GBOPHB HCR MODEL USER GUIDE

Transcription

1 GBOPHB HCR MODEL USER GUIDE August 23, 2012 (draft v11) Not to be distributed further without written consent from Mercer and GBPHB.

2 GBOPHB HCR Model User Guide Table of Contents Introduction Model Development Process Assumptions Tables Distribution by Dependent Tier and FPL Participant-Only Contributions at 9.5% of Income Participants with Unaffordable Coverage Impact of Exchange Subsidies Impact of Potential Penalties Caveats 1

3 GBOPHB HCR Model User Guide Introduction The model provides information to assist HealthFlex plan sponsors in optimizing outcomes under the provisions in the Patient Protection and Affordable Care Act (PPACA) which provide government subsidies for lower income participants toward the purchase of health plan coverage. There are three primary uses of the model: 1) Estimate distribution of their participants by each Federal Poverty Level (FPL) multiple and determine how many participants are below FPL thresholds that could make them eligible for subsidies to purchase health plan coverage through the Exchanges These estimates can be replaced with true counts if actual household income (MAGI) is obtained for all health plan participants. 2) Determine the number of participants by FPL who may be subsidy-eligible due to having coverage that is unaffordable Changes to current participant required contributions may be necessary for participants to become eligible for subsidies [also referred to as Premium Tax Credits (PTC)] The model allows the plan sponsor to enter various participant contribution levels to maximize the potential savings of shifting participants from being covered under the HealthFlex plan to being covered under the Exchanges 3) Calculate the impact on Plan Sponsor s health plan costs Shows impact on cost by participants enrolling on Exchange-based plans Plan Sponsor also has ability to model Health Reimbursement Arrangement (HRA) funding for employees, whether or not subsidy-eligible 2

4 GBOPHB HCR Model User Guide Assumptions Participant census used in the model: Compensation data from the General Board for only active clergy with reported salary greater than $0, and currently enrolled in HealthFlex Excludes active clergy in Medicare plans and Extend Health (those with small employer exception) as they would not be subsidy-eligible The impact for laity and other participants are not included Although PPACA was upheld by the Supreme Court, there are many provisions which remain unclear, and therefore the model assumes the following interpretations/assumptions: Participants are subsidy-eligible and considered to have unaffordable coverage when the participant contribution for participant-only coverage is 9.5% or more of the family s household income (Modified Adjusted Gross Income or MAGI), or they have no employer-sponsored coverage Stand-alone HRAs would still be available as a way to provide cost-offsets or incentives for those who elect coverage through the Exchanges (regulations are not yet clear) States will elect to cover Medicaid for those up to 138% of FPL, and therefore those participants will not seek coverage through Exchanges (uncertain due to politics and state budgets) The model does not assume any implications or consideration for any legal or tax issues, such as non-discrimination provisions 3

5 GBOPHB HCR Model User Guide Assumptions (cont d) Family income is estimated in the model using assumptions that project additional household income Developed based on reported UMC income plus assumptions regarding additional household income, verified against three separate UMC household income surveys conducted in prior years for the UMC clergy population Assumes 40% of those with dependents have additional spousal income Savings are calculated based on user entered assumptions regarding the disenrollment from HealthFlex for those employees eligible for Exchange subsidies or eligible for Medicaid HealthFlex plans offered to participants are assumed to meet the 60% actuarial value under PPACA (also known as the bronze plan in the exchanges), i.e., they satisfy PPACA s minimum value requirement Participants remaining in HealthFlex are assumed to be 10% more costly than those leaving HealthFlex due to their older average age Assumes distribution of FPLs/dependent tiers do not differ between large employers and small employers 4

