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Health Care Reform as Promise and Opportunity

Health Care Reform as Promise and Opportunity. Council for Health and Human Services Ministries (CHHSM) 75 th Anniversary Annual Meeting March 1, 2013 Laura Minzer Executive Director, Healthcare Council Illinois Chamber of Commerce. What this presentation will cover:.

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Health Care Reform as Promise and Opportunity

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  1. Health Care Reform as Promise and Opportunity Council for Health and Human Services Ministries (CHHSM) 75th Anniversary Annual Meeting March 1, 2013 Laura Minzer Executive Director, Healthcare Council Illinois Chamber of Commerce

  2. What this presentation will cover: The new world of coverage in 2014 Employer obligations under the ACA Employer coverage requirements and penalties in 2014 Preparing for the opportunities and challenges ahead: key takeaways for employers and individuals

  3. The ACA in 2014 The New Avenues to Coverage “This is what change looks like.” -President Obama on the signature of the Patient Protection and Affordable Care Act (ACA), March 23, 2010

  4. What happens in 2014? • Insurers prohibited from denying coverage due to a pre-existing condition AND Individuals must obtain health insurance • Their employer • The private market • The Exchange, or • Medicaid/Medicare • Employers (50 and over) must offer affordable coverage to all full-time equivalent employees • Coverage begins on the Exchange • Medicaid expansion takes effect*

  5. The Coverage Landscape in 2014 What are the mechanisms that will shape this landscape in 2014? INDIVIDUAL Uninsured GROUP INDIVIDUAL AGENTS/BROKERS Navigators/ In-person Assistance High Risk Health Insurance Pools – HIPAA CHIP, CHIP, & IPXP GROUP

  6. Source: Kaiser Family Foundation

  7. The Mechanisms Shaping the Coverage Landscape in 2014 The Individual Mandate

  8. The Individual Mandate Beginning in 2014, all individuals (with some qualified exemptions) are required to obtain health insurance coverage. Penalty Levels (Penalties are paid per adult in household with 50% penalty applied per child in the household, with cap of $2,250 per family) 2014 – Greater of $95 or 1% of taxable income 2015 – Greater of $325 or 2% of taxable income 2016 – Greater of $695 or 2.5% of taxable income

  9. The Mechanisms Shaping the Coverage Landscape in 2014 The Individual Mandate Employer “Pay or Play”

  10. The Employer “Mandate” Each employer with 50 full-time equivalent (FTE) employees must offer coverage minimum essential coverage to its full-time employees (and dependents). Failure to do so could result in a penalty.* *Ways the Penalty Applies Employer does not offer coverage & at least one employee receives premium assistance on the exchange Employer does offer coverage, but coverage is unaffordable & at least one employee receives premium assistance on the exchange

  11. The Mechanisms Shaping the Coverage Landscape in 2014 The Individual Mandate Employer “Pay or Play” Premium Assistance & Cost-Sharing Subsidies

  12. Premium Assistance & Cost-Sharing Subsidy Premium assistance – available to individuals/families between 100% and 400% FPL that do not have access to affordable employer-sponsored coverage to lower premium costs for plans on the exchange. Cost-sharing subsidy – available to individuals/families between 100% and 400% that do not have access to affordable employer-sponsored coverage to limit the selected plan’s out-of-pocket costs.

  13. Premium Assistance & Cost-Sharing Subsidy Premium Assistance Cost-Sharing Subsidy *Cost-sharing limits based on Health Savings Account qualified health plan maximum out-of-pocket cost limits for 2013 - $6,250 for single and $12,500 for family – limits indexed to CPI post-2014.

  14. The Mechanisms Shaping the Coverage Landscape in 2014 The Individual Mandate Employer “Pay or Play” Premium Assistance & Cost-Sharing Subsidies Small Employer Tax Credit

  15. Small Employer Tax Credit in 2014 • Small Employers – 25 employees or less • Avg. annual wages cannot exceed $50,000 • Employer premium contribution = 50% or more • Tax credit available in tax years 2014 – 2016 • Up to 50% of employer contributions • Up to 35% of employer contributions for tax-exempt employers

