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Health Care Reform:Facts about ACA – Three Primary Elements of the Affordable Care Act

First - Individual Mandate

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Individual Shared Responsibility (Individual Mandate)

Individual Shared Responsibility: Provision in the law that requires all Americans to have health coverage or pay a tax.

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Individuals must decide:

• Get minimum essential coverage; or

• Pay a tax

• 2014 – Pay $95 or 1% household income*

• 2015 – Pay $325 or 2% household income*

• 2016 – Pay $695 or 2.5% household income*

* The amount due is determined by the amount which is greater, the flat fee or the percent of household income.

Consult your tax advisor.

What Health Coverage Qualifies?

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Minimum Essential Coverage Requirements

Individual Grandfathered & Non-Grandfathered Plans

State & Federal Government Plans

Employer Group Plans

EXCEPTIONS TO MANDATE REQUIREMENT

Financial Hardships

American Indians

Undocumented Immigrants

Incarcerated Individuals

Religious Objections

Three Months or Less of coverage within an annual period before tax

EXCEPTED BENEFITS: Plans that are not within scope of most provisions of the ACA, like dental or vision, long-term care and other supplemental coverage offered as a separate insurance policy and do not qualify as minimum essential coverage.

Where Can An Individual Purchase Health Coverage?

All the traditional places individuals and groups have purchased health insurance in the past will not change. What is new is the introduction to the public health insurance

exchange.

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Direct

Broker

Employers

Public Exchange - NEW

Distribution Channels

TERMS TO KNOW

Health Insurance Exchange (HIX): An online marketplace for individuals and small businesses to shop for and compare health plans.

Also known as:The Public ExchangeThe Amercian Health Benefits Exchange (AHBE)The Small Business Health Options Program (SHOP)The ExchangeThe Marketplace

New Players On The New Public Exchange

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New Players in the Market

Medicaid expansion

State planOptionalUp to 133% of Federal Poverty Level

Multi-state plans

Single carrier

Similar plan in30 states in 2014

Similar plan in all 50 states by 2018

CO-OPsConsumer Operated and Oriented Plans

Private, nonprofit entity

At least one per exchange

Basic Health Plan

State planOptional133% to 200% of Federal Poverty LevelDelayed till 2015

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Online market place

Easy to compare

Two types of exchanges−American Health Benefit Exchange

−Small Business Health Options Program (SHOP)

Initial Open Enrollment from Oct 1 – March 31 for individuals

Optional Large Group Exchange in 2017-state-by-state determined

Something New: The Public Exchange

Onlineshopping sites

Public Exchange Types

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Types of Public Exchanges

State-basedexchanges

Partnership betweenstate and federal

Federally facilitatedexchange

State provides plan shopping & comparison

State provides core plan management exchange functions

States can use federal services for premium tax credit and cost-sharing reduction determination

Federal exchange provides shopping & comparison

Federal exchange provides core exchange functions

State makes final Medicaid determination

States can choose to oversee plan management and/or consumer assistance

Federal exchange provides plan shopping & comparison

Federal exchange provides core exchange functions

Federal exchange handles eligibility functions

February 15, 2013, Each State Had To Notify HHS Of Their Decision Of Operating Their Health Exchange.

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Federally Facilitated Exchange

Partnership Exchange

State-based Exchange

As of February 15, 2013

Not for distribution. Proprietary – Wellmark Blue Cross and Blue Shield

State Decisions For Health Care Exchange

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More Choice+

More Regulations

= More Confusion

Health Plans Made Simple

Second – Market Place Change

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Plan design

Essential Health Benefits

Premium rating changes

Risk assessment

Market Place Change To Health Plans

ACA Mandated Standardized Plan Designs’ And Cost Through The Metallic Tiers And Defined What Portion Of Claims Must Be Paid By An

Insurer.

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Standardized Plans: Metallic Tiers

60% plan70% plan

80% plan90% plan

40% member30% member

20% member10% member

Bronze Silver Gold Platinum

TERMS TO KNOWActuarial Value: The portion of the covered or allowable claims paid by the insurer.

Catastrophic Plan: A health plan that does not provide a bronze, silver, gold or platinum level of coverage for individuals under the age of 30 or who qualify for hardship. This is not allowed in the group market.

