Schools Insurance Group

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1 Contra C t C Costa t C County t Schools Insurance Group p Presented by: Debra DeSpain Senior Account Manager February 8, 2013

2 Mandate Overview Individual Mandate Full-Time Employees Employer Shared Responsibility Government Subsidies Cadillac Tax 2

3 January 11, Questions Question: Does the filing threshold amount change each year? Answer: The filing threshold amount is determined each year by the IRS. Question: Is the individual mandate tax assessed at time of filing taxes? Answer: Tax will held from IRS filing if there is a return. Question: What is the tax calculated on - the total annual plan premium, the employee's affordable plan choice or the difference? Answer: The employer tax penalty is applied when any one FTE takes coverage through the exchange due the lowest costing, single only coverage plan offered being unaffordable. Unaffordable means that the amount that the employees pays exceeds 9.5% of household income. When applying the Affordability Safe Harbor, this would be what the employee pays not to exceed 9.5% of box1 of the W2. 3

4 January 11, Questions Question: What does "All In" mean - premium, copays/deductibles, etc.? Does it refer to an individual's costs? Family costs? How will this be calculated individual id or group basis? Answer: All In of the 40% member share is the deductibles, copays, coinsurance of four (4) categories: Physician & Mid-Level Practitioner Care Hospital and ER Services Pharmacy Benefits Lab and Imaging Services Question: When will we know more about what 'affordable' means? Answer: Affordable means that the amount that the employee pays does not exceed 9.5% of the single only coverage of the lowest cost plan offered. Question: What is the definition of a salaried employee? Answer: The only definition that matters to ACA is the FTE definition of 30 hours per week or 130 hours per month. If a salaried employee was hired with the intent of being a full-time employee, but only works 100 hours per month, that salaried employee is considered a PTE and not subject to employer coverage 4

5 January 11, Questions Question: Can a certificated substitute be considered seasonal/temporary employee? Answer: A certificated substitute can be considered seasonal/temporary. However, you will still need to confirm the hours worked in the Safe Harbor look back period if that substitute is going to be employed as of January 1, Question: Once an employee is identified as an FTE, are they always an FTE or does that change from year to year? Month to month? Answer: Once the employee is identified as an FTE in the Safe Harbor look back period, the employee is deemed an FTE in the stability period. An FTE test will need to be made every year on the original look back period. You can decide to do month-to-month, to however, you will be required to report on a month-to-month basis Question: Will the Safe Harbor process be an option going forward or just the first year determination? ti Answer: Safe Harbor period will be determined prior to January 1, An FTE test will need to be performed based upon the original Safe Harbor period. 5

6 January 11, Questions Question: Under Affordability, what does "annual cost" mean? Plan Premium? Employee's contribution? Answer: The annual cost means what the employee cost would be on the single only, lowest cost plan offered. Question: How will cash-in-lieu elections come into play? Answer: Cash-in-lieu will still be a district option. It may be attractive to an employee to take the cash-in-lieu offer and purchase coverage on the exchange Question: Will proof of other coverage continue to be required? Answer: Possibly, as it relates to confirmation of coverage for future employer reporting. 6

7 January 11, Questions Question: Will the carriers look at the exchange as "group coverage" even though the employee enrolls as an individual? Answer: Yes, however, there will be an impact to future renewals. Question: If a high percentage of employees move to the exchange and the enrollment changes more than 10%, will Kaiser/Anthem re-rate rate the group? Answer: In speaking with the carriers, they will continue at this time to reserve the right to re-rate with a 10% +/- fluctuation in enrollment. 7

8 California Health Insurance Exchange 8

9 Covered California Vision: Is to improve the health of all Californians by assuring their access to affordable, high quality care. Mission: Is to increase the number of insured Californians, improve health care quality, lower costs, and reduce health disparities through an innovative, competitive marketplace that empowers consumers to choose the health plan and providers that give them the best value. The California Health Benefit Exchange is guided by the following Values. 9

