New Jersey State Policemen’s Benevolent Association March 6, 2013

1. Health Reform: What Does it All Mean and What Changes Are Ahead? Jessica Waltman, National Association of Health Underwriters New Jersey State Policemen’s Benevolent Association March 6, 2013

2. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

3. Recap on Health Reform • President Obama signed Patient Protection and Affordable Care Act (PPACA) on March 23, 2010 • Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms • Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant • For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage • Focuses on insurance market reforms and subsidies – does not really address the true cost of health care • Bulk of the reforms take effect in 2014, but there are still many aspects of the law employers need to be cognizant of between now and then

4. Supreme Court Outcome • The Supreme Court upheld the constitutionality of PPACA and the individual mandate • Although the mandate was deemed not constitutional under the Commerce Clause, it was deemed to be an appropriate use of the Congressional power of taxation • Bottom line: Congress can’t force Americans to obtain broccoli, but they can tax or penalize Americans who don’t • The court also ruled 7-2 to allow PPACA’s expansion of the Medicaid program, but it struck down the portion of the law that would have penalized states that chose not to expand their Medicaid programs by taking their existing federal Medicaid funds away. This part of the ruling gives states significant leverage, as it will create a coverage hole in states that choose not to expand their programs for financial reasons.

5. Health Reform Implementation

6. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

8. Political Landscape

9. Preparing for the Big Year Ahead! • 2014 is going to bring great changes to the world of employee benefits • The kinds of coverage available will change, as will the requirements and options for employers and employees • Change can be scary but it’s also a time of great opportunity

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11. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

12. Grandfathered Plans • To keep a grandfathered plan, insurers and employers have to meet strict standards. • Plan design essentially needs to stay static. Exceptions for collective bargaining agreements and improved benefits. • Cost-sharing and employer contributions changes are capped. • Grandfathered plans are only exempt from certain requirements. • It’s very hard to maintain a grandfathered plan for any length of time. • In 2012, 48 percent of those who get coverage through their jobs were enrolled in a grandfathered health plan, down from 56 percent in 2011. Employers can offer grandfathered and non-grandfathered plans. • If you are in a grandfathered plan your employer is required to provide a notice. • Grandfathered plans may not have all of the same benefits but non-grandfathered may have higher cost “If you like your health care plan, you can keep your health care plan.” President Obama, August 2009

13. September 23st Reforms

14. What Else Is Already Happening • Small Business Tax Credits • Federal Premium Rate Oversight • Account-Based Plans • Cannot reimburse OTC drugs without Rx • HSA distribution tax increase • FSA Contributions Capped at $2500 • Medical Loss Ratio requirements/rebates • Summary of Benefits and Coverage • W2 Reporting begins (requirement is optional for employers who issue less than 250 W2s until further notice)

15. What’s Already Done

16. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

17. Individual Mandate YES or NO

18. Exchange Marketplace • As envisioned, “streamlined, easy to use, consumer friendly, neutral online marketplace for health insurance” • One-stop shopping for Medicaid, CHIP, subsidized coverage and other individual coverage • Subsidized coverage will only available for individuals purchasing through an exchange, not those in an employer group • People with adequate and affordable group coverage cannot leave group plan for subsidized individual exchange coverage Obama Administration is attempting to rebrand Exchanges as “Marketplaces” • Three Governance Options: • State-Owned and Operated • State-Federal Partnership Model • Federal Fallback Exchange • NJ will have a federal exchange • First Open Enrollment 10/1/2013-3/31/2014

19. NJ Will Expand Medicaid • NJ already has one of the most generous Medicaid programs in the country . • Approximately 7% state residents have Medicaid coverage now. • Expansion expected to extend coverage to 300,000 NJ uninsured. • Most of the beneficiaries will be low income adults. • Pre-health reform NJ adults without children were not eligible unless they applied for welfare and earned no more than $140 a month.

20. Individual Coverage Subsidies

21. The Congressional Budget Office’s Take on the Subsidies

22. Premium Tax Credit’s Varying ImpactSource: Kaiser Family Foundation’s Subsidy Calculator

23. Price and Design of Small Group and Individual Market Plans

24. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

25. Basic Coverage Rules for Large Employers

26. Summary of Potential Employer Penalties under PPACA, Congressional Research Service, May 14, 2010

27. Large Employer Coverage Tests Affordable Minimum Value

28. Who has to be offered coverage? Full Time Employees (30 hours or more a week) Dependents who are defined as employee’s children under age 26 (IRC §152(f)(1)) Employers will not face tax penalties for electing not to offer coverage to spouses. If a spouse has no other source of affordable employer-sponsored coverage, he/she could get an exchange subsidy. • Other Key Points About Coverage Offers • A large employer will be considered as offering coverage to full-time employees if they offer coverage to 95% of their full-time employees and dependents(or, if greater, to 5 employees). Note: if any of the 5% of full-time employees who are not offered coverage receive premium tax credits from an Exchange, the employer will be required to pay an annual penalty of $3,000 for each of those employees.

29. Many Employers May Try To Be 49ers and 29ers

30. Determining Full-Time Employee Status • Generally, an employee who was employed on average at least 30 hours of service per week or 130 hours of service per month is considered full-time. • When calculating hours of service, the following rules apply: • The common law definition of employee is used. • All hours of service an employee performs for members of the controlled group are counted. • Each hour for which an employee is paid, or entitled to payment, for performance of duties for the employer is counted including vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence • For union/multi-employer plans, an employer won’t be penalized if: • The employer is required to make a contribution to a multiemployer plan with respect to a full-time employee pursuant to a collective bargaining agreement or appropriate related participation agreement • Coverage under the multiemployer plan is offered to the full-time employee (and the employee’s dependents) • The coverage offered to the full-time employee meets the law’s affordability and minimum value standards

31. SHOP Exchanges • SHOP Exchanges will be a new purchasing environment for small employers • Only place an employer can receive the small business tax credit post-2014 • States can allow large groups entry in 2017 if they choose • All small groups, including those who purchase SHOP coverage for employees will be subject to new market rules and plan design changes in 2014

32. Is SHOP Coverage Subsidized? • Subsidized coverage will only be available for individuals purchasing individual coverage through an exchange • Low-income individuals who are part of an employer group that buys coverage through a SHOP exchange are not eligible for a personal premium tax credit • Only subsidies that will be distributed through the SHOP exchanges are the small business tax credits • People with “adequate” and “affordable” group coverage cannot leave group plan and buy subsidized coverage through the individual exchange, even if they are low-income

33. Other Employer Requirements

34. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

35. Cost of Health Reform • Originally projected to cost the federal government approximately $1 trillion over 10 years. • Now projected to cost $1.3 trillion over 10 years. • Vast majority of the cost of the law to the federal government is paying for the Medicaid expansion and the coverage subsidies for Americans without affordable employer coverage who earn between 100-400% of the federal poverty level. • While the law does provide for some savings through increased efficiencies, it also contains a significant amount of revenue enhancements too.

36. New Direct Tax Changes for Individuals and Employers

37. End of Your Bill Taxes

38. New Taxes That Will Increase Costs of Goods/Services

39. Cadillac Tax

40. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals What’s About to Change for Coverage at Work Cost and Taxes Questions

42. Thank you! Jessica Waltman Senior Vice President of Government Affairs National Association of Health Underwriters jwaltman@nahu.org