Health Care Reform. Terminology. Terminology. Disclaimer. Individual Agenda. Overview of Material

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1 Terminology Health Care Reform Michaela L. Valentin, Director, Government Affairs Date of Enactment (DOE): March 23, 2010 Policy year -refers to individual policies Default: Calendar year Plan year -refers to small and large group (FI/ASO) policies Document year in contract Deductible or limit year Default: Calendar year Disclaimer Terminology The information provided in this presentation is not intended as legal advice. If you have legal, compliance or tax questions, we recommend that you consult with an attorney. CHIP-Children's Health Insurance Plan, not the state high risk pool In order to comply with DOI s instructions on obtaining continuing education credits, I will not discuss BCBSNE-related policies. Overview of Material Agendas: Individual Individual & Small Employer Small Employer Small & Large Employers Large Employer Medicare CLASS act Individual Agenda High Risk Pool (July 1, 2010) Coverage Options (Now 2014+) Mandate (2014)

2 Individual: Federal High Risk Pool Federal High Risk Pool: Preexisting Condition Insurance Plan July 1, Eligibility: Citizen, national, or lawfully present; Uninsured for at least the last six months; Pre-existing condition. Medicaid (already established) January 1, 2014-Medicaid Expansion up to 133% FPL Includes non-elderly, non-pregnant (parents and childless adults) Cannot have been eligible for full Medicare benefits as of December 1, 2009 Or who were eligible, but not enrolled due to a capped or limited enrollment that was full Individual: Federal High Risk Pool To apply for PCIP, you must: Complete and sign an application form Provide a copy of documentation of citizenship or legal presence in the United States Provide a copy of a letter from an insurance company, dated within the past 6 months denying your application for coverage, or excluding coverage of your medical condition Funding for Medicare Expansion: Jan. 1, 2014 through Dec. 31, % federal funding 2017: 95% 2018: 94% 2019: 93% 2020+: 90% Traditional Medicaid Medicaid up to 133% State Basic Option % non-medicaid, not Exchange eligible Individual Policy-Exchange with Subsidies Up to 400% FPL Individual Policy-Exchange without Subsidies Individual Policy-Outside the Exchange Medicare State Basic Plan % FPL (optional) State or regional non-medicaid program In lieu of enrolling in Exchanges (no subsidies) Funding: capped. Equal to 95% of the subsidies and cost-sharing reduction that would have been provided over a fiscal year through an Exchange Effective Date: Presumably 2014, when subsidies begin

3 State Basic Plan: Ineligible Individuals: Illegal Immigrants Those eligible for minimum essential coverage under: An employer-sponsored plan Medicare Medicaid CHIP TRICARE, VA Other acceptable coverage determined by HHS Advanced Determination of Premium Tax Credit and Cost-sharing Subsidies: HHS to establish program Based on latest tax return (2012 for 2014) Individual Coverage with Subsidies Premium Tax Credit Cost-Sharing Subsidies Taxpayers advance payments later reconciled on applicable year s tax return Limitation on tax increase for lower-income families whose household income is less than 400% FPL; tax liability cannot exceed $400 for families or $250 for individuals Individual Premium Subsidies up to 400% FPL for the family size Only available through the Exchange (2014) Married couples must file joint tax return to be eligible for subsidies Aliens lawfully present with household income below 100% FPL, but not Medicaid eligible Eligible for subsidies with household income of 100% FPL for family size Premium Tax Credit Payment Premium tax credit is paid directly and in advance to the insurer by Treasury to cover a portion of monthly insurance premiums Insurers must reflect payment on member bill and notify the Exchange and HHS of such reduction

