Affordable Care Act: Health Care Changes for Agents and Brokers

1. Affordable Care Act: Health Care Changes for Agents and Brokers

2. Speakers Ashley Arnold General Counsel Insurors of Tennessee (615) 515-2606 aarnold@insurors.org Ryan Young Senior Director Federal Government Affairs Independent Insurance Agents & Brokers of America (202) 863-7000 Ryan.Young@iiaba.net

3. Agenda • ACA Implementation Timeline • Health Insurance Exchanges • Agent/Broker Role in Federal Exchanges • Navigators, Non-Navigator Assisters and CACs • Issues for Agents to Consider

4. Where To Find ACA Information • Dept. of Health and Human Services: www.healthcare.gov • Center for Consumer Information and Insurance Oversight: www.cms.gov/cciio http://marketplace.cms.gov • Internal Revenue Service: www.irs.gov • Dept. of Labor www.dol.gov/ebsa/healthreform

5. ACA Implementation Timeline

6. September 23, 2010 Reforms • Young Adults: Insurers required to allow young adults to stay on their parents’ health plans until they turn 26 years old. • Pre-existing Conditions: Insurance companies will no longer be able to deny coverage to children with pre-existing conditions. • Prohibition on Lifetime and Annual Limits:Insurers prohibited from imposing lifetime limits on essential benefits. In addition, annual limits on essential benefits may only be imposed as determined by the Secretary of Health and Human Services (HHS), until 2014 when this practice will be completely prohibited.

7. September 23, 2010 Reforms • Appeals Process: Plans required to implement a consumer appeals process for coverage determinations, claims and rescissions. • Rescissions: Insurers barred from rescinding policies to avoid paying medical bills when a person becomes ill. • Preventative Services: For plans beginning on or after Sept 23, 2010 (and all plans by 2018), regulations will require coverage of recommended preventive services (routine immunizations, preventive care for infants, children and adolescents, cancer screenings, etc) without co-pays, co-insurance or deductibles.

8. Temporary Small Business Tax Credits • Phase I: Small businesses with less than 25 employees and average annual wages of less than $50k are eligible for tax credits of up to 35% of the employer’s contribution. Employers must subsidize at least 50% of their employees’ premiums in order to be eligible (Available now through 2013). • Phase II: Beginning on January 1, 2014, tax credit is increased to 50% of employer’s contribution, with the same eligibility parameters. The credit will be available to each small business for two years only. Only available through SHOP exchanges.

9. 2011 January 1, 2011 • Medical Loss Ratios:Insurers must comply with new caps on “administrative expenses” of 20% for individual and small group plans and 15% for large group. Rebates must be disbursed to consumers if these ratios are breached. • FSA Restrictions: Over the counter drugs not prescribed by a doctor may not be reimbursed through FSAs or on a tax free basis through HSAs. • Doughnut Hole Closing: As of January 1, 2011 Medicare Part D beneficiaries that fall into the “donut hole” will receive a 50% discount on covered brand-name prescriptions. This will grow to a 75% discount by 2020. • Rate Review: Federal government (or states in 2012) have the power to force insurers to justify any rate increase over 10%. Does not give states or feds the power to block rate increase.

10. 2012 • MLR Rebates: Beginning in 2012, on August 1st of each year rebates are due to consumers if their insurer did not meet the requisite MLR ratio for the previous year. For 2012 only, insurers had to send notices to all customers regarding MLRs and rebates, whether they are due to receive a rebate or not. • W-2 Reporting: Employers required to report cost of employer sponsored group health coverage on employee W-2s for 2012 tax year. This value is not taxable. Employers issuing less than 250 W-2s exempt until further notice. • Summary of Benefits and Coverages: Beginning September 23, 2012 health plans must provide a standardized and easy to understand summary of benefits and coverages as well as a glossary of commonly used insurance terms developed by HHS.

11. Tax Increases in 2013 • Increase in Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200k ($250k family) for individual taxpayers– not indexed for inflation. • New 3.8% tax on unearned (investment) income with $200k ($250 family) individual threshold– not indexed for inflation.

12. More Tax Increases… • 2012: $2.6 billion tax on insured and self insured plans to fund comparative effectiveness research. • 2013: Excise tax of 2.3% on the sale of any taxable medical device. • 2013: Contributions to FSAs limited to $2,500 per year. • 2014: $8 billion annual tax on health insurance companies. The tax will increase each year until reaching $14.3 billion in 2018. For subsequent years the fee will increase based on the previous year’s premium growth.

13. 2013 Employer Notice Requirement • Employers must provide a written notice to all employees with information on the following: • (1) the existence of exchanges and contact information for assistance (can just be HHS website) • (2) the availability of premium subsidies through exchanges, and • (3) that if the employee purchases health insurance through an exchange, they will lose any employer contribution and that all or a portion of any contribution may be excludable from income for tax purposes.

