How Did We Get Here? The Accountable Care Act and What It Means to Health Insurance and the Health Care System June 14, 2013 Robert Laszewski Health Policy and Strategy Associates, LLC Washington, DC

The health care market is changing. We are in the midst of a historic shift in the way the business of health care is being done. It is clear to policymakers, providers, and payers that we are in the last days of fee-for-service reimbursement. We are moving to a system where providers will be more often at risk for both the cost and quality of care. We are also moving to a system where individuals will be more responsible and accountable for the cost of their health care as employers evaluate their historic place in providing benefits.

The Country’s Growing National Debt Will Force Changes in the Way Health Care is Paid For

On the Current Track, How Federal Resources Would Be Allocated in 2023

And Just As the Health Care Entitlements Become Unsustainable We Have Added to Them With Passage of the Affordable Care Act (ACA) Individuals will be required to purchase coverage. Medicaid will be expanded for the poorest. Employers will be required to offer coverage. Insurance companies will be required to cover everyone. There will be minimum standards for health plans.

The Affordable Care Act… Will cost $938 billion over 10 years. Will provide coverage for about 94 percent of Americans. 30 million people are eventually expected to gain coverage––about half in private insurance and half in Medicaid. States have the option of running their own health insurance exchange—or letting the feds do it—as well as implementing the Medicaid expansion.

Accountable Care Act (ACA) Implementation: Three Months to Go States struggling to make final decisions, or carry out the decisions they’ve already made. 17 states were given initial approval to run exchanges—33 either left all of it to the feds or most of it (Partnerships). “I am absolutely confident that every state will have an exchange that will be functioning and ready,’ said Gary Cohen [HHS Spokesman], who declined to elaborate on the number or identity of states that could be in for difficulties.”

Insurance Rate Analysis by Actuarial Firm Milliman for Centrist Group “Center Forward”

The Federal Government Provides Families With Health Insurance Exchange Premium Support Based Upon Their Income as a Percentage of the Federal Poverty Level

Examples of Premium Credits for Single Coverage and a Family of Four Subsidies are tied to the second lowest cost Silver plan in each market. A single person making 100% of the federal poverty level (FPL), ($11,490) would pay no more than 2% of their income, or $230 per year. A family of four at 100% the FPL ($23,550) would be required to pay no more than 2%, or $471 per year, toward the cost of health insurance. A single person making 250% of the poverty level ($28,725) would pay no more than 8.05% of their income ($2,312) for single coverage.

Examples of Premium Credits… A family of four at 250% of the FPL ($58,875) would be required to pay no more than 8.05% of their income, or $4,739 annually, for a family health insurance plan. A single person making 300% of poverty ($34,470) would have to pay 9.5% of their income ($3,274) toward the cost of single coverage. A family of four making 300% of poverty ($70,650) would have to pay 9.5% of their income ($6,712) toward the cost of family coverage.

Examples of Premium Credits… An individual making 400% of poverty ($45,960) would have to pay 9.5% of their income toward single coverage ($4,366). An individual making more than $45,960 would not be eligible for a subsidy. A family at 400% of the FPL ($94,200) would have to pay 9.5% of their income ($8,949) toward their premium for family coverage. A family of four earning more than $94,200 a year (four times the FPL) would not be eligible for a federal subsidy toward coverage and would pay the full cost of a plan.

Will Employers Remain Committed to Providing Health Benefits? Employers with more than 50 employees will pay a fine of $2,000 per worker. Any health plan contribution the employer converts to wages would be taxable income (income and payroll taxes) to the worker as well as subject to additional payroll costs for the employer. But the wage will increase at the wage rate not at the health insurance cost trend increase which has tended to be two to four times larger. The employee will be eligible for premium payment support from the federal government based upon their family income.

Will Employers Abandon Health Benefits? Likely no quick or dramatic change. After adjusting for the fine, increased payroll costs, and employee income tax consequences an employee with a middle class family income will not be better off—likely far worse off. But likely a different conclusion in the small group market that is already shrinking at a rapid rate. An employers commitment to benefits will likely have more to do with how competitive their labor market is.

The Supreme Court Decision A surprise. Justices Kennedy, Scalia, Thomas, and Alito wanted to throw the individual mandate and the entire law out. The four liberals wanted to uphold all of it and eventually joined Roberts’ interpretation of the mandate as a tax in order save it. The Roberts Court upheld the ACA but it did narrow the Commerce Clause for the Congress by calling the mandate penalty a “tax.” And, the Roberts Court narrowed Congress’ ability to “coerce” state policy (“unfunded mandates”) by withholding federal money. The states will now have the option of participating in the Medicaid expansion.