4 Premium credit is the lesser of the following: Total monthly premium for QHP to cover taxpayer, spouse and any dependents; or The excess of the adjusted monthly premium for the applicable 2 nd lowest cost Silver plan, over a defined percentage of household income Cannot be used for catastrophic plans Cost-Sharing Subsidies: Must be enrolled in Silver (70%) plan to get costsharing subsidies Max OOP limits set at HSA-eligible plans $5,950 individual (2010) $11,900 family (2010) Defined percentage of household income is a sliding scale determined by the Federal Poverty Level (FPL) of the family involved: o Up to 133% FPL: 2.0% of income o % FPL: 3.0% 4.0% of income o % FPL: 4.0% 6.3% of income o % FPL: 6.3% 8.05% of income o % FPL: 8.05% 9.5% of income o % FPL: Capped to 9.5% of income Cost-sharing Subsidies: Maximum OOP Limits: % FPL-OOP limits reduced by 2/ % FPL-OOP limits reduced by ½ % FPL-OOP limits reduced by 1/3 Cost-Sharing Subsidy Payment (2014) HHS shall notify insurers if enrollee in a qualified health plan is eligible for cost-sharing subsidies Insurers shall then notify HHS of any cost-sharing reductions & HHS will make periodic & timely payments to plans HHS will adjust OOP limits as needed to ensure reduced OOP limits do not result in actuarial values (AV) that exceed the following AV limits: 94% AV for between 100%-150% FPL 87% AV for between 150%-200% FPL 73% AV for between 200%-250% FPL 70% AV for between 250%-400% FPL

5 : Review Indians: No cost-sharing for Indians under 300% FPL enrolled in individual market coverage through an Exchange Benefits offered, in addition to the required essential health benefits, are excluded from any cost-sharing reductions Special rule for pediatric dental coverage. In the case of individuals enrolled in both a qualified health plan and a stand-alone dental plan, cost-sharing reductions do not apply to the portion of premiums that, under regulations prescribed by HHS, are properly allocable to pediatric dental benefits Traditional Medicaid Medicaid up to 133% State Basic Option % non-medicaid, not Exchange eligible Individual Policy-Exchange with Subsidies Premium Tax Credit & Cost-Sharing Individual Policy-Exchange without Subsidies Individual Policy-Outside the Exchange Medicare Individual policy-no subsidies over 400% FPL for family size No premium assistance when purchasing in Exchange Individual Mandate: Coverage Required Non-exempt U.S. citizens and legal residents are required to maintain minimum essential coverage which includes the following: Individual market plans offered within a state Eligible employer-sponsored plans including the following: governmental plans, church plans, grandfathered group health plans and other group health Purchase Outside Exchange Minimum essential coverage No subsidies Available now and beyond 2014 Individual Mandate: Coverage Required Non-exempt U.S Citizens-minimum essential coverage: Plans offered in the small or large group market within a state Grandfathered individual or group coverage Government sponsored programs including: Medicare, Medicaid, CHIP, Department of Defense health benefit programs including TRICARE and the Nonappropriated Fund Health Benefits Program, VA and Health Care for Peace Corps volunteers Other coverage deemed acceptable by HHS in coordination with Treasury

6 Individual Mandate: Exempt from Coverage Individual Mandate: Exempt from Coverage Individual Mandate-Exempt U.S. Citizens: Affordable coverage not available (cost exceeds 8% of household income) In the case of those enrolled in an employer plan, insurance cost is the portion of the premium paid by the individual (including through salary reduction). Household income for this purpose is increased by any salary reduction contribution through a cafeteria plan Individual Mandate-Exempt U.S. Citizens: Coverage gap is determined without regard to the calendar years in which gap occurs If coverage gap is 3 months or greater, then no exemption is provided for any months (including the initial period without coverage) Individual Mandate: Exempt from Coverage Individual Mandate: Exempt from Coverage Individual Mandate-Exempt U.S. Citizens: In the case of those only eligible for individual market coverage, insurance cost is the premium for the lowest cost Bronze plan available through the Exchange and reduced by any premium subsidy that is allowable under PPACA Individual Mandate-Exempt U.S. Citizens: If there is more than one period with a coverage gap, this exemption only applies to the months in the first period without coverage Hardship situation (as determined by HHS) Religious exemption (certain faiths). Those exempt due to religious reasons must be members of a recognized religious sect exempting them from self employment taxes and adhere to tenets of the sect Individual Mandate: Exempt from Coverage Individual Mandate: Exempt from Coverage Individual Mandate-Exempt U.S. Citizens: 8% of household income threshold is indexed after 2014 by the amount by which premium growth exceeds income growth Individuals with a coverage gap of less than 3 months Individual Mandate-Exempt U.S. Citizens: Illegal aliens Individuals living outside the U.S. or residents of territories Those with incomes below tax filing threshold. (In 2010 the threshold for taxpayers under age 65 was $9,350 for singles and $18,700 for couples) Members of Indian Tribes Incarcerated individuals

