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5. 55 Subsidies for individuals For exchange plans only To be eligible, individuals must: –Have incomes between133% and 400% of federal poverty level (FPL) –Not have access to minimum essential coverage through their employer or have access to coverage, but it is not affordable Premium credits – For any level plan Cost-sharing subsidies – Silver Plan only Income ranges for 133% to 400% FPL Individual: $14,856 to $44,680 Family of four: $30,656 to $92,200

6. 66 Penalties for individuals 2014: Greater of $95 or 1% of taxable income 2015: Greater of $325 or 2% of taxable income 2016: Greater of $695 or 2.5% of taxable income 2017 and beyond: Annual adjustments KAISER EXAMPLE $50k annual pay example over 2014,15 & 16

7. 77 Tax year beginning 1/1/2018

8. 88 Coverage Requirements for EHBs Applies to: Individual and Small Group Non-grandfathered plans On and off exchange Does not apply to: Large Group plan ASO plans Grandfathered plans Benchmark plan: Each state will select for the purpose of defining EHBs If no selection, default is SG plan with the highest enrollment

9. 99 Coverage Requirements for EHBs Categories 10 identified in the law Any category not covered by the benchmark must be supplemented Habilitative services Pediatric vision On and off exchange plans Pediatric dental On exchange plans need not include if standalone dental is available on exchange Off exchange plans need not include if reasonably assured that enrollee is also enrolling in an exchange-certified standalone dental plan Plan must cover the greater of One drug in each category and class, or The same number of drugs in each category and class as the EHB benchmark

10. 10 Coverage Requirements for EHBs Categories Mental Health parity rules apply to Individual and SG plans Adult vision and dental are not EHBs, even if covered under the benchmark States may require services to be covered beyond the EHB benchmark coverage State will be responsible for the cost of these services for plans offered on the Individual exchange or SHOP. Issuers may choose to cover services beyond EHBs Substitution of benefits or quantitative limits within specific EHB category is permitted Must be actuarially equivalent No annual or lifetime dollar limits on any EHBs

11. 11 Rate Changes Expected in 2014 11 The most significant changes will be in markets for individuals and small employers Rating constraints, product constraints, new benefit mandates, and new taxes will have the biggest impact. The impact will vary significantly between each individual and each small employer.

12. 12 Rate Changes Expected in 2014 12 Different studies forecast a range of impact One report, led by former CBO Director Doug Holtz-Eakin of the American Action Forum, found that on average, premiums for young, healthy people in the individual and small group market would jump 169% while the costs for older, less healthy people would decrease by an average of 22% A study by the actuarial firm Milliman in Ohio shows the changes expected for small employers will range from a decrease of 25% to an increase of 130% In Indiana, Milliman found that the increase in premiums in the individual market beginning in 2014 could range from 75%-95% and rates for others would decrease Other studies conducted by Dr. Jonathan Gruber of MIT in Maine, Wisconsin, Minnesota and Colorado found that premiums in the individual market may increase as much as 85% and premiums in the small group market may increase more than 20%

13. 13 OPEN Enrollment Periods DEFINED OPEN ENROLLMENT periods will exist On Exchange THE ACA DOES NOT ADDRESS Open Enrollment periods Off Exchange

14. 14 States with OE Requirements NY and ME require year round open enrollment. OH has year round open enrollment products for people who do not otherwise have access to coverage. CA requires an open enrollment period to allow currently covered individuals to move to an equal or lesser plan if they have had 18 months of continuous coverage. WI requires carriers to allow current enrollees to move to less rich coverage at renewal. Child-only open enrollment periods exist in CA, CO, GA, KY, IN, MO.

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17. 17 *All exchanges required to offer this option through SHOP.

18. 18 Options for Small Employers Employers who have 50 or fewer employees will have at least the following options in 2014: Offer a fully insured plan through either: A SHOP exchange – Employer may be eligible for a temporary two-year tax credit to offset part of the employer premium contribution The off-exchange market Offer an ASO plan, if allowed by state law, where EHB and metal level requirements don’t exist Stop offering coverage and let employees buy through the Individual market Combine to be able to purchase through the large group market Offer “non-affordable” coverage to some employees to make them eligible for subsidies on individual exchanges

19. 19 2010201120122013201420152017 March 23 Health care law enacted August HHS started issuing planning grants to states July 11 HHS issued first set of proposed rules December Deadline for states to submit exchange plans January 1 HHS determines whether state exchange will be ready by October October 1 Open enrollment begins January 1 Exchange coverage begins Target date For exchanges to be financially self-sufficient State option To expand exchange eligibility to larger groups Exchange Timelines Many of the details, regulation and guidance regarding these programs are still up in the air.

