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40638CABENABC 09/13
Affordable Care Act impact on insurance plans
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What we’ll cover:
▪ Definitions and employer mandate ▪ Overview of 2014 changes▪ Case examples▪ Employer responsibilities▪ Tools and resources
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Today’s topics
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Definition: small and large groups
Right now, states can define group sizes for quoting and rating.
▪ Small group: ▪ 1 or 2 – 50 or▪ 1 or 2 – 100
employees▪ Large group:
▪ 51+
or▪ 101+
employees
Going forward, the state definition of group size for quoting or rating will still apply. For the purposes of the employer mandate (in 2015), the definition of 50+ full-time equivalency is used for compliance.
▪ Small group: ▪ 1-99
full-time equivalency▪ Large group:
▪ 100 or more full-time equivalency
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Employers have one more year to comply with the ACA employer mandate without risk of penalty (delayed until 2015).
▪ Mandate is limited to groups with 50 or more FT employees.
▪ Employers must offer affordable coverage with a minimum value (MV) of 60%:
• Affordable coverage: Employee’s share of premium must be less than 9.5% of an employee’s income.
• Minimum essential coverage: Plan must pay for at least 60% of the cost of all covered services.
• HHS has developed an MV calculator to check if a plan provides minimum value.
• If an employer does not meet these standards in 2014, employees may become eligible for subsidies in the Health Insurance Marketplace (until employer complies with these standards).
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Employermandate penalty delayed
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Affordability safe harbors
Calculation of “affordability” based on employee’s household income
▪ Employee Form W-2 safe harbor
▪ Rate of pay safe harbor
▪ Federal poverty level safe harbor
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Employer mandate
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More about the mandate
▪ Stay tuned for more details from the IRS.
▪ Send us any questions – we will follow up for you.
▪ To learn more, go to:
• MakingHealthcareReformWork.com
• Timeforaffordability.org
• Healthcare.gov
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Employer mandate
Overview of 2014 changes
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Changes that affect premiums
Guaranteed issueNo one can be denied coverage
Broader benefits and limits 10 types of Essential Health Benefits* required, out-of-pocket limits and deductible restrictions
Change in rating Rates based on age and address (and tobacco use, in some states), not gender and health status
At least 60% actuarial value Plans pay at least 60% of covered services
New taxes and feesApply to certain plans
Subsidies/credits Help those with low or moderate incomes pay for coverage
Reinsurance programInsurers / TPAs / self-funded plans contribute to fund high claims
New Health Insurance Marketplace (Exchanges) Offers plans for individuals and small groups
*Not required for large-group and ASO plans
IndividualsSmall groups
Large groups
Guaranteed issue
Broader benefits
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How each premiumis affected
~~ ~~
depending on number of required benefits
included in plan
~~ ~~
~~Increase Decrease Little change
IndividualsSmall groups
Large groups
Change in rating
At least 60% actuarial value
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How each premiumis affected
~~
for customers with more cost share
than allowed
~~
~~Increase Decrease Little change
for healthy
for less healthy
young men and older women
young women and older men
young individuals
older individuals
for healthy
for less healthy
groups younger than average
groups older than average
little change for customers with less cost
share
~~for customers
with more cost share
than allowed
little change for customers with less cost
share
~~
IndividualsSmall groups
Large groups
New taxes and fees
Subsidies/ credits
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How each premiumis affected
for those who qualify~~for those who qualify
~~Increase Decrease Little change
IndividualsSmall groups
Large groups
Reinsurance program
New Health Insurance Marketplace (Exchanges)
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How each premiumis affected
~~
~~Increase Decrease Little change
▪ Outpatient services ▪ Emergency services ▪ Hospitalization ▪ Maternity and newborn care ▪ Mental health and substance
use disorder services (including behavioral health treatment)
▪ Prescription drugs ▪ Rehabilitative and habilitative
services/devices ▪ Laboratory services ▪ Preventive and wellness and
chronic-disease management ▪ Pediatric services
(including dental and vision)
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Essential health benefits (EHBs)
*Plans for individuals and small groups must cover:
*Not required for large-group and ASO plans
▪ When EHBs are covered, annual/lifetime dollar limits cannot apply
• Affects both grandfathered and nongrandfathered plans
• Applies for in-network and out-of-network services
▪ Visit limits are allowed on EHBs and can replace dollar limits
▪ Non-EHB annual/lifetime dollar limits are allowed
▪ Rule: All covered EHBs must apply to the OOP limit.
