Time to Implement! Moving Forward with Reform

1. Time to Implement!Moving Forward with Reform By Michael Bertaut, Healthcare Economist and Exchange Coordinator Blue Cross and Blue Shield of Louisiana Pro Audience2014

2. Disclaimer—this presentation not for distribution • All information in this presentation INCLUDING THE OPINIONS OF THE PRESENTER are solely for illustrative purposes. The information is based on certain assumptions, interpretations, and calculations that are not necessarily accurate with regard to provisions of PPACA, HCERA, HIPAA, COBRA, ERISA, and other rules, regulations, guidance and all other documents issued by relevant state and federal agencies with regard to these laws and any other relevant laws. The information provided should not be considered as legal, financial, accounting, planning, or tax advice. You should consult your attorneys, accountants, and other employees or experts of this type of this type of advice based on their own interpretations, calculations, and determinations of applicable laws, rules, regulations, guidance, and any other documents and information that they determine may be relevant. The authors make guarantees or other representations as to the accuracy or completeness of the data in this presentation. • BCBSLA expressly disclaims any liability for information obtained from use of this presentation by any BCBSLA employee or by any other person. No warranty of any kind is given with regard to the contents of the presentation.

3. Setting The FieldHealthcare Financing Pre-PPACA The US and Louisiana Healthcare Financing Picture that Led to Passage

4. 316 Million seeking Healthcare46 Million Without in 2010 Employer Based ~160m The Affordable Care Act was NOT designed, nor is there enough money allocated, to replace the Employer-Based Health Insurance System. Government ~100m Individual ~10m Healthcare.Gov!

5. The Uninsured: Who were They? “46.3M Uninsured @ the end of 2009, Census 9/10/10” September 10, 2009 Census Bureau Conference Call: 2008 Update on Poverty and the Uninsured

6. Louisiana Medicaid Today: 1.3 million Enrolled • Children in modest-low income households • Blind • Disabled (Receive SSI) • Low income Seniors • Low income pregnant women WHILE they are pregnant • Foster children to 26 • Uninsured with breast or cervical cancer

7. The No Coverage Zone PLANNED EXPANSION (PPACA) 401% of FPL and above, you are on your own! 0% to 138% New Medicaid Expansion 139% to 400% Exchange Subsidy Eligible 0% Federal Poverty Level Income In the States with No Medicaid Expansion, there is a coverage gap……Here is our ACTUAL expansion. 0 to 99% of FPL 100 to 400% of FPL Coverage Gap In 2014, 100% of FPL is $11,670 for a single person, $19,790 for a family of 3.

8. Simulation:Would You Take this Deal? Exchange Performance and Louisiana Membership Results from BCBSLA on www.healthcare.gov

9. Decision Time:PPACA Participation-- The Offer • Millions of new subsidized customers • Mitigation once losses hit a certain threshold • Fed will build a well-advertised online marketplace and guarantees a level playing field. • A law that requires (sort of) almost all Americans (sort of) own your product • A federal commitment to improving the market, products, and the process with “fair” rules.

10. Decision Time: Part 2 • Federally specified caps on Gross Margin • Federally specified product design • Non-market based federal limits on executive salaries and deductibility • Federally funded competitors • Fed contract products in direct competition • Constant demolition of forecasting models by political reaction to unanticipated issues. • Federally specified sales periods, 3 month per year • Absolutely no pre-sale risk adjustment allowed • $Billions in new taxes, indexed to revenue/market share • Millions of hours of compliance work, and reporting requirements pre- and post- enactment • If you fail to participate, you surrender at least 1/3rd of your market share to your competition.

11. BCBSLA and Healthcare.Gov • Full Participation and Implementation since CEO directive in Summer 2010 • Early Recognition of Tight Deadlines and resource challenges • Recognition of potential for competitor gains from non-participation. 1m La. already locally controlled. • Very interested in recapturing any dissolved small group members. “It’s the Law of the Land until somebody tells us differently” (Reitz, May 2010)

12. BCBSLA and Healthcare.Gov • Multiple products in all 64 parishes. Bronze, Silver, Gold, Platinum across the board. • Avoided pushing narrow network products to minimize disruption and confusion. 1 out of 10 per metal level. • Worked closely with national lobbyists and CMS to get smooth launch.

