The ACA: A Policy Discussion

1. The ACA: A Policy Discussion September 23, 2013 Jennifer Furan, Policy Counsel

2. ACA Policy Discussion Outline • Precursors to the ACA • The ACA: A Framework for reform • Key 2014 market reforms • What is an exchange? • Exchange under the ACA • Federal subsidies • Minnesota exchange • Participation on MNsure • 2014 market movement • Operational readiness • Looking beyond 2014 • Questions

3. Precursors to the ACA • Exchanges are not a new concept • First emerged in the late 1970s • Alain Enthoven – concept of “managed competition” • Clinton Administration’s Health Security Act – 1993 • Proposed to achieve universal coverage through managed competition of private insurers • Built upon familiar employer-sponsored insurance system • Introduced “buying co-ops” – regional purchasing pools through which government would strictly regulate insurance practices and limit premium growth • Heritage Foundation – early 2000s • Proposed an exchange concept – similar to buying co-ops • Included an individual coverage mandate

4. Precursors to the ACA(continued) • Massachusetts bipartisan health reform – 2006 • Increased Medicaid eligibility to 300% FPG • Individual and employer mandates • Merged the individual and small group markets • Established the Massachusetts Health Insurance Connector • For Massachusetts the time was right: • Necessary to prevent losing federal Medicaid matching funds, which in 2005 totaled $385 million • Already had an Uncompensated Care Fund that could be redirected – $1 billion annually from assessments on carriers and hospitals • Had an unaffordable individual market due to guarantee issue with no mandate or subsidies

5. The ACA: A framework for Reform • The Affordable Care Act was enacted March 23, 2010 • Primarily focused on increasing access to coverage – • Increased Medicaid eligibility, federal subsidies to assist with premiums and cost-sharing • Underlying cost drivers not addressed • Some early reforms effective 6 months later, but major market reforms and exchanges not required until 2014 • Was intended to permit time for development of federal regulations and full implementation • 2012 election delayed key regulations necessary for implementation, resulting in operational readiness issues

6. The ACA: A Framework for Reform (continued) IMPROVED ACCESS ENHANCED BENEFITS INSURANCE REFORMS • Guarantee Issue • No Pre-ex • Premium Subsidies • Cost Sharing Subsidies • Dependents age 26 • EHB Package • Expanded Preventive Benefits • Cost Sharing Limits • No Annual or Lifetime Dollar Limits Rating Restrictions Effective Rate Review Single Risk Pool 3Rs New Taxes

7. Key 2014 Market Reforms • Guaranteed Issue and no pre-ex • No one can be denied coverage due to health status • Essential Health Benefits Package required in the individual and small group markets: • Most cover all Essential Health Benefits (EHBs), • Limit cost-sharing, and • Offer coverage at a bronze, silver, gold, or platinum metal level • Metal levels intended to provide consumers an indicator of the relative value provided by their chosen health plan • Annual out of pocket maximum limited • $6350/individual or $12,700/family • Applies in all markets

8. Key 2014 Market Reforms • Annual and lifetime dollar limits prohibited • Premiums may not vary except for four permitted factors: • Family composition, • Geographic area, • Age (3:1), and • Tobacco use (1.5:1) • Single risk pool • Insurers required to pool risk from exchange market with their off-exchange business • 3Rs – Risk adjustment, reinsurance, and risk corridors • Intended to offset premium increases due to reforms • Only risk adjustment is a permanent program • Reinsurance and risk corridors phase out by end of 2016

9. What is an insurance exchange? • While exchanges are only one piece of the ACA, seem to cause the most confusion • Essentially, a new marketplace for individuals and small employers to buy major medical coverage • Will have a website, call center, and face-to-face assistance: • Agents/brokers, navigators, in-person assistors, etc • Intended to provided side-by-side comparisons of plans for consumers, which is intended to increase competition and decrease costs

10. Exchanges Under the ACA • States required to run an exchange for individuals and small employers beginning January 1, 2014 • Federal government run exchanges in states that don’t • Only health plans certified by exchange as a Qualified Health Plan (QHP) will be available through exchanges • A voluntary marketplace – • Carriers not required to sell through, and • Individuals/small employers not required to purchase through • But will be the only marketplace through which eligible individuals can obtain federal premium and cost sharing subsidies • Small employer tax credits only through exchanges in 2014

11. Federal subsidies • Premium subsidies available up to 400% FPG • Sliding scale based on income • Subsidy value drops off significantly above 300% FPG • Cost sharing subsidies available up to 250% FPG • Reduced out of pocket liability for EHBs • Only tied to silver level plans • Expanded cost sharing subsidies for American Indians: • Available under any metal level plan – but still only available through exchanges • At or below 300% FPG: zero cost sharing for EHBs • Above 300% FPG: zero sharing for services from Indian health providers

12. MInnesota Exchange • State legislation enacted in March to establish MNsure • MNsure structure: • Established as a separate state agency • Seven member Board of Directors • Legislative oversight committee to provide a check on this agency under the executive branch • 2014: all plans meeting certification requirements permitted • 2015: MNsure permitted to implement active purchaser model • Selection criteria unknown and must be established by February • How will this impact consumer choice of plans? • Open enrollment for 2014: Oct 1, 2013 thru March 31, 2014 • For 2015 and beyond: Oct 15 thru Dec 7 annually

13. Participation on MNsure 5 Carriers on Individual Exchange Blue Cross Medica HealthPartners UCare PreferredOne 141 Plans across the state 3 Carriers on the Small Group Exchange Blue Cross Medica PreferredOne • Each rating area has at least two carriers • 85% have 3+ • 75% have 4+ $ MN has the lowest rate across the country so far MN Silver and Gold pricing compares to Bronze in other states

14. 2014 market movement WHOM & HOW The Affordable Care Act’s impact on Minnesotans, in terms of premium changes and market movement in 2014 Source: Minnesota Council of Health Plans

15. Operational Readiness • Federal government, states, and industry all working feverishly to implement necessary operations • Delayed federal regulations required implementation to move forward without knowing the rules • Impacted timing of product development, filings, and approval • Significantly narrowed the window for testing & opportunities for adjustments prior to October 1st open enrollment • Delayed enforcement of the employer mandate due to IRS inability to operationalize IT systems • Impact of delays in states remains unclear

16. Looking Beyond 2014 • Operational implementation will continue through 2015 • Necessary to implement what has been delayed & automate what had to be done as temporary manual processes • Additional exchange functionality expected in future years, including searching for providers and provider quality comparisons • Minnesota Comprehensive Health Association (MCHA) – the state’s high risk pool will be phased out • Due to guaranteed issue and no pre-ex • Essential Health Benefit set will be readdressed for 2016 • Will the benchmark plan process continue? or • Will a national set of essential health benefits (as was intended under the ACA) be established?

17. Looking Beyond 2014 (continued) • Necessary to address underlying cost drivers in order for reform to be sustainable • How do we address the cost of care while improving quality and outcomes? • Small Group and Individual market risk pools could be combined • In a state market like Minnesota’s, which has lower premiums in the individual market than small group, will merging the markets discourage employers from offering coverage? • Increased transparency and payment reform proposals • How do we ensure any reforms permit for continued innovations and on-going cost savings?

18. QUESTIONS?

19. Thank you.