14. Employer Notice Requirement(cont’d) • Employer must provide notice to existing employees no later than Oct. 1, 2013. • New employees must be provided notice within 14 days of start date. • Dept. of Labor has published draft model notices, which can be used by employers (available on DOL website). http://www.dol.gov/ebsa/newsroom/tr13-02.html http://www.dol.gov/ebsa/healthreform/index.html

15. 2013 (cont’d) • Agent training/registration to sell through the Federal exchanges will begin in “late summer”. • Open enrollment in all exchanges plans begins October 1, 2013, with coverage effective for January 1, 2014. • FSA Limits: Contributions to FSAs limited to $2,500 per year.

16. 2014 • Exchanges: Federal exchanges, state-federal partnerships (also technically FFEs), and state based exchanges all go online. Government subsidies available for purchase of private insurance up to 400% FPL. • Guaranteed Issue/Renewal: Coverage must be offered to anyone -- insurers are barred from considering pre-existing conditions. • Community Rating: Insurers may only vary rates due to certain factors (age, tobacco, geography and family size), and only within certain rating bands. • Medicaid Expansion: Tennessee has not opted to participate in the Medicaid Expansion.

17. 2014 (cont’d) • Small group fully-insured plan deductibles capped at $2,000 for singles and $4,000 for families. • Prevents the sale of higher deductible health plans combined with either HSA or HRAs to small businesses • Exception for plans with higher deductibles if combined with FSA that reimburses the difference between the higher deductible and $2,000 /$4000.

18. 2014: Individual Mandate • Beginning Jan. 1, 2014 virtually every U.S. citizen and legal resident will be required to purchase health insurance or face a tax penalty. • Exceptions exist for those who choose not to buy a policy for religious reasons, undocumented immigrants, incarcerated citizens, members of Native American tribes, and those with family income below the threshold requiring a tax return. • To satisfy the mandate, individuals must obtain health insurance for the entire year through one of the following sources: Medicare, Medicaid, CHIP, veteran’s health programs, a plan offered by an employer, or private insurance that is at least at the Bronze level (60% actuarial value). • Penalty for non-compliance will be phased-in according to the following schedule: • $95 (or 1% of income, whichever is higher) per person in 2014, • $325 (or 2% of income) per person in 2015, and • $695 (or 2.5% of income) in 2016. • After 2016, the penalty will be increased annually by the cost-of-living adjustment.

19. 2014: Employer Mandate...Delayed! Play or Pay • Must provide full-time employees (and dependents) with minimum essential coverage • Must be affordable (employee contribution must NOT exceed 9.5% of employee’s household income); and • Provide minimum actuarial value (plan pays more than 60% of covered plan expenses) • Pay a tax penalty • (i.e., shared responsibility payment) OR

20. 2014: Employer Mandate...Delayed! Impact on Employers • The employer shared responsibility requirements apply in a calendar year if the company averages at least 50 employees, including full-time or full-time equivalents during the prior calendar year. • Full Time employee: Work at least 30 hours per week on monthly average • Part Time employee: Count toward the total on an equivalent basis: • Divide the total hours of service of all employees who are not FT for the month by 120 to determine the FT equivalent. • Seasonal employees count towards the total for determining Employer applicability unless: • The group’s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and those seasonal employees are what put the employer over the threshold

21. 2014: Employer Mandate...Delayed! Example Total Hours (non-full-time employees) FTE Equivalent (by month) Full-Time Employees (by month) + ÷ 12 ÷ 120 30 Hours/Week OR 130 Hours/Month

22. 2014: Employer Mandate...Delayed! Penalties

23. 2017/2018 2017: States are permitted to allow businesses with more than 100 employees to purchase coverage in SHOP Exchanges. 2018: “Cadillac Tax” takes effect. A 40% excise tax is levied on employer-sponsored health plans with aggregate values that exceed $10,200 for individual and $27,500 for family. The tax is applied to the amounts that exceed the threshold and it will be indexed for inflation.

24. Health Insurance Exchanges

25. Purpose of Exchanges • ACA establishes the Health Insurance Exchanges (also known as Marketplaces) to help facilitate the purchase of health coverage for both individuals and small businesses (SHOP). • The law provides for subsidies to help eligible low-income and middle-come individuals (100% to 400% FPL) to purchase private coverage through an exchange. • Exchanges also allow for enrollment in Medicaid and CHIP.

26. State vs. Federal Exchange (FFE)

27. Exchange Metal Levels

28. Essential Health Benefits (EHBs) Required benefit categories: • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental health and substance use disorder services • Prescription drugs • Rehabilitative and habilitative services & devices • Laboratory services • Preventive and wellness services and chronic disease management • Pediatric services including oral and vision care Benefit Changes for Small Groups

29. New Rating Factors • All Market and Group Segments • Guaranteed Issue and Renewability • No Pre-Existing Waiting Period • Factors for Small Group Rates: • Age (3:1) • Tobacco Use (1.5:1) • Geographic Area • Family Size • Rates Not Based On: • Gender • Health Status • Previous Claims • Medical Underwriting • Number of Employees • Type of Business

30. Advanced Premium Tax Credits • Lower the monthly premium amount paid throughout the year. • Available on a sliding scale to eligible individuals with households: (1) with incomes between 100% and 400% of the FPL ($94,200 for a family of 4 in 2013), and (2) who don’t have access to minimum essential coverage, the equivalent of Bronze level plan and premiums cost no more than 9.5% of income. • Paid each month by the federal government to the insurer.