7 Individual Mandate: Penalty Individual Mandate: Penalty Individual Mandate Penalty: Annual penalty for not having insurance would be the greater of: a flat dollar amount per person; or a percentage of the individual s income up starting at 1% in 2014, going up to 2.5% of income in 2016 Individual Mandate Penalty: For any dependent under age 18, per person amount for calculating flat dollar amount is one half the adult individual amount. If the individual is a dependent of another taxpayer, the other taxpayer is liable for any penalty payment with respect to the dependent Flat dollar penalties are indexed to cost of living (based on CPI-U) after 2016 Individual Mandate: Penalty Individual Mandate: Penalty Individual Mandate Penalty: Flat Dollar Amount: $695 (in 2016) per person failing to buy coverage (phased in at $95 in 2014; $325 in 2015; $695 in 2016) Total family flat dollar Amount capped at 300% of the applicable per person adult amount (e.g., in 2016, $695 x 300% = $2,085) Individual Mandate Penalty: Penalty is calculated on a monthly basis; i.e., penalty is prorated for partial coverage during the year If you file a joint return, both the taxpayer and spouse are liable for the penalty Penalty amount divided by 12; calculated on a monthly basis Individual Mandate: Penalty Individual Mandate: Enforcement Individual Mandate Penalty (con t) Percentage of Taxable Income: An amount equal to a percentage of a household s income that is in excess of the applicable tax filing threshold Applicable percentage phased in at 1.0% in 2014; 2.0% in 2015; 2.5% in Generally, for 2010, the filing threshold is $9,350 for singles and $18,700 for married, filing jointly) In any event, the penalty is capped at the national average Bronze premium in the Exchange for the family size involved Individual Mandate-Enforcement and Verification: Penalty is assessed through the tax code Counted as an additional amount of federal tax owed Criminal and civil penalties are waived for any failure to pay the tax penalty. In addition, Treasury shall not file notice of lien or levy with respect to any property of a taxpayer

8 Individual Mandate: Enforcement Individual & Small Employer: Benefits Enforcement & Verification: IRS Notice of Nonenrollment. Not later than 6/30, the IRS, in consultation with HHS, is required to send a notification to each individual who files an income tax return and who is not enrolled in minimum essential coverage. Notification will include information on services available through the state Exchange Essential Benefits: HHS Secretary Sebelius has to define Effective 2014 Categories in Senate Bill Applies to NEW individual & small group policies Individual & Small Employer Agenda Individual & Small Employer: The Exchanges Web portal Essential Benefits Exchanges The Exchanges (2014): Travelocity-type sites Individuals & Small Businesses (SHOP) Subsidies only available through Exchange Can be state based or regional Can be run by state, nonprofit entity or feds Individual & Small Employer: Web Portal Key 2014 Provisions: Exchanges HHS Web Portal: Explore Your Options for Coverage Survey Individual & Small Businesses Public & Private Options Pricing Options Precursor to Exchange States (or the Feds) will operate Exchanges for small employers (1-100) and individuals States can opt to limit small group market to 1-50 in 2014 and 2015 Can also allow large employers to use Exchanges starting in 2017 Employers and individuals can buy coverage outside Exchanges, but: No government subsidies Same premium for same product inside or outside Exchange Provide customer assistance Collect health plan data Rate participating plans Medicaid/ CHIP access Certify if plans meet Exchange Review rqmts. premium rates Facilitate sales and enrollment The Exchange Administer gov t subsidies Run website with health plan info

