The Affordable Care Act Update

Transcription

1 The Affordable Care Act Update Presented by: The Union Labor Life Insurance Company SOLUTIONS FOR THE UNION WORKPLACE SPECIALTY INSURANCE INVESTMENTS

2 Overview of Presentation Provisions overview 2. The Premium Stabilization Rule under the ACA 3. Insurance Exchanges The three key ACA rules a. The Individual Mandate b. The Employer Penalty in 2015 c. Premium Subsidies 5. Defining Minimum Essential Coverage & Minimum Value Standards 6. Multiemployer plans a. Rising medical claim costs b. Impact and response to Reform b. Reducing risk with stop loss insurance 2

3 The Affordable Care Act (ACA) Represents the most significant expansion and regulatory overhaul of the U.S. health care system since Medicare and Medicaid in Aimed to increase the rate of health insurance coverage for all Americans while reducing cost. Also known as the Patient Protection and Affordable Care Act (PPACA). Commonly called ObamaCare. Passed by Congress and signed into law in March, Upheld by the Supreme Court on June 28,

4 The Affordable Care Act (ACA) Mechanisms include a number of mandates, provisions and tax credits to: improve the efficiency of the system, eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions and lower healthcare costs Coverage will be available to every individual through the insurance exchanges starting in expansion of Medicaid programs premium tax subsidies 4

5 Key Provisions Timeline 2010 Dependent coverage for children up to age 26 Maintenance of ERRP contributions Restriction on annual limits Preventative services with no cost sharing Lifetime dollar limits prohibited Coverage for preexisting condition for nongrandfathered plans 5

6 Key Provisions Timeline 2011 Closing coverage gap of Medicare Part D ( Donut Hole ) FSA/HAS/HRA reimbursement eligibility Minimum Medical Loss Ratio standards for insurers 6

7 Key Provisions Timeline 2012 Uniform coverage summaries for consumers Patient Centered Outcomes Research Institute Fee-($1 per member) 60 day advanced notice of material modification Accountable Care Organizations in Medicare 7

8 Key Provisions Timeline 2013 Elimination of tax deductibility for group plans participating in Retiree Drug Subsidy (RDS) Open enrollment in Exchanges begin for individuals and small employers October 1, 2013 State notification regarding Exchanges Employee notification of access to Exchanges FSA/HAS/HRA limits Patient Centered Outcomes Research Institute - $2 per member 8

9 Key Provision Timeline 2014 State Exchanges active Elimination of preexisting conditions limitations Auto-enrollment for 200+ employees Minimum Essential Coverage Requirements Elimination of Annual Limits Premium Stabilization Program Premium subsidies available for low to middle income households Coverage for approved clinical trials 90 day waiting period effective 9

10 The ACA s Premium Stabilization Rule Standards to addressing problematic risk distribution due to adverse selection and other health care market variations. 3 programs will be implemented starting in Transitional Reinsurance Program 2. Transitional Risk Corridors Program 3. Permanent Risk Adjustment Program 10

11 The Transitional Reinsurance Program Beginning in 2014, insurers and self-funded major medical plans, including Taft Hartley Plans are responsible for paying a fee to the federal government to help stabilize premiums in the individual health care market. Plans Years Reinsurance Pool U.S. Treasury Aggregate Contribution 2014 $10 billion $2 billion $12 billion 2015 $6 billion $2 billion $8 billion 2016 $4 billion $1 billion $5 billion Total $20 billion $5 billion $25 billion 11

12 Transitional Reinsurance Fee How are the fees calculated? Reinsurance pool + U.S Treasury + Administration Estimate of enrollees in plans subject to contributions National Per Capita Contribution Rate Estimated 2014 amounts to be collected: Reinsurance Pool U.S Treasury Estimated Administration Cost Estimated Per Capital Amount for all covered participants $10 billion $2 billion 20.3 million $5.25/month or $63/year 12