20. 20 IMPORTANT DATES Proposed regulations released December 28, 2012 Comments due to IRS on March 18, 2013 Public Hearing Scheduled for April 23, 2013 @ 10 a.m. DURING 2013, EMPLOYERS MAY RELY UPON PROPOSED REGULATIONS REQUIREMENT EFFECTIVE JANUARY 1, 2014 ▪Fiscal year plans must comply the first day of plan year beginning in 2014 This information can be accessed at www.irs.gov. Large Group Employer Mandate

21. 21 WHAT EMPLOYERS ARE SUBJECT TO THE MANDATE? ▪50 or more full-time employees (full-time = working 30 or more hours per week) -or- ▪Combination of full-time and part-time employees that equals 50 “full-time equivalent employees” Status is determined based on actual hours worked by employees in prior calendar year Large Group Employer Mandate

22. 22 AGGREGATION OF COMMON OWNERSHIP Companies are combined together to determine employee count Use established “controlled group” test in Internal Revenue Code Sec. 414 Thus, a smaller employer might need to comply if it is part of a controlled group Aggregation rules are not applied to companies to determine potential liability and payment under the employer mandate 30-employee reduction is applied across the companies, not to each company Large Group Employer Mandate

23. 23 FULL-TIME EMPLOYEE CALCULATION “Look-back” period (between 3-12 months) “Stability” period “Administrative” period PERIODS CAN VARY DEPENDING ON CATEGORY OF EMPLOYEES Collectively bargained Collectively bargained and not collectively bargained Salaried and hourly Employees working in different states

24. 24 SUMMARY An employer with 50 or more full-time employees will be subject to a nondeductible excise tax penalty if either: The employer does not offer health coverage to least 95% of its full-time employees (and their dependents*), and any full-time employee receives a premium tax credit (subsidy) for coverage on the exchange The annual penalty is $2,000 times total number of FTEs, minus the first 30 employees The monthly penalty is 1/12 of $2,000 times total number of FTEs, minus the first 30 employees Large Group Employer Mandate *Dependents = children to age 26, but not spouse

25. 25 OR… The employer offers health coverage to at least 95% of its full-time employees (and their dependents*), but at least one full-time employee receives a premium tax credit (subsidy) for coverage on the exchange. The annual penalty is $3,000 per employee receiving a subsidy The monthly penalty is 1/12 of $3,000 per employee receiving a subsidy This penalty cannot exceed the penalty imposed if an employer did not offer coverage at all. Large Group Employer Mandate *Dependents = children to age 26, but not spouse This may occur because: a)the employer did not offer coverage to that employee, or b)the coverage the employer offered that employee was either unaffordable to the employee, or c)the coverage did not provide minimum value

26. 26 Supposed to take effect several years ago On April 18, 2011, the Department of Labor held a public forum The Labor Department has stated it will issue regulations on the auto enrollment requirement in the future, and will give employers adequate notice of when to comply. Although the Labor Department has previously said that it would require auto enrollment in 2014, that date has been pushed off to the indefinite future. Automatic enrollment applies to employers with 200 or more lives Automatic Enrollment

27. 27 REQUIREMENT TO OFFER TO DEPENDENTS EFFECTIVE 01/01/15 Must “take steps” in 2014 DEPENDENTS MEANS ALL OF THE FOLLOWING TO AGE 26 Children Stepchildren Adopted children Children placed for adoption Foster children Employers may rely on employee representations on identity and ages of children Large Group Employer Mandate

28. 28 MINIMUM ESSENTIAL COVERAGE Plan coverage must provide minimum value (MV) by covering at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan HHS/IRS will provide an MV calculator, similar to the AV calculator, to be used to determine whether the plan provides minimum value Plan must be affordable, defined as an employee- only plan premium less than 9.5% of employee’s household income (may look only at employee’s income from employer) Three safe harbors Large Group Employer Mandate

29. 29 SAFE HARBORS: CALCULATION OF “AFFORDABILITY” BASED ON EMPLOYEE’S HOUSEHOLD INCOME Employee Form W-2 safe harbor Rate of pay safe harbor Federal poverty level safe harbor Large Group Employer Mandate

30. 30 PENALTY CALCULATION Scenario 1 [4980H(a)] If for any single month - Employer does not offer coverage to at least 95% of FTEs (and dependents), and - At least one employee receives federal subsidy to purchase coverage through exchange for that month Employer penalty for that month is 1/12 x $2,000 x total number of FTEs, minus first 30 FTEs Large Group Employer Mandate

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32. 32 PENALTY CALCULATION Scenario 2 [4980H(b)] If for any single month - Employer offers coverage to at least 95% of FTEs (and dependents), and - At least one employee receives federal subsidy to purchase coverage through the exchange for that month Employer penalty for that month is 1/12 x $3,000 x total number of FTEs, minus the number of FTEs who: - are new FTEs during their first three months of employment, - are new variable hour or new seasonal employees during the months of that employee’s initial measurement period (and associated administrative period), - were offered the opportunity to enroll in MEC that satisfied MV and was affordable but penalty will not exceed 1/12 x $2,000 x total number of FTEs, minus first 30 FTEs Large Group Employer Mandate

33. 33 APPLICABILITY TO MULTIEMPLOYER PLANS – CONFUSING RECORDKEEPING REQUIREMENTS Keep detailed records on look-back, stability periods, determination of full-time employee status ASSESSMENT AND PAYMENT OF EXCISE TAX IRS will send notice after it examines employee tax returns and employer informational filing under IRC 6056 (employer reporting to IRS on health insurance) Employer has opportunity to respond to notice before paying If employer liable, IRS will send demand for payment Miscellaneous Provisions

34. 34 QUESTIONS?

35. 35 Services provided by Empire HealthChoice HMO, Inc. and/or Empire HealthChoice Assurance, Inc., licensees of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield plans. Legal