9 Exchanges: The Vision Small Employer Agenda Employers and individuals sign-up with exchange and individuals select plan from among government approved options SMALL EMPLOYERS EE EE EE EE EE EE INDIVIDUAL IND IND IND IND Small Employer Tax Credit ( ) Comprehensive Workplace Wellness Grant ( ) Simple Cafeteria Plans $2k/$4k deductibles (2014) Exchange BCBS United Aetna Kaiser CIGNA Public Programs Government Subsidies Key Exchange Issues: Yet to Be Resolved Small Employer: Tax Credit Markets served Will states merge their individual and small group exchanges? Number/size of exchanges States could join together to form regional exchange or set up subsidiary exchanges States could limit exchanges to small employers (<50) until 2016, or open them up to groups up to 100; after 2017, can open up to larger employers Forthcoming federal regulations State flexibility around design and implementation of exchanges Criteria to certify plans, limit insurer participation Will develop rating system for exchange plans, e.g., quality ratings Will regulate/define role for agents/brokers in exchanges Small Group Tax Credit Amount: Phase 1: : Up to 35% of employer costs (25% if tax-exempt) with sliding scale for firm size and wages Employer costs are lesser of Nonelective employer contributions to coverage; or Aggregate amount of nonelective contributions an employer would have made if employees enrolled in a health plan that had a premium equal to the average small group premium (as determined by HHS) for the small group market in a given state Process for Receiving Premium Subsidies Small Employer: Tax Credit Consumer 5 Insurer adjusts premium and cost-sharing and charges individual the reduced price 4 Government sends subsidy directly to insurer on monthly basis 1 Goes on Exchange website Uses calculator to estimate subsidy Chooses a plan Applies for subsidy 2 Federal government receives application Reviews eligibility 3 Government informs Exchange of subsidy amount (tied to 2 nd lowest Silver plan) As designed, process appears likely to result in a high degree of customer confusion increasing the importance of playing a shaping role on interim regulatory development. Dollar flow issues will include: Collection of subsidies Reinsurance Risk adjustment Reconciliation False Claims Act application Phase 2: 2014+: Up to 50% of employer costs (35% tax-exempt) with sliding scale for firm size and wages Credit only through Exchange Limited to first 2 consecutive years of coverage (2014+) Employer costs are lesser of: Employer contribution to selected QHP; or Aggregate amount of contributions an employer would have made if employees enrolled in a qualified health plan that had a premium equal to the average small group premium (as determined by HHS) for the small group market in the rating area in which the employee enrolls for coverage

10 Small Employer: Tax Credit Small Employer: Tax Credit Tax-exempt employer credits are the lesser of: Credit allowed as defined by general rules above; or Amount of payroll taxes during the calendar year in which the taxable year begins Calculating the Small Employer Tax Credit: Full-time equivalent employees: divide the total number of hours of service for which wages are paid by the employer for the taxable year by 2,080. Round to lowest whole number If employee worked in excess of 2,080 hours, excess is not taken into account Leased employees are included in FTE and wage calculations Average annual wages are determined by dividing the aggregate amount of wages paid by the employer during the taxable year by the number of FTE s. Rounded to the next lowest multiple of $1,000 Small Employer: Tax Credit Small Employer: Tax Credit Small Employer Tax Credit Phase Out Schedule: Phase out the amount of credit Credit (before any reduction) is multiplied by the following to get reduction amount: 10+ FTE s: the # of FTE s in excess of 10 divided by 15; plus Where the average annual wage exceeds $25k, such excess divided by $25k If the employer has both more than 10 FTE s and average annual wages over $25k, reduction is sum of the amount of 2 reductions Ineligible employees for FTE and wage calculation: Seasonal employees working for 120 days or less Any 2% shareholders of an S corporation Any 5% owner of an eligible small business Family members with certain relationships to above bullets (e.g., dependent, sister, brother) Small Employer: Tax Credit Small Employer: Workplace Wellness Qualified Coverage: Phase 1: medical care coverage for hospital and medical services. Not accident only, disability income insurance, coverage for onsite medical clinics, etc. Phase 2: QHP through the Exchange Small Employer Comprehensive Workplace Wellness Grant: temporary program Secretary Sebelius to define criteria $200 million available Wellness Initiatives Eligible: Health awareness initiatives Efforts to maximize employee engagement Initiatives to change unhealthy behavior and lifestyle choices Supportive environment efforts