13 Transitional Risk Corridors Program Intended to help insurers compete on price, not on plans risk pools. An aggregate risk sharing mechanism that will redistribute funds from all health plans, whether those health plans are offered inside or outside of the Exchanges. HHS will calculate a target amount for each plan The target amount is equal to the total premiums that plan earned that year HHS will also determine each plan s allowable costs. Consistency between Medical Loss Ratio rule s rebate and the Temporary Risk Corridors Program calculation. Spending on activities & technology to improve health care quality Incurred Claims Allowable Cost Source: J.D.,Greenwood, Kate. The Affordable Care Act s Risk Adjustment and Other Risk-Spreading Mechanisms: Needed Support for New Jersey s Health Insurance Exchange. Rutgers Center for State Health Policy/Seton Hall Law, August

14 Transitional Risk Corridors Program HHS pays the plan a fraction of the portion over the threshold Plan pays HHS Plan pays HHS a fraction of the portion below the threshold 14

15 Permanent Risk Adjustment Program Aimed to provide funding to health plans that cover a disproportionately higher risk population that are both inside and outside the Exchanges to protect against adverse selection. Health plans with below average risk in a given state will be assessed a charge and plans with higher than average risk will be provided payment. States that have a State-based Exchange will be eligible to establish and operate a State-based Risk Adjustment Program. Source: J.D.,Greenwood, Kate. The Affordable Care Act s Risk Adjustment and Other Risk-Spreading Mechanisms: Needed Support for New Jersey s Health Insurance Exchange. Rutgers Center for State Health Policy/Seton Hall Law, August

16 How do all 3 programs work together? Spreads the risk to ensure premium stability in the market Permanent Risk Adjustment Program Helps to reduce premiums by covering the cost for high risk enrollees in the individual market Transitional Reinsurance Program Moving from reinsurance contributions to reinsurance payouts Limits the extent of health insurers losses and gains Transitional Risk Corridors Program 16

17 Insurance Exchanges 17

18 What are the Exchanges? The American Health Benefit Exchanges: The ACA requires each state to establish an organized health insurance marketplace for individuals and small businesses by To enable choice and affordability. Is one insurance market of many. There is still a market outside of the exchanges offered by the states. Individuals will be able to access subsidies and apply for Medicaid and small employers can access tax credits. 18

19 Who will create the Exchanges? States can decide to: Operate their own Exchange Form Partnership with 1 or more state or regional Exchange(s). Be part of Federal facilitated Exchange. Design Requirements of Exchange: HHS certified Exchanges on January 1, ACA establishes the basic requirements of Exchanges but States have flexibility with its design. All insurance plans on the Exchange will have to be community rated and follow the Guarantee Issue provision. source:

20 Exchange Options for States Each state electing to establish an exchange must adopt the federal standards and regulations for implementing those standards. State Based State operates all exchange activities and may use federal services for premium subsidies, exemptions, risk adjustment program and reinsurance program. Subsidies are available for certain taxpayers who obtain coverage through exchanges Federally Facilitated Are HHS operated. States may perform or use federal services for reinsurance program, Medicaid and CHIP eligibility assessment and determination. Insurance Exchange Market Partnership State monitors insurance carriers and may use federal services to handle enrollment and eligibility process. Multi-State Plans Administered by the Office of Personnel Management (OPM) for qualified health insurance issuers. source: 20

21 How are states progressing? Source: 21

22 Minimum requirements for small businesses Small Businesses Individual Consumer Employer-based insurance Public Subsidy Option Medicaid/CHIP Health Insurance Exchanges Health Plan A Health Plan B Health Plan C Health Plan D What are the minimum requirements for small businesses? Federal rules will include a framework for the Small Business Health Options Program (SHOP). Until 2016, states can set the size of the small group market up to 50 or 100 employees. Employers with more than 100 employees are not permitted to participate in Exchanges until 2017, at which time States MAY permit these larger employers to participate. Sources:

23 Levels of coverage offered in Exchanges Platinum Actuarial value is 90% Out of pocket is 10% Gold Actuarial value is 80% Out of pocket is 20% Silver Actuarial value is 70% Out of pocket is 30% Bronze Actuarial value is 60% Out of pocket is 40% Young & Invincible (not eligible for subsidy) For individuals under 30 yrs old Catastrophic coverage only source: 23

