Illinois Procurement

Council for Health and Human Services Ministries (CHHSM)75th Anniversary Annual MeetingMarch 1, 2013

Laura MinzerExecutive Director, Healthcare CouncilIllinois Chamber of Commerce

Health Care Reform as Promise and Opportunity

What this presentation will cover:The new world of coverage in 2014

Employer obligations under the ACA

Employer coverage requirements and penalties in 2014

Preparing for the opportunities and challenges ahead: key takeaways for employers and individuals

The New Avenues to Coverage

The ACA in 2014

This is what change looks like. -President Obama on the signature of the Patient Protection and Affordable Care Act (ACA), March 23, 2010What happens in 2014?Insurers prohibited from denying coverage due to a pre-existing condition AND Individuals must obtain health insuranceTheir employerThe private marketThe Exchange, orMedicaid/MedicareEmployers (50 and over) must offer affordable coverage to all full-time equivalent employees

Coverage begins on the Exchange

Medicaid expansion takes effect*

GROUPINDIVIDUALINDIVIDUAL GROUPNavigators/In-person AssistanceUninsuredAGENTS/BROKERSHigh Risk Health Insurance Pools HIPAA CHIP, CHIP, & IPXPWhat are the mechanisms that will shape this landscape in 2014?The Coverage Landscape in 2014

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Source: Kaiser Family FoundationThe Mechanisms Shaping the Coverage Landscape in 2014The Individual Mandate

The Individual MandateBeginning in 2014, all individuals (with some qualified exemptions) are required to obtain health insurance coverage.

Penalty Levels(Penalties are paid per adult in household with 50% penalty applied per child in the household, with cap of $2,250 per family)2014 Greater of $95 or 1% of taxable income2015 Greater of $325 or 2% of taxable income 2016 Greater of $695 or 2.5% of taxable income

The Mechanisms Shaping the Coverage Landscape in 2014The Individual Mandate

Employer Pay or Play

The Employer MandateEach employer with 50 full-time equivalent (FTE) employees must offer coverage minimum essential coverage to its full-time employees (and dependents). Failure to do so could result in a penalty.**Ways the Penalty AppliesEmployer does not offer coverage & at least one employee receives premium assistance on the exchange

Employer does offer coverage, but coverage is unaffordable & at least one employee receives premium assistance on the exchange

The Mechanisms Shaping the Coverage Landscape in 2014The Individual Mandate

Employer Pay or Play

Premium Assistance & Cost-Sharing Subsidies

Premium Assistance & Cost-Sharing SubsidyPremium assistance available to individuals/families between 100% and 400% FPL that do not have access to affordable employer-sponsored coverage to lower premium costs for plans on the exchange.

Cost-sharing subsidy available to individuals/families between 100% and 400% that do not have access to affordable employer-sponsored coverage to limit the selected plans out-of-pocket costs.

Premium AssistanceCost-Sharing SubsidyHousehold IncomePremium Limit (as a % of Household Income100 133% FPL2% of income133 150% FPL3-4% of income150 200% FPL4-6.3% of income200 250% FPL6.3-8.05% of income250 300% FPL8.05-9.5% of income300 400% FPL9.5% of incomeHousehold IncomeReduction in Out-of-Pocket Liability*100 200 % FPL2/3rds of max200 300% FPL of max300 400% FPL1/3rd of max*Cost-sharing limits based on Health Savings Account qualified health plan maximum out-of-pocket cost limits for 2013 - $6,250 for single and $12,500 for family limits indexed to CPI post-2014.Premium Assistance & Cost-Sharing SubsidyThe Mechanisms Shaping the Coverage Landscape in 2014The Individual Mandate

Employer Pay or Play

Premium Assistance & Cost-Sharing Subsidies

Small Employer Tax Credit

Small Employer Tax Credit in 2014Small Employers 25 employees or lessAvg. annual wages cannot exceed $50,000Employer premium contribution = 50% or more

Tax credit available in tax years 2014 2016Up to 50% of employer contributions Up to 35% of employer contributions for tax-exempt employers

The ExchangeWhat is an Exchange:An Exchange is a mechanism for organizing the health insurance marketplace to provide more centralized access to benefit options for consumers individuals and small employers. The health benefits exchange is a key provision of the federal Patient Protection and Affordable Care Act (ACA) where its stated goal is to provide a more efficient and competitive market for individuals and small employers.

