Understanding the Affordable Care Act

And how it affects the future of doing business…

Presented by:

Joseph VukovichPresident, Premier Financial Insurance

How will Obamacare Affect You?It will affect everyone in this room, and

everyone will be affected differently…

Two primary groups affected:

SMALL BUSINESSES: Especially those who offer an employer-sponsored health insurance plan

SELF-EMPLOYED: Consists of those individuals (and families) who purchase their own health insurance plans

Part One:

Small Business Under the Affordable Care Act

Small Businesses Under the

Affordable Care ActTwo Fundamental Changes…

The manner in which RATES are constructed

The types of PLANS available to employees

Rates & Premiums

For Small Business

• The collective health of the Group no longer matters… not in the traditional sense, anyway.

• In the past, a generally “less-healthy” group would pay a higher rate for group coverage.

• Under the new system, healthier groups will pay the same as unhealthy groups, with the healthy seeing the highest increases.

• Groups who are sick more often, will remain at their current rates, or end up paying slightly less.

Small Business Ratescontinued…

• Age can’t be more than 3-1 difference from oldest to youngest.

• There are no longer restrictions or ratings for tobacco users.

• Rates for both Males & Females are determined using the same criteria

Actuarial PriceFor Small Business

• In the past, Groups with Younger employees and Males enjoyed consistently lower rates

• Healthier genres will no longer be discounted, and will actually see significant increases

• Rates for groups with more females and older employees will likely remain stagnant

Accrual Pricecontinued…

A tax has been added to all plans, to fund the reassurance pool for individual plans.

• Said tax will add approximately 4.5% to plans, in addition to the other universal plan-based rate increases

• New health insurance rates & premiums will officially take effect on January 1st of 2014

Coming Rate IncreasesRealistic Projections

• There is no longer speculation over whether or not Group Plan rates are affected by the A.C.A.

• An estimated 85% of small groups will see some form of premium increase

• Already, we have seen premiums ranging from a negative 28% up to 143% increase

• Despite higher rates, fewer plans will be offered under the new healthcare system

Plans & OptionsFor Small Business

The most significant plan-related changes coming from the major insurance carriers, include but aren’t limited to:

• Fewer plans to choose from

• Increased maximum out-of-pocket expenses

• Higher across the board deductibles

• Mandatory Minimum Standard Benefits

Plans & Optionscontinued…

• Most carriers will have a universal offering of approximately 30 different plan (variations) from which applicants can select from

• This represents a massive decrease in options, as literally hundreds of options were available until 2014

• Plans are now categorized into four (4) main choices, ranging from Bronze to Platinum, respectively…

Coverage Plans

Main Classifications

BRONZE 60% of Actuarial value

GOLD 80% of Actuarial value

SILVER 70% of Actuarial value

PLATINUM 90% of Actuarial value

As absolutely ridiculous as it sounds, the government refers to these four health plan categories, as the Four

Levels of Generosity.

ALL plans must meet +2% or -2% of actuarial level in order to be offered.

HMO & Consumer Directed Plans, will help in deferring cost(s)

Most HMO plans will now have a deductible

Plans & Options

continued…

Deductible Changes& Out of Pocket Maximums

For the majority of plans offered in 2014, deductible amounts will be universally higher.

Individual maximum Out-of-PocketBetween $3,000 - $6,350

Family maximum Out-of-Pocket$12,700 on average

All copays will count towards a persons max out-of-pocket

Plan OptionsOPTION #1: Level-Funded, Self-Insured Plan

Similar to a PEO, these plans unite many smaller groups to form a large collective. Characteristics include:

• Most self-insured groups are not subject to some core

regulations of Obamacare

• Regulated around the group’s health & general demographics, for more reasonable premiums

• Can be tailored to meet the group’s unique needs

Level Funded PlansKey Advantages

By mirroring your current (2013) plan, these plans offer more flexibility and advantages over traditional-funded plans, under the new model.

• Rates determined by the group’s health & general demographics, to ensure reasonable premiums

• Can be tailored to meet the group’s unique needs

• No need to raise max/out-of-pocket to $6000

• No additional risk to the company

Level Funded PlansHow they work…

Unlike traditionally-funded plans, Level Funded Plans allocate funds to be used in three distinct ways:

Premium Distribution

Group ClaimsRe-Insurance PoolStop Loss Expenses

25% to internal group claims * 25% to the re-insurance pool * 50% to stop loss & expenses

50%25%

25%

Level Funded PlansCriteria & Requirements

For many smaller businesses, a level-funded plan is an ideal solution, though some criteria must be met to offer one, including:

• GROUP HEALTH STATUS – Health is a qualifying factor, making these highly-beneficial for healthier & younger groups

• EMPLOYEE SIZE – These plans are eligible to companies with 10 or more employees