13. BCBSLA and Healthcare.Gov • Through 4/7/2014: • 51,000 individual members paid. • 37,000 on-exchange, 14,000 off-exchange • 39% are age 51-64. • More than half are female. • About 70% of submitted exchange contracts are paid. • 93% of on exchange include federal subsidies, average 70% of premiums covered. • 78% NEW BUSINESS. OFFICIALLY CLOSES 4/15/2014! Roughly 40% of applications are using representation of any type (Agent, Broker, Navigator)

14. SPECIAL ENROLLMENT TYPES AND TIMEFRAMES (Next open 11/15/14)

15. Who Has to Obtain Coverage? • Deadline 3/31/2014 !! • Current Exemptions: • Low-income individuals in states that are not expanding Medicaid; • Holding a plan to be cancelled • Undocumented immigrants; • Indian tribal members; • Members of certain religious sects who do not participate in SS or Medicare. • Individuals who are in prison • Victims of Domestic Violence • Homeless • You have a shut-off notice from a utility company • Death of a close family member • Have an eviction notice. Fines: 2014 = 1% or $95 2015 = 2% or $325 2016 = 2.5% or $695

16. What is covered in a Qualified Health Plan? • All Individual and Small Group Plans MUST match the Benchmark Essential Health Benefits Plan in breadth of coverage. • For 2014/15, in Louisiana, the Benchmark will be the coverage offered in • BLUE CROSS GROUPCARE PPO on 12/31/2011 • This is a very rich plan. Includes pregnancy coverage on all members, mental/nervous/ autism spectrum disorder, and a very wide formulary.

17. The Zero Cost Conundrum: USPSTF Schedules “A” and “B” • Qualified Health Plans MUST offer anything that USPSTF classifies as “A” or “B” level preventive service, screening, or immunization at ZERO cost to the member. • Originally, this included 40 different immunizations, screenings, and tests. • Research is ongoing, the standard is a moving target. Just since 2012 they have added: • Free thoracic CT Scan for heavy smokers • Free ultrasound for aortic aneurism • Free chemo drugs BEFORE at-risk women get cancer • Free screening for gestational diabetes for the not at risk. • Free cervical cancer immunizations for boys • Grandfathered Groups are NOT subject to this authority.

18. Price Impact: New Taxes and Fees

19. How Does Healthcare.gov Work?

20. Cost Sharing Reductions/Variants Note: Cost Sharing Reductions are ONLY available on Silver Plans, not Bronze, Gold, or Platinum plans.

21. NOT Advanced Tax Credit Eligible • Incarcerated. • Income above 400% of FPL. • Income below 90% of FPL. • Offered coverage at work that is affordable and at least 60% AV. • Medicaid or CHIP eligible (income up to 138% FPL in states that have agreed to expand). • Failed to file required tax returns in previous year. • Unable to attest to residency in a single state. • In the country unlawfully.

22. Subsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old Male Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

23. Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old Male Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

24. Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old Female Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

25. The 3 Questions Every Employer Must Begin With: • How many full time Employees do I have (average FTE’s per month)? • Am I an Applicable Large Employer (ALE)? How Large? • Have I the processes and record-keeping in place to PROVE MY STATUS? Section 26 USC 4980h Compliance; The “employer mandate”

26. How Many Average FTE’s Do I have? Controlled , Affiliated and Associated Groups Must be COMBINED for this computation!!! Notice must be accurate to the hundredth of a FTE. If I work for different members of the same aggregated group, my hours must be combined to see if I am “full time”.

27. If the Answer is 0 to 49.99 FTE’s…. • No obligations to provide affordable coverage • No obligations to provide valuable coverage • No federal obligations to offer coverage…state law applies • No danger of fines under 4980H • You must still be able to demonstrate your Non-ALE status.

28. If the Answer is 50 to 99.99 FTE’s • Administration is delaying your enforcement until 1/1/16 : IF • You didn’t get to 99 by reducing your workforce except for bona fide business reasons; AND. • You keep in place any coverage offered on 2/9/2014; AND • You pay at least 95% of the premium contribution you were paying on 2/9/2014. • On 1/1/16 you must comply in full with 26 USC 4980h sections a) and b) and offer to 95% of your full time workforce and dependants. (not spouses) • Non-compliance means fines. • You must track membership beginning 1/1/14.