Key Public Health Insurance Exchange Dates:November 16, 2012 State must submit Exchange blueprint to HHS for approval/certification of 1) state-level exchange, 2)partnership exchange, or 3) federally-facilitated exchange.December 14, 2012 Extension date for state submission of Exchange blueprint to HHS for approval/certification of a state-level exchange.January 1, 2013 HHS must certify what exchange model each state will have in place for 2014. February 15, 2013 Extension date for state submission of Exchange blueprint to HHS for approval/certification of a partnership exchange.October 1, 2013 Exchange open enrollment begins.January 1, 2014 State Exchanges must be fully operational and coverage begins.December 31, 2014 Deadline for state application for Level 2 funding for operation of state-level exchange in 2016.January 1, 2015 Federal funding ends; State Exchanges must be financially sustainable.*

* For those state level exchanges operational in 2014 only.

From IL/DOI Level 1 Establishment Grant NarrativeTHE EXCHANGE THE IT PERSPECTIVE

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THE EXCHANGE THE USER PERSPECTIVE18Who will the Exchange Impact?Small employers up to 100 employees State option to limit to employers with 50 employees or less until 2016After 2017, state option to expand to larger employers

Individuals/families not eligible for MedicaidLegal citizensCoverage is subsidized for individuals below 400% FPL

Who will benefit from the Exchange?Individual eligible for federal premium tax credits

Individuals that do not qualify for Medicaid

Individuals that do not have access to employer-sponsored coverage

Small employers eligible for tax credits

What will the Exchange do?Front Door access to coverage public or private options and assistance for those options

Customer service Internet portal, hot-line

Direct outreach and enrollment assistance

Plan certification

Standardize plan information apples to apples

Interact with state regulatory agencies

*Catastrophic coverage available only on the individual market and only to those aged 30 and under that are exempt from the individual mandate.All plans are required to cover the essential health benefits Coverage on the Exchange (and off)

Employer Plan Selection on the ExchangeEmployers with fewer than 50 full-time employees have options:*Purchase small group coverage for employees:Option to select one metal tier of coverage; employees select a plan within that metal tier that aligns with their needs

Send employees to individual exchange to purchase health insurance penalty-free (employees may be able to access premium assistance)

*Employers with fewer than 100 full-time employees will have the option to purchase small group insurance on the exchange beginning 2016 without penalty; however, sending employees to the individual exchange instead of furnishing group-sponsored coverage will result in penalties assessed on the employer.

Coverage in 2014Plan levels apply to both plans sold inside and outside the Exchange (grandfathered plans and self-insured plans exempt)Cost-sharing limits imposed for individual and small group plansNo cost-sharing for certain preventive servicesInsurers selling inside the Exchange must offer at least 1 silver and 1 gold planInsurers are prohibited from creating price differentials Insurers are prohibited from rating individuals on anything but age, tobacco-use, geography, and family

What are the Essential Health Benefits?The ACA describes Essential Health Benefits as those that include:Ambulatory patient servicesEmergency servicesHospitalizationLaboratory servicesMaternity and newborn careMental health and substance use disorder services, including behavioral health servicesPediatric services, including oral and vision carePrescription drugsPreventive and wellness services and chronic disease managementRehabilitative and habilitative services and devices

Why the Essential Health Benefits MatterLifetime limits are prohibited on the dollar value of Essential Health BenefitsRestricted annual limits on Essential Health Benefits until 2014, after which annual limits are prohibitedPlans and issuers may impose lifetime and annual limits on Non-Essential Health BenefitsPlans sold on the Exchange and in the private individual and small group markets must cover Essential Health Benefits; states requiring coverage mandates in excess of Essential Health Benefits must subsidize the cost of those mandatesEssential Health Benefits also apply to Medicaid

What the ACA says:What the Supreme Court says:States must expand Medicaid eligibility to all individuals at or below 133% FPLORRisk loss of all federal Medicaid funding

State expansion = 100% federal match until 2017; 95% match until 2020; 90% match thereafter States may expand Medicaid eligibility to all individuals at or below 133% FPLANDFailure to expand does not result in loss of federal $

State choosing to expand = 100% federal match until 2017; 95% match until 2020; 90% match thereafter* The Medicaid Twist

27To Expand or Not?Considerations/questions moving forward:What impact will this have on Exchange participation and the private market?What impact will this have on providers?What impact will this have on state budgets?How will HHS/CMS respond through regulations?