  16. The Exchange * For those state level exchanges operational in 2014 only. What is an Exchange: An Exchange is a mechanism for organizing the health insurance marketplace to provide more centralized access to benefit options for consumers – individuals and small employers. The health benefits exchange is a key provision of the federal Patient Protection and Affordable Care Act (ACA) where its stated goal is to provide a more efficient and competitive market for individuals and small employers. Key Public Health Insurance Exchange Dates: • November 16, 2012 – State must submit Exchange blueprint to HHS for approval/certification of 1) state-level exchange, 2)partnership exchange, or 3) federally-facilitated exchange. • December 14, 2012 – Extension date for state submission of Exchange blueprint to HHS for approval/certification of a state-level exchange. • January 1, 2013 – HHS must certify what exchange model each state will have in place for 2014. • February 15, 2013 – Extension date for state submission of Exchange blueprint to HHS for approval/certification of a partnership exchange. • October 1, 2013 – Exchange open enrollment begins. • January 1, 2014 – State Exchanges must be fully operational and coverage begins. • December 31, 2014 – Deadline for state application for Level 2 funding for operation of state-level exchange in 2016. • January 1, 2015 – Federal funding ends; State Exchanges must be financially sustainable.*

  17. THE EXCHANGE – THE IT PERSPECTIVE From IL/DOI Level 1 Establishment Grant Narrative

  18. THE EXCHANGE – THE USER PERSPECTIVE

  19. Who will the Exchange Impact? • Small employers up to 100 employees • State option to limit to employers with 50 employees or less until 2016 • After 2017, state option to expand to larger employers • Individuals/families not eligible for Medicaid • Legal citizens • Coverage is subsidized for individuals below 400% FPL

  20. Who will benefit from the Exchange? Individual eligible for federal premium tax credits Individuals that do not qualify for Medicaid Individuals that do not have access to employer-sponsored coverage Small employers eligible for tax credits

  21. What will the Exchange do? “Front Door” access to coverage – public or private options and assistance for those options Customer service – Internet portal, hot-line Direct outreach and enrollment assistance Plan certification Standardize plan information – “apples to apples” Interact with state regulatory agencies

  22. Coverage on the Exchange (and off) All plans are required to cover the “essential health benefits” *Catastrophic coverage available only on the individual market and only to those aged 30 and under that are exempt from the individual mandate.

  23. Employer Plan Selection on the Exchange Employers with fewer than 50 full-time employees have options:* • Purchase small group coverage for employees: • Option to select one metal tier of coverage; employees select a plan within that metal tier that aligns with their needs • Send employees to individual exchange to purchase health insurance penalty-free (employees may be able to access premium assistance) *Employers with fewer than 100 full-time employees will have the option to purchase small group insurance on the exchange beginning 2016 without penalty; however, sending employees to the individual exchange instead of furnishing group-sponsored coverage will result in penalties assessed on the employer.

  24. Coverage in 2014 Plan levels apply to both plans sold inside and outside the Exchange (“grandfathered” plans and self-insured plans exempt) Cost-sharing limits imposed for individual and small group plans No cost-sharing for certain preventive services Insurers selling inside the Exchange must offer at least 1 silver and 1 gold plan Insurers are prohibited from creating price differentials Insurers are prohibited from rating individuals on anything but age, tobacco-use, geography, and family

  25. What are the Essential Health Benefits? The ACA describes Essential Health Benefits as those that include: • Ambulatory patient services • Emergency services • Hospitalization • Laboratory services • Maternity and newborn care • Mental health and substance use disorder services, including behavioral health services • Pediatric services, including oral and vision care • Prescription drugs • Preventive and wellness services and chronic disease management • Rehabilitative and habilitative services and devices

  26. Why the Essential Health Benefits Matter Lifetime limits are prohibited on the dollar value of Essential Health Benefits Restricted annual limits on Essential Health Benefits until 2014, after which annual limits are prohibited Plans and issuers may impose lifetime and annual limits on “Non-Essential Health Benefits” Plans sold on the Exchange and in the private individual and small group markets must cover Essential Health Benefits; states requiring coverage mandates in excess of Essential Health Benefits must subsidize the cost of those mandates Essential Health Benefits also apply to Medicaid

  27. * The Medicaid Twist What the ACA says: What the Supreme Court says: States must expand Medicaid eligibility to all individuals at or below 133% FPL OR Risk loss of all federal Medicaid funding State expansion = 100% federal match until 2017; 95% match until 2020; 90% match thereafter States mayexpand Medicaid eligibility to all individuals at or below 133% FPL AND Failure to expand does not result in loss of federal $ State choosing to expand = 100% federal match until 2017; 95% match until 2020; 90% match thereafter

  28. To Expand or Not? Considerations/questions moving forward: • What impact will this have on Exchange participation and the private market? • What impact will this have on providers? • What impact will this have on state budgets? • How will HHS/CMS respond through regulations? Supreme Court Decision only impacts expansion piece, not other mandatory Medicaid changes, including new eligibility determination criteria, new coverage requirements, and new payment methodologies to providers.