31. Cost-Sharing Reductions • Reduces out-of-pocket expenses, deductibles, copayments and coinsurance. • Available on a sliding scale to enrollees in Silver level plans with income between 100% ($23,550 for a family of 4 in 2013) and 250% FPL ($58,875 for a family of 4 in 2013).

32. Tax Credit Eligibility by Income Level

33. Carriers on Federal Exchanges • HHS has not distributed state-by-state information on insurer interest in offering plans on federal exchanges. • Final plan agreements will be signed by insurers by September– rates will be made public then. Carriers that have applied in Tennessee: BC/BS of TN Humana Cigna Coventry Community Health Alliance

34. Enrollment Periods for Individuals • First Open Enrollment will be October 1, 2013 through March 31, 2014 • Coverage starts January 1, 2014 for plan selections made by December 15, 2013 • Annual Open Enrollment (after first year): • October 15th- December 7th • Coverage begins January 1 of the next year

35. SHOP Enrollments • October 1, 2013: Plans available for review and enrollment for coverage starting as soon as January 1, 2014. • Rolling monthly enrollments for employers after January 1st. • Once a group is enrolled, its rate is guaranteed for 12 months.

36. FFE SHOP Plan Selection • “Employee choice” delayed until 2015 in FFEs • In 2014, employers in FFE states will: • Choose one QHP to offer • Decide the percentage of premium to contribute • In 2015 and beyond, employer will choose single metal level (gold, silver, etc.) • Employee will choose plan from the specified metal level.

37. Small Group Business Benefit Changes for Small Groups Metal Level Coverage Requirements Bronze Silver Gold Platinum Essential Health Benefits Ten required coverage categories Out of Pocket Maximums New accumulation rules and ceiling Deductible Maximums* $2,000 single $4,000 family

38. Small Group Business Benefit Limits and Out-of-Pocket Costs Limits No annual limit No lifetime limit Small Group Deductible Ceiling Single $2,000 Family $4,000 Out-of-Pocket Maximums Single $6,350 Family $12,700

39. Small Group Business • Determine group size • Review SHOP plan options after October 1 • Discuss Private Exchange options • Review existing policy for comparison Document, Document, Document

40. Agent and Broker Role in FFEs

41. Agents In Federal Exchanges • In Tennessee’s exchange (run by HHS), agents will be able to help clients apply for coverage, select a health plan and be compensated directly by the carrier. • For the individual market, producers will be able to enroll consumers in either of two ways: • Through issuer websites • Work with the consumer using the exchange website • In the SHOP, agents and brokers will work with consumers using the exchange website to complete the employer and employee applications. http://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/agent-broker-5-1-2013.pdf

42. Producer Compensation in FFEs • Compensation determined through direct negotiation between the agent/broker and carrier. • The producer paid directly by the carrier; the exchange will not be involved in collecting or remitting compensation. • The only requirement by the federal government is that producers be paid the same inside and outside of exchanges for “similar health plans.” • In order to receive payment, during enrollment an agent will need to enter both his/her NPN number and an exchange ID number (received after completion of training/registration).

43. Agent Training and Registration • Training and registration to begin in “late summer.” • To participate in placing business through the federal exchanges, agents/brokers must: • Follow all state licensing, appointment, and market conduct requirements • Complete on-line exchange training modules • FFE and ACA basics training, Individual Market, SHOP • Complete identity authentication steps • Sign the agent/broker agreement • CMS estimates the entire process will take 4.75 hours to finish, and must be completed annually.

44. Draft Agent Registration Document

45. Publishing of Producer Contact Info • FFE will list agent/brokers who have successfully registered with the FFE will be made available on the exchange website. • This information will be available on an ongoing basis, and will include the name and contact information for the agent/broker. • Name, address, telephone numbers, and email address provided during the registration process. • Initial publication of this material is expected to be available for open enrollment.

46. Navigators, Non-Navigator Assisters and CACs

48. Navigators • Navigator programs empower certain groups (such as unions and non-profits) to raise public awareness regarding the existence of exchanges, as well as providing referrals for enrollees and to “facilitate enrollment” in qualified health plans. • Big “I” has viewed this as a consumer protection issue, and has pressed the Administration to ensure that navigators or similar entities will be properly licensed, trained and certified. • HHS regulations create a training and certification process for navigators at the federal level, and also allowing states broad authority to require further licensing and training.

49. Administration has also established new programs for “non-navigator assistance personnel” such as in-person assisters and application filers. • These entities are similar in function to navigators, except they can be funded by grants from the federal government. • In-Person Assistance

50. All exchanges (state, partnership or federal) must have CAC program. • Again, similar to navigators and non-navigator assisters in function. • The Federal Exchange will designate organizations to be CACs. • Examples of groups to be CACs are community health centers, hospitals or social service agencies. • Certified Application Counselors