $75,000 will pay 2% of income • In 2016: • Incomes below $110,000 will pay $2,085 • Incomes above $110,000 will pay 2.5% of income • Based on a family of four

10. Figure A-3. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $125,000

11. Figure A-4. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $500,000

12. Affordability • General rule: Employee’s share of the self-only premium for the employer’s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income or the employee may be eligible for a premium tax credit to purchase Exchange coverage • Treasury-proposed safe harbor: No employer penalty if the employee’s share of the self-only premium for the employer’s lowest-cost, minimum value plan does not exceed 9.5% of the employee’s current W-2 wages from the employer • Clarifies that an employer must offer coverage to employees and dependents, but that the affordability test is based on employee contribution to self-only coverage

13. Affordability

14. Actuarial Value • The ACA establishes community rates on all qualified health plans which are marketed as tiers with a pre-established Actuarial Value (AV) of the required Essential Benefits • Proposed AV Tiers: • Platinum = 90% • Gold = 80% • Silver = 70% • Bronze = 60%

15. Actuarial Value • Tiers will be based on Actuarial Value (AV) Scores • AV Tiers will have a variation of +/- 2 percentage points • For example rates for the Silver tier will have an AV between 68 and 72% • This approach greatly reduces rate differentials between plans and carriers

16. Essential Benefits • Recommended set of 10 benefits in each plan which include: • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental Health and Substance Abuse (behavioral health)

17. Essential Benefits (Cont’d) • Prescription Drugs • Rehabilitative and habilitative services and devices • Laboratory services • Preventive and wellness services and chronic disease management • Pediatric services, including oral and vision care

18. Essential Benefits • No annual dollar limits • Maximum deductible of $2000 individual and $4000 family Employers with 50+ employees: • Employer requirement to offer essential benefits • Penalty of $2,000 per employee for failure to comply

19. Large Group Tax Penalty Calculation

20. Additional 2014 Rules • Small group redefined as 1 to 100 • Premium taxes on carriers – can be passed directly to the fully insured plan • Medicaid Program Expansion – state decision to offer coverage to individuals up to 133% of the Federal Poverty Level • Guarantee Issue • No Pre-Existing Conditions for adults

21. Guarantee Issue • All health insurance plans will no longer be underwritten – coverage is guaranteed regardless of health • No pre-existing condition limitations for adults • Children have been exempt since 2010 • Must have Creditable Coverage • Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days

22. No Pre-Existing Conditions • No pre-existing condition limitations for adults • Children have been exempt since 2010 • Must have Creditable Coverage • Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days • Without Creditable Coverage an adult has a 12 month pre-ex limitation

23. Exchanges • Mechanism to purchase health insurance for individuals and employer groups with 1 to 100 employees • ACA was drafted for states to run exchanges, but a majority of states have refused to comply and deferred to the Federal Exchange, including Ohio

24. Exchange Functions • Certify that health plans are ‘qualified’ with Essential Benefits • Operate website for comparisons • Operate a toll-free hotline • Determination of consumer eligibility for plans and affordability programs (tax credits, Medicaid, CHIP, etc.) • Facilitation of consumer enrollment

25. Federal Exchange Rules • Accepts all health insurance carriers • Guidance indicates intent to work with agents and brokers • Will not replace a states Department of Insurance • HHS (Health and Human Services) will manage web site and consumer hotline

26. Small Business Health Options Program (SHOP) • Exchanges will allow employer groups to enroll • Employees allowed choice among plans • Coverage from multiple carriers but one bill • Employers can also offer a single plan • Includes groups with 1 to 100 employees • In 2017 100+ employee groups can enroll

27. Role of Brokers • Guidance from HHS suggests a role a ‘Navigators’ • Must pass certification • Recent proposed legislation on MLR and commission exclusion passed Senate in September • HHS will integrate link to web portal for certified agents/brokers

28. Plan Design Strategies • Defined Contribution Health Plans • For employers with under 50 employees drop coverage altogether and fund a fixed dollar amount into individual medical accounts for employees to purchase their own coverage • Eliminates renewals, fiduciary liability and provides employees more choices • ERISA (self-funded plans) are exempt from ACA regulation • Additional exemptions – Unions, MEWA’s, etc.

29. Questions? • If you want to learn more about PPACA and receive future updates subscribe to our newsletter or call me: Doug Helser, Life & Health Specialist MMA Insurance 614-834-6624 or 614-961-0339 dough@mmains.net www.mmains.net