10 Covered California The California Health Insurance Exchange is guided by six values: Consumer-focused: At the center of the Exchange s efforts are the people it serves, including patients and their families, and small business owners and their employees. The Exchange will offer a consumer-friendly experience that is accessible to all Californians, recognizing the diverse cultural, language, economic, educational and health status needs of those we serve. Affordability: The Exchange will provide affordable health insurance while assuring quality and access. Catalyst: The Exchange will be a catalyst for change in California s health care system, using its market role to stimulate new strategies for providing high-quality, affordable health care, promoting prevention and wellness, and reducing health disparities. Integrity: The Exchange will earn the public s trust through its commitment to accountability, responsiveness, transparency, speed, agility, reliability, and cooperation. Partnership: The Exchange welcomes partnerships, and its efforts will be guided by working with consumers, providers, health plans, employers and other purchasers, government partners, and other stakeholders. Results: The impact of the Exchange will be measured by its contributions to expanding coverage and access, improving health care quality, promoting better health and health equity, and lowering costs for all Californians. 10

11 Covered California 19 Regions 33 Anticipated Carriers 13 Southern California 20 Northern California Kaiser, Anthem Blue Cross, Blue Shield of California, Health Net anticipated to participate p Health Plans and rates anticipated by June 2013 Must be self-sufficient, without federal or state money, by

12 Covered California Provides a regulated internet marketplace Individuals can purchase from other carriers Small business (50 or less employees) can purchase for their employees Exchanges will provide consumer assistance 12

13 Covered California Benefit Levels based upon actuarial value*: PLATINUM 90% GOLD 80% SILVER 70% BRONZE 60% * Actuarial value means that the plan will pay the percentage noted and the enrollee will pay the remainder. For example: The Silver plan will pay 70% of benefits costs and the enrollee will be responsible for 30% of the benefits cost 13

14 Covered California Basic Plan Designs GENERAL Platinum Coinsurance Plan Platinum Copay Plan Gold Coinsurance Plan Gold Copay Plan Estimated Actuarial Value 91.8% 90.3% 81.7% 80.3% Overall Deductible (Integrated Medical/Rx) $0 N/A $500 N/A Facility Only (IP, ASC, and ER) $0 $500 Brand Drug $0 $0 $100 $100 Out of Pocket Maximum $3,000 $3,000 $4,500 $4,500 OUTPATIENT Primary Care/Specialist Visits $25 $25 $35 $35 Preventive Care No Cost Share Diagnostic X-Ray & Lab 10% $25 20% $100 Imaging (CT/PET Scans, MRI) 10% $150 20% $200 Emergency Room (Waived if Admitted) $150 $150 $200 $200 Urgent Care $40 $40 $50 $50 Outpatient Surgery Facility 10% 10% 20% 20% Outpatient Surgery Physician/Surgeon 10% $150 20% $200 Pregnancy Prenatal and Postnatal $25 $25 $35 $35 Delivery (All inpatient services related to the Delivery) 10% $300 per day up to 3 days * 20% $600 per day up to 3 days * INPATIENT Facility 10% $300 per day up to 3 20% $600 per day up to 3 Physician Surgeon 10% days * 20% days * PHARMACY Generic $5 $5 $10 $10 Preferred Brand $15 $15 $20 $20 Non-Preferred Brand $25 $25 $35 $35 Specialty 10% 10% 20% 20% 14

15 Covered California Basic Plan Designs GENERAL Silver Coinsurance Plan Silver Copay Plan Silver HSA Plan Estimated Actuarial Value 71.9% 71.7% 71.6% Overall Deductible $1,200 N/A $1500 (Medical & Rx) Facility Only (IP, ASC, and ER) $1,400 Brand Drugs $200 $250 Out of Pocket Maximum $6,400 $6,400 $6,400 OUTPATIENT Primary Care/Specialist Visits $45 $45 20% Preventive Care No Cost Share Diagnostic X-Ray & Lab 30% $150 20% Imaging (CT/PET Scans, MRI) 30% $250 20% Emergency Room (Waived if Admitted) $250 $250 20% Urgent Care $60 $60 20% Outpatient Surgery Facility 30% 30% 20% Outpatient Surgery Physician/Surgeon 30% $259 20% Pregnancy Prenatal and Postnatal $45 $45 20% Delivery (All inpatient services related to the Delivery) 30% $0 20% INPATIENT Facility 30% 30% 20% Physician Surgeon 30% 0% 20% PHARMACY Generic $20 $20 20% Preferred Brand $30 $30 20% Non-Preferred Brand $50 $50 20% Specialty 30% 30% 20% 15