29. If the Answer is 100+ FTE’s • You must offer to 70% of full timers in 2015. • You must offer to 95% of full timers in 2016. • At that point, you must comply in full with 26 USC 4980h sections a) and b) and offer to dependants (not spouses). • If you lay off people to get below 100, IRS will demand proof of bona fide business reasons. • Non-compliance means fines. • You must track membership at all times beginning now.

30. Transitional Relief for Non-Calendar Year Plans • An employer can wait until his non-1/1 renewal date to comply, IF: • Renewal date was not modified after 12/27/2012 • As of February 9, 2014, in the preceding 12 months at least 25% of all employees are covered; or • 33% of all full time employees are covered; or • 33% of all employees are offered coverage; or • 50% of all full time employees are offered coverage. • If you do not comply by renewal date, fines apply retroactively to 1/1/15.

31. Who is a dependant under 4980H? • Your legally adopted or birth-children until the last day of the month in which they turn 26 years old. • Your non-US Citizen children who are a citizen of Mexico or Canada. • Excludes foster children. • Excludes Step children.

32. Who is an employee under 4980H (that is, who must be offered coverage?) • Any common law employee except: • Leased Employees (Section 414(n)(2)) • Sole Proprietor • Partner in a Partnership • 2% S-Corporation Shareholder • Section 3508 Worker (real estate agents, certain other direct sales relationships) Note that H-2A and H-2B workers are employees under this standard unless they are seasonal.

33. The Price of Failure-2015 and Beyond (ALE’s 50-99.99 start 2016) • 4980h a) Fine “ALPHA” • Requires that all ALE’s offer minimum essential coverage to AT LEAST 95% (70% for 2015) of their benefit eligible employees. • If no compliance, only ONE benefit eligible employee has to draw an advanced tax credit from an Exchange to trigger the fine. • Fine is ENTIRE BENEFIT ELIGIBLE WORKFORCE COUNT minus 30 x $166.67/month without coverage. • 4980h b) Fine “BRAVO” • Requires that the offer in a) be “affordable” and “at least 60% actuarial value”. • If no compliance, each benefit eligible employee drawing an ATC from Exchange will trigger a $250/month fine, up to a max of the fine computed in a).

34. What Does “Affordable” Mean?Final Safe Harbors as of 2/10/14) • Federal Poverty Line: • Use 100% of FPL x 9.5% = affordable premium for all employees. Use FPL number up to 6 months in advance. • In 2014, would be $11,670 x 9.5% = $1,108.65 ($92.38/mo) • Rate of Pay: • Use hourly rate times 130/month to determine wages x 9.5% to compare to premium, or 9.5% of monthly salary. • Cannot be used for “tipped” employees. • At $10/hour, $1,300/month x 12 x 9.5% = $1,482.00 ($123.50/mo) • 9.5% of Employee Box 1 W-2 income in premiums for employee-only coverage. • Determined at end of calendar year, and on an employee-by-employee basis, based on THIS YEAR’s wages. • Partial-year adjustments allowed for new employees who work part of a year. • At $20,800/year ($10/hr full time) = $1,976.00 /$164.67m

35. Preparing for the Inquiries: 2016 and Beyond (How to NOT pay fines) • Prove you are under 50 FTE’s or under 100 FTE’s in 2015 only. • Prove the employee in question was never full time when he worked for your firm. • Prove the employee in question was offered an insurance plan that met the federal definitions of affordability, and offered at least 60% AV.

36. Contact Info: Michael R Bertautmichael.bertaut@bcbsla.comLinked-In Recommendations Welcome! Office: 225-297-2719 Cell: 225-573-2092

37. Appendix SlidesFull Presentation Plus Covering Individual and Group Insurance issues

38. Subsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old Female Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

39. Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old Female Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

40. Clarity on Medicare • Medicare Part A is considered minimum essential coverage. Part B alone is not. • Agents and Brokers may NOT sell QHP’s to Medicare eligible clients. • A Medicare eligible PAYING FOR PART A may choose to forego Medicare and purchase a subsidized plan from www.healthcare.gov. If they choose to go BACK to Medicare fines may apply. • You may not have both Medicare and a QHP with subsidies. If you keep both, any www.healthcare.gov funding will cease. • If your employer provides retiree coverage through a SHOP plan, you may keep the plan and Medicare. Medicare will be secondary payer.