11 Small Employer: Cafeteria Plans Small & Large Employers Agenda Simple Cafeteria Plans for Small Group Businesses: Eligibility: Has an average of 100 or fewer employees on business days during either of the preceding 2 years For new employers: average number of employees reasonably expected to employ in the current year Establishes simple cafeteria plan Early Retiree Reinsurance W-2 Exchange Voucher Part D Exclusion Exchange Notice to Employees Statements to Covered Individuals No waiting periods HSA s Small Employer: Cafeteria Plans Small & Large Employers: Early Retirees Employee Eligibility: Employees with 1,00 hours of service Employers may exclude employees: Not 21 Less than 1 year of service Covered under a CBA Nonresident alien working outside the US Effective taxable year after 12/31/10 Early Retiree Reinsurance Program: Application only Reimburses 80% of valid claims between $15k-90k Reimbursement cannot go back into general revenue Must be used to lower costs for employees Small Employer: Deductible Limits Small & Large Employers: W-2 s Cost-sharing Limitations: Deductibles Limits at $2,000/$4,000 (single/family) Applies to new policies only Exchange: January 1, 2014 Outside: 2014 Plan year W-2 Reporting (2011): Oct 12-IRS Notice W-2 reporting optional for 2011 Employers must disclose the aggregate cost of benefits provided by employers for each employee s health insurance coverage on the employee s annual Form Excludes dental and vision

12 Small & Large Employers: W-2 s Small & Large Employers: Part D Exclusion W-2 Reporting not required for: Contributions to Archer MSAs and HSAs; and Salary reduction contributions to FSAs as defined in IRC 125 How Plan Value Determined: Use the same calculation as is currently used in determining the employer-provided portion of the applicable premiums for the taxable year for the employee determined under the rules for COBRA continuation coverage, including the special rule for selfinsured plans Applies to taxable years beginning after 12/31/10, but is optional for Part D Tax Exclusion: Eliminates the tax exclusion for subsidy payments made when employers offer retiree Rx coverage that is as good as or better than Medicare Part D Small & Large Employers: Exchange Voucher Small & Large Employers: Exchange Notice Free Choice Voucher (Exchange Voucher Program): Employer that offers minimum essential coverage may have to offer voucher to employee not enrolled in group health plan if the employee is eligible Written notice about the Exchange: By March 1, 2013 for current employees At time of hire for new employees Description of coverage options, tax credits and subsidies available Small & Large Employers: Exchange Voucher Small & Large Employers: Statements Eligibility: Earns up to 400% of FPL Premium contribution for group coverage is between % of household income. Employee gets voucher to enroll in coverage through the Exchange Voucher value is equal to the highest employer contribution for a company plan for which the employee is eligible to enroll. If the employee buys coverage for less than the value of the voucher, the employee keeps the difference in taxable cash Written statements to covered employees: with information to each covered individual, listing the aforementioned information (previous slide) as well as the name, address and contact information of the employer s insurer. Statements have to be given to individuals on/before January 31, 2013

13 Small & Large Employers: Waiting Periods Large Employer: Penalty No waiting periods greater than 90 days (2014) Small Group GF & New Large Group GF & New Large Employer Penalty: > 50 full-time employees Full-time employee works, on average, 30+ hours/wk Seasonal employee included in 50 if he works more than 120 days/year Small & Large Employers: HSA s Large Employer: Penalty HSA s (2011) Penalties for unqualified withdrawals from HSA s increase HSA s & FSA s Need Rx from doctor to get OTC products reimbursed Insulin-exception Large employers not offering coverage & 1 full-time employee goes to Exchange & rec s tax credit or costsharing subsidy: Penalty: Annual fee of $2,000 per full-time worker Employer subtracts the first 30 full-time workers from payment calculation (e.g., firm with 51 full-time workers pays $2,000 x 21 = $42,000) Fee is calculated on a monthly basis, i.e., based on whether coverage is provided, whether one full-time employee receives a credit or subsidy through Exchange and on number of full-time employees for the month Large Employer: Penalty Large Employer: Penalty Large Employer Penalty Auto enrollment for Employers with 200+ Employees Large employer offering coverage (doesn t meet minimum essential coverage) & 1 full-time employee goes to Exchange & rec s tax credit or cost-sharing subsidy Penalty: Employer pays the lesser of: $3,000 for each full-time employee receiving a tax credit or subsidy, or $2,000 per full-time worker (Employer subtracts the first 30 full-time workers from this payment calculation)

