The Politics and Impact of PPACA on Brokers and Employers

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1 The Politics and Impact of PPACA on Brokers and Employers By Janet Trautwein, CEO National Association of Health Underwriters The Unintended Consequences Dependents to Age 26 and lifetime and annual limits Popular but at a cost waivers required on limits Medical Loss Ratios Devastating to Brokers Grandfathered plan issues Very few employers can meet grandfathering requirements Pre-existing conditions limitations for children Child only coverage unavailable in many states Restrictions on OTC medications Encourages use of more expensive medications and physician visits Limited Benefits Plan Waivers These plans typically offered to part-time employees or others that may not have access to or be able to afford other coverage. Initial waivers were granted in September 2010 if it could be demonstrated that it would cause a significant number of people to lose access to any coverage prior to The initial waivers were granted for one year.

2 Current Status On June 17, 2011, CMS issued a notice that plans that had received waivers already could extend their waiver through The waiver extension request must be submitted by September 22, Any plan offered prior to September 23, 2010 that intends to file an initial waiver must file by September 22, The guidance also includes new disclosure requirements regarding communication to plan participants. PPACA Requirements in 2014 PPACA in 2014 Individual Mandate Requires all American citizens and legal residents to purchase qualified health insurance coverage Legal challenges to the constitutionality of this requirement will take this case to the Supreme Court. In 2014, those without insurance will pay the greater of $95 or 1% off household income that exceeds personal exemption for that year Starting in 2016, the penalties rise, to the greater of $695 or 2.5% of income. These penalties apply to EACH family member without coverage

3 PPACA in 2014 Individual Mandate Exemptions to individual mandate for: financial hardship religious objections (see for reference IRC Sec (g)(1)) American Indians those without coverage for less than three months undocumented immigrants, incarcerated individuals those for whom the lowest cost plan option exceeds 8% of an individual s income, and those with incomes below the tax filing threshold Current Status of Individual Mandate The U.S. Court of Appeals for the 6th Circuit ruled that the individual mandate is constitutional early this summer. The U.S. Court of Appeals for the 11 th Circuit recently ruled that it is unconstitutional. These rulings move the process one step closer to Supreme Court review. Meanwhile, the Republican majority in the House continues to push for repeal of the provision. PPACA in 2014 Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable Rates are restricted to 3 to 1 for age and no health status Exclusions based on preexisting conditions would be prohibited in all markets Redefines small group coverage as employees.

4 PPACA in 2014 Creates sliding-scale tax credits for non-medicaid eligible individuals with incomes up to 400% of FPL to buy coverage through the exchange The requirement that the subsidies are only available through the exchange is significant It is a particular threat to employer plans due to other provisions that allow employees to opt out of employer sponsored coverage Essential Benefits Defined in 2014 Section 1302(b) defines essential health benefits to include: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and Substance use disorder services Prescription drugs Rehabilitative and habilitative services and devices; Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care Institute of Medicine Recommendations on Preventive Care for Women Screening for gestational diabetes Human Papilloma virus DNA testing Annual counseling and screening on STDs & HIV FDA approved contraceptives, sterilization procedures, and counseling Lactation support and equipment rental Screening and counseling for domestic violence At least one well-woman preventive visit annually

5 Health Insurance Exchanges Exchanges Small Businesses Groups of up to 100 employees, can buy unsubsidized coverage through the Exchange Grandfathered, selfinsured and large fully insured plans not eligible to participate Federal Government Sets criteria for plan participation and purchaser eligibility Provides subsidies for individuals Manages state Exchange if a state fails to A web portal marketplace for health insurance Individuals No subsidies for ones offered employer-based coverage, unless that coverage is unaffordable or doesn t meet quality test States Each sets up own Exchange structure and governance Will be involved in premium rate reviews; can approve/reject as provided under state law 2010 Steptoe & Johnson LLP Exchanges Who Has Access Purchaser Types of Coverage Individuals without access to employer coverage (U.S citizens and legal residents only) Individuals whose employer coverage doesn t meet the affordability or quality tests Individuals previously covered by the Pre existing Condition Insurance Plan Small employers and their employees Individual Coverage Group Coverage Income Eligible Subsidized Coverage Congress and Congressional Staff

6 Groups With No Access and the Potentially Uninsured Purchaser Any size employer who wants to maintain a grandfathered plan Employer with more than 100 employees (by 2017 states could allow) Any size employer who wants to offer a self funded product People of all income levels who have qualified group coverage that meets the affordability and quality tests People eligible for Medicaid/S CHIP but not enrolled People the choose to ignore the individual mandate/pay penalty Individuals who are not U.S. Citizens or Legal Residents No Exchange Access Potentially Uninsured Exchanges Inside and Outside Markets Congress specifically provided that individual and group health insurance markets are to exist outside of the exchanges. The law specifies that grandfathered plans will continue to exist outside the exchange. Other plans are also permitted to exist outside of the exchange, and from experience in Massachusetts and Utah, some individuals and businesses will continue to purchase coverage there. Employers and Exchanges Making sure exchanges provide a benefit for employers and do not in any way undermine the ability or willingness of employers to provide coverage is a top priority. Although PPACA allows the state the option of expanding the exchange to serve as a potential coverage option for larger groups beginning January 1, 2017, this could result in unintended consequences. The large employers that would be attracted to the exchange would be those with an older and sicker employee population that would benefit from the exchange s modified community rating structure. This would increase the cost of coverage for other participants.