Supreme Court Decision only impacts expansion piece, not other mandatory Medicaid changes, including new eligibility determination criteria, new coverage requirements, and new payment methodologies to providers.

28Access to Exchange Premium Subsidies Under Medicaid ExpansionIndividualEXCHANGEIs income at or below 133% FPL?If YESIf NOMedicaid*Advanceable Premium Tax Assistance Application ProcessDoes the individual have access to employer-sponsored coverage?If YESIf NOAdvanceable tax assistance awarded based on incomeIs employer-sponsored coverage affordable?**If YESIf NONo premium tax assistance availablePremium tax assistance available on sliding scale (based on income) and employer assessed a penalty*According to recent guidance issued by HHS, Medicaid-eligible individuals can still purchase qualified health plans on the exchange, they just can not access premium tax assistance to do so.** Affordable coverage is met if employees share does not exceed 9.5% of W-2 wages or plan provides coverage for at least 60% of medical benefits.Access to Exchange Premium Subsidies Under Non-ExpansionIndividualEXCHANGEIs income at or above 100% FPL?If NOIf YESUNINSUREDAdvanceable Premium Tax Assistance Application ProcessDoes the individual have access to employer-sponsored coverage?If YESIf NOAdvanceable tax assistance awarded based on incomeIs employer-sponsored coverage affordable?**If YESIf NONo premium tax assistance availablePremium tax assistance available on sliding scale (based on income) and employer assessed a penalty** Affordable coverage is met if employees share does not exceed 9.5% of W-2 wages and plan provides coverage for at least 60% of medical benefits.Employer Obligations, Coverage Requirements and Penalties

The ACA in 2014

Change is one thing. Acceptance is another. -Arundhati Roy from The God of Small ThingsKey ACA Provisions Impacting EmployersTax Credits for Health Benefits (Small Employers)

Coverage Expansions and New Benefit Requirements

New Administrative Requirements

New Penalties on Employers (50 employees or more)

32Employers (less than 50 employees)Employers (50 employees or more)Exempt from employer coverage responsibilities and penaltiesEligible to purchase coverage on the Exchange beginning 2014Small employers (25 employees or less) eligible for tax credit to purchase coverage on the ExchangeRequired to provide affordable coverage or be subject to penaltiesEmployers with 100 employees or more eligible to purchase coverage on the Exchange beginning 2016; state option to open Exchange to larger employers in 2017No tax credit availableEmployer Size Matters in 2014

Coverage Changes Impacting Employers

New Administrative Mandates

35The Employer MandateEach employer with 50 full-time equivalent (FTE) employees must offer coverage minimum essential coverage to its full-time employees (and dependents). Failure to do so could result in a penalty.**Ways the Penalty AppliesEmployer does not offer coverage & at least one employee receives premium assistance on the exchange

Employer does offer coverage, but coverage is unaffordable & at least one employee receives premium assistance on the exchange

Determining Employer SizeFull-Time Employee: The ACA defines full-time employee as any employee that has worked an average of 30 hours or more for at least one week in a month.

Full-Time Equivalent (FTEs): The ACA requires employers to account for FTEs by adding all of the hours worked by part-time employees (less than 30 hours/wk) and dividing by 120 (seasonal employees are exempt).

37Employer Size Determination ExampleEmployer has 35 full-time employees (all working more than 30 hours a week) and 20 part-time employees who all work 24 hours per week (or 96 hours per month).