Only About Half of the States Will Expand Their Medicaid Programs

Number of People That Would Be Covered Under the ACA’s Medicaid Expansion in States That Brought the SCOTUS Suit Alabama351,567 Alaska42,794 Arizona105,428 Colorado245,730 Florida951,622 Georgia Idaho85,833 Indiana297,737 Iowa114,691 Kansas143,445 Louisiana366,318 Maine43,468 Michigan589,965 Mississippi320,748 Nebraska83,898 Nevada136,353 North Dakota28,864 Ohio667,376 Pennsylvania482,366 South Carolina344,109 South Dakota31,317 Texas1,798,314 Virginia372,470 Wisconsin205,987 Utah138,918 Washington295,662 Wyoming28,899

2014 to 2019 Cost for Key States to Expand Medicaid and the Federal Share Source: Kaiser Commission on Medicaid and the Uninsured StateTotal State Medicaid Spend Total Federal Spend Total State and Federal Federal Share of Incremental Cost Florida$1.2 billion$20 billion$21.2 billion94% Louisiana$337 million$7 billion$7.4 billion96% Texas$2.6 billion$52 billion$55 billion95% Wisconsin$205 million$4.2 billion$4.4 billion95%

Findings of the Wisconsin Legislative Fiscal Bureau Governor Walker’s Medicaid plan would offer those above 100% of the federal poverty level coverage in the new federal health insurance exchange rather than in Medicaid. Federal Medicaid expansion under the new health law would cover 84,700 more people. Governor Walker’s plan would boost the state budget by $119 million over the next two years even after the cost of adding the additional people to Medicaid under the new health law. Accepting the federal Medicaid expansion would save the state an additional $340 million through 2021.

The Health Insurance Marketplace

New way to buy health insurance when key parts of the health care law take effect The Health Insurance Marketplace Even working families can get help through the Marketplace Enrollment starts October 1, 2013 Coverage begins January 2014 Introduction 12/18/2014 Understanding the Health Insurance Marketplace 23

24A New Way to Get Health Insurance05/09/2013 to  Insurance companies compete for business  Offers you choices  Easy to use – plain language  Apples-to-apples comparison of plans Compare all your options side-by-side o Price o Quality o Benefits How does the Marketplace work?

 To be eligible to join a plan in Marketplace you must Live in the service area of the plan Be a U.S. citizen or be lawfully present Not be in prison (incarcerated) Who can get coverage from the Marketplace? 05/09/2013A New Way to Get Health Insurance25

05/09/2013A New Way to Get Health Insurance Lower Income Higher Income Streamlined Application 26

Same Application – Different Results 12/18/2014 Understanding the Health Insurance Marketplace 27

A New Way to Get Health Insurance05/09/2013  Based on family income and size Premium discount  Family of four with annual income $23,550* – $94,200* or less  And not eligible for certain other insurance coverage like Medicaid Lower cost-sharing (like copays)  Family of 4 with annual income $58,875* or less (some other restrictions) *2013 amounts Help to Pay Qualified Health Plan Costs 28

Qualified Health Plans cover Essential Health Benefits which include at least these 10 categories Ambulatory patient servicesPrescription drugs Emergency servicesRehabilitative and habilitative services and devices HospitalizationLaboratory services Maternity and newborn carePreventive and wellness services and chronic disease management Mental health and substance use disorder services, including behavioral health treatment Pediatric services, including oral and vision care Essential Health Benefits 12/18/2014 Understanding the Health Insurance Marketplace 29

 Small Business Health Options Program is a Marketplace for small businesses and their employees Beginning 2014, small businesses will have more choice and control over health insurance spending o Choices among Qualified Health Plans to meet every budget o Access tax credits for eligible employers o New consumer protections Small Business Health Options Program (SHOP) 12/18/2014 Understanding the Health Insurance Marketplace 30

A New Way to Get Health Insurance05/09/2013  Easy  Convenient  Streamlined In Person By Mail By Phone Online How to Apply 31

A New Way to Get Health Insurance05/09/2013  You can enroll in a Qualified Health Plan during 1.The Initial Open Enrollment Period October 1, 2013 – March 31, The Annual Open Enrollment Period Each year starting in 2014 October 15 – December 7 3.A Special Enrollment Period Certain situations  Like loss of certain other coverage When to Enroll 32

33A New Way to Get Health Insurance05/09/2013  Help will be available in the Marketplace Toll-free call center Website Help in-person o Navigators and other trained assisters o Agents and brokers (state’s decision) Assistance – It’s Available If Needed

A New Way to Get Health Insurance Starting October 1, 2013, you will be able to apply through this site 05/09/2013  Consumer Focused  In Plain Language Now - Sign up for and Text Alerts and Get Ready 34

The Marketplace is a new way to find health insurance There is assistance available to help you get the best coverage for your needs Insurance will continue to be sold outside of the Marketplace Purchase from Marketplace not required The Marketplace is the only place to get the New premium discounts and cost-sharing reductions Key Points to Remember 05/09/2013 A New Way to Get Health Insurance 35

A New Way to Get Health Insurance05/09/2013  Stay Connected Sign up to get and text alerts at signup.healthcare.gov Updates and resources for partner organizations are available at Marketplace.cms.gov Facebook.com/Healthcare.gov Want more information about the Marketplace? 36

