NEC Affordable Care Act Forum: Health Care Reform Overview

NEC Affordable Care Act Forum: Health Care Reform Overview Presentation by Rob Trautlein Senior Director, Health Care Reform Project Management Office October 22, 2014

Our vision for a sustainable, affordable Health Care system Health Care Reform impacts every individual, plan sponsor and employer Aetna remains committed to helping our customers understand and navigate the new health care landscape We will continue to advocate for a marketplace that delivers value and promotes affordability, competition, choice, and flexibility

Health Care Reform Timeline ACA Provisions Continue to take effect in 2014 and Beyond Health Insurance Provider Fee Public Exchanges Product & Plan Impacts and Other 2014 Insurance Reforms Additional Employer Reporting Requirements Taxes & Fees Medicare MLR (first experience year) Medicaid Expansion Taxes & Fees Employer Mandate / Minimum Essential Coverage (MEC) Reporting Medicare MLR (reporting requirement for 2014 experience year) HPID /Health Plan Certification (Small health plans) Public Exchanges Taxes & Fees Employer Mandate / MEC Reporting HPID /Health Plan Certification (Large health plans)

2014 Mid-term Elections Outlook and Ongoing Impact of Health Care Reform Implementation 2014 Midterm Outlook Senate 19 competitive races means Democratic majority at risk Republicans need net gain of 6 seats to win control House of Representatives 79 Competitive Races, with Republicans likely to maintain control Democrats unlikely to reach net gain of 17 seats needed to win House majority Governor Races 36 seats in play: 6 (of 22) Republican seats are at risk of flipping this cycle 5 (of 14) Democratic seats are at risk of flipping this cycle

2014 Mid-term Elections Outlook and Ongoing Impact of Health Care Reform Implementation Midterm Elections Impact on ACA Legislative opportunities remain limited Highly partisan House and Senate continue to make consensus on many issues difficult Regulatory environment provides increased potential for Administration continues to work with insurers to fix ongoing trouble spots on the Federal Exchange and want to make 2014 open enrollment successful Productive ACA changes possible in 2015 for following reasons: New Members of Congress potential for fewer incumbents mean there will be less ownership of 2010 law Debt Limit/SGR Patch Expiration-- Need for a comprehensive deal in March 2015 opens the door for ACA changes similar to what was achieved in this year s small group deductible win. Narrower Majorities (particularly in Senate) more compromise with the Democratic administration will be needed if they are to prevent government shutdowns, etc. State of Implementation-- The law is covering people now and will be very difficult to take away. Focus will be on fixing problems (which polling overwhelmingly shows people want).

Suggested Areas of Focus in 2015 and Beyond Summary Safe harbor related to out-of-pocket maximum expires upon 2015 plan renewal New services will be considered preventive for non-grandfathered plans (or plans that have elected to conform and be ACA compliant with the preventive care guidelines), with no member cost share Prepare for compliance with and enforcement of the Employer Shared Responsibility mandate including the Employer Reporting Requirements Despite extension of safe harbor (pending further regulatory guidance), SBC compliance should be a continued priority Implications of ACA mandated taxes and fees remain: Health Insurer Fee (HIF) Patient Centered Outcome Research Fee Transitional Reinsurance Contribution Cadillac Tax (2018) Benefit Strategies for your long term group benefits plan

Suggested Areas of Focus in 2015 and Beyond Products & Plans Employer Mandate Administrative and Reporting Taxes and Fees Public Exchanges

Suggested Areas of Focus in 2015 and Beyond Public Exchanges: 2014 at a Glance From turbulent launch to huge enrollment surge October 2013 launch was rocky, frustrating consumers who were attempting to enroll. Technical issues create compressed timeframe for members to enroll in January 1, 2014 plans, this enrollment extension granted Huge surge of enrollments in mid March mid April; almost half of the total national marketplace enrollments came in during this period. Marketplace exceeds enrollment expectations by 1 million members. Challenging regulatory environment Deadline extensions and evolving eligibility guidelines complicated the member experience, delaying bills and ID cards. Keep What You Have changed risk pool dynamics. Consumers struggle with new marketplace rules, insurance basics Exchange plans require binder payment before coverage becomes active; billing becomes top call driver for this membership. Consumers didn t always realize exchange plans often have unique networks. Many members struggled with insurance basics, including concepts like deductibles or step therapy for medications.

Suggested Areas of Focus in 2015 and Beyond Public Exchange: On the horizon for 2015 2015 premium increases Across carriers, 2015 premiums for exchange plans are expected to increase an average of 7.5%. Increases vary widely across the country. They also vary within states based on plan, age and location. Keep What You Have extension viewed as driving some of the rate increases. Medical costs and operational investments associated with implementing support for exchanges also cited as contributing factors. Technical gaps remain Key technology gaps need to be resolved to ensure marketplace is ready to support both new and renewing consumers. Carriers continue to advocate for more automated solutions for key functionality, such as member change and termination transactions. Marketplace must be able to act as reliable source of truth for all member data.