6 GBOPHB HCR Model User Guide Table A Section 1 Participants by Household Income & Number of Dependents Participants 100% (138% in states that agree to PPACA s expanded Medicaid program) to 400% of FPL are potentially eligible for subsidies to purchase health coverage through Exchanges Participants <138% of FPL are assumed to be eligible for Medicaid However, some states have already indicated that they will not be expanding Medicaid to cover up to 138% of FPL Participants above 400% FPL are not eligible for subsidies Count/Percent of Participants by Federal Poverty Level (FPL) Ranges Count of Participants Percent of Participants 2014 Family Tier 2014 Family Tier Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 100% FPL % FPL 0% 0% 0% 0% 0% 0% 100%-125% FPL %-125% FPL 0% 0% 0% 0% 0% 0% 125%-138% FPL %-138% FPL 0% 0% 0% 0% 11% 1% 138%-150% FPL %-150% FPL 0% 0% 5% 0% 0% 0% 150%-200% FPL %-200% FPL 2% 1% 5% 6% 8% 2% 200%-250% FPL %-250% FPL 2% 16% 14% 20% 30% 15% 250%-300% FPL %-300% FPL 0% 16% 18% 4% 8% 12% 300%-350% FPL %-350% FPL 26% 9% 5% 14% 0% 11% 350%-375% FPL %-375% FPL 17% 3% 5% 6% 0% 6% 375%-400% FPL %-400% FPL 10% 3% 5% 8% 6% 5% 400%-425% FPL %-425% FPL 5% 2% 0% 0% 4% 2% 425%-450% FPL %-450% FPL 5% 2% 3% 5% 31% 5% >450% FPL >450% FPL 33% 48% 42% 37% 2% 42% Total % of Population 16% 66% 4% 8% 6% 100% Potentially subsidy-eligible 5

7 GBOPHB HCR Model User Guide Section 2 Subsidy Eligibility Provisions Participants in the 138%-400% FPL range are potentially eligible for subsidies to purchase health coverage through exchanges Participants will be subsidy-eligible only if the health plan that their employer offers is considered unaffordable, or they have no employer-sponsored coverage A plan is considered unaffordable for a participant when the premium charged for participant-only coverage is 9.5% or more of the family s total income (MAGI) Note that the premium amounts shown in the table would be for participant-only coverage Participant-only contribution for coverage is required to be higher than these amounts for a participant in each FPL/dependent tier to be subsidy-eligible Actual premium contributions for participant plus dependent coverage would be much higher, as it would be the participant-only share plus additional amounts for dependent coverage 6

8 GBOPHB HCR Model User Guide Tables B-1 and B-2 Section 2 Employee Premiums Reflecting 9.5% of Income The table on the left reflects, on average, what 9.5% of family income represents for each FPL range and each dependent tier The top table on the right corresponds to the contributions shown in the table on the left, and shows what the participant contribution share equates to, as a percent of total HealthFlex projected 2014 premium The bottom table on the right shows current participant contribution share for each respective tier Note that the percentages reflecting 9.5% of family income are the percentage of premium payable for participant-only coverage Plan sponsor would also charge additional amounts on top of these amounts for covering dependents Table B-1 Table B-2 Monthly Contributions Representing 9.5% of Income (Average Level in Range) Contributions at 9.5% of Income Reflected as Percent of Projected 2014 Participant-Only Premium 2014 Family Tier 2014 Family Tier Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 100% FPL N/A $64 N/A N/A N/A 100% FPL N/A 5% N/A N/A N/A 6% 100%-125% FPL N/A N/A N/A N/A N/A 100%-125% FPL N/A N/A N/A N/A N/A N/A 125%-138% FPL N/A N/A N/A N/A $ %-138% FPL N/A N/A N/A N/A 17% 30% 138%-150% FPL N/A $182 $240 N/A N/A 138%-150% FPL N/A 13% 14% N/A N/A 20% 150%-200% FPL $183 $232 $311 $322 $ %-200% FPL 25% 17% 18% 18% 25% 30% 200%-250% FPL $210 $303 $376 $445 $ %-250% FPL 28% 22% 21% 25% 31% 34% 250%-300% FPL N/A $349 $440 $496 $ %-300% FPL N/A 25% 25% 28% 35% 36% 300%-350% FPL $319 $410 $495 $643 N/A 300%-350% FPL 43% 29% 28% 36% N/A 39% 350%-375% FPL $336 $457 $601 $702 N/A 350%-375% FPL 46% 33% 34% 40% N/A 41% 375%-400% FPL $361 $491 $614 $747 $ %-400% FPL 49% 35% 35% 42% 54% 50% KEY POINT: Represents what the participant share of participant-only premium needs to be for an participant in each FPL/dependent tier to be subsidy-eligible. Therefore, actual premium for participant plus dependents would be much higher as it would need to account for this participant-only coverage premium plus additional cost sharing for dependent coverage HealthFlex Contributions by Tier Represented as Percent of 2013 Premium by Tier HealthFlex Coverage Tier 2013 Percentage Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Current - All Incomes 0% 47% 58% 58% 58% 29% 7

