The Impact of Healthcare Reform (PPACA) on City Employees

1. The Impact of Healthcare Reform (PPACA) on City Employees Presented by: Lisa Ghotbi - Deputy Director, Health Service System Susan Gard - Chief of Policy, Department of Human Resources March 3, 2014

2. Today We Will Cover… • PPACA Summary • Impact on Healthcare Benefits • Impact on Healthcare Cost • Impact on Benefit-Eligible Employees • Intersection with our current Benefit Rules

3. PPACA – Healthcare Reform • On March 23, 2010, President Obama signed the health care reform bill, Patient Protection and Affordable Care Act (PPACA), into law. PPACA makes sweeping changes to the U.S. health care system including new requirements in five key areas: • Expanded & Consistent Coverage – “Essential Benefits” • Insurance Reform & Exchange Marketplaces • Health Plan Administration Requirements • Fees/Taxes • Individual & Employer Coverage Mandates • PPACA has an eight (8) year implementation timeline: 2010 to 2018.

4. Complex set of changes required: Taxes and Fees Exchanges and Subsidies Expand coverage for un-insured & under-insured Employer and Individual Mandate PPACA regulations are designed to standardize healthcare coverage for all Americans

5. Impact on Employee Healthcare Benefits • Expanded Coverage • Dependent children must be offered coverage up to age 26. • HSS coverage expanded from age 25 to age 26 in 2011. • Elimination of Pre-existing Condition Exclusions (no impact on HSS) • Minimum set of ‘Essential Benefits’ that plans must cover (no impact on HSS) • Elimination of Lifetime and Annual Maximums on ‘Essential Benefits’ • HSS eliminated $2Mil lifetime maximum in the UHC City Plan in 2011. • As healthcare coverage standardized, pre-tax Healthcare Flexible Spending Accounts (FSAs) were reduced to a maximum of $2,500 (from $5,000) in 2013.

6. Impact on Employee Healthcare Benefits • Access to Preventative Health Care • Zero employee cost-share for Prevention Services • HSS coverage changed from $15 copay to a $0 copay for preventive care and routine office visits in 2011. • Zero employee cost-share for an expanded list of Woman’s Preventative Services (including oral contraception) • HSS coverage changed to a $0 copay for all contraception 2013. • HSS has seen an increase in members obtaining their recommended screening and prevention services since this coverage change went into effect.

7. Impact on Employee Healthcare Benefits • Standardized “Essential Benefits” in the individual and small group insurance markets in 2014. • Ambulatory patient services • Emergency services • Hospitalization • Laboratory services • Maternity and newborn care • Mental health and substance abuse services, including behavioral health treatment • Prescription drugs • Rehabilitative and habilitative services and devices • Preventive and wellness services and chronic disease management • Pediatric services, including oral and vision care • For comparability to the plans on the Exchanges. Set State-by-State and includes all State mandates

8. Impact on Employee Healthcare Benefits • Large group and self-insured plans are required to meet similar standards for benefit generosity and plan affordability. • Minimum Value Standard: employers with 51 or more full-time employees must offer at least one plan with an actuarial value of at least 60% or face potential penalties. This means employees will be exposed to no more than 40% of the cost of care. • Large firms that offer ‘minimum value standard’ coverage cannot have the employee-only premium in the employer’s lowest-cost plan exceeds 9.5% of family income for any single employee or face penalties. • Group health plans may not impose annual deductibles greater than $2,000 single/$4,000 family for plan years starting on or after January 1, 2014, • Penalties are $2,000 per full-time employee monthly

9. Impact on Employee Healthcare Cost New Fees & Taxes & Other Added Cost 2.29% of the 2.43% 2014 premium increase is attributable to ACA fees and taxes. Additional ACA pharmaceutical and medical device excises taxes will be paid by plan vendors and passed on in future premium increases.

10. Impact on Employee Healthcare Cost The expanded coverage requirements, access to preventative care at zero copay, and standard essential benefits also add cost to the annual premium renewals which are paid by the employer and the employee. 2018 Cadillac Tax – 40% excise tax on all plans with a high aggregate value PPACA has additional cost reporting and innovation projects that are believed to be the cause of lower healthcare trends in the last few years… “Health care spending growth is the lowest on record (1.3%)” ….“Health care price inflation is at its lowest rate in 50 years (1%).” …“The ACA is contributing to the recent slow growth in health care prices and spending and is improving quality of care.” Trends in Health Care Cost Growth and the Role of the Affordable Care Act. Office of the President, November 2013.

11. Employer Mandate • Full-time employees (FTEs) entitled to health benefits for a limited cost • Statute defines “full-time” as working an average of at least 30 hours per week or 130 hours per month • Applies to temporary and permanent employees • Employees who work less than 30 hours and who do not receive employer benefits must have their hours tracked and reported to the IRS • Automatic enrollment: Large employers must automatically enroll new employees in coverage. • The Employer Mandate is delayed until 1/1/2015

12. City Review of PPACA Impacts on Employees • DHR team • HSS • Continuously vetting all issues to determine what, if any, changes the City needs to make to be compliant. • The Employer Mandate is delayed until 1/1/2015

13. City Review of PPACA Impacts on Employees

14. Summary • PPACA is standardizing healthcare coverage and this is having a positive impact on City employees: • Expanded coverage and free preventative services • Lower healthcare trends even with new taxes and fees • The employer mandate standardizes the definition of ‘Benefited FTE’ and includes a broader group of employees • City team continuously analyzing requirements to ensure compliance