Suggested Areas of Focus in 2015 and Beyond Public Exchange: On the horizon for 2015 Renewing exchange plans for 2015 Recent guidance supports ability for most consumers to automatically renew their current plan (or a similar plan) for 2015. Tax credits will be automatically renew based on the information the federal government has on file. Members will be encouraged to update their information to ensure they receive the right tax credit amount. Members still have the option to shop for a different plan on the exchanges. Renewing members will receive information from the carrier about their 2015 benefits, including new rate and any major benefit changes.

Suggested Areas of Focus in 2015 and Beyond Public Exchanges: Models by State for 2015

Health Care Reform Tools and Resources Aetna has several tools and resources to help our customers understand the anticipated impacts of ACA and prepare for 2014 and beyond www.healthreformconnection.com Health Care Reform Videos Aetna has invested significantly in freely available online resources to provide customers with the latest legislative updates, analysis and impacts of Health Care Reform. Quick and easy-to-understand overview of exchanges and Health Care Reform. Available on Health Reform Connection, Facebook, YouTube. Broker, Consultant, & Customer Webinars Aetna continues to provide educational and training sessions for our customers to ensure they are armed with the most current information on Health Care Reform.

Take Home Messages Aetna remains focused on participating in the transformation of the health care delivery system such that all Americans have a choice of affordable, simple health care options Aetna remains committed to fostering compliance with the ACA and helping our customers achieve the same As constructive advocates for the people who use our services, we continue to work with HHS, NAIC and other agencies to shape regulations and avoid unintended consequences We all have a role to play; get and stay informed

NEC Affordable Care Act Forum: Preparing for the Employer Mandate Presentation by Walter M. Foster October 22, 2014

Overview of PPACA Patient Protection and Affordable Care Act ( PPACA, the ACA, or ObamaCare ) Main Goal: get more people covered by health insurance Small Business Health Options Program ( SHOP ) Small Bus. Tax Credit Employer Mandate Individual Mandate

Overview (cont.) Law being phased in over several years (2010 through 2018) Insurance Reforms (eliminating lifetime caps, coverage of children to age 26, MLR rebates, etc.) Reforms aimed at improving healthcare outcomes, improving efficiency, and reducing cost of healthcare

Employee Choice Program Employer selects coverage level and employee selects health plan through SHOP marketplace. Goal is to improve health insurance for small business employees. Concern is increased premiums caused by adverse selection. Federally-facilitated SHOP marketplaces (Maine and New Hampshire) offer less choice and have been delayed. State-based SHOP marketplaces (Connecticut, Massachusetts, Rhode Island, and Vermont) offer more choice and have been implemented.

Recent Court Decisions and Challenges to the ACA Nat l Fed n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (2012) Upheld the Individual Mandate in the Patient Protection and Affordable Care Act (the ACA ). Struck down the Medicaid expansion in the ACA. Burwell v. Hobby Lobby, decided June 30, 2014 Exemption for closely held for-profit companies from the ACA birth control requirement due to religious freedom protections.

Recent Court Decisions and Challenges to the ACA Four lawsuits challenging the IRS s attempt to offer subsidies and impose employer penalties through federally operated Exchanges are pending, with substantive steps and rulings in 2014. Health and Human Services delays until 2016 the employee choice or SHOP provision for small business for 18 states.

Small Business Health Insurance Tax Credit To Qualify, the business: Must have < 25 FTEs Must pay an avg wage of < $50,000/yr Must pay at least ½ of health insurance premiums 2014 Max credit 50% of health ins costs

W2 Reporting under the ACA Employers who issue more than 250 W2 s must report cost of health coverage on employees W2 forms. What - extent of coverage under an employersponsored group health plan. Where - Wage and Tax Statement, in Box 12, using Code DD. Does it affect tax liability? NO

Automatic Enrollment in Health Plan New Section 18A of FLSA. Requires ERs subject to FLSA with >200 Ees to automatically enroll new FT Ees in health plan FAQs issued on 12/22/2010 indicate DOL will not have regulations in place to take effect by 2014 DOL Tech. Rel. issued Feb. 9, 2012 indicated Auto Enrollment will not be enforced until regulations are issued in 2014

Health Exchange Overview ACA requires each state to create a health exchange Massachusetts = www.mahealthconnector.org Maine = federally exchange Rhode Island = www.healthsourceri.com New Hampshire = Partnership exchange conditionally approved Connecticut = www.ct.gov/hix Vermont = www.healthconnect.vermont.gov (single payer system) Creates a One Stop Shopping experience to compare benefits, costs and quality of service.

