Time to Implement!Moving Forward with

Reform

By Michael Bertaut, Healthcare Economist and Exchange Coordinator

Blue Cross and Blue Shield of Louisiana8.0 GP

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All information in this presentation INCLUDING THE OPINIONS OF THE PRESENTER are solely for illustrative purposes. The information is based on certain assumptions, interpretations, and calculations that are not necessarily accurate with regard to provisions of PPACA, HCERA, HIPAA, COBRA, ERISA, and other rules, regulations, guidance and all other documents issued by relevant state and federal agencies with regard to these laws and any other relevant laws. The information provided should not be considered as legal, financial, accounting, planning, or tax advice. You should consult your attorneys, accountants, and other employees or experts of this type of this type of advice based on their own interpretations, calculations, and determinations of applicable laws, rules, regulations, guidance, and any other documents and information that they determine may be relevant. The authors make guarantees or other representations as to the accuracy or completeness of the data in this presentation.

BCBSLA expressly disclaims any liability for information obtained from use of this presentation by any BCBSLA employee or by any other person. No warranty of any kind is given with regard to the contents of the presentation.

Disclaimer

What Will We Talk About?

The Marketplace @ Healthcare.gov

New Regulations and Impact on Rates for Individuals

New Requirements for Businesses

316 Million seeking Healthcare

Employer Based

~160m

Government~110m

Individual~10m

Healthcare.Gov!

The Affordable Care Act was NOT designed, nor is there enough

money allocated, to replace the

Employer-Based Health Insurance

System.

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Yes. At least 9 months of 2014. Exemptions are GROWING!!!!

◦ Low-income individuals in states that did not participate in the Medicaid Expansion

◦ Undocumented immigrants;◦ Indian tribal members and their

dependents;◦ Members of certain religious sects who do

not participate in SS or Medicare.◦ Individuals who are in prison◦ Victims of Domestic Violence◦ Homeless ◦ You have a shut-off notice from a utility

company◦ Death of a close family member◦ Have an eviction notice.

Do I as an Individual HAVE to have Health Care Coverage?

Fines:2014 = 1% or $952015 = 2% or $3252016 = 2.5% or $695

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WHAT’S THE PLAN?◦ To create a streamlined, easy to use, consumer friendly, health

neutral, gender neutral, FEDERALLY REGULATED market for individual health insurance.

HOW DOES IT WORK?◦ Designed specifically to remove the 2 biggest barriers to health

insurance: Cost and Health Status, with federal subsidies and no medical questions allowed.

WHEN DOES IT OPEN?◦ 10/1/2013. Closes again on 3/31/2014◦ Subsequent years open enrollment will be about 8 weeks long

(October 15 – December 7th) WHAT CAN I BUY THERE?

◦ Health, Dental, and maybe Vision insurance from many major carriers. Each state will have its own unique exchange and product selection.

What’s Healthcare.gov?

Special Enrollment Triggers (60 day)

Loss of Minimum Essential Coverage (except for non-payment)

Marriage (60 days from marriage date), Birth, or Placement for Adoption (60 day window)

Gain citizenship or qualifying immigration status

Loss of AFFORDABLE employer sponsored coverage (COBRA?)

Carrier violates insurance contract

Change in eligibility for tax credits or cost sharing reductions

Move to a different Exchange Area

Indians may change plans once per month

Undefined “exceptional circumstances”

Enrolled in non-qualifying employer coverage

Risk Factor

Pre-2014And GF

Post-2014

Non-GF

CUIBONO?

AGE OF INSURED

RATE MAY VARY UP TO 10X BETWEEN 19 AND

64 YEAR OLD

RATE MAY VARY ONLY 3X

BETWEEN 21 YEAR OLD AND 64

YEAR OLD

In general, Americans 50 to 64 years

old

GENDER WOMEN CHARGED MORE DURING

CHILDBEARING YEARS. MEN CHARGED MORE

POST AGE 55

GENDER MUST BE IGNORED FOR RATE SETTING

Women age 16 to 45

Men age 55-64

HEALTH STATUS

MEDICAL RECORDS, CLAIMS DATA,

PHARMACY RECORDS, ALL USED TO

DETERMINE RATE OR OUTRIGHT EXCLUDE

APPLICANT FROM COVERAGE

HEALTH INFORMATION CANNOT ALTER

RATES OR EXCLUDE ANYONE

Americans with lots of

health conditions

Price Impacts: Federal UW Rules

Tax/Fee Cost When? Who Pays?