41. The Employer Mandate and Classifying Your Workforce Section 4980h Treasury 2014-03082 11 February 2014

42. Who is benefit eligible (Full Time) and When?(IRS Bulletins 2012-58/59, PHSA 2708) • Any employee who averaged 30 hours of service per week or 130 hours per month. • No eligible employee may be required to wait more than 90 days until coverage becomes effective. • Coverage not required for Seasonal Workers who are engaged for less than 6 months per year. • Volunteer emergency first responders are not covered • Teachers are full time, even if they don’t work 3 months/year.

43. What is a Common Law Employee? • FOR THE ALE COMPUTATION, the common law definition of employee must be used: • “Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done.This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.” (www.irs.gov)

44. Transitional Relief for Non-Calendar Year Plans • An employer can wait until his non-1/1 renewal date to comply in 2015, IF: • Renewal date was not modified after 12/27/2012; and • As of February 9, 2014, in the preceding 12 months at least 25% of all employees are covered; or • 33% of all full time employees are covered; or • 33% of all employees are offered coverage; or • 50% of all full time employees are offered coverage. • If you do not comply by renewal date, fines apply retroactively to 1/1/15. No transitional relief in 2016.

45. Who is an employee under 4980H (that is, who must be offered coverage?) • Any common law employee except: • Leased Employees (Section 414(n)(2)) • Sole Proprietor • Partner in a Partnership • 2% S-Corporation Shareholder • Section 3508 Worker (real estate agents, certain other direct sales relationships) Note that H-2A and H-2B workers are employees under this standard unless they are seasonal.

46. The Price of Failure-2015 and Beyond (ALE’s 50-99 start 2016) • 4980h a) Fine “ALPHA” • Requires that all ALE’s offer minimum essential coverage to AT LEAST 95% (70% for 2015) of their benefit eligible employees. • If no compliance, only ONE benefit eligible employee has to draw an advanced tax credit from an Exchange to trigger the fine. • Fine is ENTIRE BENEFIT ELIGIBLE WORKFORCE COUNT minus 30 x $166.67/month without coverage. • 4980h b) Fine “BRAVO” • Requires that the offer in a) be “affordable” and “at least 60% actuarial value”. • If no compliance, each benefit eligible employee drawing an ATC from Exchange will trigger a $250/month fine, up to a max of the fine computed in a).

47. Allowable Mandatory Coverage Rules • An employer can REQUIRE participation in his health plan as a condition of employment under the following circumstances: • The offer is at least 60% AV; AND • The offer is provided at no cost to the employee; OR • The offer is provided at a premiums for self-only coverage equal to or less than 9.5% of 100% of FPL for that calendar year ($92.38/month for 2014)

48. Grandfathering: Why Keep It? • Not subject to Rate Compression or New Federal Underwriting Laws • Not subject to 3:1 age rating • Can keep existing rate/benefit plans • Not required to add ANY new coverage for USPTF Schedule B tests, immunizations, or screenings, or treatments. • Enjoy limited protections from experimental medicine costs and clinical trial expenses. • About 60% of BCBSLA group members and 50% of Individual members are in GF plans. “You’re Darn Tootin’ Listen to your Grandfather!!”

49. Grandfathering: How to Keep It? • Plan must have been in force on 3/23/2010. Plans sold since are NOT Grandfathered. • Plan must not eliminate or omit any of the coverage or treatments covered on 3/23/2010. • Plan cannot adjust coinsurance against employee/insured at all. • Plan cannot increase deductibles or co-payments by more than Medical Inflation plus 15% since 3/23/2010 (currently 25.56% cumulative since 3/23/2010). • Employer Plan cannot increase employee’s share of premiums by more than 5% over the baseline percentage share on 3/23/2010. “You’re Darn Tootin’ Listen to your Grandfather!!”

50. Civic Organization designed to provide unbiased information on PPACA • Healthcare and Wellness Information • Focused on explaining drivers of healthcare costs, the critical importance of personal wellness, and the need for access to quality healthcare for all Louisiana’s citizens. • Solely an educational resource, not seeking to create public policy • Over 200 member organizations, including LDOI! • JOIN THE EFFORT @ www.lhec.net