• Applies to medical, pharmacy and pediatric vision and dental benefits that are part of the plan
• Does not apply to:
- Pediatric vision and dental benefits that are not part of the plan
- Stand-alone benefits, which are “excepted” under HIPAA
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EHBs and annual/ lifetime dollar limits
NOTE: Medical Policy rules still apply to EHBs
2014 OOP limits for all individual, small group and large group nongrandfathered plans:
• Individual: $6,350
• Family: $12,700
▪ The OOP cap applies for medical and specialty EHBs
▪ Cap is equal to the amount established for HSA-compatible plans
HHS sees the complexity of having one OOP for all types of EHBs. So it issued a one-year safe harbor for plans with multiple EHB service providers.
▪ During this time, the plan will be considered compliant as long as the medical OOP does not exceed the maximum.
▪ If a separate pharmacy OOP was already in place, it also must not exceed$6,350/$12,700.
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Out-of-pocket (OOP) maximum
Premiums for small groups and individuals are not based on gender or health, but on:
Family size Age – with maximum 3:1 rating bands Where people live Tobacco use
• no more than 50% more for users
• exceptions may apply in some states
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Community rating
Center Forward
▪ Increases likely in the individual and small group markets
▪ Some groups up by 49%, others down by 39%
American Action Forum
▪ Increase in costs for young, healthy people in the individual and small group markets
▪ Costs for older, less healthy would drop about 22%
Milliman actuarial firm
▪ 75% to 95% rise in premiums in the individual market
▪ Rates for others would drop
Jonathan Gruber of MIT
▪ Premiums in individual market may increase as much as 85%
▪ Small group market may increase more than 20%
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Studies on premium impact
Small groups with renewal dates in 2014 can:
▪ Renew off-cycle in late 2013.
▪ Lock in Q4 rates without the new community ratings.
▪ Have a new 12-month rate guaranteed.
▪ Sync their renewal dates for medical, dental, vision, disability and life coverage.
* Not offered in all states. Please contact your sales
representative for details.
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Small group: Early renewal option*
Case examples
2020
Health coverage options for groups with 50 or fewer employees:
The big picture for small groups
2013 Option▪ Early renewal
for groups with effective renewal dates in 2014
2014 Options▪ A fully insured plan
through:• The SHOP in the Health
Insurance Marketplace• Other channels outside
the Marketplace▪ An ASO plan, if allowed
by state law▪ No coverage – let
employees buy through the individual market
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Case example
Early renewal
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Mike’s Accounting Firm, with 31 employees, chose early renewal in 2013. The reasons:
▪ Can lock in 12-month rate before the higher community ratings kick in
▪ Happy with current coverage▪ Not sure yet how reform will affect coverage;
need more time to understand the changes▪ Can roll up coverage into one easy renewal date
How it works:▪ Mike renews off-cycle in late 2013 for a 12/1 renewal date▪ Mike locks in Q4 prices before community rating▪ When renewal comes next year, 12/1/14, reform
changes will apply and Mike can choose what options are right for the business
▪ Mike might want to help his employees with funding, but he should be cautious and seek legal and tax advice.
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Case example
No coverage
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Billy’s Bike Rentals, a small business with 35 employees, chose to stop offering coverage to their employees.
