Matt EylesVP, Public Affairs & Policy

February 20, 2013

Health Care Reform: Denial Is Not an Option

Penn-Ohio Regional Healthcare Alliance

Reform Is Moving Full Steam Ahead

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Agenda / Topics

• Recent Federal Rules

• Exchange Update

• Plan Designs in 2014

• Applicability of New Taxes/Fees

• Employer & Individual Mandate

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4

Post-Election Regulatory Tidal Wave

11/20 11/20 11/20 11/20 11/20 11/30 11/30 12/28

Many Proposed/Final Rules Yet to Come

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Not yet proposed

Proposed

Proposed rule issue – awaiting final

AK

HI

CA

AZ

NV

OR

MT

MN

NE

SD

ND

ID

WY

OK

KSCO

UT**

TX

NMSC

FL

GAALMS

LA

AR

MO

IA

VA

NCTN

IN

KY

IL

MIWI

PA

NY

WV

VT

ME

RICT

DEMD

NJ

MANH

WA

OH

DC

Federally Facilitated

Planning Partnership Exchange

State Exchange

Exchange OutlookAs of Feb 18, 2013

**Utah has expressed goal to operate existing small group exchange under state model and individual exchange under federal model .

Request is subject to HHS approval/disapproval

Fed = 26.5State = 17.5Partner = 7.0

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Latest Exchange Timelines

Federal Activities

2013 2014

Ongoing Regulations and Guidance

Partnership Exchange Deadline

Feb 15, 2013

Choose EHB BenchmarkDec 26, 2012

Start QHP CertificationApril 2013

Ongoing Grants to States

Still Waiting on:Final Exchange Rules, including

federal exchanges (Mar / Apr 2013)

State Activities•EHB = Essential Health Benefits•HHS= Health and Human Services

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Complete QHP CertificationJuly 31, 2013

Plan Preview Period in Federal

ExchangeAug 2013

Finalize Media Plan

Jun 15, 2013

Outreach & Education Plan

Mar 29, 2013

HHS Consultation

May-Aug 2013

Oct 1AEP open

Jan 1Coverage begins

SHOP ExchangesSmall Business Health Options Program

• Integrated exchanges; SHOP eligibility expanded to large groups

• Broad employee choice options for employers

Limited Market, Less Flexibility Large Market, Broad Flexibility

WV

• Separate exchanges; SHOP limited to groups <100** • Minimum requirements for employee choice

Federal Requirements• Exchanges must establish a small business health options program (SHOP) for small

businesses in addition to individual exchanges

*States can limit SHOP exchanges to employers with up to 50 employee for plan years before January 1, 2016.

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Key SHOP Design Features

*States can limit SHOP exchanges to employers with up to 50 employee for plan years before January 1, 2016.** Employee choice is when the qualified employers select a benefit tier and employees may choose any plan within that tier. SHOP exchanges may create alternative enrollment options for employers, and employers may elect to limit employees to just a single plan or permit employees to select plans from multiple benefit tiers

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SHOP Exchanges Must Offer Employee Choice Option

Employee Choice

Employer

Platinum

Gold

Silver

Bronze

Employee

Plan A

Plan B

Plan C

Plan D

HHS is proposing to allow employers to choose a tier level and permitting employees to choose plans from that tier. They are also taking comments on

whether to allow employers to choose the level of coverage and a specific plan for their employees or to allow employees to “buy up” to another level

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Plan Design FeaturesEssential Health Benefits (EHBs)

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10 Mandated Benefit Categories

Plan Design Features: Actuarial Value

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Coverage of EHBs can be offered at four “metallic” levels:

Platinum – 90% of health care expenses are paid by the plan

Gold – 80% of health care expenses are paid by the plan

Silver – 70% of health care expenses are paid by the plan

Bronze – 60% of health care expenses are paid by the plan

Actuarial Value (AV)•HHS will allow insurers flexibility to determine specific cost sharing as long as overall AV level is met (+/-2%).

