State of Delaware

Delaware Society for Human Resource Management

Health Insurance Exchanges and

the Small Group Market

September 11, 2012

Agenda

• Healthcare Reform in Delaware

• Overview of Health Insurance Exchanges

Employer Eligibility for the Exchange

Eligibility for Tax Credits

Employer Mandate

Relevant Definitions

Exchange Purchasing Model and Process

Waiting Periods

Employer Affordability Safe Harbor

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Health Care Reform in Delaware

• Medical Homes

• Workforce Development

• Delaware Health Information Network (DHIN)

• Emergency Room Utilization Study

• Essential Health Benefits

• Health Insurance Exchange

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Overview of Health Insurance Exchanges

• The Affordable Care Act requires that each state will have a health insurance exchange (Exchange) operational in 2014.

Exchanges are marketplaces that will allow an individual or small business to shop for, compare, select, and pay for private health insurance plans that meet certain quality and value criteria.

• States have four options to meet this requirement by 2014: Establish and operate a State-run Exchange Identify and establish a partnership with other states to establish a

Regional Exchange Cede all functions to the Federally Facilitated Exchange Enter into a partnership with the Federally Facilitated Exchange in which

the State retains Plan Management, Consumer Assistance, or both areas of Exchange functionality

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Overview of Health Insurance Exchanges

• Given Delaware’s small expected Exchange enrollment, financial analyses showed that the cost of operating an Exchange may be too large to justify a State-based Exchange.

Delaware aims to minimize any additional administrative cost that may impact premiums in the State.

Risk is too high for the first year of operation to make a State-based Exchange feasible.

• Delaware has opted to pursue a State-Federal Partnership in which the State retains Plan Management and Consumer Assistance functionality.

Plan Management and Consumer Assistance have the highest impact on consumers and other stakeholders in the State.

The Federal government would assume responsibility for supporting the technical infrastructure of the Exchange.

Delaware has been working very closely the Federal agencies responsible for Exchange implementation to ensure that the State’s interests are protected and the needs of Delawareans are met.

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Employer Eligibility for Exchange

• Small Business Health Options Program (SHOP) Exchange will offer health insurance plans to small employers starting in January 2014

According to current guidance, the Exchange will adopt current DE small group market rules for 2014 and 2015

Starting in 2016, the SHOP Exchange must offer coverage to businesses with ≤100 employees

States may choose to expand to larger groups in 2017 and beyond

• Total employees for Exchange eligibility = full time workers, part time workers, and seasonal employees

For seasonal workers, employee count is equal to the proportion of days worked in a year.

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Tax Credit Eligibility

• Employers with < 25 low wage employees may be eligible for tax credits Low wage = maximum of $50,000 per year Tax credit may equal up to 50% of employer share of premium

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Employer Mandate

• ACA requires large employers to provide minimum coverage to all full time employees

Employee contribution is ≤ 9.5% of the employee’s W-2 wages If your employee earns $28,000 per year, they may pay a maximum of

$222/month for their share of the premium

• If an employer chooses not to offer coverage to their employees, the employer will be charged a penalty if:

An employee enrolls in an individual Exchange plan AND qualifies for a federal subsidy (income less than 400% FPL)

Penalty = $167 per month per full time employee (less 30 full time employees)

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Large Employers and Full Time Employees

• Large Employer for Purposes of Penalty: Average of 50 or more full time employees on business days during the

preceding calendar year A business can claim an exemption from large employer status if:

• The total number of full time employees only exceeded 50 for less than 120 business days, OR

• If the full time employees in excess of 50 were all seasonal employees

• Full time employee: An employee who worked, on average, 30 hours per week during the calendar year

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Who is considered an employer?

• Sec 414 (b): Employees of a controlled group of corporations are treated as though they are employed by a single employer

• Sec 414 (c): Employees of partnerships, proprietorships, etc, that are under common control are considered employed by a single employer

• Sec 414 (m): Employees of an affiliated service group or organization (e.g. groups that are shareholders or regularly perform services for another organization, including managerial services) are employed by a single employer

• Sec 414 (o): The Secretary of the Treasury may provide additional regulations to prevent the avoidance of employee benefit requirements through the use of separate organizations, employee leasing, or other arrangements

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Who is an employee?