  29. Access to Exchange Premium Subsidies Under Medicaid Expansion Medicaid* If “YES” Individual EXCHANGE Is income at or below 133% FPL? If “NO” Advanceable Premium Tax Assistance Application Process Premium tax assistance available on sliding scale (based on income) and employer assessed a penalty Does the individual have access to employer-sponsored coverage? No premium tax assistance available If “NO” If “NO” If “YES” Is employer-sponsored coverage affordable?** If “YES” *According to recent guidance issued by HHS, Medicaid-eligible individuals can still purchase qualified health plans on the exchange, they just can not access premium tax assistance to do so. ** Affordable coverage is met if employee’s share does not exceed 9.5% of W-2 wages or plan provides coverage for at least 60% of medical benefits. Advanceable tax assistance awarded based on income

  30. Access to Exchange Premium Subsidies Under Non-Expansion UNINSURED If “NO” Individual Is income at or above 100% FPL? EXCHANGE If “YES” Advanceable Premium Tax Assistance Application Process Premium tax assistance available on sliding scale (based on income) and employer assessed a penalty Does the individual have access to employer-sponsored coverage? No premium tax assistance available If “NO” If “NO” If “YES” Is employer-sponsored coverage affordable?** If “YES” ** Affordable coverage is met if employee’s share does not exceed 9.5% of W-2 wages and plan provides coverage for at least 60% of medical benefits. Advanceable tax assistance awarded based on income

  31. The ACA in 2014 Employer Obligations, Coverage Requirements and Penalties “Change is one thing. Acceptance is another.” -Arundhati Roy from The God of Small Things

  32. Key ACA Provisions Impacting Employers Tax Credits for Health Benefits (Small Employers) Coverage Expansions and New Benefit Requirements New Administrative Requirements New Penalties on Employers (50 employees or more)

  33. Employer Size Matters in 2014 Employers (less than 50 employees) Employers (50 employees or more) Exempt from employer coverage responsibilities and penalties Eligible to purchase coverage on the Exchange beginning 2014 Small employers (25 employees or less) eligible for tax credit to purchase coverage on the Exchange Required to provide “affordable” coverage or be subject to penalties Employers with 100 employees or more eligible to purchase coverage on the Exchange beginning 2016; state option to open Exchange to larger employers in 2017 No tax credit available

  34. Coverage Changes Impacting Employers

  35. New Administrative Mandates

  36. The Employer “Mandate” Each employer with 50 full-time equivalent (FTE) employees must offer coverage minimum essential coverage to its full-time employees (and dependents). Failure to do so could result in a penalty.* *Ways the Penalty Applies Employer does not offer coverage & at least one employee receives premium assistance on the exchange Employer does offer coverage, but coverage is unaffordable & at least one employee receives premium assistance on the exchange

  37. Determining Employer Size Full-Time Employee: The ACA defines full-time employee as any employee that has worked an average of 30 hours or more for at least one week in a month. Full-Time Equivalent (FTEs): The ACA requires employers to account for FTEs by adding all of the hours worked by part-time employees (less than 30 hours/wk) and dividing by 120 (seasonal employees are exempt).

  38. Employer Size Determination Example Employer has 35 full-time employees (all working more than 30 hours a week) and 20 part-time employees who all work 24 hours per week (or 96 hours per month). Employer Size Calculation: 20 part-time employees x 96 hours = 1920 1920 / 120 = 16 Full-Time Equivalents EMPLOYER SIZE = 35 FTs + 16 FTEs or 51 Total Employees

  39. Determination & Potential Application of Employer Penalties by Categories of Employees Congressional Research Service (CRS) Analysis (Summary of Potential Employer Penalties under the PPACA, May 2010)