PCORI Fee $1 or $2 PMPY $1 for Plan Years <

10/1/13; $2 After that

Carrier for Fully Insured; Sponsor for Self-Funded

Transitional Reinsurance

Fee

$63 PMPY 2014; Lower afterwards

2014 and Beyond

Carrier for Fully Insured; Sponsor for Self-Funded

Health Insurer Fee

$40M La 2014$8B Nationally;$70M+ La 2017

$14.3B Nationally

2014 and Beyond

Carrier for Fully Insured

Exchange Fee 3.5% of Premiums in Exchange (FFE)

2014 and Beyond

Carrier for fully insured

Unearned Income Tax

3.8% on unearned above $200k

single/$250k joint

2013 and Beyond

Individual Tax Payer

Price Impact: New Taxes and Fees

All Individual and Small Group Plans MUST match the Benchmark Essential Health Benefits Plan in breadth of coverage.

For 2014/15, in Louisiana, the Benchmark will be the coverage offered in

BLUE CROSS GROUPCARE PPO on 12/31/2011◦ This is a very rich plan. Includes pregnancy

coverage on all members, mental/nervous/ autism spectrum disorder, and a very wide formulary.

What Medical Services Must Be Covered?

Moving from 5-6:1 to 3:1 on age rating Guarantee Issue Coverage Gender neutralization Dissolution of High Risk Pools Exchange-COBRA connection in ASO No rate adjustments for health status Health status of uninsured Reduction in Medicaid maternity coverage Expansion of Private maternity coverage Essential health benefit requirements in coverage Taxes/Fees on Carriers Removal of “Dial-a-risk” options Carrier compliance Costs Carrier system build-out costs

Price Impacts: PPACA Changes Drive Rates Up

Base Rates 2013 vs 2014 (Non-GF, unsubsidized)

AGE & Gender

2013 Blue Max

$2500

2014 Blue Max

$2500

% Chang

e In Rates

30 YR Male

$160.03 $294.08 +84%

40 YR Male

$222.46 $331.13 +49%

60 YR Male

$533.88 $703.20 +32%

30 YR* Female

$417.71 $294.08 -30%

40 YR* Female

$493.48 $331.13 -33%

60 YR* Female

$680.64 $703.20 +3%

AGE & Gend

er

2013 Blue

Saver $1,900

2014 Blue

Saver $1,900

% Change in Rates

30 YR Male

$146.07 $298.04 +104%

40 YR Male

$203.06 $335.60 +65%

60 YR Male

$487.33 $712.68 +46%

30 YR* Female

$415.64 $298.04 -28%

40 YR* Female

$484.79 $335.60 -31%

60 YR* Female

$655.62 $712.68 +9%

* 2013 rates include maternity for females, coverage was actually carried by only 10% of females covered. 2014 rates must include maternity for everyone, including males.

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Family Adult 1 Adult 2 Child 1 Child 2Ages 40 36 6 4

Issuer B B(Benchmark) B BMetal Level Bronze Silver Gold Platinum

Typical Sample Premium $10,908 $12,120 $13,332 $15,350

Family Income $35,000/year (149% of FPL)Premium Tax Subsidy$10,734 $10,734 $10,734 $10,734

Family pays: $174 $1,386 $2,598 $4,616 Payment % of Income 0.4% 4.0% 7.4% 13.2%

Family Income $88,000/year (375% of FPL)Premium Tax Subsidy $3,760 $3,760 $3,760 $3,760

Family pays: $7,148 $8,360 $9,572 $11,590 Payment % of Income 8.1% 9.5% 10.9% 13.2%

How Will Healthcare.gov Work?

Plan TYPE Income of Applicant

Deductible In Network CO-

INSURANCE

In Network MAX OUT

OF POCKET

Sample Benchmark

Silver Individual

251% of FPL or above

$2,000 80% $4,000

201% to 250% of FPL

$2,000 80% $3,000

151% to 200% of FPL

$500 80% $1,400

100 to 150% of FPL

$0 95% $1,300

Cost Sharing Reductions/Variants

Note: Cost Sharing Reductions are ONLY available on Silver Plans, not Bronze, Gold, or Platinum plans.This is a sample computation, not an actual product.