Employer Size Calculation:20 part-time employees x 96 hours = 19201920 / 120 = 16 Full-Time EquivalentsEMPLOYER SIZE = 35 FTs + 16 FTEs or 51 Total Employees

38Employee categoryHow is this category of employee used to determine large employer?Once an employer is determined to be a large employer, could the employer be subject to a penalty if this type of employee received a premium tax credit?Full-timeCounted as one employee, based on a 30-hour or more work weekYESPart-timeProrated (calculated by taking the hours worked by part-time employees in a month divided by 120)NOSeasonalNot counted, for those working less than 120 days in a yearYES, for the month in which a seasonal worker is full-timeTemporary AgencyGenerally, counted as working for the temporary agency (except for those workers who are independent contractors)YES, for those counted as working for the temporary agencyCongressional Research Service (CRS) Analysis (Summary of Potential Employer Penalties under the PPACA, May 2010)Determination & Potential Application of Employer Penalties by Categories of EmployeesEmployer Size Determination ChallengesReconciling Employer Size as it relates to the Exchange and Employer Size as it relates to the application of the penalty

Ensuring guidance and forthcoming regulations are consistent with current classifications/methods employers use to determine employee eligibility for benefits

Ensuring forthcoming regulations are sensitive to fluctuations in employee work week schedules

40Navigating the Challenges: the Regulatory ApproachIs the employee FT, FTE, or PT?Measurement Period = Did the employee average at least 30 hours per week (measurement allowed between 3 and 12 months)?

Stability Period = If yes to above, employee must be treated as a FT/FTE employee for coverage/penalty purposes for at least 6 months, but not more than 12 months (regardless of hours averaged during this period).

Measurement period must be applied uniformly to all employees in the same category, including salaried employees and hourly employees; collectively-bargained and non-collectively bargained employees; employees of different entities and those located in different states.

41Navigating the Challenges: the Regulatory ApproachAdministrative Period = Up to 90 days allowed to be used between conclusion of measurement period and associated stability period.

Waiting Period for Coverage = Limited to no more than 90 days after a new employee becomes eligible for employer-sponsored coverage (12 months or less).

42Employer Size Application ExampleEmployee A was hired as an IT specialist at Widgits, Inc. on January 1, 2014. Widgits, Inc. applied a 9-month measurement period to Employee A during which time the employee averaged at least 30 hours per week. After applying a 1-month administrative period, Widgits, Inc. offers Employee A health coverage under its benefit plan for a period that runs from November 2, 2014 through July 1, 2015. Widgits, Inc complied with regulating guidance and would not be subject to an employer-shared responsibility penalty at any point during Employee As employment.

43Coverage RequirementsPenalty TreatmentsIf employer requires a contribution greater than 9.5% of household income, OROffers a plan that covers less than 60% of medical costs on average, THENEmployee is eligible for the exchange and the employer pays a penaltyEmployers not offering coverage:$2,000 x number of FTE (non-seasonal) (first 30 employees are exempt from calculation)Employers offering inadequate coverage:The lesser of $3,000 per employee receiving premium credit or $2,000 x number of FTE - 30Coverage/Affordability Standards & Penalties

Minimum ValueEmployer-sponsored coverage is deemed to provide minimum value if it pays for at least 60% of all plan benefits without regard to co-pays, deductibles, co-insurance, and employee premium contributions.

45Affordability Test: Challenges to OvercomeThe ACA did not specify whether affordability was measured using the premium for employee-only coverage or the premium for dependent/family coverage.

Employer has no way of knowing an employees household income.

46Affordability Test: Safe Harbor ApproachProposed regulations give wide flexibility on the application and compliance with this provision.

Affordability applies to employees cost for self-only coverage and only has to meet affordability under one plan option offered by the employer (HMO, PPO, HSA, HDHP).

Three affordability safe harbor approaches offered:W-2 wage measurementRate of pay measurementFederal Poverty Level measurement

47Examples of the Safe Harbor Affordability TestEmployee A earns $87,000 a year and pays $1,088 a month for family coverage. Employee As income is the only source of household income. Under the employers benefit plan, the employee would pay $625 a month for employee-only coverage. Employee As contribution is more than 9.5% of household income, but under the Safe Harbor method, because the employers employee-only portion of the premium is less than 9.5% of the employees W-2 wages, the employers coverage is deemed affordable and the employee is not eligible for a Premium Tax Credit. Therefore, no penalty is assessed.