Employer Shared Responsibility (the Employer Mandate ) IRS Issued Rules on Jan 2, 2013 (78 Fed Reg 218 et seq) Employer Mandate Eff. Jan 1, 2015 for Employers with 100 or more Ees. Applies to Employers with > 50 to 99 FTEs one year later Jan. 1, 2016

Employer Shared Responsibility Must Be Paid If: ER does not offer health coverage and at least one FT Ee receives a premium tax credit to help pay for coverage on an Exchange OR ER offers coverage to FT Ees, but at least one FT Ee receives a premium tax credit to help pay for coverage on an Exchange (either b/c not offered to that Ee, or b/c coverage offered was unaffordable or did not provide minimum value )

Determining Applicable Large Employer Status Aggregation rules ( Controlled Group and Affiliated Service Group ) apply Calculation for 2015 based on 2014 employee census Total # of Full-time employees, including seasonal employees for each month in the previous year divided by 12; PLUS Total # of FTEs, including seasonal employees for each month in the previous year divided by 12

Determining Applicable Large Employer Status (cont.) To calculate FTEs, must use 30 hours per week or 130 hours per month If result is < 50, NOT a Large Employer If result is > 50, and if seasonal employees are present, must determine if seasonal exception applies

Seasonal Exception to ACA Seasonal Exception : If Er s workforce exceeds 50 full-time employees for 120 days (or four calendar months) or fewer during a calendar year, and the Ees in excess of 50 who were employed during that period were seasonal workers, the employer is not an applicable large employer Example 1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FT 20 20 20 24 25 25 25 25 23 20 20 20 PT/FTEs 5 5 10 40 40 40 40 40 10 5 5 5 Total 25 25 30 64 65 65 65 65 33 25 25 25 Assuming that the workers who are added in March September are seasonal workers 12 month total = 512 Monthly Avg 512/12 = 42.66 = 42 Because 42 < 50, the Employer is not an applicable large employer.

Seasonal Exception to ACA Example 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FT 20 20 20 24 25 25 25 25 23 20 20 20 PT/FTEs 5 5 10 100 100 100 100 100 10 5 5 5 Total 25 25 30 124 125 125 125 125 33 25 25 25 Assuming that the workers who are added in March September are seasonal workers 12 month total = 812 Monthly Avg 812/12 = 67.66 = 67 Because 67 >50, the Employer is an applicable large employer SUBJECT TO the seasonal worker exception. Because the workforce exceeded 50 for more than four months (the number exceeded 50 for five months ), the seasonal worker exception does not apply, and the employer is an applicable large employer.

Seasonal Exception to ACA Example 3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FT 20 20 20 24 25 25 25 25 23 20 20 20 PT/FTEs 5 5 10 15 35 100 100 100 15 5 5 5 Total 25 25 30 39 60 125 125 125 38 25 25 25 Assuming that the workers who are added in May September are seasonal workers. 12 month total = 667 Monthly Avg 667/12 = 55.58 = 55 Because 55>50, the Employer is an applicable large employer SUBJECT TO the seasonal worker exception. Because the workforce did not exceed 50 for more than four months (the number exceeded fifty for exactly four months), the seasonal exception applies, and the Employer is not an applicable large employer.

Minimum Value Er provided health benefits must provide minimum value and must be affordable Affordable means that the Ee s cost must not exceed more than 9.5% of income Minimum Value -- a plan fails to provide minimum value if the plan s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.

Employer Penalties Ers that do not offer coverage and have at least 1 FT Ee who receives subsidized coverage must pay $2,000 per FT Ee, but the first 30 Ees are excluded in calculating the assessment. Ersthat offer coverage that is either unaffordable or inadequate and who have at least 1 FT Ee receiving subsidized coverage must pay an annual fee of $3,000 for each FT Ee receiving a premium credit, with a maximum penalty equal to $2,000 for each FT Ee, excluding the first 30 employees

ACA Taxes and Fees The Congressional Joint Committee on Taxation identified more than 20 new or increased taxes in the ACA, totaling almost $1.1 trillion over the next ten years. $25 billion in taxes affecting health insurance costs in 2014 It has been estimated that taxes and fees on insurers/health care industry will increase costs for businesses by about 3% per year

Cadillac Tax Effective January 1, 2018. 40 percent excise tax on rich health plans, determined according to annual premiums. In 2018, the threshold for single coverage is $10,200 and $27,500 for family coverage (with a higher threshold for retirees and those in high-risk professions like law enforcement). Employers with unionized workforces need to plan now for how this tax might fit into future union contracts.

Resources on the Web US Dept. of Labor http://www.dol.gov/ebsa/healthreform/ Internal Revenue Service http://www.irs.gov/uac/affordable-care-act-tax- Provisions-Home Fed. Gov t ACA Website https://www.healthcare.gov/ Mass. Connector https://www.mahealthconnector.org

Questions? Walter M. Foster (617) 342.6853 wfoster@eckertseamans.com

ACA Taxes and Fees Copyright 2014 Eckert Seamans Cherin & Mellott, LLC, All Rights Reserved. This presentation does not provide legal advice. We recommend that you consult an attorney for specific guidance on legal questions.