Politics, Producers and PPACA Jessica Waltman, SVP of Government Affairs for the

National Association of Health Underwriters

About NAHU

• Professional association specializing in health insurance issues that represents approximately 100,000 agents, brokers and consultants with more than 150 chapters nationwide

• Focuses on government affairs representation, public relations, compliance assistance for members, professional development, networking and communications

• Individual memberships and corporate partnership program available

• Join at www.nahu.org 2

Current Political Dynamic

Individual Mandate

PPACA Constitutionality Challenge• U.S. Supreme Court agreed to consider NFIB v. Sebelius, the

challenge to the health reform law being brought by 26 states and the National Federation of Independent Business during its 2012 term.

• Four issues are under consideration:– Whether the law’s “individual mandate” to purchase coverage is constitutional– Whether the required Medicaid expansion by the states is constitutional– If the federal Anti-Injunction Act, which establishes that entities can’t sue over a tax until

it has actually been levied, is applicable in this case. – If the law’s lack of a “severability clause” means that the whole law is struck down if one

portion is found unconstitutional.

• An unprecedented six hours of oral arguments over three days is scheduled for March 26-28. (Normal is one hour on one day).

Supreme Court—What Could Happen• Potential outcomes include:

– Whole law struck down– Whole law upheld– Portion(s) of the law struck/upheld– Whole case thrown out for new litigation post 2014 implementation– Variations thereof

• Any attempt to undo provisions of this law that have been already implemented law will be messy and could have serious market repercussions

• Implementation of market reform provisions without the individual mandate will have an even greater cost/market impact

• Big political gamble for all involved with the ball now in SCOTUS’ court • Ruling expected in June or July of 2012• Any way things shake out, it will have a major election impact in

November

Unhappy StatesBudget deficitsMedicaid changes/increased costs to statesNew mandatesTight timeframesLack of speedy guidance/regulationsRefusal of some to take PPACA funds/implement programsExtreme variation in state political climatesTea Party influence untested and varied by state Everyone is waiting to see what happens with the lawsuit

Congressional OutlookRepeal/ Replace vs. Fix It!

Capitol PoliticsWashington’s political dynamic

is completely fracturedCompromise is extraordinarily

difficult--moderates can’t survive

House actions are tempered by tight Democratic majority in the Senate and President Obama

Both parties trying to balance delivering on promises now and goals for 2012 elections

Inaction will only increase as we get closer to November

NAHU’s Focus

• Taking Care of Our Clients– Access and Role of Agents as health reform moves forward– MLR, Exchanges

• Taking Care of Business– The employer responsibility requirements relative to providing

coverage, health benefit exchanges, notification and reporting requirements, summary plan documents, etc.

– A multitude of other compliance requirements, definitions and timeframes that conflict with time-tested employer benefit practices and other state and federal health care laws

NAHU’s Focus

• Taking Care of Health Care Costs– Creating new health coverage access will be a wasted effort if people

are unable to pay for their coverage– True cost containment measures– Responsible use of subsidies and equity for all purchasers

• Taking Care of the Future– Medicare and private Medicare products– LTC incentives– Responsible Financing

OR

Medical Loss Ratios• Minimum loss ratio requirements have been established for insurers in all

markets• The MLR is 85% for large group plans and 80% for individual and small

group plans (100 and below)– May impact provisions that reduce claims cost, such as pay for

performance, nurse lines, disease management, etc.– May result in fewer carriers offering coverage in some areas,

particularly rural, resulting in less consumer choice• Carriers will have to issue a premium rebate to individuals when MLR is

too low (beginning 2012)• Group plan rebates will go to the employer to benefit the plan generally

Legislative FrontThe Latest Activity on MLR

• HHS has announced that there will be no federal regulatory relief other than state MLR adjustments for the individual market

• There are two “broker bills” pending in Congress to fix the economic problems caused to agents by the MLR requirements.– Legislation to “pass” producer commissioners “through” the MLR

calculation so that agents and brokers are not adversely impacted by the regulation

• HR 1206, the original bipartisan measure to fix this, now has almost 190 cosponsors with more being added every week

• S. 2086 introduced on February 3– Four original bipartisan co-sponsors with more waiting to be added– Complement to HR 1206

Other Areas for Legislative Action• LTC—CLASS Repeal and Private Market Incentives legislation• Medicare Open Enrollment Period • Small Business Deductible Cap• Subsidies Inside/Outside Exchange• Employer Mandate• New National Premium Tax• Other New Tax Burdens• Financing Challenges– Private Medicare Options– Employer Exclusion

Much of PPACA’s impact on both agents and the private health insurance market moving forward now centers around

regulatory action, both federally and in the states.