This Means That Carriers Must Sell Plans That Meet the ACA’s Standards = Qualified Health Plans

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Certified by the Exchange

−Offer Essential Health Benefits Package

– Essential Health Benefits

– Based on Metallic Tiers

– Meet Cost Sharing Requirements

−Quality Accreditation

Available ON and OFF the Exchange

Qualified Health Plans (QHP)

TERMS TO KNOW

Essential Health Benefits (EHB): A bundle of certain medical services as defined by each state.

Minimum Essential Coverage (MEC): Government-sponsored plans, employer-sponsored plans, individual grandfathered and non-grandfathered plans, and other coverage.

A Qualified Health Plan (QHP) Must Cover Essential Health Benefits As Defined By ACA.

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A bundle of basic medical services

Applies to Non-Grandfathered Plans

Individual Plans

Small Group Plans

Large groups may not impose annual dollar limits on EHBs in 2014

Essential Health Benefits (EHB)

BENEFIT CATEGORIESAmbulatory Patient Services

Lab Services

Prescriptions

Chronic Disease Management

Maternity and Newborn Care

Preventive Care

Emergency Services

Mental Health and Substance Abuse Treatment

Rehabilitative and Habilitative Services/Devices

Hospitalization

Pediatric Services, including oral and vision care

Qualified Health Plans(QHP) Must Limit Cost Sharing

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Cost-sharing out-of-pocket (OPM) maximum limits

•$6,250 for individuals (2013)

•$12,500 for families (2013)

Small Group Plan Deductibles

•$2,000 single

•$4,000 family

Cost-sharing Limits

TERMS TO KNOW

Out-of-pocket cost sharing (OPM) can not exceed the HSA limits. Note: Effective 2015 drug co-pays will be included in the OPM.

ACA Requires Health Insurance Carriers To Calculate Premium Much Differently Than In The Past.

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New rules for premium calculations

Premiums willfluctuate widely

Health and genderno longer a factor

Premiumcalculations

TERMS TO KNOWCommunity Rating: A method of setting health insurance premiums that spreads costs evenly across the entire community.

2014

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Sample Premium Comparison

1 Prior to consideration for trend and other health care reform changes.

For illustrative purposes only

Because Of Cost, ACA Provides Tax Credits To Reduce The Cost For Persons Between 100% And 400% Of Federal Poverty Level (FPL).

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Individuals with access to affordable coverage at a minimum value can’t get financial help.

If group coverage isdeemed unaffordable,the group may be penalized.

Financial Help for those between 100% and 400% of the federal poverty level($44,680 single/$92,200 family 2012).

SUBSIDY QUALIFICATION NOTIFICATION

Exchange must notify employer of:

• Employee Name• Qualification Status• Employer Liability

Employers can appeal to avoid the penalty.

TERMS TO KNOWTax Credit: Small groups with 1-25 employees may qualify for a tax credit up to 50 percent in 2014. But it will go away in 2016.

Consult your tax advisor.

Who Will Market Health Insurance On The Public Exchange?

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Navigators (NEW)

Brokers

Group Administrator

Help Navigating Reform

TERMS TO KNOWNavigators: A newly defined non-profit entity that will provide consumer education and advice, outreach to the underserved, and help with enrollment on the exchange.

Third – Access to Coverage

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Employer Responsibility Mandate

Medical Loss Ratio

Flexible Spending Accounts

Transparency and Administrative Compliance

Employer Role has changedEmployer Role has changed

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• To avoid penalties, employers with 50 or more full-time equivalent employees (FTEs) must:

− Offer affordable coverage (9.5% of employees annual household income)

− Maintain a minimum value of 60%

• Safe Harbors issued by IRS(9.5% of employee’s annual salary)

• Cannot discriminate in favor of the highly compensated -105(H) rules

Employer Coverage Requirements – Employer Responsibility Mandate

TERMS TO KNOWAffordable Coverage: An employee’s cost of coverage cannot exceed 9.5 percent of theirannual household income, for their lowest cost plan.

Minimum Actuarial Value: The portion of the covered or allowable claims paid by the insurer cannot be less than 60 percent.

Consult your tax advisor.

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Affordable Coverage and Minimum Value requirements apply toGroups 50+

Group size equals number of full-time equivalent employees

Seasonal workers are not considered part of group size

Full-Time Equivalent Employees

DETERMINING YOUR GROUP SIZE:

Company X = 65 Employees

Profile 45 Full Time

16 Part Time

4 Seasonal

Monthly Part-Time Hours: 960

Seasonal Hours: N/A

Divided by 120: 8

Total FTE: 45 Full Time + 8 53

TERMS TO KNOWFull-time Equivalent Employees: total number of hours of service for which wages were paid to part-time employees during the taxable year divided by 2,080. Then add that number to the total number of full-time employees.

