Impacts of the Affordable Care Act

Patient Protection and Affordable Care Act (ACA)

Impacts of Health Care Reform

September 2013

Introduction

This information is for illustrative purposes only and is being provided to help increase understanding of the impacts of some of the provisions of the Affordable Care Act (ACA). This document does not attempt to cover all of the law’s provisions and should not be used as legal advice for implementation activities. We encourage clients to seek professional advice including legal counsel, regarding how the new requirements may affect their specific plan.

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The Affordable Care Act (ACA)

• Signed into law March 23, 2010

• Two decisions issued by Supreme Court on June 28, 2012:

• ACA constitutional – Congress can impose a tax on those without coverage

• Medicaid expansion criteria unconstitutional – states may opt out of expansion

• Most significant health care legislation since the passage of the Social Security Act of 1965 to establish the Medicare and Medicaid programs

• Impacts consumers, providers, and insurers by dictating:

• Who must buy insurance

• How insurance will be sold

• What health benefits are mandatory

• Regulations are being issued by:

• Health and Human Services (HHS)

• Department of Labor (DOL)

• Department of the Treasury (IRS)


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Medicaid Expansion in Florida

• The ACA expanded Medicaid eligibility criteria to cover all individuals earning up to 138% (about $16,000) of the Federal Poverty Level (FPL).

• Medicaid would provide coverage for individuals at 0 – 138% FPL, while the Marketplace would provide subsidies for individuals at 138 – 400% FPL.

• The Supreme Court determined that the parameters of the Medicaid expansion – requiring expansion of program eligibility criteria in order to maintain current funding – were unconstitutional. As a result, states are allowed to opt out of Medicaid expansion without losing existing funding.

• In February 2013, Governor Scott announced that he would support Medicaid expansion for 2014-2016. However, the Florida Legislature did not expand the state’s Medicaid eligibility criteria during the 2013 session.

• This lack of Medicaid expansion means:

• Individuals under 100% FPL who do not meet existing Florida Medicaid eligibility criteria are not eligible for Medicaid or Marketplace subsidies

• Individuals from 100 – 138% FPL will qualify for Marketplace subsidies

Key ACA Provisions


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Changes to Health Plans

Small Group and Large Group Only

For individual and small group coverage that begins on or after January 1, 2014:

• No preexisting condition limitations – medical history can no longer be used to determine eligibility for coverage or related premiums

• Guarantee issue – everyone who applies for health coverage must be accepted

• Guarantee renewability – enrollees will be able to renew their plan except in cases of fraud or non-payment of premiums

• Essential Health Benefits (EHBs) – a series of services that must be covered by all plans with no lifetime maximums or annual limits

• Out of pocket maximum limits – established at $6,350 for single plans, $12,700 for family plans

• “Metal” level plans – categories of health plans (Platinum, Gold, Silver, Bronze) that cover the same EHBs at different cost-sharing levels

• Premium tax credits – available based on household income to assist with purchasing health coverage

7Essential Health Benefits (EHBs)Individual and Small Group Coverage


• For plan years starting January 1, 2014, all non-grandfathered individual and small group health plans must cover these benefits with no annual or lifetime limits.

• All state Medicaid plans must also cover these services.

1. Ambulatory patient services

2. Emergency services3. Hospitalization4. Maternity and newborn

care5. Mental health and

substance use disorder services, including behavioral health treatment

6. Prescription drugs7. Rehabilitative and habilitative

services and devices8. Laboratory services9. Preventive and wellness

services and chronic disease management

10.Pediatric services, including oral and vision care


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Metal Level Benefit Plans

Four Metal Level categories of health plans will be available:

• Each metal plan covers the same set of Essential Health Benefits

• A plan’s Metal Level is based on what a plan will pay, on average, for covered services

• Metal levels are based on differences in cost-sharing and out-of-pocket costs for covered services

Platinum Gold Silver BronzeHigher Premium Lower Premium


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Changes to Rating Rules

As of January 2014, new rating rules take effect for non-grandfathered individual and small group plans:

• No pre-existing condition exclusions

• No medical history or gender used in rating

• Rating factors used to determine premiums limited to:

– Ages of each individual applying for coverage

– Single rate factor for ages 0 – 20

– Rates for adults 21 – 63 increase based on age and cannot exceed 3:1 ratio

– Single rate factor for ages 64+

– Geography where the subscriber lives (individual), group is located (small group)

– Tobacco use (rates may be up to 50 percent higher for tobacco users)

• Rates for families will be the sum of the rate for each person to be covered, with a cap of 3 children ages 0 – 20

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ACA Fees and Taxes


Name What Who Pays How Much When

Patient Centered Outcomes Research Institute (PCORI) Fee

Pursues comparative clinical effectiveness research and other initiatives to improve quality and lower costs. Funded with annual fees (per covered life) each plan or policy year.

