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Affordable Care Act Town Hall September 27, 2012 Jim Hardy Deloitte Consulting LLP.

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Presentation on theme: "Affordable Care Act Town Hall September 27, 2012 Jim Hardy Deloitte Consulting LLP."— Presentation transcript:

1 Affordable Care Act Town Hall September 27, 2012 Jim Hardy Deloitte Consulting LLP

2 - 2 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx Specific provisions of the ACA are restructuring the market landscape Government Program Changes Taxes and Fees Insurance Exchanges Specific ACA provisions effective in 2014 Prohibits health plans from denying coverage or rating applicants based on health, requires provision of essential health benefits, introduces actuarial equivalence and metallic levels Adjusts plan options to a common standard between health plans and mitigates the impact of Guaranteed Issue and pricing uncertainty in the short term Expansion of Medicaid, Medicare Advantage MLR requirements, and Payment Reforms Lowers the cost of coverage for the low and middle income populations in the Individual market Levies against health insurers and other groups to fund subsidies and risk management mechanisms Additional reporting requirements, penalties for employers who fail to offer affordable comprehensive coverage, auto enrollment of new FTEs Creates government regulated Individual and Small Group health insurance marketplaces Risk Management Mechanisms Employer Changes Guaranteed Issue (GI) and Rating Changes Institutes penalties for failing to purchase health insurance Individual Mandate Tax Credits and Subsidies

3 - 3 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx Specific Provisions on the Horizon : Individual Mandate Note: 1.This represents the max flat dollar family penalty. The flat dollar amount is capped at 300% of the Individual amount. 2.Applicable income is defined as the individual’s household income that exceeds the applicable filing threshold for the applicable tax year. The applicable filing threshold is comprised of personal exemptions plus standard deductions 3.Penalty cannot be greater than the national average premium for Bronze level coverage in the Exchange  Beginning in 2014, the Individual Mandate applies penalties to those who do not obtain health insurance coverage  Beginning in 2017, the penalties will be increased by the cost-of-living adjustment  There is no metallic plan level (actuarial value) requirement for coverage in terms of satisfying the individual coverage mandate Provision Overview YearIndividual Penalty (Greater of the Two) 2014 $95 / Adult / Year $47.50 / Child / Year $285 / Family / Year 1 Or 1.0% of applicable income 2, whichever is greater $325 / Adult / Year $ / Child / Year $975 / Family / Year 1 Or 2.0% of applicable income 2, whichever is greater $695 / Adult / Year $ / Child / Year $2,085 / Family / Year 1 Or 2.5% of applicable income 2, whichever is greater 3 Individuals will be assessed penalties for failing to acquire coverage

4 - 4 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx  Applicable large employers will be required to pay fees for providing no coverage or unaffordable coverage –An applicable large employer is an employer with more than 50 Full-time Equivalent Employees –Affordable coverage does not require an employee to pay more than 9.5% of their household income for employee only coverage and has an actuarial value of at least 60% Provision Overview Impact to Employers Applicable Large Employers Sponsor Health Plan Coverage Do not Sponsor Health Plan Coverage Monthly Penalty = ($3,000 /12) x #FTEs* with subsidized coverage Monthly Penalty = [($2,000/12) x (# FTEs* – 30)] No Penalty Provide Unaffordable Coverage Provide Affordable Coverage *Full Time Employee Specific Provisions on the Horizon : Employer Mandate If an Applicable Large Employer does not provide affordable comprehensive coverage, it will be responsible for paying penalties starting in 2014

5 - 5 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx  ACA will provide premium tax credits to those below 400% Federal Poverty Level (FPL) and cost sharing subsidies for individuals with incomes at or below 250% of FPL  Premium tax credits will decrease the cost of insurance and be calculated based on the second lowest priced Silver plan  Federal cost sharing subsidies will be available for individuals who qualify for federal premium credits and are enrolled in a Silver tier plan Provision Overview $1,289 $3,450 $4,656 $1,206 $3367 Consumers’ Net Premium and Government Premium Tax Credit Illustrative Individual Income <$16K Individual Income $22K - $27K Individual Income >$27K Specific Provisions on the Horizon : Premium Tax Credits and Cost Sharing Subsidies Premium tax credits and cost sharing subsidies will lower the cost of coverage for those individuals in the population who fall below specific income thresholds and apply for coverage through the Exchanges.