Hold for HHS slides

Preparing for the Health Insurance Marketplace: A View From Wisconsin June 14, 2013 Wisconsin Entitlement Reforms, Patient Protection, and the Affordable Care Act 38

39 Wisconsin Entitlement Reforms Governor Walker’s proposed entitlement reforms will:  Ensure every Wisconsin resident has access to affordable health insurance  Create a BadgerCare Plus program that is sustainable  Help more Wisconsin citizens become independent and rely less on government health insurance  Maintain the health care safety net for those who need it the most

Current BadgerCare Health Plans 40

BadgerCare Health Plan

42 Wisconsin’s Currently Uninsured The following is Wisconsin’s uninsured population taken from the Current Population Survey (CPS) estimates for 2011.

43 Wisconsin Entitlement Reforms Governor Walker’s proposed entitlement reforms will specifically:  Reduce the number of uninsured non-elderly adults by 50%, from 14% to 7%  Provide an estimated 259,198 childless adults and parents and caretaker coverage in BadgerCare Plus  Provide an estimated 692,308 childless adults and parents and caretaker relatives will be covered in the Marketplace

44 PPACA - MAGI Requires that states use the IRS’ methodology for determining Modified Adjusted Gross Income (MAGI), with certain exceptions, to determine household composition, family size, and income eligibility, thereby eliminating most income deductions and disregards  Will be used as the basis for determining Medicaid, CHIP, and Exchange eligibility for certain populations starting in 2014 MAGI will not be used for determining eligibility for the elderly, blind, and disabled (EBD) population  MAGI introduces tax filing status and tax relationships as new factors in determining how households are tested for eligibility  The new rules are highly complex and will require massive systems and operational changes by state Medicaid agencies between now and January 2014  DHS is developing MAGI based training material and will deliver using a variety of media and face- to-face meetings  DHS enrollment and budget impacts assume that MAGI will have a relatively small impact on the program The greatest impact related to MAGI for existing members is the introduction of tax relationships into how their household sizes are determined and whose income will be considered. For some families, this will result in greater eligibility, while for others, it will result in loss of eligibility. In addition, child support payments will no longer be counted as income in the eligibility determination process. About 15 percent of our cases currently have child support income.

45 Overview of Projected Impacts to Medicaid/BadgerCare Plus BadgerCare Plus Enrollment Impacts  An estimated 87,000 parent and caretaker relatives and 5,000 childless adults will transition to coverage in the new federal marketplace  An estimated 84,000 childless adults and 9,000 parent and caretaker relatives that are currently uninsured will be enrolled in BadgerCare Plus  Overall BadgerCare Plus enrollment is projected to stay between 770,000 to 800,000 over the next biennium DHS assumed that the uninsured rate for non-elderly (non-pregnant) adults would be reduced by 50% - from 14% to 7%. The following take-up rates were used in our modeling:  Parents/Caretakers – 25%  Childless Adults (new adult group) – 65%

46 Overview of Estimated Marketplace Enrollment Marketplace Enrollment Estimates  An estimated 232,000 parent and caretaker relatives and 460,000 childless adults will enroll in Marketplace Includes transition of people in the current non-group and small group markets Includes transition of existing state and federal high risk pool (HIRSP) members Includes employees from large employers that are estimated to drop coverage (10% of current ESI coverage) Includes take-up of the currently uninsured (using the same take-up assumptions as previously noted for BadgerCare Plus) Includes the transition of an estimated 95,000 adults from BadgerCare Plus  Small take-up of children assumed; current uninsured rate for children is 5%

Looking Ahead… Governor Walker is committed to two goals when it comes to ensuring all Wisconsin citizens have access to affordable coverage: 1.Ensure that existing BadgerCare Plus members that will be eligible to enroll in a QHP have a smooth transition to the Marketplace 2.Reduce the uninsured rate for non-elderly adults by 50% over the next two years DHS will work side-by-side with all of our existing community partners as well as new partners, Navigators and Certified Application Counselors (CACs). DHS is already working with Enrollment for Health Wisconsin, Inc. (e4Health) on this front, along with other provider organizations and insurers on ideas for outreach to both of these populations. DHS is also working closely with CMS on the transition for the BadgerCare Plus members and ways that we can monitor and track members’ transition and enrollment into the qualified health plans offered in the marketplace. 47

Looking Ahead… Implementation  DHS is working closely with the Office of the Commissioner of Insurance on transition.  Key components: Income Maintenance Offices – Milwaukee Enrollment Services Center Certified Application Counselors – stakeholders, provider and advocate engagement Navigators 48

Looking Ahead… Key Dates:  Summer 2013 – Qualified Health Plans in place  Late Summer 2013 – “The Marketplace” is unveiled  August/September 2013 – DHS and CMS finalize waiver for childless adults under 100% FPL  October 1, 2013 – enrollment in “The Marketplace” begins 49

50 Questions