Florida Blue pays fee for individuals and insured groups. ASO group employers pay fee directly to IRS.

$1 per covered life, up to $2 plus.

2012 – 2019

Transitional Reinsurance Fee

Funds the Transitional Reinsurance Program. Distributed to insurers in non-grandfathered individual market that attracts high-risk individuals.

Health plan pays fee. ASO group employers pay fee.

$5.25 PMPM for 2014. Later years TBD.

2014 – 2016

Health Insurer Fee

Annual fee funds premium tax credits or subsidies for low-income individuals and families purchasing insurance through the exchange marketplace in 2014.

Health insurer pays fee, but may be included in premiums.

TBD 2014 and ongoing

Exchange User Fee

Assessed to insurers offering health plans on Exchange to cover related operational and administrative costs.

Health insurer pays fee, but may be included in premiums.

3.5% of monthly premium for QHPs enrolled through exchange.

2014 and ongoing

High Value Plan Tax

“Cadillac Tax” fee assessed on high premium health plans.

Health plan pays fee, but may be included in premium. ASO group employers pay fee.

40% of value of plan benefits that exceed thresholds. Details TBD.

2018 and beyond

Health Insurance Marketplace(Exchange)

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Health Insurance Marketplace for Individuals

• Allows individual consumers to determine eligibility for financial assistance and/or public health programs, and provide information and support for them to evaluate and enroll in health plans

• For January 1, 2014 effective dates, open enrollment is from 10/1/13 – 12/15/13

• Open enrollment continues 12/16/13 through 3/31/14 for February – May 2014 effective dates


Note: Financial assistance available to applicants with incomes 100-400% of Federal Poverty Level (FPL) to help them purchase insurance in the Marketplace.

• Consumer provides demographic, income, dependent information

• Marketplace supports online, mail, phone, or in person applications

• Application routed to HHS “data hub” to validate income, citizenship status

• Marketplace provides eligibility results and amount of premium tax credit available*

• Online tools and in-person support available to perform plan comparison

• Enrollment and tax credit information sent to issuer of selected QHP

Consumer completes Marketplace application

Marketplace makes eligibility determination

Consumer enrolls in Qualified Health Plan (QHP)

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Advance Premium Tax Credits (Subsidies)

• Household’s expected income for the coverage year is between 100% and 400% of the Federal Poverty Level (FPL):

• Individual must enroll in individual coverage through the Marketplace

• Individuals cannot enroll in another form of Minimum Essential Coverage, such as Medicaid, Medicare, Tricare, or employer-sponsored coverage

• If married, the applicant must file a joint tax return

• Subsidies are paid directly to the insurance company each month to offset premium costs for the health plan selected by the applicant. The insurance company will send a monthly bill to the enrollee for any premium balance due.

2013 FPL 100% 200% 300% 400%Single $11,490 $22,980 $34,470 $45,960

Family of 4 $23,550 $47,100 $70,650 $94,200


Updated 5/29/13


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Individual Mandate and Penalties

• The ACA imposes tax penalties on individuals and dependents who do not maintain minimum essential coverage beginning January 1, 2014

• The tax applies each month an individual and their dependents do not have qualifying coverage (exceptions exist for those who have incomes below tax filing levels or other financial hardship)

• The sum of monthly penalties is the annual penalty and is the greater of:

• It is important to note that the tax penalty for most people is likely to be 1% of their taxable income – NOT the $95 flat dollar amount

Tax Amount 2014 2015 2016

$95

$325$695

1%

2%2.5%

Flat dollar amount(total capped at 300% of the per person adult amount)

% of taxable household income

SHOP Marketplace


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Small Business Health Options Program (SHOP)

• Allows small employers with up to 50 full-time employees* to purchase health insurance coverage for employees and obtain support for administrative functions related to billing and payment tasks.

• Employers with business locations in multiple states will apply for the SHOP in each state they operate. Employees will enroll in coverage based on the state of their worksite location.

*States can continue to use their definitions for the number of employees in a small group (50) until 2016. As of January 1, 2016, small groups will be defined as up to 100 full-time employees.