6 - 6 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx Specific Provisions on the Horizon : Guaranteed Issue and Rating Changes ACA outlines three provisions that are designed to mitigate the potential impact of adverse selection. These provisions include: Age (variation is limited to a 3 to1 ratio) Rating AreaFamily Composition Tobacco Use (variation is limited to a 1.5 to1 ratio) Risk Management Mechanisms Individual Mandate Premium Tax Credits and Cost Sharing Subsidies Guaranteed Issue/Rating Rules Overview In 2014, health plans will no longer be able to deny coverage based upon pre-existing conditions and will be allowed to vary rates based on only the following criteria: Adverse Selection Mitigation

7 - 7 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx  IL Total population in 2011: 12,830,632  Age - The young adult population (18-25 year olds) is the least likely to have health insurance (24% of young adults are uninsured). Insurance coverage prevalence increases as age increases.  Household Income - Insurance coverage increases as income increases. Only 5% of persons living in households with incomes over 400% of the Federal Poverty Level (FPL) are uninsured whereas 34% of persons living in households with incomes less than 138% FPL are uninsured.  Geographic Regions – The adult (18-64) uninsurance rate ranges from 12% in the Urban Counties to 19% in the Rural Counties4.  Insurance Adequacy - Of Illinoisans who are currently insured, the majority (83%) report that they are at least “adequately” insured while 13% report being underinsured. The remaining 4% are not sure. What it Means for Illinois – The Uninsured Population *Deloitte’s Review of the Current Illinois Health Coverage Marketplace: Background Research Report. September 2011.

8 - 8 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx As income increases, consumers are increasingly likely to have health insurance coverage. Illinois population (18-64) by insured status and income level (2011 IHIS) According to the 2011 Illinois Health Insurance Survey (IHIS) 34% of those having incomes below 138% FPL are uninsured, while only 5% of those above 400% are uninsured. *Deloitte’s Review of the Current Illinois Health Coverage Marketplace: Background Research Report. September 2011.

9 - 9 - ACA Town Hall v2RRomney3230 JL v12pptx.pptx Specific Provisions on the Horizon : Health Insurance Exchanges The Affordable Care Act (ACA) establishes Exchanges as a new marketplace for the individual and small group market. Individual Exchanges / SHOP Exchanges: By 2014, States shall establish an Exchange that facilitates the purchase of coverage for individuals and small employers; States can establish Exchanges in geographically distinct markets and/or participate in regional Exchanges Group Size: Exchanges will cover individuals and small groups up to 100.* In 2017, States may allow groups of 100+ to join the Exchanges Standard Plans: Health plans must cover the minimal essential benefits, offer at least Silver (68-72% actuarial equivalence) and Gold (78-82% actuarial equivalence) products, and charge the same premium for plans inside and outside the Exchange Underwriting Requirements: Restricted underwriting rules and guaranteed issue requirements for the market. Simplified Enrollment: A standard form and single electronic interface will be used to determine eligibility and enroll in the Exchange, Medicaid, CHIP, and State Basic Plan (if applicable) Quality & Patient Satisfaction Ratings: The Secretary of HHS will develop a system to rate health plans on quality, price and enrollee satisfaction and publish that information on the Exchanges Specific Exchange Provisions * Note: For plan years beginning prior to January 1, 2016, a state may define small employer groups as groups of 1-50 employees.

10 ACA Town Hall v2RRomney3230 JL v12pptx.pptx Exchange Eligibility:  US citizen or legal alien  Not incarcerated  Resident of the state in which Exchange is based Access to Premium Tax Credits and Cost Sharing Subsidies:  Between 133% and 400% FPL  Not offered affordable coverage through an employer Exchange Eligibility:  Full-time employees of small businesses from 1 to 100 employees  State option to limit to businesses of 50 or less until 2016  States will decide on the degree of choice offered to employees through the small business Exchange and how employers can provide contributions toward employee coverage  Beginning in 2017, states will have the option to open the Exchanges to large employers (100+) Individual Exchange Small Business Health Options Program Specific Provisions on the Horizon: Health Insurance Exchanges States have a considerable amount of flexibility in deciding how to structure their Individual and Small Group Exchanges