100% FPL ($11,490)

150% FPL ($17,235)

200% FPL ($22,890)

300% FPL ($34,470)

400% FPL ($45,960)

401% FPL ($46,000 &

Up)

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$19.15

$57.45 $120.65

$272.89

$298.04

$298.04

Premiums/Month

Pre-PPACA Stan-dard Rate $146.07

Subsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old Male

Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

100% FPL ($11,490)

150% FPL ($17,235)

200% FPL ($22,890)

300% FPL ($34,470)

400% FPL ($45,960)

401% FPL ($46,000 &

Up)

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

$19.15

$57.45 $120.65

$272.89

$298.04

$298.04

Premiums/Month

Pre-PPACA Stan-dard Rate :

W/maternity:$416.54

W/0 maternity:$209.02

Subsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old Female

Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

100% FPL ($11,490)

150% FPL ($17,235)

200% FPL ($22,890)

300% FPL ($34,470)

400% FPL ($45,960)

401% FPL ($46,000 &

Up)

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$19.15 $57.45

$120.65

$272.89 $363.85

$712.68

Premiums/Month

Pre-PPACA Stan-dard Rate $487.33

Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old Male

Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

100% FPL ($11,490)

150% FPL ($17,235)

200% FPL ($22,890)

300% FPL ($34,470)

400% FPL ($45,960)

401% FPL ($46,000 &

Up)

$0.00

$100.00

$200.00

$300.00

$400.00

$500.00

$600.00

$700.00

$800.00

$19.15 $57.45

$120.65

$272.89 $363.85

$712.68

Premiums/Month

Pre-PPACA Standard

Rate :W/maternity:

$655.62W/0 maternity:

$449.00

Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old Female

Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

100% FPL ($23,550)

150% FPL ($35,325)

200% FPL ($47,100)

300% FPL ($70,650)

400% FPL ($94,500)

401% FPL ($94,600 &

Up)

$0.00

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$39.25

$123.64

$247.27

$559.31

$748.12

$996.29

Premiums/Month

Pre-PPACA Standard

Rate :W/maternity:

$783.81W/0 maternity:

$577.19

Subsidized Premiums for Silver Plan Blue Saver $1,900/$3,800; Family of 4 (40 yr

old male, 38 yr old female, 10 yr old male, 8 yr old female)

Assumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)

Incarcerated. Income above 400% of FPL. Offered coverage at work that is affordable and

at least 60% AV. Medicaid or CHIP eligible (income <138% fpl in

states that have agreed to expand). Failed to file required tax returns in previous year. Member of a tax household getting affordable

coverage offer from employer Unable to attest to residency in a single state. In the country unlawfully.

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Who Can’t Get Help?

The Small Business Health Options Plan (SHOP) exchange will list small group options from a variety of health carriers that can be purchased online. Groups 2-50 in 2014.

ALE’s are not SHOP-eligible. IRS tax credits for low income small group

coverage that began in 2010 will phase out of the general market in 2014 and only be available if you purchase on SHOP.

Several key features of SHOP have been delayed at least one year, possibly longer.

What about Small Groups?

PPACA required creation of new Forms under Section 6055/6056

All firms would populate forms with detailed data about their employees and health plans offerings, submitted with quarterly tax returns

Data would be put into new tool, shared with IRS, DOL, CCIIO, to help regulate business health insurance, test for affordability, coverage, discrimination, etc.

Database is not ready, regulations not released, forms not available, so all pushed back to 1/1/15.

Why the Delay in Employer Fines?

How many benefit eligible Employees do I have?

Am I an Applicable Large Employer (ALE)? ALE Yes, or No, What do I do?

As an Employer, What 3 Questions Must I Answer?

Any employee who averaged 30 hours of service per week or more in the previous look-back period (3 to 12 months.)

Any new hire who, after 90 days, is REASONABLY EXPECTED to work more than 30 hours/week

If a REASONABLY EXPECTED determination cannot be made after 90 days, then another 90 day period may be used to make the call.

If eligibility determination is made, and then hours change, coverage must continue for the LONGER of the look-back period or 6 months.

Who is benefit eligble?

FOR THE ALE COMPUTATION, the common law definition of employee must be used:

“Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.” (www.irs.gov)

What is a Common Law Employee?