9 GBOPHB HCR Model User Guide Tables C-1 and C-2 Section 2 Distribution of Participants with Unaffordable Coverage Table on left shows the number of participants with unaffordable coverage at current participant-only contribution levels Table on right allows for modeling various participant-only coverage contribution levels and shows the resulting number of participants who would have unaffordable coverage at any specific contribution level (user input) and therefore be subsidy-eligible Some participants, especially those with more dependents and those close to the 400% FPL level, may actually be financially worse off under Exchange coverage, even with subsidies Current Contribution Levels Projected Participants Hitting Unaffordability Threshold (9.5% of Income) by Federal Poverty Level (FPL) Ranges Proposed Contribution Levels Contributions for Participant Only Coverage $ PEPM % Premium 2013 Levels $0 0% Contributions for Participant Only Coverage $ PEPM % Premium 2014 Levels $0 0% 2014 Levels $375 51% Variable cell to model impact of various participant-only contribution levels Projected Participants with Unaffordable Coverage at Current Premiums Projected Participants with Unaffordable Coverage at Proposed Premiums Table C-1 Table C Family Tier 2014 Family Tier Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 100% FPL % FPL %-125% FPL %-125% FPL %-138% FPL %-138% FPL %-150% FPL %-150% FPL %-200% FPL %-200% FPL %-250% FPL %-250% FPL %-300% FPL %-300% FPL %-350% FPL %-350% FPL %-375% FPL %-375% FPL %-400% FPL %-400% FPL Total Total

10 GBOPHB HCR Model User Guide Tables D-1 and D-2 Section 2 Determination of Disenrollment from HealthFlex The exhibit continues with two additional tables that allow the user to indicate if the participant in each FPL will disenroll from HealthFlex Even though participants may be eligible for Medicaid or Exchange subsidies, they may not want to disenroll from HealthFlex; some participants, especially those with more dependents and those close to the 400% FPL level, may actually be financially worse off under Exchange coverage, even with subsidies No indicators are provided for those at 400% FPL or above, as they are assumed not to disenroll The table on the left shows the indicators for current contribution levels, while the table on the right shows the proposed contribution levels Current Contribution Levels Proposed Contribution Levels Table D-1 Table D Disenroll from Health Flex? 2014 Disenroll from Health Flex? Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps 100% FPL N N N N N 100% FPL Y Y Y Y Y 100%-125% FPL N N N N N 100%-125% FPL Y Y Y Y Y 125%-138% FPL N N N N N 125%-138% FPL Y Y Y Y Y 138%-150% FPL 150%-200% FPL N N N N N N N N N N User input: 138%-150% FPL 150%-200% FPL Y Y Y Y Y Y Y Y Y Y 200%-250% FPL N N N N N toggle 200%-250% FPL Y Y Y Y Y 250%-300% FPL N N N N N between 250%-300% FPL Y Y Y Y Y 300%-350% FPL N N N N N 300%-350% FPL Y Y Y Y Y Y or N 350%-375% FPL N N N N N 350%-375% FPL Y Y Y Y Y 375%-400% FPL N N N N N 375%-400% FPL Y Y Y Y Y 9