24 The Individual Mandate The Individual Mandate requires all adult U.S. citizens under the age of 65 to purchase health insurance coverage. Will apply for all health insurance coverage purchased by individuals starting in Coverage must meet the Minimum Essential Coverage Provision. Failure to comply with mandate may result in a tax penalty. Source: 24

25 What are the Individual Mandate penalties? Greater of $95 per Adult and $47.50 per Child Up to $285 per Family or 1.0% of family income Estimated Federal Tax Threshold $10,075 single, $20,150 family Estimated Federal Tax Threshold $10,000 single, $20,000 family. Greater of $325 per Adult and $ per Child Up to $975 per Family or 2.0% of income. Greater of $695 per Adult and $ per Child Up to $ $2,085 per Family or 2.5% of income Estimated Federal Tax Threshold $10,150 single, $20,300 family. The Estimated Federal Tax Threshold is the estimated taxable income above which an individual or family is required to purchase health insurance or pay a penalty. source: 25

26 Individual Mandate Penalty Examples: Annual Family Income Single (S) or Family of 4 (F) $30,000 S $200 $399 $695 $30,000 F $285 $975 $2,085 $50,000 S $400 $799 $996 $50,000 F $300 $975 $2,085 $70,000 S $600 $1,199 $1,496 $70,000 F $500 $997 $2,085 $80,000 S $700 $1,399 $1,746 $80,000 F $600 $1,197 $2,085 $90,000 S $800 $1,598 $1,996 $90,000 F $700 $1,397 $2,085 Based on estimated Federal Tax Threshold $10,000 single, $20,000 family source: healthreform.kff.org 26

27 The Employer Mandate Also known as the Employer Shared Responsibility Penalty or Employer Penalty. Requires businesses that do not provide affordable coverage to pay a penalty. The administration announced in July that the Employer Mandate will be delayed until 2015 due to concerns regarding the reporting requirements for Delay allows more time to simplify the reporting requirements consistent with the law and to help employers and funds adapt to making health care coverage more affordable. 27

28 The Employer Mandate In order for the penalty to apply, the employer must have: 50+ full time employees (this includes part-time equivalent) 1 or more of their employees receiving a premium tax subsidy to purchase insurance in the exchange because they are within 400% of FPL. How will the Employer Mandate impact employers who participate in collectively bargained plans? Transitional relief for non-calendar year plans and multiemployer plans. HHS and Secretary of Labor proposed regulatory guidance for employers in determining full time status for their employees. Safe Harbor Methods in determining variable hour employees. Measurement or look-back period. source: 28

29 The Employer Mandate How the penalty works If the employer drops coverage completely: Employee is eligible to purchase health insurance on the exchanges and receiving a subsidy to cover premium. If the employer offers coverage that is not considered affordable or of minimum value: Penalty would only apply if the coverage provided to the employee is more than 9.5% of that employee s individual income. Employer is required to pay penalty (Total # of full time employees minus 30) X $2,000. Employer Penalty Penalty is lesser of: (Total # of full time employees minus 30) X $2,000] or [Total # of employees who receive tax subsidies) X$3,000.] source: 29

30 The Employer Mandate Delay The IRS will report employee eligibility for premium subsidies to employers starting in Determination of eligibility for Premium Tax Subsidies Individuals will report information to the IRS on their access to employer provided coverage when applying for subsidies starting in In order to support the Employer Penalty, large employers must report to the IRS on the health care coverage provided to their full-time employees in Employer Penalty DELAYED Affordable Health Care Coverage Employer Reporting Requirements DELAYED Individual Mandate Penalty In order to support the Individual Mandate, insurers and self funded plans must report to the IRS for each individual for whom minimum essential coverage was provided in