His reasons:
▪ Costs are too high
▪ Save on administrative expenses
▪ Focus on growing business
How it works
▪ He drops coverage and provides employees information on obtaining coverage through the Marketplace
▪ His employees shop for coverage through traditional selling channels
▪ Some may qualify for subsidies through the Health Insurance Marketplace only
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Health coverage options for groups with 50 or more full-time equivalency:
Case example
Large groups
2014 Options▪ A fully insured plan▪ An ASO plan▪ A defined contribution plan (e.g. private exchange)▪ No coverage – let employees buy through the
individual market (on or off the Marketplace)
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His reasons:
▪ Benefits are important to attract and retain employees.
▪ Most of his employees would not benefit from tax credits available in the Health Insurance Marketplace.
▪ The business won’t incur employer penalties in 2015.
Steve owns an auto body business with 120 employees. He will offer minimum value minimum essential coverage to all full-time workers in 2014 (even though it’s not required until 2015).
Case example
Large group Affordability tests
How it works:
▪ Add essential health benefits at plan anniversary in 2014.
▪ Ensure the plan meets minimum value and affordability requirements.
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Case example
Large groupAffordability tests
Kevin, an employee at Steve’s Auto Body, makes $37,000 a year as reported on his W-2. He pays $3,500 a year for self-only medical coverage.
Kevin does not qualify for a premium tax credit:▪ The cost of his employer-sponsored coverage is $3,500.▪ $3,500 is less than 9.5% of his $37,000 income
(9.5% of $37,000 = $3,515).▪ Steve’s company is not liable for an employer penalty:
• The company offers minimum essential coverage (that is minimum value) to at least 95% of all full-time workers and dependents, and
• Kevin’s required contribution toward health insurance is not more than 9.5% of his W-2 wages ($3,515), and is considered affordable
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Health coverage options for individuals:
▪ People not already on a government plan:
• Employer-sponsored coverage
• Individual coverage through Health Insurance Marketplace (the Exchange) or a plan outside the Marketplace
• No coverage – pay the penalty
Case examples
Individuals
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Melanie’s employer has decided to quit offering coverage. Melanie needs coverage for her family and herself, so she’s going to shop in the Marketplace.
Her reasons:
▪ She can compare plans side by side from different insurers.
▪ She wants to explore the new Marketplace to find coverage that meets her needs.
▪ She can work with her producer to find out if she qualifies for a subsidy or tax credit when she buys a plan in the Marketplace.
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Case example
Shop in the Marketplace
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Mandy is 27 and recently aged off her parent’s plan. She has opted not to buy any coverage.
Her reasons:▪ She thinks the cost is too high.▪ She can always go to the ER if she needs to. ▪ Mandy may save money on premiums, but she’ll pay a
penalty for not having insurance. The penalty goes up each year:
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Case example
No coverage
Penalty is $95or 1% of taxable earnings*
2014: 2015: 2016:
Mandy should work with her producer to see if she qualifies for a subsidy or a tax credit before deciding to go without insurance.
Penalty is $325 or 2% of taxable earnings*
Penalty is $695 or 2.5% of taxable earnings*
*whichever is larger
Employer responsibility
All employers – whether they offer health plans or not – are required to tell employees:
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Notice of options for coverage
Employers must provide the notice to employees by
October 1, 2013
▪ Coverage is available through the new Health Insurance Marketplace.
▪ Employees may be able to get a tax credit or subsidy through the Marketplace.
▪ Employees may lose employercontribution if they buy a plan through the Marketplace, and this may have a tax impact to employees.
Tools to help you
Redesigned site for producers and employers: www.makinghealthcarereformwork.com
With a new suite of tools and resources such as:
Interactive decision support
▪ Educates on the basics of ACA impact
▪ Provides recommendations
ACA financial calculator
▪ Online interview gathers plan and employee information
▪ Provides a customized report showing the financial impact of ACA on employer plans
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HCR website and tools
Anthem Blue Cross is the trade name of Blue Cross of California. Anthem Blue Cross and Anthem Blue Cross Life and Health Insurance Company are independent licensees of the Blue Cross Association. ® ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross names and symbols are registered marks of theBlue Cross Association.
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Legal