• Employer provides group and employee data, selects metal tier and contribution amount

• SHOP supports online, mail, phone, or in person applications

• Online tools and in-person support available to perform plan comparison

• Starting in 2015,Employee may select any QHP available at employer-sponsored coverage tier

• Starting in 2015, SHOP aggregates premiums owed by employer and sends single bill**

• Starting in 2015, SHOP collects payments from employer and makes payment to insurers

Employer completes SHOP application

Employee reviews and enrolls in SHOP QHP

SHOP performs administrative functions starting in 2015


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SHOP Functions

Provide “employer choice” enrollment model where employer selects a single health plan to offer all employees

Develop and offer premium calculator for employees to compare QHPs after application of any employer contribution

Enforce 70% participation rule based on rate of employee participation in SHOP, not plan or issuer enrollment

Require insurers to modify rates at uniform time and prohibit changes to employer rates

Provide “employee choice” enrollment model where employer selects metal level of coverage to offer all employees; employees select any plan at that metal level

Aggregate premiums and provide monthly bill to employers that reflects total amount due insurers

Receive payments from employers and transfer payments to insurers

Reconcile enrollment and employer participation information with insurers on a monthly basis during their plan year

2014 2015


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Small Business Tax Credits

available to employers with 10 or fewer employees and average annual wages of less than $25,000; phases out as firm size and average wages increase.Full Credit-

For tax years 2010-2013: For tax years 2014-2015:• Tax credit available for any employer-sponsored

health insurance • Maximum credit 35% for small business employers• Maximum credit 25% for small tax-exempt

employers (e.g., charities)

• Tax credit only available for employer-sponsored health insurance in SHOP

• Maximum credit 50% for small business employers • Maximum credit 35% for small tax-exempt

employers

Eligibility Requirements

less than

$50,000

Average annual wages for full-time equivalent employees must be

Insu

ranc

e P

rem

ium

s

Employer must contribute at least 50% of the cost toward each employee’s single health insurance

Employer must haveless than 25 employees

%100

%50

Employee ContributionsEmployer Contributions

$100K

$50K

Employer Impacts

NOTE: Employer Penalt ies delayed unti l 2015


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Employer Notice to Employees about Marketplaces

• Employers must provide all employees a notice that explains the availability of coverage through the Marketplace and that an offer of employer coverage affects the ability of employees to get coverage through the Marketplace.

• Employers will be required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. The notice must be provided within 14 days of an employee’s start date.

• For current employees, employers must provide the notice by October 1, 2013. The notice is required to be provided at no cost to the employee.

• The notice must be provided in writing in language that can be understood by the average employee. The notice may be provided by first-class mail, or electronically if the DOL electronic disclosure requirements are met.

• DOL guidance: http://www.dol.gov/ebsa/pdf/tr13-02.pdf

• Sample notice for employers who offer health coverage:

http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf

• On September 11, the DOL released guidance that indicated employers would not be penalized for failing to provide notices by October 1.







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90 Day Waiting Period

• For plan years starting in 2014, group employers cannot have a waiting period that exceeds 90 days (coverage must be effective no later than 91st day)

• The 90 day maximum waiting period applies to:– Large and Small Group Employers– Insured and Self-Insured– Grandfathered and Non-Grandfathered– All employees eligible for coverage

• The 90 day waiting period starts on the date an employee is eligible for coverage, typically their date of hire

• For employees in a waiting period at the plan renewal date, if the employee has already waited 90 days they are immediately eligible to enroll in coverage (the employee gets credit for “time served”)


22Counting of Employees to Determine Group SizeEmployer Penalties delayed until 2015

Note: Businesses controlled by a single owner must be treated as a single entity for purposes of counting employees and group employer size determination for applicability of employer penalties

Florida Statute 627.6699(3)(w)(1)[Formerly (3)(v)]

As modified by FL SB 1842

Florida Statute 627.6699(3)(w)(2)Adopting:

Affordable Care Act (ACA) 1304(b)

Internal Revenue Code (IRC) 4980H

[ACA Sec. 1513]

Rule for counting employees

Average number of “Eligible” employees employed on business days during the preceding calendar year

Average of total number of all employees (e.g., W-2) employed on business days during preceding calendar year

Annual average of total full-time employees and full-time equivalents (total hours worked by non-full-time staff divided by 120)

Includes part-time and seasonal employees No Yes (each EE = 1) Yes (as equivalents/fractions)

“Small Group”≤50 eligible employees ≤50 total employees

(Florida will adopt 1-100 SG in 2016) ≤49 FTEs

Who must be offered coverage?

