Affordable Care Act Update May 2014 Donna Lively Director of Insurance Plans GuideStone Financial Resources

Agenda Individual Mandate Employer Mandate Reporting and Taxes 2

Background Core of law is an attempt to reduce number of uninsured Requires most in U.S. to have health insurance Creates state-based Exchanges (federal as well) Large employers required to offer coverage or pay penalties Expands Medicaid to 138% of the federal poverty level ◦ 26 states have expanded Medicaid 3

Happening Now 23 delays to the law 50 regulations in process of being written right now Recent changes to HRA/EPP/FSA Recent changes to Employer Mandate Congress in a deadlock 4

Individual Shared Responsibility — Individual Mandate 5

2014 Impact: Individuals and Families Individual Shared Responsibility provision began January 1, 2014 Everyone with income above the poverty level must have “minimum essential coverage” Some exemptions to individual mandate do apply ◦ Hardship ◦ Indian Tribe ◦ Religious Objection ◦ Incarcerated/Not in U.S. legally ◦ Coverage under health care sharing ministry — such as Medi-Share or Samaritan’s Trust – considered MEC 6

2014 Impact: Individuals and Families Penalty is $95 or 1% of Household income in 2014 ◦ There are penalty maximums 2014 penalty collected with 2015 tax refund ◦ If you aren’t owed a refund, you don’t pay the penalty  Penalty never goes away  If you ever have a refund the penalty will be deducted Penalty increases year over year ◦ $325 or 2% in 2015 ◦ $695 or 3% in

2014 Impact: Exchanges/Marketplaces Exchanges opened as an alternative for people with: ◦ No other available coverage ◦ Lower to moderate income ◦ Pre-existing medical conditions Open enrollment period: ◦ Annual time to enroll for coverage ◦ October 01, 2013 – March 31, 2014 (extended for 2014) ◦ HIPAA Qualifying Event for off-annual-enrollment ◦ Non-HIPPA QE for short term coverage would include medical underwriting 8

2014 Impact: Exchanges/Marketplaces Who will be offering coverage in the exchanges? Fully insured, state-regulated insurance companies Participating carriers (varies by state) No church plans or unions are allowed to offer benefits in the Exchanges and their participants are not eligible for a subsidy What networks and benefits will be available? Majority are more narrow provider networks High-tech, sub-specialty providers probably not available through the exchanges Variety of benefit options 9

2014 Impact: Exchanges/Marketplaces Would the exchanges save me money? Premium tax credit (subsidy) ◦ Tax credit offered to Americans who earn less than 400% of poverty level. ◦ Note: Clergy housing allowance is not included in household income calculation. Cost-sharing reductions (subsidy) ◦ Lower deductible and higher co-insurance level for persons earning less than 300% of poverty level. ◦ Claims paid at the “higher” level regardless of chosen plan. 10

Eligibility for Premium Tax Credit 11 *Federal Poverty Level (FPL) The premium tax credit is not available to employees of employers that adopt the Small Business Health Options Program (SHOP).

2014 Impact: Exchanges/Marketplaces and SMALL GROUP Rating rules? Guaranteed issue and renewability Restrictions on rate flexibility — rates can vary by: ◦ Community rating ◦ Age — 1:3 slope from younger to older ◦ Family size  Larger the family the higher the rate ◦ Geography ◦ Smoking habits — 1:1.5 upcharge 12

2014 Impact: Exchanges/Marketplaces and SMALL GROUP What will the plans look like? Creation of standard metallic benefit plans Essential health benefits required ◦ No coverage dollar limit for the 10 identified categories of services Maximum out-of-pocket spending (MOOP) limits: ◦ No more co-insurance maximums ◦ MOOP are an aggregate of all eligible, in-network medical and RX including co-pays, deductibles, co- insurance,  $6,350 — Individual (2014)  $12,700 — Family (2014) 13

Premium Tax Credit is NOT available if you are… Offered an employer sponsored health plan that is affordable and of minimum value Enrolled in an employer plan Are covered by Medicare or Medicaid Are covered by another government coverage Have income above 400% of poverty level 14

Small Group Insurance 96% of all organizations are less than 50 FTE Small group has no mandate to offer coverage Small group defined as: ◦ <50 in 2014 and 2015 ◦ <100 in

Applicable Large Employer and the Pay-or-Play Penalty 16

2014 Impact: Large Employer Large Employer Mandate Delayed until 2016 for Employers with 50 to 99 full-time equivalent employees (FTEE) ◦ IF they meet transitional relief rules Transitional Relief Rules for Size Groups No reduction in size of work force or overall hours of services to qualify for the transition relief Employer does not eliminate or materially reduce any health coverage offered on February 9 th, 2014 Employer certifies that it satisfies these requirements (on Section 6056 report) 17

2014 Impact: Large Employer Effective 2015 Employers with 100+ FTEE are defined Applicable Large Employers ◦ Applicable Large Employers must :  (a) Offer coverage to at least 70% of employees working 30 hours or greater » Moves back to 95% in 2016  (b) Coverage must be affordable and of minimum value 18

2014 Impact: Large Employer Affordable – Contribution limits for Employee Only coverage ◦ 9.5% is maximum contribution an employee can make to the “employee only” coverage ◦ Determined by:  W-2 wages  Employee’s hourly rate  Federal poverty level Adequate - Plan provides Minimum Value, meaning plan pays an actuarially equivalent 60% of required health care expenses 19

2014 Impact: Large Employer No Offering Penalty (a): $2,000 penalty assessed for all FT employees if not offering coverage to all 30-hour workers and one receives a subsidy ◦ In 2015 first 80 workers will not count toward penalty calculation ◦ In 2016 first 30 workers do not count toward penalty calculation Affordable/Adequacy Penalty (b): $3,000 per employee who receives a subsidy because coverage is not affordable and not of minimum value 20

Additional Taxes, Rules, Reporting and Regulations 2014–

2014 Impact: All Employers January 1, day waiting period limitation ◦ Eligible employees will wait no more than 90 calendar days for coverage to begin End of pre-existing coverage limitations ◦ Certificate of Credible Coverage is no longer required 22

2015 Impact: Employers IRC Section 6055 – All size employers Information to IRS, employer, employees substantiating the plans’ provision of Minimum Essential Coverage IRS Form 1095-B for all employers regardless of size IRC Section 6056 – Greater than 50 FTEE Report health plan information to the IRS and to employees IRS Forms 1095-C for employers with 50 or more employees 23

2014 Impact: Taxes PCORI – $2 per covered life Transitional Reinsurance – ◦ $63 per covered life ◦ $44 per covered life Health Insurance Industry Fee – 2.3% of premium Federal Exchange User Fee - 3.5% of premium 24

In the wings… W-2 reporting of health benefits ◦ Less than 250 employees — not required to report ◦ If the organization is not required to provide COBRA benefits — reporting is optional Nondiscrimination rules for fully insured health plans Automatic enrollment for employers with >200 employees Cadillac tax on high-cost health plans

Keep Informed Count your employees Watch and wait More delays and modifications to come Watch for subsidy to be reduced Watch for non-coverage penalty to be increased Election year will continue conversation about “keep or repeal” ACA 26

Website Bookmarks m2/ReimbursementVehicles m2/ReimbursementVehicles eform2 eform2 eform2/EmployerMandate eform2/EmployerMandate 27

The preceding information is general in nature and is intended to keep you apprised of certain important developments. This information may be subject to interpretation or clarification over time, so we cannot guarantee its accuracy or how it might be determined to apply in certain situations. However, we hope it will provide you a useful frame of reference as you endeavor to carry out your responsibilities and serve your employees. 28