PPACA Implementation and the Marketplaces aka Exchanges Presented by: Cathy Cooper November 15, 2013
Today s Agenda 2014 Provisions Groups over 50 in 2014 Groups under 50 in 2014 Marketplaces aka Exchanges
2014 Provisions
2014 Provisions Effective on Plan Year Metal Level/Actuarial Value (AV) Non grandfathered individual & small group plans must have a minimum actuarial value AV is the way to express a plans overall level of financial protection in one number For example, if a plan has an AV of 70% on average, a participant would be responsible for 30% of the cost of all covered benefits In the Exchanges, AV is represented as metal levels 60% for a bronze plan, 70% for a silver plan, 80% for a gold plan, 90% for a platinum plan
2014 Provisions Effective on Plan Year Essential Benefits Non grandfathered individual & small group plans Must include services in the following 10 categories: Ambulatory patient services Emergency services Hospitalization Maternity & newborn care Mental health & substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease mgmt Pediatric services, including oral and vision care
2014 Provisions Effective on Plan Year All applicable plans must include the essential benefits package and must comply with limitations on annual costsharing for plans that are sold in the exchanges Michigan s essential benefit package is a Priority Health HMO package PPACA limits the amount of out of pocket cost sharing (deductible, coinsurance, copayments) for essential benefits only Includes OV and RX copayments which are typically not included in the out of pocket maximum Does not include non essential benefit charges, out of network charges and services not covered by the plan $6,350 single/$12,700 family in 2014 After 2014, amount will be indexed based by the change in the cost of health insurance
2014 Provisions Effective on Plan Year Annual deductibles are limited to $2,000 single/$4,000 family coverage A deductible may exceed the limit if the plan cannot reasonably reach the actuarial value (AV) of a given level of coverage without exceeding the limit HHS may increase this amount in future years An employer may offer a higher deductible plan, i.e. $3,000/$6,000, as long as that employer reimburses the deductible down to the allowable limit of $2,000/$4,000 Carriers struggled with AV of these plans
2014 Provisions Effective on Plan Year Annual Limits (grandfathered and non grandfathered) Insurers may not impose annual limits on the dollar value of essential benefits Reporting of Health Insurance Coverage Any group that provides minimum essential coverage to an individual during a calendar year must report certain information to the IRS and provide a written statement to the individual Waiting Periods (grandfathered and non grandfathered) Group health plans cannot require any waiting periods in excess of 90 days
2014 Provisions Effective on Plan Year Elimination of all pre existing condition limitations (all plans) Guaranteed renewability and availability Insurers have to renew coverage at the option of the group and accept every group that applies for coverage Wellness Programs The maximum reward for participation in a wellness program will increase to 30% of cost of applicable coverage
Groups over 50
Employer Responsibility Delayed until January 1, 2015 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 Penalties assessed for no coverage or coverage that doesn t meet a minimum value standard or is not affordable
Employer Responsibility Minimum value standard (plans share of costs is at least 60%) will determine adequacy of coverage Affordable coverage is coverage where the employee s share is less than 9.5% of household income However, employers don t need to use that standard to determine if their plan is adequate The premium employers use to calculate affordability is the single employee rate for the lowest tier plan, regardless of how many dependents employee has covered on the employer plan or what plan the employee elects The employer uses the employee s W2 wage to calculate income, not the household income
Rate & Plan Expectations for 2014 Insurers estimate there will be a 6 7% increase in rates due to new PPACA taxes alone Does not include trend or change in base rates Some groups are looking at self funding to avoid compliance with state mandates, ERISA taxes, essential benefits, and medical loss ratio requirements
Groups Under 50
What About Groups Under 50? Groups under 50 in size have to comply with: Essential Benefits Lifetime limits Deductible cap Out of pocket maximums Only exception to the rule is for grandfathered plans Check with your carrier to make sure they honor grandfathered plans Groups under 50 FTE s are also eligible to purchase coverage on the SHOP Exchange
The Good News No employer mandate No penalties No coverage at all Unaffordable coverage
The Bad News Plans will have to change to meet the new essential benefits guidelines Renewals will be mapped to compliant plan Policies can only be rated using the following: Area, Age (3:1) and tobacco status (1.5:1) most carriers are not charging a tobacco surcharge for small groups Applies to all fully insured plans inside and outside of the exchange, both group and individual Health status and industry can no longer be used to determine rates