7 Navigator Program Standards Exchange must establish program with grants Navigators must be/have/do Public and private entities Relationships with employers and employees, consumers or self-employed Meet any licensing, certification or other standards prescribed by State or Exchange Not have a conflict of interest as navigator Navigator Duties Required by PPACA Conduct public education activities to raise awareness of the availability of Qualified Health Plans; Distribute fair and impartial information concerning enrollment in Qualified Health Plans, and the availability of premium tax credits and cost-sharing reductions in accordance with federal tax laws; Facilitate enrollment in Qualified Health Plans; Provide referrals to any applicable office of health insurance consumer assistance or health insurance ombudsman, or any other appropriate state agency or agencies, for any enrollee with a grievance, complaint, or question regarding their health plan, coverage, or a determination under such plan or coverage; Provide information in a manner that is culturally and linguistically appropriate to the needs of the population being served by the Exchange. What Can a State Permit Brokers to Do? A State may choose to permit agents and brokers to Enroll qualified individuals, employers or employees in QHPs Assist individuals in applying for advance payments of the premium tax credit and cost-sharing reductions Exchange may elect to provide information regarding licensed agents and brokers on its website

8 Existing Regulation of Agents and Brokers Agents and brokers have been regulated by state insurance departments for 100+ years and are legally accountable for their actions National Insurance Producers Registry (NIPR)is the national database and means of tracking producer activity in all states and territories To be in business agents/brokers must: Comply with state licensing requirements (fees, background check, etc) Pass licensing exam Comply with CE requirements Demonstrate financial responsibility Maintain professional liability insurance Maintain appointment standards with licensed insurers Existing State Laws Regarding Agent/Broker Licensure State laws on producer licensure are extremely consistent from state-tostate State-level licensing uniformity was mandated by the Gramm-Leach- Bliley Act enacted in 1999 Existing state laws are based on the NAIC Producer Licensing Model adopted in 2000 What triggers the need for an insurance producer license in every state? It s not: Where an individual works An individual s job title How an individual is compensated It is: the individual s actions

9 A person shall not sell, solicit or negotiate insurance in this state for any class or classes of insurance unless the person is licensed for that line of authority in accordance with this Act. NAIC Producer Licensing Model Act Sell means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company. NAIC Producer Licensing Model Act Solicit means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company. NAIC Producer Licensing Model Act

10 Negotiate means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers. NAIC Producer Licensing Model Act Current Status On July 11, HHS released a proposed rule on establishment of Exchanges. The rule includes the minimum requirements for carriers to offer qualified plans in an Exchange It also includes the requirements employers must meet to participate in the SHOP exchange. Current Status The proposed rule theoretically gives states more flexibility in implementing Exchanges. The rule indicates that a state may receive conditional approval if they are making progress even if they can t demonstrate full operational status by January 1, The regulations also allow states to develop to partner with the federal government and use the systems being developed there.

11 Employer Responsibilities Employer Responsibilities Employer must count all full-time employees and part-time employees on a full-time equivalent basis in determining if they have 50 or more employees Certain seasonal workers are not counted in determining if employer has 50 workers Full-time = 30 or more hours per week, determined on a monthly basis The definition of full-time employee is a major topic of discussion on Capitol Hill Penalties assessed for no coverage or coverage that is not affordable

12 Summary of Potential Employer Penalties under PPACA, Cong. Research Service May 14, 2010 Other Responsibilities Employers must automatically enroll new full-time employees in employer-sponsored coverage Must provide adequate notice and opportunity to opt out Applies to employers with more than 200 full-time employees Notice to current employees and new hires about exchange and subsidies Existence of exchange, services and how to obtain assistance Availability of subsidies if employer coverage is unaffordable or below minimum benefit level. More Employer Responsibilities New rules are out relative to the reporting on W-2s the value of employer provided health insurance A new four-page summary of benefits must be provided to employees beginning in 2012 Completion of form 5500 will become more complex New requirements on claims and appeals will be in place

13 More Employer Responsibilities Tracking and notification of number of months employees covered by minimum required coverage. A variety of new reporting requirements for self-funded plans must be provided to the government and employees. Pending or Watch Listed 105(h) non-discrimination rules Accountable Care Organizations Specific process of auto-enrollment Information Sharing for Subsidies Class Act MLR and Essential Benefits on Ex-Pats Medicare Secondary Payer and potential expansion of employer ESRD responsibility Employer Decisions How to budget for increased plan costs What will the new compliance costs be? Can I afford to continue to offer coverage to employees? What are the implications if I drop coverage for employees? What is my communication strategy?