• Common Law of Agency Principles for the employee-employer relationship

You have the right to control and direct the individual who perform the services provided

You have the right to discharge the individual

The individual is economically dependent on the business for whom they are providing services

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How an Exchange Works

• General process for purchasing coverage in the SHOP:1. Employer logs into Exchange website2. Employer enters basic information about employees who will be offered

coverage3. Employer sets parameters for plan options4. Employee logs in using “access code” from their employer5. Employee views all options made available to them and the premium they

will pay after their employer’s contribution is deducted6. Employee chooses option and completes enrollment

• There are four potential purchasing models for the Exchange...

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Note on Exchange Purchasing Models

• Federal regulations supported a defined contribution model for Exchange plans

• Currently, defined contribution is 50% of employee premiums for small group plans in Delaware

• However, no specific contribution requirements have been issued for the Exchange. The only requirement is that there must be a plan offered that fits the affordability guidelines.

• The following models include examples of employer contributions and do not propose a specific employer contribution level

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One Carrier, One Plan

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Monthly Premiums for Single Coverage

Plan/Carrier Carrier A Carrier B Carrier C Carrier D

Platinum $540 $531 $518 $554

Gold $480 $472 $460 $492

Silver $420 $413 $403 $431

Bronze $360 $354 $345 $369

Employer chooses one plan and pays 50% of premium, or $207.

One Carrier, Multiple Plans

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Example of Contribution Split Between Employer and Employee

Carrier B Total Premium Employer Share

Employee Share

Platinum $531 $207 $324

Gold $472 $207 $265

Silver $413 $207 $206

Bronze $354 $207 $147

Multiple Carriers, One Plan Level

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Example of Contribution Split Between Employer and Employee

Silver Level Total Premium Employer Share

Employee Share

Carrier A $420 $207 $213

Carrier B $413 $207 $206

Carrier C $403 $207 $196

Carrier D $431 $207 $224

All Carriers, All Plans

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Example of Employee Share of Monthly Premiums

Plan/Carrier Carrier A Carrier B Carrier C Carrier D

Platinum $333 $324 $311 $347

Gold $273 $265 $253 $285

Silver $213 $206 $196 $224

Bronze $153 $147 $138 $162

Employer share is fixed at $207 (50% of Silver Level Plan from Carrier B) and employee pays the difference

All Carriers, All Plans

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Example of Employee Share of Monthly Premiums

Plan/Carrier Carrier A Carrier B Carrier C Carrier D

Platinum $373 $364 $351 $387

Gold $313 $305 $293 $325

Silver $253 $246 $236 $264

Bronze $193 $187 $178 $202

Employer share is fixed at $167 and employee pays the difference

Waiting Periods for Insurance Coverage Eligibility

• Waiting periods must not be longer than 90 days Defined as the period that must pass before the individual is eligible to

be covered for benefits under the terms of the group plan Special enrollment periods apply for individuals when they become

eligible for coverage under their employer’s plan

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Employer Affordability Safe Harbor

• 9.5% affordability is based on Box 1 of the W-2 for that employee from you (as an employer), not on the employee’s total household income.

• Affordability is based on self-only coverage.

• If an employee chooses to enroll in coverage through their employer, even if it doesn’t meet the affordability standard, no penalty would apply.

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Future Guidance and Updates

• The information provided in this presentation is based on the most current guidance available to states.

• The US Department of Health and Human Services (HHS) has stated that they will release further guidance on operational components of the SHOP under a Partnership model in the near future.

• The Delaware Health Care Commission (HCC) will continue to provide the most current information on Exchange planning and other aspects of Health Care Reform in Delaware.

HCC meetings are open to the public and occur during the first Thursday of every month in Dover

Reports, FAQs, and updates are posted to the HCC website regularly: http://dhss.delaware.gov/dhcc

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