11 GBOPHB HCR Model User Guide Tables E-1 & E-2 Section 3 Estimated Distribution of Participants Exchange vs. HealthFlex The tables below details the number of participants into those who are Medicaid eligible, are Exchange-subsidy eligible ( Unaffordable ), and who will remain on HealthFlex ( Affordable ), based on either current contributions (Table E-1) or proposed contributions from Table C-2 (Table E-2) Based on the assumption of who disenrolls from HealthFlex, the Unaffordable and Medicaid participants are further broken out into those who are assumed to disenroll from HealthFlex, versus those who are assumed to remain on HealthFlex Table E-1: Affordability Provision Estimated Count of Participants Estimated Percent of Participants Family Tier Family Tier Group Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Group Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Affordable Affordable 100% 100% 100% 100% 89% 99% Unaffordable Unaffordable Disenroll from HealthFlex Disenroll from HealthFlex 0% 0% 0% 0% 0% 0% Remain on HealthFlex Remain on HealthFlex 0% 0% 0% 0% 0% 0% Medicaid Medicaid Disenroll from HealthFlex Disenroll from HealthFlex 0% 0% 0% 0% 0% 0% Remain on HealthFlex Remain on HealthFlex 0% 0% 0% 0% 11% 1% Total Table E-2: Affordability Provision Estimated Count of Participants Estimated Percent of Participants Family Tier Family Tier Group Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Group Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Affordable Affordable 43% 69% 82% 94% 89% 69% Unaffordable Unaffordable Disenroll from HealthFlex Disenroll from HealthFlex 57% 31% 18% 6% 0% 31% Remain on HealthFlex Remain on HealthFlex 0% 0% 0% 0% 0% 0% Medicaid Medicaid Disenroll from HealthFlex Disenroll from HealthFlex 0% 0% 0% 0% 11% 1% Remain on HealthFlex Remain on HealthFlex 0% 0% 0% 0% 0% 0% Total

12 GBOPHB HCR Model User Guide Table F-1 Section 3 Impact of Exchange Subsidies Using Current Contributions Shows the impact on costs for the plan sponsor, assuming no change to current participant-only contribution levels Figures are based on the assumed number of participants with Medicaid eligibility or subsidy-eligiblity with unaffordable coverage, who disenroll from HealthFlex (based on the Y or N indicators from the prior table) Table F-1: Premium Distribution: Those Potentially Leaving HealthFlex Plan versus Those Remaining Estimated 2014 Annual Premium Costs Single 1 Dep 2 Deps 3 Deps 4+ Deps Total A. Total HealthFlex Cost: No Change $513,112 $2,546,249 $276,086 $637,121 $467,222 $4,439,790 B. Disenroll from HealthFlex: Unaffordable $0 $0 $0 $0 $0 $0 C. Disenroll from HealthFlex: Medicaid Eligible $0 $0 $0 $0 $0 $0 D. Remaining in HealthFlex: (A. - B. - C.) $513,112 $2,546,249 $276,086 $637,121 $467,222 $4,439,790 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total E. Estimated 2014 Contributions: No Change $0 $476,107 $161,078 $371,718 $272,593 $1,281,496 F. Estimated 2014 Net Plan Cost: No Change (A. - E.) $513,112 $2,070,142 $115,008 $265,403 $194,629 $3,158,293 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total G. Estimated 2014 Contributions: Remaining $0 $476,107 $161,078 $371,718 $272,593 $1,281,496 H. Estimated 2014 Additional Contributions $0 $0 $0 $0 $0 $0 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total I. Additional HRA Cost $0 $0 $0 $0 $0 $0 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total J. Total New Combined Cost: $513,112 $2,070,142 $115,008 $265,403 $194,629 $3,158,293 (D. - G. - H. + I.) Estimated % Change in Cost ((J. - F.) F.) 0% 0% 0% 0% 0% 0% In this example, because $0 is currently charged for participant-only coverage, no one is deemed to have unaffordable coverage and therefore no one is subsidy-eligible. Additionally, as the situation would not have changed for any current or newly Medicaid eligible participants, this scenario assumes no migration to Medicaid plans. Therefore, no one is assumed to disenroll from HealthFlex and no savings is estimated for the plan sponsor. 11

