Health Care Reform:2014 Overview and Implications

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In this presentation, we’ll cover:

Health Care Reform at a glance

Impacts to individuals

Impacts to employers

Exchange overview

Market impacts and implications

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Health Care Reform at a glance

Focuses on coverage expansion and insurance market reform

Largely maintains the employer-based system

Changes purchasing model for individuals and small groups

Financial implications for individuals, employers, providers and insurers

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2010-2012: What has been implemented?

Mandated Benefit Changes

Women’s Preventive

Grandfathering

Small Group tax credit began in 2010

Summary of Benefit Coverage (SBCs)

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Benefit and Coverage Changes for 2013 and 2014

2013

W-2 reporting requirements for groups filing >250 W2s

FSA contribution limited to $2,500 as of 1/1/13

Employers required to notify employees of Exchanges

2014

No exclusions for pre-existing conditions

Remove dollar annual and lifetime limits

No waiting periods greater than 90 days

Maintaining coverage for clinical trials

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2014 Impacts to Individuals

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Individuals must buy coverage or pay penalty

Individuals must purchase qualified coverage or pay a penalty

Coverage options: Medicare Medicaid, Child Health Plus, Family Health Plus Health care exchanges Employer based coverage

Penalty: greater of flat dollar amount or percentage of income Starts at $95 maximum in 2014; scales up to $695 in 2016

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Individuals can receive subsidized coverage

Income-based tax credits for purchasing coverage from a health care exchange

Cost sharing subsidies available on a sliding scale between 100% and 400% of federal poverty level (FPL)

Medicaid expansion*

100% FPL

133% FPL

200% FPL

300% FPL

400% FPL

500+%FPL

Subsidized private coverage through exchangesUnsubsidized

private coverage

400% FPL = $92,200 for a family of 4 Tax Credit*Tax credit in 100-133% FPL range only available to non- Medicaid eligible legal aliens

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2014 Impacts to Employers

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Small Group SHOP Opens in 2013

Small employer groups (<50 employees) able to purchase coverage from SHOP exchange 10/1/2013 for 1/1/14 effective date

If coverage obtained from SHOP exchange, eligible for a tax credit up to 50% of the premiums paid for their employees

Must meet specified requirements including <25 employees, average salary of <$50,000, at least 50% employer contribution to premium

Tax credit sunsets in 2016

Penalties do not apply to groups with <50 employees

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Small Group Benefit Changes for 2014

Small groups must meet Essential Health Benefits on and off exchange NYS announced that the Oxford Small Group EPO will be

used as the model Small group packages will need to be modified to meet

the new standards

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Large Group Requirements in 2014

All full time employees must have affordable coverage

Full time = 30 hours a week or more

Equivalency formula will be available to determine how many part-time and seasonal workers equal full time

Essential Health Benefits do not apply to large/self-funded groups

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Large Group Affordability and Coverage Requirements

Must offer coverage that meets affordability and coverage requirements or pay penalty

Coverage requirement is at least one plan offered to all employees at minimum 60% actuarial value

Employee premium contribution at <9.5% of employee income

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Large employers begin paying penalties

Penalty paid if at least 1 employee purchases subsidized coverage on the exchange in lieu of employer coverage

Extensive reporting requirements to the IRS

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Health Care Exchanges

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Health care exchanges are effective January 1, 2014

Online health care marketplaces – think Expedia

Individuals and small groups can purchase coverage

Individuals can purchase subsidized coverage if they meet criteria

State administered

Health plans that meet qualifying requirements may offer products on the exchange

RFI process beginning in January 2013

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Exchanges have four primary roles

Establish web portal for purchasing and enrollment

Manage subsidies and eligibility

Approve health plans for participation

Assist in outreach and education

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Exchange products must meet specific requirements

All plans must cover essential health benefits

Core service categories established by federal Department of Health and Human Services

Plans may offer up to four coverage tiers

Platinum, gold, silver and bronze

NYS requiring all metal levels for exchange participation

Optional catastrophic policy for certain individuals

• Young adults (under 30)

• Anyone for whom employer-based coverage does not meet affordability requirements

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How Exchanges Work

American Health Benefit Exchange

Small BusinessHealth Options Program

(SHOP) Exchange

Platinum Gold Silver BronzeCatas-trophic Platinum Gold Silver Bronze

Carrier A Carrier B Carrier C Carrier D

ProductLevels

Carriers

Purchaser

Carrier A Carrier B Carrier E Carrier F

Member Selects Employer Selects

Member Selects Member Selects

Tax Credit/Subsidy

Members below 400% FPL Employers below 25 EEs

Individuals Small groups

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The following considerations apply to the three-month grace period:– Individuals must have paid at least one month’s premium– The issuer is only obligated to pay claims during the first month of

the grace period

• The rule says that during the grace period, the issuer:– May pend claims during the second and third months of the grace

period– Must notify IRS/HHS of non-payment of premium– Must notify providers of the possibility for denied claims during the

second and third months Must notify members when their payment is late Must notify members if their coverage is terminated

If an individual enrolled in an Exchange product receives a premium tax credit, the issuer must allow a three-month premium grace period.

Exchange Individual Grace Period: Background

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Individual Grace Period Requirements and Design: How The Grace Period Works

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Exchange Regulatory Status

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Legislative Updates – Health Care Reform

Supreme Court decision that individual mandate is constitutional under “tax” law

Multiple attempts at repeal with no success

New York state updates

Executive order passed in April establishing NYS Exchange

Multiple studies underway to determine exchange structure and operations

Current Medicaid vendor (CSC) announced as Exchange vendor

Regional advisory committees and CEO meetings underway

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Market Impacts and Implications

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Estimated Market Shifts (National)

Individual

Medicaid

Medicare

Self-funded

Large group

Small group

Uninsured

Individual market growth

Medicaid growth based on increase in eligibility

Medicare growth due to population increase

Relatively stable large group market

Small groups most likely to drop coverage

Uninsured movement into exchanges

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Shift to retail market will occur

Employers

Possible reduced incentive to offer – but, must weigh costs and benefits

Perceived justifiable alternative for employees

Individuals

Influx of previously/newly uninsured buying direct

Affordability increased through subsidies

Directly making cost and coverage decisions

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Resulting changes in the market landscape

Diminished barriers to entry

Emerging individual market

Population with unique and diverse segments

Widely available products with price as focal point

Shift from traditional sales channels to retail

Adverse selection threat/difficulty managing risk

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Stakeholder Implications

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Implications for Individuals

Coverage vs. penalty decisions

Will need to assume greater control over their health care spending and decisions

Will need to navigate exchanges vs. private insurance

Will need to understand subsidy impacts and processes

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Implications for Employers

Large employers must make “play or pay” decisions

Small employers must decide if and where to purchase coverage

Must understand qualified coverage requirements and whether they meet them

Must collect and report data and information that they may not currently have

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Implications For Physicians and Hospitals

New health plans and/or increased price sensitivity may bring new risk to reimbursement

Credit and collection challenges with high cost share

Capacity to meet increased demand

Care delivery models are evolving (e.g., Accountable Care Organizations)

Reimbursement arrangements moving to pay for quality vs. pay for service

Possible reimbursement cuts looming from Medicaid and Medicare

Need to also make decisions as employer group offering coverage to employees

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Implications for Insurers

Emerging consumer segments

Changes in group purchasing dynamics

Reduced predictability in competitive landscape

Limited product and benefit differentiation

Challenges in managing risk

Direct-to-consumer focus

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Thank You