Month Benefit Eligible

Common Law Hours

/120 FTE Total FTE AVERAGE

JAN 2014 22 3300 27.5 49.5

FEB 2014 23 2800 23.3 46.3

MAR 2014 23 3250 27.1 50.1

APR 2014 23 3450 28.8 51.8

MAY 2014 24 3105 25.9 49.9

JUNE 2014

22 3271 27.3 49.3

JULY 2014 23 3655 30.5 53.5

AUG 2014 24 3705 30.9 54.9

SEPT 2014

25 3000 25.0 50.0

OCT 2014 26 3800 31.7 57.7

NOV 2014 27 3950 32.9 59.9

DEC 2014 30 4250 35.4 65.4 53

Am I an Applicable Large Employer? (ALE)Controlled , Affiliated and Associated Groups

Must be COMBINED for this computation!!!

No obligations to provide affordable coverage

No obligations to provide valuable coverage

No obligations to offer coverage

No danger of fines under 4980H

You must still be able to demonstrate your Non-ALE status.

Ok, I’m not an ALE, what now?

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You have many new Federal Obligations that can be condensed into 3 major options:

1. AVOID FINES--Must offer “affordable”, “minimum value” health coverage to 95% of all benefit eligible employees. Must offer coverage to children under age 26 (but not spouse and subsidy not required). MUST BE OFFERED AT LEAST ONCE PER PLAN YEAR!!!!

2. RISK SOME FINES—Offer coverage that fails one of the tests in #1 above. Employer is fined $250 per month per employee who “leaks” to the Exchange. Max fine is total fine computed under “3” below.

3. PAY THE FINES –Fail to offer minimum essential coverage to at least 95% of your benefit eligible employees, employer must pay $2,000 per year per uncovered employee minus first 30 lives.

Ok, I’m an ALE, What Do I do now?

4980h a) Fine “ALPHA”◦ Requires that all ALE’s offer minimum essential coverage to

AT LEAST 95% of their benefit eligible employees.◦ If no compliance, only ONE benefit eligible employee has to

draw an advanced tax credit from an Exchange to trigger the fine.

◦ Fine is ENTIRE BENEFIT ELIGIBLE WORKFORCE COUNT minus 30 x $166.67/month without coverage.

4980h b) Fine “BRAVO”◦ Requires that the offer in a) be “affordable” and “at least

60% actuarial value”.◦ If no compliance, each benefit eligible employee drawing an

ATC from Exchange will trigger a $250/month fine, up to a max of the fine computed in a).

The Price of Failure-2015 and Beyond

Federal Poverty Line:◦ Use 100% of FPL x 9.5% = affordable premium for all employees.◦ In 2012, would be $11,170 x 9.5% = $1,061.15

Rate of Pay:◦ Use hourly rate times 130/month to determine wages x 9.5% to

compare to premium.◦ At $10/hour, $1,300/month x 12 x 9.5% = $1,482.00

9.5% of Employee Box 1 W-2 income in premiums for employee-only coverage. ◦ Determined at end of calendar year, and on an employee-by-

employee basis.◦ Partial-year adjustments allowed for new employees who work part of

a year.◦ At $20,800/year ($10/hr, 40 hrs/week) = $1,976.00

What Does “Affordable” Mean?(Proposed Safe Harbors)

Prove you are NOT AN ALE Prove the employee in

question was never benefit eligible when he worked for your firm

Prove the employee in question was offered an insurance plan that met the federal definitions of affordability, and offered at least 60% AV.

How to Defend Against Fines listed in section 4980h a) and b)!

SAVE FOR 2015!!!

Grandfathering: Current Benefits to Groups

“You’re Darn Tootin’ Listen to your Grandfather!!”

• Not subject to Rate Compression or New Federal Underwriting Laws• Not subject to 3:1 age rating• Can keep existing rate/benefit plans• Not required to add new coverage for USPTF Schedule B tests/immunizations at first dollar.• Not required to add new Women’s Wellness coverage at first dollar.

Civic Organization designed to provide unbiased information on PPACA

Healthcare and Wellness Information Focused on explaining drivers of healthcare

costs, the critical importance of personal wellness, and the need for access to quality healthcare for all Louisiana’s citizens.

Solely an educational resource, not seeking to create public policy

Over 100 member organizations, including LDOI!

JOIN THE EFFORT @ www.lhec.net

Michael R. BertautHealthcare Economist

LINKED-IN Recommendations WELCOME!!!

Michael.bertaut@bcbsla.com

Office: 225-297-2719Cell: 225-573-2092

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