13 GBOPHB HCR Model User Guide Table F-2 Section 3 Impact of Exchange Subsidies Using Proposed Contributions Models the impact on costs for the plan sponsor, given the proposed participant-only contribution levels Figures are based on the assumed number of participants with Medicaid eligibility or unaffordable coverage, who disenroll from HealthFlex (based on the Y or N indicators from the prior table) At higher participant-only contribution levels, plan premium costs are reduced due to participant eligibility for subsidies and assumed disenrollment from HealthFlex. Table F-2: Premium Distribution: Those Potentially Leaving HealthFlex Plan versus Those Remaining Estimated 2014 Annual Premium Costs Estimated HRA Contributions (Per Month) The plan sponsor s costs are also further offset by the additional increase in the participantonly contributions. Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Group Single 1 Dep 2 Deps 3 Deps 4+ Deps A. Total HealthFlex Cost: No Change $513,112 $2,546,249 $276,086 $637,121 $467,222 $4,439,790 Remain on HealthFlex $300 $300 $300 $300 $300 B. Disenroll from HealthFlex: Unaffordable $279,879 $709,343 $47,127 $34,943 $0 $1,071,292 Disenroll from HealthFlex -Unaffodable $200 $200 $200 $200 $200 C. Disenroll from HealthFlex: Medicaid Eligible $0 $4,961 $0 $0 $46,800 $51,761 Disenroll from HealthFlex -Medicaid $0 $0 $0 $0 $0 D. Remaining in HealthFlex: (A. - B. - C.) $233,233 $1,831,945 $228,959 $602,178 $420,422 $3,316,737 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total E. Estimated 2014 Contributions: No Change $0 $476,107 $161,078 $371,718 $272,593 $1,281,496 F. Estimated 2014 Net Plan Cost: No Change (A. - E.) $513,112 $2,070,142 $115,008 $265,403 $194,629 $3,158,293 This is the net plan cost if no contribution changes were made, and no disenrollment from HealthFlex occurred. Single 1 Dep 2 Deps 3 Deps 4+ Deps Total G. Estimated 2014 Contributions: Remaining $0 $352,319 $131,340 $349,415 $242,856 $1,075,930 Illustrative 2014 Employee Contributions for Exchange Coverage (Silver Plan) H. Estimated 2014 Additional Contributions $112,500 $729,000 $49,500 $126,000 $90,000 $1,107,000 % FPL Maximum Monthly Contribution % of AHI Single Family of 2 Family of 4 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 138% 3.00% $41 $55 $84 I. Additional HRA Cost $169,200 $755,520 $45,360 $105,120 $72,000 $1,147, % 4.00% $59 $80 $ % 6.30% $124 $169 $257 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 250% 8.05% $199 $269 $410 J. Total New Combined Cost: $289,933 $1,506,146 $93,478 $231,883 $159,566 $2,281, % 9.50% $281 $381 $581 (D. - G. - H. + I.) 400% 9.50% $375 $508 $774 Estimated % Change in Cost ((J. - F.) F.) -43% -27% -19% -13% -18% -28% This is the net plan cost savings, including assumed disenrollment from HealthFlex, plus savings from additional contribution and the additional HRA costs. 12

