Health Insurance Exchanges and the Small Group Market

1. Health Insurance Exchanges and the Small Group Market September 11, 2012 Delaware Society for Human Resource Management

2. Agenda • Healthcare Reform in Delaware • Overview of Health Insurance Exchanges • Employer Eligibility for the Exchange • Eligibility for Tax Credits • Employer Mandate • Relevant Definitions • Exchange Purchasing Model and Process • Waiting Periods • Employer Affordability Safe Harbor

3. Health Care Reform in Delaware • Medical Homes • Workforce Development • Delaware Health Information Network (DHIN) • Emergency Room Utilization Study • Essential Health Benefits • Health Insurance Exchange

4. Overview of Health Insurance Exchanges • The Affordable Care Act requires that each state will have a health insurance exchange (Exchange) operational in 2014. • Exchanges are marketplaces that will allow an individual or small business to shop for, compare, select, and pay for private health insurance plans that meet certain quality and value criteria. • States have four options to meet this requirement by 2014: • Establish and operate a State-run Exchange • Identify and establish a partnership with other states to establish a Regional Exchange • Cede all functions to the Federally Facilitated Exchange • Enter into a partnership with the Federally Facilitated Exchange in which the State retains Plan Management, Consumer Assistance, or both areas of Exchange functionality

5. Overview of Health Insurance Exchanges • Given Delaware’s small expected Exchange enrollment, financial analyses showed that the cost of operating an Exchange may be too large to justify a State-based Exchange. • Delaware aims to minimize any additional administrative cost that may impact premiums in the State. • Risk is too high for the first year of operation to make a State-based Exchange feasible. • Delaware has opted to pursue a State-Federal Partnership in which the State retains Plan Management and Consumer Assistance functionality. • Plan Management and Consumer Assistance have the highest impact on consumers and other stakeholders in the State. • The Federal government would assume responsibility for supporting the technical infrastructure of the Exchange. • Delaware has been working very closely the Federal agencies responsible for Exchange implementation to ensure that the State’s interests are protected and the needs of Delawareans are met.

6. Employer Eligibility for Exchange • Small Business Health Options Program (SHOP) Exchange will offer health insurance plans to small employers starting in January 2014 • According to current guidance, the Exchange will adopt current DE small group market rules for 2014 and 2015 • Starting in 2016, the SHOP Exchange must offer coverage to businesses with ≤100 employees • States may choose to expand to larger groups in 2017 and beyond • Total employees for Exchange eligibility = full time workers, part time workers, and seasonal employees • For seasonal workers, employee count is equal to the proportion of days worked in a year.

7. Tax Credit Eligibility • Employers with < 25 low wage employees may be eligible for tax credits • Low wage = maximum of $50,000 per year • Tax credit may equal up to 50% of employer share of premium

8. Employer Mandate • ACA requires large employers to provide minimum coverage to all full time employees • Employee contribution is ≤ 9.5% of the employee’s W-2 wages • If your employee earns $28,000 per year, they may pay a maximum of $222/month for their share of the premium • If an employer chooses not to offer coverage to their employees, the employer will be charged a penalty if: • An employee enrolls in an individual Exchange plan AND qualifies for a federal subsidy (income less than 400% FPL) • Penalty = $167 per month per full time employee (less 30 full time employees)

9. Large Employers and Full Time Employees • Large Employer for Purposes of Penalty: • Average of 50 or more full time employees on business days during the preceding calendar year • A business can claim an exemption from large employer status if: • The total number of full time employees only exceeded 50 for less than 120 business days, OR • If the full time employees in excess of 50 were all seasonal employees • Full time employee: An employee who worked, on average, 30 hours per week during the calendar year

10. Who is considered an employer? • Sec 414 (b): Employees of a controlled group of corporations are treated as though they are employed by a single employer • Sec 414 (c): Employees of partnerships, proprietorships, etc, that are under common control are considered employed by a single employer • Sec 414 (m): Employees of an affiliated service group or organization (e.g. groups that are shareholders or regularly perform services for another organization, including managerial services) are employed by a single employer • Sec 414 (o): The Secretary of the Treasury may provide additional regulations to prevent the avoidance of employee benefit requirements through the use of separate organizations, employee leasing, or other arrangements

11. Who is an employee? • Common Law of Agency Principles for the employee-employer relationship • You have the right to control and direct the individual who perform the services provided • You have the right to discharge the individual • The individual is economically dependent on the business for whom they are providing services

12. How an Exchange Works • General process for purchasing coverage in the SHOP: • Employerlogs into Exchange website • Employerenters basic information about employees who will be offered coverage • Employer sets parameters for plan options • Employee logs in using “access code” from their employer • Employee views all options made available to them and the premium they will pay after their employer’s contribution is deducted • Employee chooses option and completes enrollment • There are four potential purchasing models for the Exchange...

13. Note on Exchange Purchasing Models • Federal regulations supported a defined contribution model for Exchange plans • Currently, defined contribution is 50% of employee premiums for small group plans in Delaware • However, no specific contribution requirements have been issued for the Exchange. The only requirement is that there must be a plan offered that fits the affordability guidelines. • The following models include examples of employer contributions and do not propose a specific employer contribution level

14. One Carrier, One Plan Employer chooses one plan and pays 50% of premium, or $207.

15. One Carrier, Multiple Plans

16. Multiple Carriers, One Plan Level

17. All Carriers, All Plans Employer share is fixed at $207 (50% of Silver Level Plan from Carrier B) and employee pays the difference

18. All Carriers, All Plans Employer share is fixed at $167 and employee pays the difference

19. Waiting Periods for Insurance Coverage Eligibility • Waiting periods must not be longer than 90 days • Defined as the period that must pass before the individual is eligible to be covered for benefits under the terms of the group plan • Special enrollment periods apply for individuals when they become eligible for coverage under their employer’s plan

20. Employer Affordability Safe Harbor • 9.5% affordability is based on Box 1 of the W-2 for that employee from you (as an employer), not on the employee’s total household income. • Affordability is based on self-only coverage. • If an employee chooses to enroll in coverage through their employer, even if it doesn’t meet the affordability standard, no penalty would apply.

21. Future Guidance and Updates • The information provided in this presentation is based on the most current guidance available to states. • The US Department of Health and Human Services (HHS) has stated that they will release further guidance on operational components of the SHOP under a Partnership model in the near future. • The Delaware Health Care Commission (HCC) will continue to provide the most current information on Exchange planning and other aspects of Health Care Reform in Delaware. • HCC meetings are open to the public and occur during the first Thursday of every month in Dover • Reports, FAQs, and updates are posted to the HCC website regularly: http://dhss.delaware.gov/dhcc