Consult your tax advisor.

Medical Loss Ratio Does Not Apply to the Iowa Bankers Benefit Plan

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• Medical Loss Ratio (MLR)

Large group: 85%Small group: 80%Individual: 80%

Wellmark already metthis requirement

How much of a premium dollar must be spent on medical care and quality improvement?

TERMS TO KNOW

Medical Loss Ratio*: The ratio between how much of your premium dollar is spent on administrative expense compared to medical care and quality improvements.

Quality Improvement: Expenses to reduce hospital re-admissions, improve patient safety, reduce medical errors, and health information technology investments.

Overhead Expenses: Expenses like administration, marketing, profits, salaries and broker-directed feesare paid from the remaining 15 percent.

*The calculation is based on a carriers total book of business and is not measured on an individual plan basis.

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Flexible Spending Accounts (FSA) Caps Changing

Effective in 2013

$2,500 limit on salary reductions

Spouses can have separate FSAs

EXCEPTIONS TO THE RULE

Premium Only Plans (POPs)

Cafeteria plans such as dependent care and adoption assistance

Non-elective contributions or Reimbursement Programs

−Flex Credits

−Salary reduction contributions

• An employees’ share of health coverage

•Dependent care

•Adoption assistance

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Summary of Benefits and Coverage Standardized in plain English

Explains coverage and gives definitions

Groups will play a role in distributionor may pay a penalty

IBBP provides SBC for the Plan

IBIS provides SBC for the partially self-funded IBIS 105 plan

Summary Of Benefits And Coverage (SBC)

SBC RULES1.When new employee enrolls

2.During open enrollment

3.Upon group renewal

4.Within seven days of request

5.Within 60 days of any material benefit change

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Exchange Notification Regulations

Employer groups required to notify employees of their rights

Written notice

Notice must be distributed by October 1, 2013

NOTICE CHECKLIST

1. Include Exchange contact information

• Exchange services

2. Actuarial Value Status

3. Subsidy options

4. Employer contribution guidelines

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New IRS Reporting Rules

Employer Reporting Coverage for full-time

employees Certify minimum essential coverage Required in 2015 for 2014 tax year Same information must be provided

to employees We do not know the form or

format yet.

REPORTING RULES(Begin collecting Jan. 1, 2014)

1. Group name and EIN

2. Filing date

3. Certify employer-sponsored coverage requirements

• Duration of waiting period

• Months of availability

• Lowest cost option (monthly)

• Total allowed costs

4. Number of full-time employees, name, address, TIN and dependents

Note: Please contact you tax advisor for specific details.

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Form W2 Reporting Groups that offer minimum

essential coverage

Employers who filed 250 or more W2 Forms annually

Aggregate costs of employer-sponsored health coverage

Required in 2013 for the 2012 tax year

In box 12, using code DD(DD indicates non-taxable income)

New IRS Reporting Rules

EXCEPTION TO THE RULE•Self-insured group health plan that is not subject to any federal continuation coverage requirements.

•Employers that are tribally chartered corporations wholly owned by federally recognized Indian tribal governments.

•This excludes beneficiaries and dependents.

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Note: Please contact you tax advisor for specific details.

More Reporting For Health Plans

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Quality of Care Reporting Effective Date:

– Regulations were to be issued no later than March 23,2012.

– Waiting on guidance for Health and Human Services (HHS) as of today.

What we do know:

– Submit annual reports to HHS and enrollees during open enrollment on whether the plan fulfills certain quality of care measures developed by HHS.

– HHS to develop appropriate penalties.

– Does appear to apply to IBBP employers. We are waiting for further guidance.

New Health and Human Services (HHS) Reporting Rules(Pending)

Iowa Bankers Benefit Plan Is A Non-Grandfathered Plan

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Grandfathered Plans

IBBP announced our decision not to grandfather September of 2010.

Why we did not GRANDFATHER

Could not change certain benefits

Could not increase costs to members too much

No employer participating in IBBP could make a change

TERMS TO KNOWGrandfathered: An individual or group health plan that existed on or before the date the ACA was signed into law — March 23, 2010.