14 GBOPHB HCR Model User Guide Table F-2 (cont d) Section 3 Impact of Exchange Subsidies Using Proposed Contributions As costs are also offset by increased participant-only contributions, the plan sponsor could elect to offset the increase to participant contributions via contributions to an HRA (if permitted by regulations after 2014) However, there will be some winners and losers by offsetting the increase in participant contributions in a cost-neutral way Participants remaining in HealthFlex would most likely not get the full amount of the increase in participant contributions, as only those remaining in HealthFlex would be paying the additional increase in participant-only contributions Participants in the lower FPLs disenrolling from HealthFlex may actually receive more in HRA amounts than they pay for coverage through an Exchange; however participants in the higher FPLs would pay more Table F-2: Premium Distribution: Those Potentially Leaving HealthFlex Plan versus Those Remaining Estimated 2014 Annual Premium Costs Estimated HRA Contributions (Per Month) Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Group Single 1 Dep 2 Deps 3 Deps 4+ Deps A. Total HealthFlex Cost: No Change $513,112 $2,546,249 $276,086 $637,121 $467,222 $4,439,790 Remain on HealthFlex $300 $300 $300 $300 $300 B. Disenroll from HealthFlex: Unaffordable $279,879 $709,343 $47,127 $34,943 $0 $1,071,292 Disenroll from HealthFlex -Unaffodable $200 $200 $200 $200 $200 C. Disenroll from HealthFlex: Medicaid Eligible $0 $4,961 $0 $0 $46,800 $51,761 Disenroll from HealthFlex -Medicaid $0 $0 $0 $0 $0 D. Remaining in HealthFlex: (A. - B. - C.) $233,233 $1,831,945 $228,959 $602,178 $420,422 $3,316,737 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total E. Estimated 2014 Contributions: No Change $0 $476,107 $161,078 $371,718 $272,593 $1,281,496 F. Estimated 2014 Net Plan Cost: No Change (A. - E.) $513,112 $2,070,142 $115,008 $265,403 $194,629 $3,158,293 type of participant. In this example, those remaining in HealthFlex would get $300 of the $375 increase in contributions covered. Those enrolling in Exchange-based coverage would be getting $200. Single 1 Dep 2 Deps 3 Deps 4+ Deps Total G. Estimated 2014 Contributions: Remaining $0 $352,319 $131,340 $349,415 $242,856 $1,075,930 Illustrative 2014 Employee Contributions for Exchange Coverage (Silver Plan) H. Estimated 2014 Additional Contributions $112,500 $729,000 $49,500 $126,000 $90,000 $1,107,000 % FPL Maximum Monthly Contribution % of AHI Single Family of 2 Family of 4 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 138% 3.00% $41 $55 $84 I. Additional HRA Cost $169,200 $755,520 $45,360 $105,120 $72,000 $1,147, % 4.00% $59 $80 $ % 6.30% $124 $169 $257 Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 250% 8.05% $199 $269 $410 J. Total New Combined Cost: $289,933 $1,506,146 $93,478 $231,883 $159,566 $2,281, % 9.50% $281 $381 $581 (D. - G. - H. + I.) 400% 9.50% $375 $508 $774 Estimated % Change in Cost ((J. - F.) F.) -43% -27% -19% -13% -18% -28% Variable cells to model different HRA levels by These are illustrative amounts that participants may pay for Exchange coverage. The amounts become very high as the FPL range and family size increases. In this example, each participant would receive $200 in an HRA to help offset these contribution amounts. 13

15 GBOPHB HCR Model User Guide Tables G-1 and G-2 Section 3 Potential Penalties PPACA also imposes penalties on large employers (defined as having 50 or more employees) who do not provide coverage, or who provide coverage that is either unaffordable or plans that do not provide a 60% actuarial value benefit ( minimum value ) As each church will be considered by the model as an employer in interpreting PPACA, unless a church is a large employer (50 or more employees), penalties will not be assessed The model allows for plan sponsors to enter the % of participants employed by a large employer, in order to calculate the potential penalties Table G-1: Summary of Potential Penalties Family Tier Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Estimated Penalties $0 $0 $0 $0 $0 $0 Table G-2: Summary of Potential Penalties Family Tier Single 1 Dep 2 Deps 3 Deps 4+ Deps Total Estimated Penalties $0 $0 $0 $0 $0 $0 This example is for the current contribution level, where no one would have unaffordable coverage, so the penalties would not be assessed even for a large employer. This example is for the proposed scenario, and assumes 0% of employees are covered by a large employer, therefore no penalties are projected to be assessed. 14