Rates in 2014 Rates will be per person based on ages of enrolling members and area of group headquarters, with a maximum of 3 oldest children under age 21 There are 16 rating areas that were chosen by the state No longer Single, Two person or Family rates Contribution strategy may have to change to contribution by tier i.e. Today an employer pays 70% and the employee pays 30%, in 2014, the 70% will not be the same for all singles, two person, and families, which will be a budget challenge Additional taxes will apply on top of these changes
Rate & Plan Expectations for 2014 Insurers estimate there will be a 7 8% increase in rates due to new PPACA taxes alone Does not include trend or change in base rates Some groups are looking at self funding to avoid compliance with state mandates, ERISA taxes, essential benefits, and medical loss ratio requirements Insurers are determining how Small Group Reform law fits since participation rules can be enforced Impacts to renewal questionnaire??? Some insurers are renewing groups in December 2013 to avoid compliance with these rules until December, 2014, however, taxes will still be applied January, 2014
Marketplaces aka Exchanges
The Marketplace, aka Exchange HHS decided that Exchanges will now become Marketplaces because the word exchange does not translate to Spanish Coverage is available January 1, 2014 with enrollment beginning October 1, 2013 through healthcare.gov many technical glitches have caused access problems Coverage meets minimum value, essential benefits and metal standards, i.e. Gold, Silver, Bronze All plans are subject to a 3.5% service fee that is sent directly to the Federal government
Individual Marketplace Individuals purchase coverage here Subsidies are only available to qualified individuals purchasing coverage through health insurance exchanges after January 1, 2014 Individuals with family incomes between 100 400% of the federal poverty level are eligible for a premium tax credit Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost sharing Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and get a subsidy
Individual Coverage Subsidies The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individual s insurer The amount of the refundable premium tax credit received is based on the premium for the second lowest cost qualified health plan in the exchange (the silver plan) and in the rating area where the individual is eligible to purchase coverage Exchange subsidies do no mean free coverage and they will benefit lower income individuals and families very differently Plan decision makers and their families generally will not qualify for subsidies
The PPACA Premium Tax Credit s Varying Impact Individual 30 year old with qualified employer coverage Family Status Married, two children Income Percentage of income that may be spent on health insurance $35,000 9.5% of household income Estimated value of the employee s annual tax credit in 2014 No one in the family qualified to buy coverage in the exchange or get a subsidy 30 year old with no employer coverage 30 year old with no employer coverage 45 Year old with qualified employer coverage Single $35,000 9.5% of household income Married, two children Married, three children $35,000 3.97% of household income $55,000 9.5% of household income $155 (based on Kaiser Family Foundation s projection of a $3440 annual single premium in 2014) Individual s annual premium costs would be $3325 $8,720 (based on Kaiser Family Foundation s projection of a $10,108 annual family premium in 2014) Family s annual premium costs would be $1,388 $0 No one in the family is qualified to buy coverage in the exchange or get a subsidy 45 year old with no employer coverage 45 year old with no employer coverage Single $55,000 N/A $0 Individual may buy coverage in the exchange but would not qualify for subsidy Individual s annual premium payments would be $5,609 based on Kaiser Family Foundation s projection of 2014 single premium Married, two children $55,000 7.52% of household income $10, 100 (based on Kaiser Family Foundation s projection of a $14, 250 annual family premium in 2014) Family s annual premium costs would be $4,135
Individual Mandate Requirement that all individuals obtain private health insurance or pay a penalty Exemptions are members of certain faiths, health care sharing ministries, those with income restraints or hardships Additional exemptions: native americans, those who haven t had coverage for up to 90 days, undocumented immigrants, and imprisoned people Penalty is assessed by the IRS and collected upon tax filing Due to problems with marketplace site, there is much political pressure to delay the individual mandate
SHOP Exchange Groups (2 50 only) can purchase coverage here Groups over 50 will be eligible in Jan. 1, 2016 Groups over 100 will be eligible in Jan. 1, 2017 Only place the Small Business Tax Credit is available in 2014 Fewer than 25 full time employees Pay an average wage of less than $50,000/year Pay at least 50% of employee premiums
Eligibility Requirements SHOP Employer s business must: Be located in a SHOP s service area Have at least one eligible employee on payroll Have no more than 50 full time equivalent (FTE)* employees on payroll Offer coverage to all full time** employees *Part time workers must be counted as fractions of an FTE when determining employer size, even if part time workers are not offered coverage. **Full time is defined as working an average of 30 or more hours per week.
