Future of Healthcare - Affordable Care Act

January 28, 2014USF Performing Arts Center

The Affordable Care Act:Updates and Developmentsfor Employers

Average Health Care Spending

Health Care Cost by Age

Source: Fischbeck, Paul. “US-Europe Comparisons of Health Risk for Specific Gender-Age Groups.” Carnegie Mellon University; September, 2009.

“Marketplace” Overview

The Affordable Care Act (ACA) provided for the creation of online marketplaces where individuals and small employers (up to 50 FTEs) can purchase “Qualified Health Plans.” Indiana deferred to the Federal Government’s Marketplace (www.healthcare.gov) which has had difficulties.• Recent data from the Individual Marketplace suggest an improved

website: – 137,000 enrolled in October and November; and– 1,059,000 enrolled in December.

• Enrollment through the SHOP has been delayed completely until November (for coverage effective January 1, 2015).

• In 2016, groups with up to 100 FTE’s are considered Small Groups, and must comply with ACA Small Group provisions.

Individual Marketplace Overview

Indiana - 30,443 enrolled as of December 28, 2013: • 25,877 (85%) received government subsidies• 17,048 (56%) female – 13,395 (44%) male• 6,393 (21%) between the ages of 18 and 34

• QHPs must offer “EHB package” with four levels of coverage. Nearly two of three bought “Silver” plans.

< 18 18-25 26-34 35-44 45-54 55-64 65 +

1,522 (5%)

2,131(7%)

4,262(14%)

4,262(14%)

6,089(20%)

11,873(39%)

0 (0%)

Bronze Plan (58-62 AV)

Silver Plan(68-72 AV)

Gold Plan(78-82 AV)

Platinum Plan(88-92 AV)

7,002 (23%) 20,397 (67%) 3,044 (10%) No data

Individual Marketplace Subsidies

Subsidies from the Federal Government come in two forms:• Advance Premium Tax Credit – Apply toward monthly premiums for

any plan (except catastrophic or SADP) on a sliding scaled based on income level (100% to 400% of the federal poverty level).

• Cost-Sharing Reductions – Reduce deductibles, copays and other cost-sharing associated with QHPs for those with income between 100% and 250%. To utilize, individuals must purchase a modified version of a Silver-level plan.

Eligibility for coverage through an employer disqualifies a Marketplace applicant for subsidies. Such coverage must

be “affordable” and provide “minimum value.”

Open Enrollment Periods

In the Individual Market, inside or outside the Marketplace, the open enrollment period (OEP) for the next few years are:• 2014 – October 1, 2013 through March 31, 2014. However, CMS

has orally stated that the OEP ends for those who have paid their initial premiums once their effective dates pass.

• 2015 – November 15, 2014 through January 15, 2015; and• Thereafter – October 15 through December 7.

In the Small Group Market:• Continuous OEP except for groups that fail to meet participation

and/or contribution requirements. Then, the OEP is November 15 through December 15.

Special Enrollment Periods

Special enrollment periods (SEP) permit individuals to alter their health coverage decisions, potentially, following certain “life events.” In the Marketplace, life events resulting in SEP eligibility, and which include a 60-day window to elect coverage, include:

• Adding a member (birth, marriage);• Relocation to a new ZIP Code, county or state;• Losing access to other coverage (employer coverage);• Release from incarceration; or• Changes to citizenship or immigration status.

Special Enrollment Periods

Life events not resulting in SEP eligibility are:• Removing a member (death, divorce);• Gaining access to other coverage (employer coverage);• Becoming pregnant;• Change in tax-filing status/tax household composition;• Change in status as an American Indian/Alaskan Native or

Tribal Status;• Change in disability status;• Corrections to date of birth or SSN; or• Increase or decrease in income that does not result in a SEP.

SHOP Marketplace Overview

Online enrollment in the SHOP was delayed until 2014. Until then, small groups can enroll via the Direct Enrollment Process: • Issuers enroll small groups using existing processes subject to SHOP

requirements.• Small groups and employees are never redirected to the SHOP website.

Instead, small groups must complete paper applications to be mailed to the SHOP.

• SHOP will determine SHOP eligibility for coverage for small groups and employees. The IRS determines Tax Credit eligibility.

• This eligibility determination is a pre-requisite for the Small Business Health Care Tax Credit.

• Working owners may enroll in SHOP coverage assuming the small group employs at least one common law employee (and offers health coverage to all full-time employees), but they don’t “count” towards the Tax Credit qualifications.

Small Business Health Care Tax Credit

To qualify for the tax credit, a small group must:• Pay at least 50% of premium costs for full-time employees (30

hours/week;• Acquire the SHOP’s eligibility determination before 12/31/14;• Purchase a SHOP-certified QHP, for PHP - is a SHOP-certified QHP

offered outside the SHOP; and• Claim the tax credit as part of its 2014 tax returns.

Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit is: • Worth up to 50% of a small group’s contributions toward premium

costs, but varies based on the number and salaries of employees. • At its highest for small groups with fewer than 10 employees who

are paid an average of $25,000 or less. – Working owners are not included in this calculation.

• Only available to an employer for two (2) years.

Rating Rules

Insurance issuers may not charge discriminatory premium rates in the individual and small group markets. Rates may vary only by whether a plan covers:• An individual or family;• Rating area;• Actuarial Value;• Age (3:1); and • Tobacco Use (no more than 1.5:1).

All Small Groups are priced via Community Age Rating – no Tier Rating (single/family). The use of medical underwriting

has stopped in the insured markets.

Premium Rates & Smoking Surcharge

With respect to the surcharge an issuer can charge an employer:• An employer cannot require an employee to pay a contribution

that is greater than the contribution for a similarly situated employee based on any health factor (such as tobacco use) unless the group health plan is associated with a wellness program satisfying the requirements of PHSA § 2705 and regulations at 45 CFR 146.121.

• To assess this surcharge in the small-group market, an employee must be given the opportunity to avoid the surcharge by joining a smoking cessation/wellness program. – If an employee has the option to join the program at open enrollment,

but declines, he will next have the opportunity to avoid the surcharge upon renewal or reenrollment for subsequent coverage at next year’s annual open enrollment.

2014 Rate Example

Group with 13 employees covered.

Tier Rate

Monthly Premium

$10,267

Single $473

Employee + Spouse

$1,023

Employee+ Children

$925

Family $1,481

New Age Rate

Monthly Premium

$13,174

Single $384 - $893

Employee + Spouse

$1,498 - $1,994

Employee+ Children

$1,161 - $1,546

Family $1,293 - $1,624

2014 Example Detail

Assumption is that all employees are non-tobacco users.

1/1/2014Age

1Q 2014Est. Rate

Subscriber Est. Rate

Employee A ES

6168

$964.29$1,029.38

$1,993.67

Employee B E 45 $495.64 $495.64

Employee C ES

5455

$732.86$765.16

$1,498.02

Employee D E 29 $383.79 $383.79

Employee E ESDDD

4044131118

$438.75$479.25$235.34$235.34$235.34

$1,624.02

Employee F EDDD

427

1816

$454.66$235.34$235.34$235.34

$1,160.68

Employee G E 59 $893.41 $893.41

Questions?

Disclaimer: This presentation is meant to be informative, not to be relied on as legal and/or tax advice. Please consult your legal or tax professionals for advice specific to your business.