Cost Sharing•Max $2,000 / $4,000 deductible*•Out-of-pocket max = $12,500**

*Deductible may be higher if cannot comply with metallic level standard

**Estimate based on Health Saving Account limits

Plan Design FeaturesRules Inside & Outside Exchanges

Applies to INDIVIDUAL and SMALL GROUP PLANS

Rating Rules • Rates may only vary by: (1) age but no more than 3 to 1 across rating bands set by HHS; (2) tobacco use but no more than 1.5 to 1; (3) self-only or family enrollment; and (4) rating area (specified by the state)

Guaranteed Issue & Waiting Periods

• Guaranteed issue and guaranteed renewal with no exclusions• Employer groups may not have waiting periods over 90 days

Essential Health Benefits Package

• Must cover essential health benefits (10 categories) and offer “metallic” level plans

Clinical Trials • Qualified individuals may not be denied participation in clinical trials

Risk Pools • All plans must be part of a single risk pool (individual separate from SG but states have flexibility to merge both into single risk pool)

Reinsurance & Risk Adjustment

• All plans must contribute to temporary reinsurance program• Risk adjustment applies to all plans

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Taxes & FeesTemporary vs. Permanent

FY2013-19 CY2014-16 CY2014 CY2014 CY2014 CY2018

Temporary Permanent

FY = Fiscal Year (Oct 1 – Sep 30)

CY = Calendar Year

Putting It All TogetherMajor Reform Impacts for Groups

Rate Driver SG Fully-insured LG Fully-insured

Community Rating+/- 25% depending on group characteristics

N/A

Compression of age / sex bands

+30% to -15% depending on group

agesN/A

Coverage of EHBs +5% (estimate) N/A

Risk Pool Changes +15% (estimate)

Uncertain due to unknown shift to self-

insured

Commissions TBD state-by-state Pass through

New taxes / fees+2 – 7% (estimate)

PCORI fee, Health Insurer Tax, Re-insurance, Exchange User Fees

+2 – 5% (estimate)PCORI fee, Health Insurer Tax, Re-

insurance

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Putting It All TogetherImpact of Federal Taxes/Fees on Annual Premiums

Small Group

Single Family

Base 2014 Premium* $7,142.86 $17,142.86

Health Insurer Tax* $150.00 $360.00

PCORI Fee** $2.00 $8.00

Risk Adjustment Fee** $1.00 $4.00

FFE User Fee (3.5%)** $255.25 $612.60

Reinsurance Fee** $63.00 $252.00

Total New Taxes & Fees $471.25 $1,236.60

% of Premium 6.2% 6.7%

*Based on Oliver Wyman study estimates (Oct 31, 2011) **PCORI, Risk Adj, FFE, and Reinsurance Fee based on HHS rules

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Employer and Individual Mandate

Employer Requirements

•As of January 2014, employers >50 FTEs must offer minimum essential coverage (60% AV) that is “affordable” •Premiums cannot exceed 9.5% income or penalties apply in LG

•Small employers are exempt whether self- or fully-insured

•Self-insured / LG do not have essential health benefits requirement but SG does

Employer Requirements

•As of January 2014, employers >50 FTEs must offer minimum essential coverage (60% AV) that is “affordable” •Premiums cannot exceed 9.5% income or penalties apply in LG

•Small employers are exempt whether self- or fully-insured

•Self-insured / LG do not have essential health benefits requirement but SG does

Individual Requirements

•As of January 2014, individuals must obtain and maintain minimum essential coverage or pay a penalty

•Exceptions to the mandate for certain individuals.

– For example, if cost of available coverage >8% of income

•3-month grace period during the year, but then penalties are cumulative

Individual Requirements

•As of January 2014, individuals must obtain and maintain minimum essential coverage or pay a penalty

•Exceptions to the mandate for certain individuals.

– For example, if cost of available coverage >8% of income

•3-month grace period during the year, but then penalties are cumulative

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Employer Mandate Proposed Rule

Major Provisions Key Issues

Defines eligible employers as those with >50 FTEs for each month in preceding calendar year

Defines FTEs as any employee who is employed an average of 30 hrs/wk or 130 hrs/month

Exception for certain employers who employ seasonal workers for brief periods during calendar year

Eligible employers must offer coverage to all new FTEs within 90 days

Must offer coverage to FTEs and dependents; spouses not included in definition of dependent

Coverage must meet minimum value standards (60% AV) and affordability standards (9.5% salary) based on self-only

No change to affordability standard from earlier IRS proposal could make coverage unaffordable to dependents of lower wage employees

Exclusion of spouses from definition of dependents could lead to employer changes

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Large Group Decisions in 2014

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Large Group Employers (>50 employees) face penalties if they do not offer coverage OR if any employee receives a federal premium tax credit or cost sharing subsidy in an Exchange.

No

No

Yes

Yes

No

Yes

Yes

No

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Small group employers (<50 FTE employees) do not face employer penalties even if an employee receives a premium tax credit or cost sharing subsidy in an Exchange.

No

No

No

No

Yes

Yes

Yes

Yes

*Employee may elect to go to exchange for insurance but will not be penalized if they do not.

Small Group Decisions in 2014Implications for Employees

No

Yes

No

Yes

No

Yes

THANK YOU!

QUESTIONS?