• NO HMOs OFFERED – Level funded plans do not offer an HMO option, all participants (employees) will have a PPO

Plan OptionsOPTION #2: HRA (Health Reimbursement Account) A higher deductible plan with lower premiums, where a portion of the employee deductible is paid by {employer}. Characteristics include:

• Follows the 80/20 model – Statistically, 80% of most claims are initiated by the same 20% of the group

• Pay per Claim – Company only pays for claims when they occur, allowing, the employer to keep unused claim funds

• Affordable Option – Arguably the most economically-savvy plan, from an employer and employee perspective

HRA PlansBenefits & Advantages

• Electing for a higher deductible, keeps premiums & annual out-of-pocket expenses lower

• By paying for claims as they occur, businesses can retain more working capital, versus large lump sum payments

• Allows the business to keep unused claims funds at the end of the fiscal year

• More affordable monthly premiums for employees, while placing an emphasis on healthy living

Plan OptionsOPTION #3: Individual Employee Plans

• An arrangement where each employee purchases their own plan, with the expenses to be offset by company contributions.

• Under the new law, if you offer your employee health insurance, you are automatically making them ineligible for a subsidy.

• By not offering a group plan, you have the option of giving each employee a specified amount, to help reduce their premiums.

• This can free you of many tasks associated with offering a traditional group health plan…

KEY COMPANY BENEFITS

Defined Contribution Allocating a specified amount to be issued to each employee, allows you to save and better manage your healthcare dollars

Time Savings Significantly reduces the amount of time you our your HR team spends on renewals, payroll, inquiries, etc.

Subsidy Benefits By not offering a group plan, your employees may be able to lower rates even further with healthcare subsidies

Individual Employee Plans Key Benefits

EMPLOYEE BENEFITS

Flexible Purchasing Many employees have reported ‘limited choice’ as the number one drawback of group plans. This option allows them 100% of the decision over which plan they choose.

More Control Over PlanPrivacy and control of one’s healthcare related matters are very important, and this option provides the freedom of both

Individual Employee Plans Key Benefits, continued

Part Two:

Self-Employed Options Under Affordable Care Act

Legal & Regulatory DocumentationOver 10,000 pages of regulations and mandates for health insurance companies, essentially forcing them to change the way healthcare benefits are administered.

Government-Run Program Similar in nature to food stamps & section 8 housing, this program was designed to ensure that all Americans have

access to affordable health insurance.

Self-Employment & Healthcare ReformObamacare is not a health insurance plan, it is a complex new

health insurance law. It cannot be purchased, rather, it consists of two fundamental components. Understanding how the law has been designed, will ultimately result in selecting the best plan for your business.

The two components that make up the Affordable Care Act, are:

A “Grandfathered” health insurance plan, is really just any plan that was purchased before March 2010, where no major changes have been made to the plan’s deductible, maternity, additional members, etc…

• Can be kept indefinitely as long as NO changes are made (which makes them very scarce)

• No changes in benefits, not required to join any healthcare reform-compliant plans

• All pre-existing riders and exclusions remain active

• Do not offer any new essential benefits, such as preventative

Self-Employment Individual & Grandfathered Plans

Self-Employment Non-Grandfathered Plans

Whereas grandfathered plans were purchased before March of 2010, a non-grandfathered health insurance plan, was purchased after the March 2010 cutoff. The majority of todays’ existing healthcare plans are non-grandfathered.

• Plans must be changed by 1/1/2014, with limited members being able to wait until their plan’s annual anniversary

• No one can be denied for coverage based on prior health problems, income, pregnancy, and more…

• No exclusions will be allowed on new plans

• Members in the same geographic area will pay the same rate scale, with the only factors being tobacco, age and county

Essential Benefits For New 2014 Health Plans

All new plans include what are referred to as the 10 Essential Benefits, which cover a wide range of health concerns, programs & procedures.

• Ambulatory services• Emergency services• Hospitalization • Maternity & Newborn • Mental Health • Substance Abuse/Addiction• Behavioral health treatment

• Prescriptions & Rx drugs• Rehabilitative services• Lab services • Preventative wellness • Chronic disease

management • Pediatric services

IMPORTANT: All Americans are required to purchase a new plan as of January 1st 2014, or face a penalty equal to a certain

percentage of annual income.

Actuarial PricingPremium Factors & Plan Details

For the first time since its inception, gender will not play a role in determining a person’s health insurance premium. Here are a few more characteristics of new plans under the Affordable Care Act.

• May not exceed 3-1 price difference from youngest (21) to oldest (64)

• Pay per child for up to three children, under the age of 21

• All plans must include the 10 Essential Benefits

• All children must have dental and will be charged for it

• Can rate up to 50% for tobacco users

New Plan Structures Pros & Cons of Reformed Plans

While new healthcare plans will retain some of the characteristics of those prior to 2014, they will be marked by sweeping differences.

