1. Impact of Affordable Care Act on Alaska Carolyn Heyman-Layne October 2, 2013

2. Presentation Overview Patient Protection and Affordable Care Act (PPACA) –Health Reform Overview –Current Status of PPACA in Alaska –Employer Side of PPACA –Grandfathering Plans –Compliance Issues in PPACA 2

3. Health Reform: Acts I, II, III… Patient Protection and Affordable Care Act (P.L. 111-148) –Original legislation, enacted March 23, 2010 Health Care and Education Reconciliation Act (P.L. 111-152) –Changes by House, enacted March 30, 2010 TRICARE Affirmation Act Potential for: –Additional Federal Laws –Corresponding State Laws Over 100 Pages of regulations and guidance expected per page of legislation 3

4. Main Topics Covered by Legislation Titles I & II: Health Care and Insurance Coverage Title III: Delivery of Health Care Title IV: Prevention and Public Health Title V: Health Care Workforce Title VI: Fraud and Abuse Title VII: Health Technology Title VIII: CLASS Act (Already Eliminated) Title IX: Taxes and Fees (How are we paying for this?) Title X: Amendments 4

5. Results of Supreme Court Decision for Alaska Supreme Court said individual mandate legal as a tax, but states not required to expand Medicaid State of Alaska is currently taking the position that it will not expand Medicaid to cover up to 133% of the Federal poverty level. State has chosen not to develop a state Health Insurance Marketplace, leaving that responsibility to the Federal government. State could change its position at any time, as there is no deadline for determining participation in the Medicaid expansion. However, it is currently expected to maintain the same position at least until there is a change in administration. Strong lobby for expansion currently taking place 5

6. Effects on Coverage in Alaska Federal Poverty LevelPre-Reform Status Full Implementation Status Status Under Current State Position 0-100% FPL Not covered unless eligible for Denali KidCare, Alaska Native Healthcare or VA Covered by Medicaid Not covered unless eligible for Denali KidCare, Alaska Native Healthcare or VA 100-133% FPL Not covered unless eligible for Denali KidCare, Alaska Native Healthcare or VA Covered by Medicaid or eligible for significant subsidies in Health Insurance Marketplace Eligible for significant subsidies in Health Insurance Marketplace, but not otherwise covered 133-400% FPL Not covered unless eligible for Denali KidCare, Alaska Native Healthcare or VA, but may be able to afford insurance Eligible for subsidies in Health Insurance Marketplace with amount of subsidy decreasing as income increases >400% FPLNot covered unless eligible for Denali KidCare, Alaska Native Healthcare or VA, but may be able to afford insurance 6

7. Health Reform: Employer Timeline In effect now: –Patient’s Bill of Rights –Children cannot be denied coverage for pre-existing conditions (extended in 2014) –Rescission prohibited except for fraud –Dependent coverage extended to age 26 –Annual limits restricted (prohibited for essential benefits in 2014) –Lifetime limits not allowed for essential benefits –Small business tax credits –Policy and renewal guaranteed –Increased Medicaid payments for primary care –Extending funding for Children’s Health Insurance Programs 7

8. Timeline (con’t) 2014 –State exchanges available for individuals and small businesses Small business tax credit increase –Limits on insurers: cannot charge more based on health or gender; limits on premium variations based on age 2015: Employer obligation to provide “qualified health insurance coverage” (over 50 employees) or pay penalty 2017: Large employers allowed to participate in Exchange 2018: Cadillac tax in effect 8

9. Health Insurance Marketplace (Exchange) Health Insurance Marketplace for individuals and small businesses –Less than 100 employees until 2017 –Administered by government agency or non-profit Benefits: –Competitive market –Common rules on pricing and offering –Supposed to provide more information for consumers –Makes changing employment easier 9

10. Essential Health Benefits Ambulatory patient services (outpatient care you get without being admitted to a hospital) Emergency services Hospitalization (such as surgery) Maternity and newborn care (care before and after your baby is born) Mental health and substance use disorder services, including behavioral health treatment (this includes counseling and psychotherapy) Prescription drugs Rehabilitative and habilitative services and devices (services and devices to help people with injuries, disabilities, or chronic conditions gain or recover mental and physical skills) Laboratory services Preventive and wellness services and chronic disease management Pediatric services 10

11. Alaska Marketplace Options & Assistance Marketplace: –Premera Blue Cross Blue Shield –ODS Assistance: –Navigators –Enroll Alaska Available Plans: –Platinum – covers 90% of costs –Gold – covers 80% of costs –Silver – covers 70% of costs –Bronze – covers 60% of costs –Catastrophic 11

12. Costs in the Marketplace for Alaska 12 Family of Four with Income of $100,000 (340% FPL): $974/$792/$609 http://kff.org/interactive/subsidy-calculator/