31 Who is eligible for premium subsidies? Subsidies are provided to individuals and families with household income between % of the Federal Poverty Level Based on premium costs of silver plan (70%) To qualify for subsidies Individual must: be a resident of the state where the exchange is established. not be enrolled under an Exchange plan as an employee or their dependent (through an employer who purchases coverage through the Exchange for their employees). not be covered by Medicaid, Medicare, military or veterans' coverage or other coverage recognized by HHS. not be eligible for coverage through an employer sponsored plan where the employer makes the required contribution toward that coverage. source: 31

32 How do Exchange tax credits work? The financial benefit of tax credits available in an insurance exchange will vary person to person within any Plan based on family income and number of dependents. The illustration below provides examples of estimated insurance premiums that are based on 2014 incomes and number of dependents. Annual Family Income Age Single (S) or Family of 4 (F) Estimated Insurance Premium Amount paid by Person Government Tax Credit $30, S $3,688 $2,512 $1,176 $30, F Medicaid $50, S $4,358 $4,358 $0 $50, F $12,549 $3,365 $9,184 $70, S $5,390 $5,390 $0 $70, F $14,614 $6,594 $8,020 $80, S $5,390 $5,390 $0 $80, F $14,614 $7,600 $7,014 $90, S $5,390 $5,390 $0 $90, F $14,614 $8,550 $6,064 32

33 What is Minimum Essential Coverage? The ACA requires every individual to maintain minimum essential coverage for themselves and any non-exempt dependent or pay a penalty. Coverages that satisfy the individual mandate includes: Coverage under eligible group and retiree health plans (whether insured or self insured) Coverage under certain government programs--medicare, Medicaid, the Children s Health Insurance Program (CHIP) and TRICARE; Coverage provided through the individual insurance market Other coverage recognized by HHS, including: self-funded student health coverage coverage under Medicare Advantage plans. 33

34 What is the Minimum Value Standard? Plan's share of the total allowed costs of benefits provided is 60% or more of costs. Why is this important? Premium Subsidy Eligibility An employee may not claim a premium subsidy if: 1. They are eligible to enroll in an employer-sponsored health plan that meets this minimum value standard (unless the premium for coverage is unaffordable.) 2. They are enrolled in an employer plan - even if that plan fails to provide minimum value or is not affordable. Approximately 98% of individuals covered by employer-sponsored health plans in 2011 received coverage that met minimum value. Source: 34

35 Multiemployer Plans Response to Health Care Reform 35

36 Claims above $1 Million are increasing Claims per 10,000 Members Average Claim Charge for Claims Excess of $1 Million > $1M > $2M $2,000,000 $1,750,000 $1,500,000 $1,250,000 $1,000,000 $750,000 $500,000 From Munich Health North America November 2012 Newsletter 2012 and 2013 are projected by Ullico

37 The ACA s effect on multiemployer plans & Ullico s response Many multiemployer plans have benefited from waivers. A large percent (we estimate 25%-30%) of self-funded multiemployer plans do not purchase stop loss. The ACA s implementation in 2014 will result in an increase need for stop loss insurance in the multiemployer market. 37

38 Greater need for medical stop loss insurance 2010 PPACA Impact Amount of Annual Maximum (beginning after 9/23/2010): -9/23/10 to 9/22/11: $750,000-9/23/11 to 9/22/12: $1,250,000-9/23/12 to 12/31/13: $2,000, : Unlimited Impact on Health Plans 1. Require additional cost for large claims. -Could add $50-$100/year/member cost. 2. Number of claims over $1 million--increasing by 20+% a year. -Claims over $2 million-- no longer a rare occurrence. 3. Clinical trails--required to be covered in Potential for additional large claims. 38

39 Summary 1. Plans that are already approved for the Annual Limit Restrictions waiver are exempt from paying the additional health care coverage costs until January 1, The implementation of Insurance Exchanges is set to be effective January 1, 2014 with open enrollment beginning October 1, Plans will need to be operational and meet federal standards. 3. The 2014 Premium Stabilization Rule will impact all fully insured and self funded plans, including multiemployer plans. 4. It is unclear how the delay of the Employer Penalty will impact the transitional relief rules for multiemployer plans. 5. Ullico continues to work with Labor to prepare for the future of health care. 39