14 Large Employer: Auto Enrollment Self-funded (ASO): IRS Report Automatic Enrollment for Employers with over 200 full-time employees Reporting minimal essential coverage to the IRS: Option for which employer pays the largest portion of the cost of the plan & portion of the cost paid by the employer in each enrollment category for such option Name, address, tax id number of each full time employee during the calendar year & the months during which such employee (and any dependents) were covered under any health benefit plan Additional info the Treasury Dept may be required to administer the small business tax credit and coverage is a qualified health plan through the Exchange Self-funded (ASO): IRS Report Self-funded (ASO): Cadillac Tax Reporting minimal essential coverage to IRS Length of any waiting period Months during calendar year coverage was made available Monthly premium for the lowest cost option for each enrollment category within the plan Employer s share of total allowed costs of benefits provided Cadillac Tax Plan administrator pays the tax on the excess over $10,200/individual and 27,500/family 40% Self-funded (ASO) Agenda Self funded (ASO): HHS Study Minimum Essential Coverage Reporting Cadillac Tax HHS Study HHS study: self funded plans employer profile, insurance group, coverage costs, claim denials, etc. to determine if an employer is financially sound to offer a self funded insurance plan.

15 Individual/Small/Large Agenda Individual/Small/Large Agenda Near Term Provisions (9/23) Grandfathering Rate Review Dependent Age 26 No Pre-existing Condition Exclusion-Children MLR 2014 Provisions: Guaranteed Issue No Pre-existing Condition Exclusions-Adults Modified Community Rating Individual/Small/Large Agenda Individual/Small/Large: Grandfathering Near Term Provisions: Annual $ Limits Lifetime $ Limits Internal/External Appeals Preventive with No Cost-sharing Grandfathering: if you like your plan, you can keep it Grandfathered Policy/Plan: A policy/plan that was in effect on March 23, 2010 when the Senate bill passed/doe Non-grandfathered Policy/Plan: A policy/plan with an effective date after March 23, 2010 Go through reform provisions Loss of GF status = subject to additional reform Preventive services Individual/Small/Large Agenda Individual/Small/Large: Grandfathering Near Term Provisions: Patient Protections No Rescissions Cause the Loss of GF status: Eliminating all or substantially all benefits to diagnose/treat a particular condition Increasing coins by any amount above the level set on 3/23/10 Increasing fixed amount cost-sharing more than the sum of medical inflation plus 15 percentage points from the level on 3/23/10

16 Individual/Small/Large: Grandfathering Individual/Small/Large: Dependents Causes the Loss of GF Status (con t): Increasing co pays by an amount that exceeds the greater of: A total % (3/23/10) that is more that the sum of medical inflation plus 15 percentage points; or $5 increased by medical inflation Reducing employer or employee organization contributions base on the cost of coverage or a formula by more than 5 percentage points below the contribution rate on 3/23/10 Reducing an overall annual dollar limit or adding a new overall annual dollar limit, compared to what as in effect on 3/23/10 Dependent Age 26: Up to age 26 under parent s policy Doesn t have to live at home Can be married Doesn t have to be in school GF group before 2014: dependent s employer Plan year 6 months after DOE Applies to GF/new policies/plans across all LOB s Individual/Small/Large: Grandfathering Individual/Small/Large: No Pre-X GF status applies separately to each benefit option offered under a group health plan No Pre-existing Exclusions for Children: Under 19 Applies to all markets and GF group plans, not GF individual policies Plan year 6 months after DOE Individual/Small/Large: Rate Review Individual/Small/Large: MLR Rate Review: Insurers must file premium rates with DOI to prevent unreasonable rate increases unreasonable 2010 plan year Applies to new individual policies and small & large group insured plans Does not apply to GF plans Medical loss ratio: Reporting: Plan years 6 months after DOE Rebates: begin with respect to plan year Applies the GF & new Individual policies and GF & new small and large insured plans Continued application of state benefit mandates States that apply benefit mandates to coverage in Exchanges must defray additional costs Formula unknown