13. The Rules for Employers Employers not required to provide health insurance Employer provided “qualified” health insurance must: –Pay for at least 60% of covered health care expenses for a typical population; and –No employee should have to pay more than 9.5% of family income for the employer plan. If both conditions not met and one employee goes to exchange or gets tax credit, then employer pays penalty. Or employer may provide a non-compliant health insurance plan, which would result in a reduced penalty amount, but not eliminate the penalties altogether. Or employer may choose to pay penalties rather than sponsor health insurance – “pay and walk away” option. 13

14. Determining How the Rules Apply #DescriptionPenaltiesCost 1.Provide PPACA compliant health coverage for all employees. NoneCost of health insurance plan that pays for at least 60% of covered health care expenses, with employee cost limited to 9.5% of family income or less. 2.Provide limited health plan to employees. Penalty A = $3,000/yr. x (# of full-time equivalent employees receiving the tax credit - 30) Cost of limited health insurance plan for those employees who choose the plan + Penalty A. Penalty A Example 1: If Employer has 100 full-time equivalents and 80 select the employer plan and 20 select the tax credit for alternate coverage, then there would be no penalty because the number of employees receiving tax credit does not exceed 30. Penalty A Example 2: If Employer has 100 full-time equivalents and 50 select the employer plan and 50 select the tax credit for alternate coverage, then the penalty would equal $3,000 x (50-30) = $60,000. Penalty A Example 3: If Employer has 100 full-time equivalents and 10 select the employer plan and 90 select the tax credit for alternate coverage, then the penalty would exceed the total for Penalty B below ($3,000 x 90-30 = $180,000) and so Penalty A would equal Penalty B: $140,000. Employer would pay this penalty in addition to the cost for the ten employees who selected the plan. 3.Continue to provide no insurance for employees. Penalty B = $2,000/yr. x (# of full-time equivalent employees – 30) Penalty B Penalty B Example: If Employer has 100 full-time equivalents, it would pay $2,000 x (100-30) = $140,000 14

15. Guessing game… Cost of fully ACA compliant health plan < Penalty B = Implement compliant plan. Cost of fully ACA compliant health plan > Penalty B = Conduct additional analysis of limited health plan costs. –Estimated cost of limited plan + Penalty A < Penalty B = Offer limited plan. –Estimated cost of limited plan + Penalty A > Penalty B = Offer nothing. ???????????????? 15

16. In other words… 16

17. Other Employer Challenges Employers with < 50 employees are exempt – to hire or not to hire? Employers with more than 200 employees must automatically enroll employees in health insurance plan and allow employees to opt out. Employers offering “Cadillac” plans pay 40% excise tax on excess premiums starting in 2018 17

18. Other Employer Challenges Challenges: –Grandfathering plans: In 2011, approximately 72% of small businesses had at least one grandfathered plan. Not required to cover preventive services without cost sharing Not required to cover Essential Health Benefits Not required to provide appeals process for contesting coverage decisions Not required to allow direct access to OB/GYN without referral –Had to be in place before March 23, 2010 – does it remain grandfathered? Yes, if benefits and costs to employees stay largely the same. 18

19. Grandfathered vs. Non-Grandfathered All Guarantee coverage regardless of health status Allow children up to 26 Not allowed to impose exclusions for pre-existing conditions (2010 for under 19; 2014 for adults) Report proportion of income from premiums that are used on medical care – less than 80% and enrolled small businesses get rebate Non-Grandfathered (New) Premium rating based on health status not allowed as of 2014 Must cover Essential Health Benefits beginning in 2014 (decided by State) Labeled as bronze, silver, gold and platinum demonstrating percentage of costs covered for typical population 19

20. How do you stay “grandfathered”? Do not increase cost-sharing above the rate of medical inflation Do not decrease annual limits Do not institute new limits Do not decrease employer contributions by more than 5% Do not eliminate coverage for specific conditions currently covered It is ok to: –Enroll new employees –Change Insurance carriers –Make slight changes in coverage and costs 20

21. ACA Compliance Provisions Requires Compliance Program as a Condition of Participation in Medicare –All providers must certify that they have an effective compliance program –Regulations expected for various provider types, nursing home regulations already issued –Enforcement activity increased –Flexibility for varying size providers 21

22. Health Reform Resources The law: http://www.hss.state.ak.us/fedhealth/docs/ppaca- consolidated_003_xml.pdf Federal Guidance – http://www.healthcare.gov/law/introduction/index.html http://www.healthreform.gov/reports/statehealthreform/alaska.html Kaiser Family Foundation - http://healthreform.kff.org/ State Guidance - http://www.hss.state.ak.us/fedhealth/ http://www.hss.state.ak.us/healthcommission/nhcr/default.htm 22

23. heyman-layne@alaskalaw.pro (907) 677-3600 Sedor, Wendlandt, Evans & Filippi, LLC Questions? 23