Process to Enroll in the SHOP Beginning this fall, employers can created their own My Accounts at healthcare.gov and go through the application process as follows: Step 1: Employers registers basic information about their businesses. Step 2: Next, employer inputs an employee roster with basic information about each employee. Step 3: The SHOP will generate information about the range of premiums for plans, and, at the employer s request, detailed descriptions of specific plans at different price points. In 2014, employers can provide health insurance coverage to their employees by offering a single Qualified Health Plan (QHP) option.
Process to Enroll in the SHOP Step 4: In 2014, after the employer selects one QHP, that QHP will be the default reference plan. Step 5: Once the employer has selected a reference plan, they choose a defined percentage of the reference plan to contribute for each employee. The employer also decides if and at what percentage they will contribute towards dependent and dental coverage. (Like contributions to employee coverage, employer contributions to dependent insurance coverage and dental coverage are optional under the Affordable Care Act for small employers.) Step 6: Next, the employer decides whether all employees will contribute the same amount for coverage or will pay a premium based on age.
Process to Enroll in the SHOP Step 7: The employer views a summary of choices and has an opportunity to explore what if scenarios. Step 8: The employer can also help each eligible employee enroll in SHOP. Step 9: The employer reviews the completed application and determines if he or she has provided all the required information and met the minimum participation rate (in most states at least 70% of employees must participate*). Last, the employer establishes a waiting period policy for newly eligible employees, and submits the first month s premium.
Private Exchanges: An Alternative Like the public exchanges, private exchanges offer an organized market place for health insurance plans with multiple designs and price points Unlike public exchanges, private exchanges: Are managed in the private sector Are not eligible for government subsidies Private exchanges are generally based on defined contribution models
Why Employers are Looking at DC To reset how the employer and employee share the cost of coverage To connect employees to their health care and its costand be a catalyst for employees to make better choices To improve financial predictability in medical program budgeting To parallel retirement plans transition from DB to DC Source: Mercer March 6,2013
DC Tax Treatment Tax treatment of medical plans can continue as is with a qualified Sect. 125 plan Pre tax for employee Deductible expense for employer Tax treatment of voluntary benefits Employer chooses one medical carrier and signs group contract no penalty
Private Exchange Models Single Carrier: BCBSM Glide Path open to all certified agents Single Distributor: AON, Hewitt closed to all agents Multi carrier, Multi product, Multi distributor: iselect Custom Benefits Store open to all certified agents
iselect Portfolio Employee Offerings- Health (min 8-10 plan options) Dental ( 3 options) Vision (4 options) Life Disability Worksite Voluntary coverage Health Savings Accounts Pet Insurance Telemedicine FSA (optional) Carrier Partners -HAP -Priority Health -Met-Life -Guardian -Allstate -Symetra Employers Choose the Carriers, the employee chooses the plan
The Ultimate ACA Pain Reliever SMALL GROUP Set up defined contribution now avoid member level pricing issues Enrollment tool will do the pricing work from the employee Products offered PPACA ready Plan documents, reports and process easy for compliance LARGE GROUP PPACA Actuarial Value Assurance with the suites Contribution strategy allowing for split funding solutions.. Affordability Voluntary Products Available for Part timers Compliance documents all stored on the tool Fully insured or self insured options
Why Offer Employer Sponsored Coverage? Employers can provide substantial economic value and financial peace of mind to employees by offering group health insurance coverage A healthy workforce is directly linked to productivity Offering benefits can allow employers to attract the best workers and remain competitive Tax deductibility for employers Employees pay for coverage pre tax and generally receive employer contributions
Considerations for Small Groups To offer coverage or not offer coverage, a few reminders: Public exchanges are new and untested many problems Coverage will be available for purchase outside the exchange, however, new rating factors and plan designs will apply does early renewal strategy make sense? Coverage may be available through a private exchange that allows the employee to have choice but generally through a more manageable number of carriers If the employer drops coverage, then everyone has to go to the exchange to get coverage determine how many of your employees would be eligible for subsidies Consult your insurance agent on these decisons
Questions? Cathy Cooper ccooper@haaweb.net (248) 344 2291