17 Individual/Small/Large: Limits Individual/Small/Large: Patient Protections No annual dollar limits: Restricted: plan year 6 months after DOE Prohibited: 2014 Applies to individual new policies and GF & new group plans No lifetime dollar limits: Plan year 6 months after DOE Applies to GF & new policies/plans across all LOBs Patient Protections: Emergency Services In Network Out of Network OB/GYN-no primary care physician referral Pediatrician-no primary care physician referral Applies to new policies/plans across all LOB s Does not apply to GF polices/plans across all LOB s Individual/Small/Large: Appeals Individual/Small/Large: Recission Internal & External Appeals-Plan year 6 months after DOE: Nebraska doesn t have an external review Nebraska: 1 of 6 states without external appeal process For states that don t have external review, federal gov t is external reviewer Applies to new policies/plans across all LOB s No Rescissions: Except for fraud or intentional misrepresentation of material fact Applies to GF & new policies/plans across all LOB s Individual/Small/Large: Preventive Individual/Small/Large: 2014 Preventive Services-Plan year 6 months after DOE: Prohibits cost-sharing (deductibles, co pays, coinsurance) for certain recommended preventive services provided by an in-network provider Applies to new policies/plans across all LOB s Does not apply to GF policies/plans across all LOB s USPSTF web site: Guaranteed Issue (2014): Everyone else Applies to new individual policies & small & large group plans for insured business Does not apply to GF individual policies Prior req. for small group GF plans Not required for large group GF plans Effective 2014 plan year

18 Individual/Small/Large: No Pre-X Medicare Taxes: High Income Earners No Pre-existing Exclusion Period (2014): Everyone else Applies to new individual policies & small & large GF & new group plans Effective 2014 plan year (on/after Jan. 1, 2014) Additional 0.9% Medical Hospital Insurance Tax on high income earners: $200k/individual $250k joint return Employer HI tax remains at 1.45% Effective % tax on unearned income Interest, dividends, annuities, royalties, rents Income over $200k/250k Effective 2013 Individual/Small/Large: 2014 Medicare Advantage Reductions Modified Community Rating-new plans only: Age 3:1 Tobacco 1.5:1 Geography Family Composition Applies to new individual policies, new small & large group insured plans Does not apply to GF individual, GF small & large Effective 2014 plan year Medicare Advantage Reductions: Reduces MA funding by $206B over 10 years Direct cuts account for $136B and interactions with other cuts in the FFS Medicare program for an additional $70B Medicare Agenda Medicare: Donut Hole Medicare Taxes Medicare Advantage Reductions Donut Hole Preventive Care Provisions that do NOT apply to Medicare Donut Hole Coverage Gap: $250 rebate to all beneficiaries that reach donut hole in % coins rate for generics in 2011 in the gap (down from 100% today) Phases it down to 25% in 2020 Phase down on coins for brand name drugs to 25% Effective 2010

19 Medicare: Drug Discounts CLASS Act Brand Drug Discounts in Donut Hole- After 1/1/11, 50% discount on brand-name drugs used by Part D enrollees in the donut hole Discounts paid by the manufacturer are counted as incurred drug expenses toward the catastrophic limit, beyond which Medicare pays 95% of drug costs Effective 2011 CLASS Act: Voluntary national insurance program Financed through payroll deductions Provides a cash benefit to individuals who require community living assistance service & support Medicare: Preventive Care CLASS Act: Enrollment Preventive care at no cost (January 2011) CLASS Act: Long Term Care Program Enrollment: Auto enrollment for all working individuals over 18 (opt out) Eligibility: 5 yr. vesting period. Benefits triggered when individual experiences a functional limitation expected to last 90+ days CLASS Act Agenda CLASS Act: Premium Enrollment Eligibility Premium Benefits Beneficiaries CLASS Act-Premium: Premium: $5/mo. for those below 100% FPL & full-time students under 22 Can do payroll deduction for monthly premium costs No U/W 65+: if paid premium for 20 years & not actively employed, no premium increase

20 CLASS Act: Benefits CLASS Act-Benefits: Not less than $50/day (scaled to level of ability) Not subject to lifetime or aggregate limit Payment of cash benefit goes into beneficiary s Life Independence Account to purchase nonmedical services (personal assistance, transportation, etc) needed to maintain independence in the home CLASS Act: Benefits CLASS Act: CLASS beneficiaries enrolled in Medicaid & rec g home & community-based services would retain 50% of the daily or weekly case benefit and the remainder would be applied toward the cost to the state of providing assistance Medicaid coverage would be secondary coverage to CLASS coverage CLASS Act: Other Coverage CLASS Act: Eligibility for CLASS act is disregarding when determining an individual s eligibility for other federal, state or local benefits (Soc. Security, Medicare, Medicaid, low income housing assistance, etc.)