  40. Employer Size Determination Challenges Reconciling Employer Size as it relates to the Exchange and Employer Size as it relates to the application of the penalty Ensuring guidance and forthcoming regulations are consistent with current classifications/methods employers use to determine employee eligibility for benefits Ensuring forthcoming regulations are sensitive to fluctuations in employee work week schedules

  41. Navigating the Challenges: the Regulatory Approach Is the employee FT, FTE, or PT? Measurement Period = Did the employee average at least 30 hours per week (measurement allowed between 3 and 12 months)? Stability Period = If yes to above, employee must be treated as a FT/FTE employee for coverage/penalty purposes for at least 6 months, but not more than 12 months (regardless of hours averaged during this period). Measurement period must be applied uniformly to all employees in the same category, including salaried employees and hourly employees; collectively-bargained and non-collectively bargained employees; employees of different entities and those located in different states.

  42. Navigating the Challenges: the Regulatory Approach Administrative Period = Up to 90 days allowed to be used between conclusion of measurement period and associated stability period. Waiting Period for Coverage = Limited to no more than 90 days after a new employee becomes eligible for employer-sponsored coverage (12 months or less).

  43. Employer Size Application Example Employee A was hired as an IT specialist at Widgits, Inc. on January 1, 2014. Widgits, Inc. applied a 9-month measurement period to Employee A during which time the employee averaged at least 30 hours per week. After applying a 1-month administrative period, Widgits, Inc. offers Employee A health coverage under its benefit plan for a period that runs from November 2, 2014 through July 1, 2015. Widgits, Inc complied with regulating guidance and would not be subject to an employer-shared responsibility penalty at any point during Employee A’s employment.

  44. Coverage/Affordability Standards & Penalties Coverage Requirements Penalty Treatments If employer requires a contribution greater than 9.5% of household income, OR Offers a plan that covers less than 60% of medical costs on average, THEN Employee is eligible for the exchange and the employer pays a penalty • Employers not offering coverage: • $2,000 x number of FTE (non-seasonal) (first 30 employees are exempt from calculation) • Employers offering inadequate coverage: • The lesser of $3,000 per employee receiving premium credit or $2,000 x number of FTE - 30

  45. Minimum Value Employer-sponsored coverage is deemed to provide “minimum value” if it pays for at least 60% of all plan benefits without regard to co-pays, deductibles, co-insurance, and employee premium contributions.

  46. Affordability Test: Challenges to Overcome The ACA did not specify whether affordability was measured using the premium for employee-only coverage or the premium for dependent/family coverage. Employer has no way of knowing an employee’s household income.

  47. Affordability Test: Safe Harbor Approach • Proposed regulations give wide flexibility on the application and compliance with this provision. • Affordability applies to employee’s cost for self-only coverage and only has to meet affordability under one plan option offered by the employer (HMO, PPO, HSA, HDHP). • Three affordability safe harbor approaches offered: • W-2 wage measurement • Rate of pay measurement • Federal Poverty Level measurement

  48. Examples of the Safe Harbor Affordability Test Employee A earns $87,000 a year and pays $1,088 a month for family coverage. Employee A’s income is the only source of household income. Under the employer’s benefit plan, the employee would pay $625 a month for employee-only coverage. Employee A’s contribution is more than 9.5% of household income, but under the Safe Harbor method, because the employer’s employee-only portion of the premium is less than 9.5% of the employee’s W-2 wages, the employer’s coverage is deemed affordable and the employee is not eligible for a Premium Tax Credit. Therefore, no penalty is assessed.

  49. Examples of the Safe Harbor Affordability Test Employee B is paid $13.25 an hour and pays $120 a month for employee-only coverage under their employer’s plan. Employee B’s premium contribution based on the formula for rate of pay ($13.25 x 130) is approximately 7% of their rate of pay. The employer’s coverage is affordable and the employee is not eligible for a Premium Tax Credit. Therefore, no penalty is assessed.

  50. Examples of the Safe Harbor Affordability Test Employee C is paid $13.25 an hour and pays $220 a month for employee-only coverage under their employer’s plan. Employee C’s premium contribution based on the formula for rate of pay ($13.25 x 130) is approximately 12.8% of their rate of pay. Similarly, under the FPL safe harbor, their contribution is 12.9% for a single individual ($11,170). In this scenario, the employer’s coverage is not affordable and Employee C is eligible for a Premium Tax Credit on the Exchange and the employer is assessed a penalty of $2,000 (annual) for this employee.

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