11 Functions of a Health Insurance Exchange Health Insurance Exchange Business Process and Systems Customers Screen Compare plans and enroll Change plans Request mandate exemption Brokers, Navigators, Community Partners Small Employers Employees of Small Businesses Help customers enroll Provide information Role will likely vary by State Select plan level Pay premiums Track fines Screen Compare plans Enroll Change plans Exchange Administrators Customer Service and Operations Federal and State Agencies / Systems Certify plans Rate plans Approve exemptions Send/receive tax, premium, and other information used for verification, enrollment, and risk adjustment Support phone and mail enrollments Help customers Manage grievances Health Plans Submit plan for listing Maintain plan info, benefits, quality, cost, and providers Receive enrollments and premiums Social Services Programs Receive eligibility referrals Participation on the exchange will require plans to understand and integrate with the various roles across the Exchange value chain

12 What Employers decide to do will determine the size and impact of Exchanges Employer responses will vary dramatically in navigating the challenges presented by the Exchange Our hypotheses Small Group Employers (1-50)  Small group employers will be highly price sensitive and could gravitate towards the lowest cost options  Employers might opt to drop coverage and pay the penalty  The role of brokers will evolve Large Group Employers (100+)  Large employers should balance demands for talent against the rising cost trend – shifting health care costs from a benefit towards defined contribution  Companies where intellectual capital is critical could continue to offer benefits to retain talent  Other industries, like manufacturing and retail, could see employers shift workers to part time or offer medical benefits as defined contributions  Specific employers within each sector may determine when and how enrollment gravitates to exchanges Mid-Sized Employers (51-100)  The behavior of small and mid- sized employers could differ from those who have more than 100 employees – leading to greater market segmentation  Small to mid-sized employer reactions will vary based on their:  Industry  Workforce Structure  Worker Wage Mix  Current Benefit Program The size of the Exchange market could well exceed 46M lives if employers drop coverage en masse or large employers opt to use the Exchange in 2017

13 ACA Town Hall v2RRomney3230 JL v12pptx.pptx  The individual mandate is anticipated to reduce the amount of charity care  For hospitals it is more complicated – while charity care is expected to decline, hospitals will also see a decline in supplemental payments they receive from Medicaid and Medicare that previously helped defray some of their charity care costs  A specific question is whether providers – especially physicians – have the capacity to meet the needs of all the newly insured  Health care delivery systems especially in urban areas may experience significant impact due to newly insured populations seeking care Implications for Providers of the Individual Mandate

14 ACA Town Hall v2RRomney3230 JL v12pptx.pptx ACA impact on insurance, providers Three core strategies: (1) replace fee for service incentives, (2) leverage information technology to reduce cost and improve quality, (3) increase integration/coordination Insurance system changes Elimination of pre-existing condition, lifetime and annual limits for insurance plans Required coverage of preventive health services without co-payments Creation of health insurance exchanges in each state to facilitate access to affordable insurance and manage subsidized purchases by individuals and employers Federal-state regulation of insurance plan coverage, premiums, and medical expenditures Delivery system changes Increased linkage between performance (outcomes, costs) and payments/incentives Increased integration of physicians, hospitals and long term care providers Increased access to health services by under-served populations Increased alignment of coverage with evidence Consumerism Engaged, accountable, Preventive health, individual insurance, PHR Comparative Effectiveness What works best, at what cost? Personalized medicine, bundled payments, provider adherence/performance- based payments liability reforms Health Information Technology Information driven health: cost, quality, safety Electronic medical records, health information exchanges, fraud detection, administrative simplification, clinical data ware-housing, ICD-10, direct to consumer e-medicine Primary Care 2.0 The front door and “home” Home monitoring, retail medicine, LTC, medical homes, retail medicine, medical homes, health coaching The Anticipated “New Normal” Delivery System

15 ACA Town Hall v2RRomney3230 JL v12pptx.pptx  What role will Health Insurance Exchanges play in changing the individual insurance market?  How will Health Insurance Exchanges impact the small and large group markets?  Will Insurers be attracted and remain committed to the transformed individual market?  Will Health Insurance Exchanges, the individual mandate and other ACA provisions lead to more affordable health care?  AND…  WHAT HAPPENS AFTER THE ELECTION???? Specific questions going forward

16 This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, "Deloitte" means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2012 Deloitte Development LLC. All rights reserved.


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