48Examples of the Safe Harbor Affordability TestEmployee B is paid $13.25 an hour and pays $120 a month for employee-only coverage under their employers plan.Employee Bs premium contribution based on the formula for rate of pay ($13.25 x 130) is approximately 7% of their rate of pay. The employers coverage is affordable and the employee is not eligible for a Premium Tax Credit. Therefore, no penalty is assessed.

49Examples of the Safe Harbor Affordability TestEmployee C is paid $13.25 an hour and pays $220 a month for employee-only coverage under their employers plan.Employee Cs premium contribution based on the formula for rate of pay ($13.25 x 130) is approximately 12.8% of their rate of pay. Similarly, under the FPL safe harbor, their contribution is 12.9% for a single individual ($11,170). In this scenario, the employers coverage is not affordable and Employee C is eligible for a Premium Tax Credit on the Exchange and the employer is assessed a penalty of $2,000 (annual) for this employee.

50The Challenges and Opportunities Ahead: Key Takeaways

The ACA in 2014

The best thing about the future is that it comes one day at a time. - Abraham LincolnKey Changes for Employers This YearW-2 Reporting of Coverage (250 or more) 2013Uniform summary of benefits to enrollees (9/23/12) 2013Contribution limits on FSAs 2013Tax deduction for Medicare Part D retiree drug subsidy eliminated 2013Employee notification of Exchange option and employer shared responsibility obligations 2013Employer size in 2014 is determined by workforce THIS YEAR.

52Key Changes for Employers in 2014New coverage/employer shared responsibility penalties kick-in (50 and over) 2014New state/federal health benefits exchange opens for business (less than 50) 2014Employer reporting on minimum essential coverage and affordability 2014/2015Coverage changes (guaranteed issue, annual/lifetime limits, waiting period limitation, modified community rating, cost-sharing limits) 2014Small employer tax credit (less than 25) to purchase on the Exchange 2014

53Employers (less than 50 employees)Employers (50 or more) No Coverage OfferedEmployers (50 or more) Fully InsuredEmployers (50 or more) Self-InsuredPurchase small group coverage on the Exchange?If Exchange, select plans for employees or allow employees to choose?If no coverage offered employees pay individual penalty or purchase individual policies on Exchange or private market

Assess employee demographics eligibility for premium tax credits?Pay the penalty or begin offering coverage (purchased on private small group market) to avoid penalty?*

* Employers with less than 100 employees can begin purchasing coverage on the Exchange beginning in 2016.

Assess cost-sharing and benefits to determine affordability Assess employee demographics eligibility for premium tax credits?Weigh the options - keep coverage or drop coverage, pay penalty, and send employees to shop on the Exchange?Are there other benefit options?Assess cost-sharing and benefits to determine affordabilityAssess employee demographics eligibility for premium tax credits?Weigh the options -keep coverage or drop coverage, pay penalty, and send employees to shop on the Exchange?Considerations for All Employers

Key TakeawaysKnow your numbers 2013 determines size in 2014!Full-time, full-time equivalentsLook Back/Stability Test

Know your benefits Affordability Safe Harbor TestPlan ahead

Eligibility for the small employer tax credit?

Develop communication strategy!

Consult with professionals

55Key TakeawaysThe next three years will likely involve a lot of trouble-shooting for everyone

Employees, patients, and stakeholders are just as likely to be as confused and overwhelmed (if not more so) than the employer or provider

Complex and confusing regulations and guidance DOES NOT mean that reality has to be that confusing and complex

Agility and patience will be key

56The Challenges and Opportunities AheadThe heavy lift of preparing and educating consumersThe market variables aboundPolitical and legal challenges still existReconciling points of access with points of careNew partnerships forming and new ways of thinking about the delivery of care New direction for the system

57List of ResourcesIRS resources on ACA provisions: http://www.irs.gov/newsroom/article/0,,id=220809,00.htmlUS Department of Labor Employee Benefits Security Administration (EBSA): http://www.dol.gov/ebsa/Healthcare.gov implementation resources: http://www.healthcare.gov/law/resources/Center for Consumer Information and Insurance Oversight (CCIIO): http://cciio.cms.gov/Kaiser Family Foundation Health Reform Source: http://healthreform.kff.org/

58Contact Information:lminzer@ilchamber.org(217) 522-5512, ext. 240Questions?

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