16 GBOPHB HCR Model User Guide Caveats Mercer has prepared these projections exclusively for GBOPHB, to estimate the range of the impact of federal Health Care Reform. These estimates may not be used or relied upon by any other party or for any other purpose than for which they were issued by Mercer. Mercer is not responsible for the consequences of any unauthorized use. All projections are based on the information and data available at a point in time and the projections are not a guarantee of results which might be achieved. The projections are subject to unforeseen and random events and so must be interpreted as having a potentially wide range of variability from the estimates. Further, the estimates set forth in this report have been prepared before all regulations needed to implement the Patient Protection and Affordable Care Act (PPACA) and Health Care Education and Reconciliation Act (HCERA) have been issued, including clarifications and technical corrections, and without guidance on complex financial calculations that may be required. (For example, some Health Care Reform provisions will likely involve calculations at the individual participant level.) Accordingly, these estimates are not Actuarial Opinions. GBOPHB is responsible for all financial and design decisions regarding PPACA and HCERA. Such decisions should be made only after GBOPHB s careful consideration of alternative future financial conditions and legislative scenarios, and not solely on the basis of the estimates illustrated here. Lastly GBOPHB understands that Mercer is not engaged in the practice of law and this report, which may include commenting on legal issues or regulations, does not constitute and is not a substitute for legal advice. Accordingly, Mercer recommends that GBOPHB secures the advice of competent legal counsel with respect to any legal matters related to this report or otherwise. The information contained in this document and in any attachments is not intended by Mercer to be used, and it cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or imposed by any legislative body on the taxpayer or plan sponsor. 15

17 Glossary Federal Poverty Level (FPL) The set minimum amount of gross income that a family needs for food, clothing, transportation, shelter and other necessities. In the United States, this level is determined annually by the Department of Health and Human Services. FPL varies according to family size (and by geography for Alaska). Patient Protection and Affordable Care Act (PPACA) Also known as the Affordable Care Act or ACA is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to be rolled out through 2014 and beyond. Individual Mandate ACA provision that requires all Americans to purchase health insurance if not otherwise covered. It is also called the shared responsibility payment for not having minimum essential coverage. 16

18 Glossary Exchanges State-based or Federally-faciliated, the ACA requires states to establish health benefit Exchanges by January 1, 2014 (the Federal government will set up Exchanges for states that elect not to set up their own state-based Exchange). Each Exchange must set up a website through which an individual or small business will be able to purchase Qualified Health Plan (QHP) coverage. Qualified Health Plan (QHP) QHPs are insured health plans that meet minimum federal standards (covering essential health benefits ) established under the ACA as well as the certification standards established by each separate state Exchange. QHPs must provide benefits at various actuarial levels called bronze (60%), silver (70%), gold (80%) and platinum (90%). Through the Exchanges, individuals will be able to determine whether they are eligible for PTCs or for Medicaid or the Children s Health Insurance Program (CHIP). 17

19 Glossary Essential Health Benefits These are the benefits that insured plans offer, effective Certain broad categories of benefits (ambulatory patient services, emergency services, hospitalizations, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services, and pediatric services) constitute essential benefits. Self-funded plan like HealthFlex may not set annual limits on essential health benefits. Minimum Essential Coverage This term is used to describe the coverage required to fulfill the individual mandate and the coverage employers will be required to offer to avoid penalties under ACA. The definition includes any eligible employer-sponsored plan, which means that most employer-sponsored group health plans should meet this requirement. Of course, additional requirements must be met to avoid the free rider penalty. The coverage must also be affordable and sufficiently valuable. 18

20 Glossary Modified Adjusted Gross Income (MAGI) Also known as actual household income. It is the amount of income that determines how much of an individual's IRA contribution is deductible. The MAGI is found by taking the individual's adjusted gross income and (for example) adding back such items as student-loan deductions, IRA-contribution deductions and deductions for higher-education costs. MAGI excludes housing allowance or parsonage value; i.e., it would be a clergyperson s income without adding any housing factor. Premium Tax Credit (PTC) Also referred to as subsidies. These are monies (subsidies) afforded by the PPACA where certain low-income individuals may qualify for premium tax credits (PTCs) that assist them with purchasing qualified health plans (QHPs) offered through State (or Federal)-based health insurance exchanges (Exchanges). 19

21 Glossary Unaffordable Insurance - Employer-sponsored coverage is unaffordable if the required premium for participant-only coverage exceeds 9.5% of the applicable taxpayer s MAGI. For example: If the MAGI is $50,000 and the employer requires a premium for a family plan that exceeds $4,750 (9.5% of $50,000), the plan is considered unaffordable under PPACA. 20

22 Services provided by Mercer Health & Benefits LLC.