• Plans will be structured by bronze, silver, gold & platinum

• Most plans will have higher out-of-pocket maximums

• Most HSA plan deductibles will be between $5,000 (individual)

• to $10,000 (for families)

• All new healthcare plans have worst case scenario of $6,350 and $12,700, respectively for individuals & families.

Part Three:

Understanding Your Options

New plans can be purchased in one of two ways:

Off-Exchange Just as they are today, individuals and families have the option of purchasing a plan directly from the major carriers. Ideal for those with higher incomes who will not qualify for subsidies.

On-Exchange The Illinois Health Insurance Marketplace, or Health Insurance Exchange, will sell plans directly to consumers who meet specified income levels and/or financial criteria.

Weighing Your Options Choosing the ideal plan

Purchasing Options Off-Exchange Plans Off Exchange health insurance plans will be available to

those who do not qualify for government subsidies, or 400% of the poverty level.

OFF-EXCHANGE PLANS, ADVANTAGES

• Do not have to deal with the stress of government websites, forms, customer service, etc…

• Will be the only way to buy coverage if offered group coverage, applicable for both employee and spouse, dependents

• Eliminates the fear of having to reconcile future income against any subsidies received.

Purchasing Options Off-Exchange Plans On Exchange health insurance plans allow those with

limited or lower incomes to buy a healthcare plan, with the help of a premium tax credit.

ON-EXCHANGE PLANS, OVERVIEW

• Approximately 40% of Americans will qualify for subsidized health insurance coverage

• Will be the only way to buy coverage if looking for a premium tax credit from the government

• Tax credit must be calculated at www.healthcare.gov

On-Exchange Plans Continued…

• Based on adjusted gross income, with a minimum of 138% of poverty level required to apply.

• The less money a person makes, the higher the amount subsidized will be.

• If under 138% of poverty level, applicant will be required to pay the full amount or go on Medicaid.

• Benefits will also be available for those who earn less than 250% of the poverty level.

• Premiums may be as low as $100/month in certain situations

On-Exchange Plans Exemptions Despite being pitched as something that “every American”

can benefit from, many individuals and families will not be able to purchase health insurance on the exchange.

• If offered a health insurance through an employer, or if one’s spouse is offered coverage under a group

• If income is not within the specified poverty range

• If currently on any other government-sponsored health program, such as Medicaid, Medicare, Children’s Health plan

Healthcare Subsidies Applying for Benefits

As expected, the process of obtaining government subsides for new health insurance will require a detailed, specific process.

• Begins by creating an account and filling out the online application at healthcare.gov website, which takes approximately one hour.

• Only the government’s healthcare website can accurately calculate the amount of a person/family’s subsidy

• Working with a broker can expedite the process, by helping with new forms, insurance language, coverage options, more

Healthcare Subsidies Additional information

• Once granted a subsidy, the individual or family is only responsible for the amount quoted. The premium will be paid directly to the carrier by the government.

• Choosing the RIGHT plan the FIRST time is crucial, to avoid being literally stuck in a plan that was chosen too hastily, or even on accident.

• If working with a broker, it is important to obtain and remember their NPN number to ensure accuracy and a seamless transition

• Plans look very similar on paper and screens, read all details carefully to avoid overlooking Rx coverage, etc.

Healthcare Subsidies Enrollment Details

Purchasing a government-subsidized plan requires a meticulous series of steps that must be followed exactly as specified, to avoid not having coverage, missing deadlines or selecting the wrong plan.

• Applicants MUST apply during open enrollment period, which runs from 10/1/2013 until 3/31/2014

• If coverage is needed in January 1st 2014, the application process must be completed by December 15th 2013.

• No applications will be accepted from 4/1/2014 through 10/15/2014 unless special enrollment criteria is met (marriage, childbirth, loss of employment, more.

• Plans may not be changed mid-year

Enrollment Details Continued…

• Open enrollment and healthcare plan changes will be accepted every year, from October 15th until December 7th

• Americans who do not purchase a plan, will be subject to fines and penalties, which will increase incrementally each year.

• As of right now, Medicare (for those over 65) remains relatively unchanged. Based on overall inconsistency, this could very well change.

• Health insurance brokers can help answer all questions and concerns relating to eligibility, income requirements, plan types, and other healthcare reform concerns.

What Can I Do? Navigating Healthcare Reform

Despite the personal opinions that have enveloped Obamacare, we all have to make the most of it, since no entitlement program has ever been recalled. Here are a few things to keep in mind:

• Be sure to apply within the specified window to avoid fines, not having coverage or choosing the wrong plan

• Consider higher-deductible plans, and using the savings to open an HSA account.

• Be mindful of your health history at all times, when selecting a plan that addresses your unique needs.

• Work with a broker you can trust, as they charge no fees for their expertise and services.