16 Covered California Basic Plan Designs Bronze Coinsurance Plan Bronze Copay Plan Bronze HSA Plan Catastrophic Plan GENERAL Estimated Actuarial Value 62.0% 64.8% 61.6% 57.9% Overall Deductible (Integrated Medical/Rx) $3,500 $3,500 $6,400 Facility Only (IP, ASC, and ER) $4,500 Out of Pocket Maximum $6,400 $6,400 $6,400 $6,400 OUTPATIENT Primary Care/Specialist Visits $60 $80 30% 0% Preventive Care No Charge Diagnostic X-Ray & Lab 40% $200 30% 0% Imaging (CT/PET Scans, MRI) 40% $350 30% 0% Emergency Room (Waived if Admitted) $300 $300 30% 0% Urgent Care $75 $95 30% 0% Outpatient Surgery Facility 40% 40% 30% 0% Outpatient Surgery Physician/Surgeon 40% $350 30% 0% Pregnancy Prenatal and Postnatal $60 $80 30% 0% Delivery (All inpatient services related to the Delivery) 40% 0% 30% 0% INPATIENT Facility 40% 40% 30% 0% Physician Surgeon 40% 0% 30% 0% PHARMACY Generic $25 $25 30% 0% Preferred Brand $50 $50 30% 0% Non-Preferred Brand $75 $75 30% 0% Specialty 40% 40% 30% 0% 16

17 Covered California Exchange must Offer essential benefits Offer at least one silver, one gold and one child-only plan Charge the same premium whether the plan is sold through the exchange or offered outside the exchange. No subsidies are available for plans outside of the exchange Guaranteed issue and renewal 17

18 Covered California Exchange must Follow underwriting rules: Rates can vary by only the following: Individual v. family - Will be allowed to vary rates based on who is enrolled in the plan. Rates can be charged based on whether the plan covers only an individual or a family (i.e., individual + spouse, individual + dependents) Geographic Rating Area - Will be allowed to charge more for people who live in areas where medical costs are high Tobacco Use, no more than 1.5 to 1 - Will be allowed to charge more for people that use tobacco products. However, not more than 1.5 times the non-tobacco user s rate Age no more than 3 to 1 - Will be allowed to vary rates based on age. However, will be limited to charging an older adult more than 3 times the rate of a younger person Risk corridors and risk adjustment 18

19 Covered California Initial Open Enrollment: October 1, Open Enrollment: October 15 th December 7 th Special enrollment provisions will be included 19

20 Covered California Exchange purchasing could be complicated for employees: Will have to determine which insurance company to use, level of coverage and network coverage Political l and economic pressures could mean changes If negotiating additional wages for benefit trade-off may be almost impossible to match exactly the additional cost to each employee (some would pay more and some less depending on household income, family size and age) Would have to use after tax dollars to pay for the exchange May run the risk of needing to pay back excess subsidy 20

21 Covered California Required Employer Notification Delayed until summer Written notice including a description of how the employee may contact the Exchange for assistance Must include if the plan offered by the employer is inadequate, meaning does not meet minimum value (60%) Must let employees know that they may be eligible for a premium tax credit and a cost-sharing sharing reduction if they purchase a health plan through the Exchange Must notify employees that if they purchase a health plan through the Exchange, the employee may lose the employer s contribution to health benefits offered by the employer 21

22 Cadillac Tax An excise tax will be levied on rich or Cadillac employer sponsored medical benefit programs. 22

23 Cadillac Tax Starting in 2018 an excise tax will be imposed on high- value health plans of active employees and retirees If the aggregate value of employer-sponsored health insurance for actives exceeds $10,200* (single) or $27,500* (family), a 40% excise tax will be imposed on amounts exceeding that threshold The tax is imposed on insurers of fully-insured plans and plan sponsors of self-insured plans The dollar amounts for retirees, high risk professions or employed to repair or install electrical or telecommunications lines are $11,850/$30,950 * As adjusted by the health cost adjustment percentage 23

24 Cadillac Tax Aggregate g cost of major medical, Rx, executive physicals, employer contributions to FSA and HSA is included Calculation is done by the employer who allocates the penalty among the insurance carriers and notifies them of the penalty amount The penalty is assessed on the insurance carrier for fully-insured plans/plan sponsor for self-funded plans Excludes dental and vision; includes HRA s, HSA s and FSA s 24

25 Additional Resources Health Reform: Department of Health and Human Services (HHS): Department of Treasury/Internal Revenue Service: p// / / Department of Labor: SBC Information: SBC Frequently Asked Questions (FAQ s): Keenan & Associates: /h / Covered California: 25

26 Thank You... Keenan is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you. Questions: Debra DeSpain Senior Account Manager DDeSpain@Keenan.com x