Employer Responsibility Mandate –Pay or Play

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Employer Big Decision: Pay or Play

Comply with coverage requirements or be assesseda penalty

Weigh your options

Decide in 2013 for 2014

DECISION CHECKLIST Analyze costs

Analyze benefits

Review salaries

Calculate hours worked

Evaluate contracts

Meet with your tax and legal advisor

Make Your Decision

WHAT ABOUT THE PENALTIES?There are several penalties employer groups may be assessed if they choose not to comply with the mandate — the no coverage penalty, the unaffordable coverage penalty, and a penalty for non-compliance with SBC distribution.

Employer Responsibility Mandate – Pay or Play

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No Coverage Penalty

No access to minimum essential coverage

$2,000 per full time employee*

TERMS TO KNOWPremium Tax Credit: Reduces premium costs for people below 400 percent of the federal poverty level in one of two ways: A refundable credit conducted with the annual tax return or an advanceable payment made directly to the insurance carrier.

The total penalty applies to your total number of full-time employees minus 30, and is accrued on a monthly basis.Consult your tax advisor.

PENALTY ASSESSMENT GUIDELINES

Employer denies employee access to minimum essential coverage

At least one full-time employee receives a premium tax credit through the public exchange

Pro-rated for each month an employer doesn’t offer coverage

Employer Responsibility Mandate Pay or Play

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$3,000 per full-time employee

•Group coverage is offered

•One or more full-time employees receive a premium tax credit or cost-sharing subsidy

Inadequate Coverage Penalty

PREMIUM TAX CREDIT AND COST-SHARING SUBSIDY QUALIFICATIONS

Employer coverage is not affordable

Employer coverage does not meet minimum actuarial value

Employee must purchase coverage from HIX

Note: All IBBP Health Plan Options Meet The Minimum Actuarial Value

Employers are responsible for the inadequate coverage penalty only for those employees who receive the premium tax credit or cost-sharing subsidy, but the total employer penalty cannot exceed $2,000 times the total full-time employees minus 30. The penalty is determined on a monthly basis.

Consult your tax advisor.

Employer Responsibility Mandate – Pay or Play

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Calculating the Annual Penalties

Employer Responsibility – Distribution of Summary of Benefits and Coverage (SBC)

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SBC Non-compliance

Applies to all markets and plans

$1,000 per occurrence

Penalties are not tax deductible

Note: IBBP prepares the SBC for the Plan. IBIS prepares the SBC for the IBIS 105 plans.

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Research to find better medical treatments

Financed with Comparative Effectiveness Research fee

$1 per member in 2012 – 2013

$2 per member in 2014

Patient-Centered Outcomes Research Trust Fund

Although there are no guidelines for 2014 and beyond, employer groups should be prepared to pay annually through 2019. IBIS will pay the PCORI fee for participating IBBP employers. Employers are responsible for the PCORI fee for their partial self-funded 105 plans. Please see your tax advisor!

Projected Cost Per The Congressional Budget Office

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Projected Total Annual Fees Paid By 2019

DrugManufacturers

HealthInsurers

Medical DeviceManufacturers

$20 Billion

$60Billion

$26Billion

IBBP Will Pay Another Fee – The REINSURANCE FEE Estimate $1.59 million

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Big Change = Big Risk

1 States that have elected to run a state-based exchange, may also choose to establish a state-based program or defer to the federal Department of Health and Human Services (HHS). 2Although the Reinsurance fee only impacts the individual market, all large groups, including self-funded plans, will have to finance it. The amount of funds over the three-year period is highest in the first year ($10 billion) and then tapers off to $4 billion by 2016.

Risk Adjustment Reinsurance Risk Corridors

Duration Permanent 2014 – 2016 2014 - 2016

Purpose Transfers $ from carriers with low-risk members to those with high-risk members

Subsidy for catastrophic events based on established formula for sharing excess losses1

Final “catch all” safety net for QHP carriers on the exchange. QHPs will share excess gains and losses based on established targets.

Applies to NGF individual and small group plans

NGF individual health plans on and off the exchange

QHPS

Funded by Carriers in the same state offering NGF individual and /or small group plans.

Example: Carriers selling individual plans in Iowa would transfer funds only between other carriers selling individual plans in Iowa.

All markets; fully-insured group plans, self-funded plans, grandfathered and non-grandfathered plans2

QHP carriers share gains and losses with HHS.  Not designed to be budget neutral, and could cost the US government if too many carriers require reimbursements.

• Iowa Bankers Benefit Plan - We are here to inform, lead and assist as we navigate together through Health Care Reform.

• Call us at -1-800-258-1415.

May 2013 CkWehde, IBIS