“Eligible” full-time employees (work 25+ hours per week and has met waiting period rules)

[Can Include Independent Contractors]

FL: “Eligible” full-time employees (work 25+ hours per week and has

met waiting period rules) [Can Include Independent

Contractors]

Full-time Employees (average 30 hours/week)

Rule used for:

• Market Segment Determination for Grandfathered Plans

• Market Segment Determination for Non-Grandfathered Plans

• Apply PHSA Market Reforms• Apply MLR standards

• Determine SHOP eligibility • Determine Small Group

Tax Credit Eligibility• Apply Employer “Pay or

Play” Penalties


23How many hours do my employees work?Employer Penalties delayed until 2015

Number ofFull-Time

Equivalent (FTE) Employees

Number of Full Time Employees working 30 or

more hours per week

Aggregate number of hours of service for all employees who were not employed an average of at least 30 hours per week for

the month, divided by 120

Total Number of Full Time Equivalent Employees (FTEs)

+

=

Updated 7/15/13

This calculation is done for each month, the monthly totals combined, and then divided by the number of months counted. If the result is 50 or more, the employer must offer health coverage to all full-time employees and their dependents under age 26.

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Measurement 4Measurement 3Measurement 2Measurement 1

Stability 2Stability 1

JANJAN JANJAN JAN

Admin 1

Stability 3

Admin 2 Admin 3

OCTOCTOCTOCT

What timeframe do I use to count employee hours?Employer Penalties delayed until 2015

• Measurement period – timeframe for counting employee hours• Administrative period – identify full-time employees• Stability period – offer full-time employees health coverage


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How is Affordability and Minimum Value calculated?Employer Penalties delayed until 2015

Affordability: Employee contribution cannot exceed 9.5% of employee’s annual income (W-2 wages) for employee-only coverage

Minimum Value (MV): Minimum share of cost for covered benefits plans must pay 60%

9.5%



26Employer Penalty Scenarios as of 2015Employer Size Scenarios, Criteria Employer Penalties

1-24 Not mandatory for employer to offer coverage No penalty (employer may qualify for tax credits)

25-49 Not mandatory for employer to offer coverage No penalty

50 or more

• Does not offer insurance to 95% of full-time employees • No full-time employee receives a subsidy

No penalty

• Does not offer insurance to 95% of full-time employees • A full-time employee receives a subsidy

Penalty. Employer pays $2,000 annually times number of full-time employees, less first 30 employees

• Offers insurance to 95% of full-time employees• Coverage meets Minimum Value covering at least 60% of

the cost of services• Coverage is Affordable where employee share of premiums

for single coverage cannot exceed 9.5% of annual W2 wages

No penalty

Important Note: If the employee coverage is considered affordable (regardless of the cost for family coverage), then employees and their dependents are not eligible for subsidies in the Exchange.

• Offers insurance to 95% of full-time employees• Coverage does not meet Minimum Value, and/or• Coverage is not Affordable;• A full-time employee receives a subsidy

Penalty. Employer pays $3,000 penalty annually for each full-time employee receiving subsidy, up to maximum of $2,000 times number of full-time employees, minus first 30

• Offers insurance to 95% of full-time employees• Coverage does not meet Minimum Value, and/or• Coverage is not Affordable• No full-time employee receives a subsidy

No penalty

27Employer Penalties Scenario PathwaysEmployer Penalties delayed until 2015


Do you haveFTEs receiving a subsidy?

Do you offer coverage to 95% of FTEs?

Employer pays $2,000 annually times number of full-time employees, minus first 30 employees


Does coverage deliver minimum value?

Do you haveFTEs receiving a subsidy?

Is coverage affordable?


Is coverage affordable?

Employer pays $3,000 penalty annually for each full-time employee receiving subsidy, up to maximum of $2,000 times number of full-time employees, minus first 30.

Does at least one plan offer minimum value?

Addit ional Resources


Learn More at Florida Blue

New health care reform website now includes:

• An overview of health care reform

• Access to our health care reform ebook

• Videos on various health care reform topics

• A subsidy estimator tool

• Options to call or email Florida Blue for more information

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http://floridabluehealthcarereform.com/


Learn More at HealthCare.gov

The official government website that includes:

• An overview of health care reform

• Information for individuals and small businesses on how the ACA affects them

• Will be the official Marketplace website for enrollment as of October 1

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https://www.healthcare.gov/


Learn More at BusinessUSA

New government site designed for employers that includes:

• Material on how the ACA affects small and large businesses

• A tool based on size and location to help businesses learn about affordable coverage options

• Relevant information from HHS, Treasury, and the SBA

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http://business.usa.gov/healthcare

Impacts of the Affordable Care Act

Economy & Finance

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