PPACA Exchanges• State-based health insurance exchanges not optional, if a state doesn’t create one, federal

government will• Possibility of state/federal hybrid, but in that scenario the federal government maintains

ultimate control• Role of the agent/broker highly dependent on state and federal regulatory action• Role of the federal government in state-based exchange operations looks greater than

ever before• Key issues at state and federal level

– Agent/broker distribution for both individual and small group markets– Agent/broker representation in exchange development and operations– Navigators– Market-driven– Distinct Risk Pools– Individual and small-group only– Cost-effective design– State-specific modifications in federally-run exchanges

Exchanges – Inside and Outside Markets• Congress specifically provided that individual and group health

insurance markets are to exist outside of the exchanges. • The law specifies that “grandfathered” plans will continue to

exist outside the exchange.• Other plans are also permitted to exist outside of the exchange,

and from experience in Massachusetts and Utah, some individuals and businesses will continue to purchase coverage there.

• Subsidies only currently available through the exchanges. Fixing that will require a federal statutory change.

New Exchange Regulation• HHS released a 644-page final exchange regulation

on March 12• Addresses the establishment of exchanges and the

eligibility standards for employers, which are two of the five areas where HHS has exchange rules in the pipeline.

• Still to be released in the next few weeks are final rules that address risk-spreading mechanisms, how Medicaid eligibility will be determined in the exchanges and how premium subsidy tax credits will work.

New Exchange Regulation• Things the rules do not cover:

– Individual mandate– Essential benefits– Quality standards– Rating reforms, actuarial value standards and other market changes

coming in 2014 – How federal exchanges that HHS will be required to set up in states

that don’t create their own will work– How “partnership” exchanges where HHS and the states will split

exchange management functions will work • It’s expected that bulletins, rather than formal rules will be

issued on these items later this spring

New Exchange Regulation• HHS made a path for producers and TPAs to sell products

through the exchange and determine tax credits for consumers outside of the mandatory navigator program

• The regulation gives the states much discretion on how agents and the exchange will work together

• The states will also have the ability to determine the mechanism for which agents are compensated

• HHS did not set a commission for agents or set exchange marketing standards, but instead left those items up to the states

New Exchange RegulationNavigators• HHS states that Navigators must meet any licensing, certification or other

standards prescribed by the State or Exchange, as appropriate• Navigators may not have a conflict of interest during the term as Navigator, at least

one Navigator must be community/consumer focused non-profit • Health insurance issuers are prohibited from serving as Navigators and that

Navigators must not receive any compensation from any health insurance issuer in connection with the enrollment of any qualified individuals or qualified employees in a QHP

Pending Issue• A portion of this rule is issued on an interim final basis. As such, we will consider

comments from the public on the following provisions:• •§155.220(a)(3) – Related to the ability of a State to permit agents and brokers to

assist qualified individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs

Market Reforms and Plan Design Requirements Moving Forward

• Essential health benefits guidance, which will help shape what services must be covered for non-grandfathered individual and small group plans, is just the first step

• Actuarial value bulletin gives a sense of how HHS will determine value and will regulate cost-sharing and provides for state flexibility

• Additional guidance on both to follow and regulation expected this spring• Other requirements for individual and small group markets forthcoming

– Rating restrictions– QHP certification and standards

• Large Groups– Minimum value standard TBD– Employer responsibilities relative to exchanges, etc.

Other Key Regulatory Matters• Definition of a FTE• Group Size Definitions• Grandfather Rules• Rate review• Child-Only policy access• ACOs• Co-op Plans• Multi-state Plans

• Actuarial standards• PCIP• 105(h)

Nondiscrimination• Notification

requirements on employers

• New Summary Plan Document

• Small business tax credit

NAHU Moving Forward• MLR, work on Exchanges and other regulatory actions relative

to are our top immediate priorities• Grassroots efforts• Public Relations initiatives• Focus on real issues – the cost of health care• NAHU and broker visibility is high• Overriding objective is to ensure the role of agents and

brokers to serve both individual and employer clients and continuation of employer-sponsored coverage