The Affordable Care Act: What Happens Now? Kansas Insurance Department Kansas State Department Of Education October 18, 2012

2010 Affordable Care Act Provisions—in effect NOW 2010 ACA Provisions Exchanges Federal Pre-existing Condition High Risk Pools (PCIP – KS) No lifetime limits and phase-out of annual limits No rescissions, except in cases of fraud Coverage of preventive health services with no out-of-pocket costs “Reasonable” unpaid breaks for nonexempt, nursing mothers and private location 2014 ACA Provisions

No pre-existing condition exclusions for children Dependent coverage to age 26 Small Business Tax Credit For businesses with 25 or fewer employees Average wages less than $50,000 Employer must contribute at least 50% of premium Tax credit phases out as number of employees and wages increases : Up to 35% of total employer contribution; – up to 50% 2010 Affordable Care Act Provisions—in effect NOW 2010 ACA Provisions Exchanges 2014 ACA Provisions

Elimination of pre-existing condition exclusions Guaranteed issue and renewability of coverage Rating factors limited to age, tobacco use, geography and family structure Tax credits and subsidies for individuals to help pay premiums and out-of-pocket costs; up to 400% of the Federal Poverty Level Employers can offer increased wellness incentives; permits rewards or penalties up to 30% of cost of coverage 2010 ACA Provisions Exchanges 2014 ACA Provisions

Mandated coverage for “essential health benefits” Uniform explanation of benefits and standardized definitions Individual mandate to ensure consumers do not wait until they are ill to seek coverage You will be penalized for no coverage (with some exceptions) Establishment of an exchange—federal or state-run 2010 ACA Provisions Exchanges 2014 ACA Provisions

2014 ACA Considerations Lawsuit heard by U.S. Supreme Court during March—June 28 th ruling upheld individual mandate as a tax The law builds on an employer-based system that is intended to standardize and equalize benefit coverages. The individual market will work better because pre- existing conditions are not an issue. November general election considerations still on the table, definitely affecting exchange activity 2010 ACA Provisions Exchanges 2014 ACA Provisions

What’s an Exchange? An exchange is an online marketplace where individuals and small employers will be able to buy health insurance products sold by insurance companies. People who apply to buy insurance through the exchange who are eligible for a public program (like Medicaid) will be enrolled in that program ACA Provisions Exchanges 2014 ACA Provisions

What’s an Exchange? Under the Affordable Care Act each state shall establish an American Health Benefit Exchange by January 1, 2014 The Secretary of Health and Human Services must certify by January 1, 2013, if a state will be able to operate a qualified Exchange If a state does not build an exchange, the federal government will operate it for the state 2010 ACA Provisions Exchanges 2014 ACA Provisions

Attention Small Businesses! Employers with fewer than 50 workers are exempt from employer responsibility taxes. They don’t have to pay a penalty if their employees get tax credits through a health insurance exchange. Small employers are exempt from the insurance mandate, but their employees are not ACA Provisions Exchanges 2014 ACA Provisions

Individual & Small Group Exchange Basics Individuals may enroll in any qualified health plan offered in a state Exchange, with or without subsidy or tax credits Employers may choose coverage level OR one or more qualified health plans Employees choose from carriers offering at that coverage level OR plan(s) selected by employer Employees individually rated (limited to the four allowed rating Factors—age, tobacco use, geography, family structure) 2010 ACA Provisions Exchanges 2014 ACA Provisions

Levels of Coverage Bronze – covers 60% of actuarial value of benefits Silver – covers 70% of actuarial value of benefits Gold – covers 80% of actuarial value of benefits Platinum – covers 90% of actuarial value of benefits Catastrophic – high-deductible plan for young (under age 30) and those exempt from individual mandate 2010 ACA Provisions Exchanges 2014 ACA Provisions

Essential Health Benefits “Essential Health Benefits” in health plans must contain at least the following 10 categories: --Ambulatory patient services --Emergency services --Hospitalization --Maternity and newborn care --Mental health and substance use disorder services, including behavioral treatment --Prescription drugs --Rehabilitative and habilitative services and devices --Laboratory services --Preventive and wellness services and chronic disease mgmt. --Pediatric services, including oral and vision care 2010 ACA Provisions Exchanges 2014 ACA Provisions

Essential Health Benefits Essential health benefits benchmark election was due September 30, 2012, no election made States could choose one of the following benchmark insurance plans: One of the three largest small group plans in the state by enrollment. One of the three largest state employee health plans by enrollment. One of the three largest federal employee health plan options by enrollment. The largest HMO plan offered in the state’s commercial market by enrollment ACA Provisions Exchanges 2014 ACA Provisions

2014 Implementation Small Group (SHOP) Exchange States must establish SHOP exchange in 2014 May be combined with individual market exchange Until 2016, exchanges may be restricted to employers with 1-50 employees In 2016, exchanges serve employers with employees States may expand exchanges to larger employers beginning in 2017 Employees may be given choice of carrier by their employer Employer may choose coverage level Employees choose from carriers offering at that level 2010 ACA Provisions Exchanges 2014 ACA Provisions

Exchange Timeline IT Systems Architecture Federal Rulemaking State Legislation and Regulations Federal & State IT Buildouts Secretary Determines if State will Establish Enrollment Begins Federal Policymaking Coverage Effective Outreach & Education Plan Bidding/Contracting Certification of Health Plans Planning & Establishment Grants

Definition of Full-Time Employee 2010 ACA Provisions Exchanges 2014 ACA Provisions ACA defines full-time employee as an employee who works 30 hours per week, per month, on average However, ACA also looks to part-time employees to determine full-time employer equivalent. If total full-time and full-time equivalent employees > 50, business IS subject to employer mandate penalty and coverage provisions If an employee is hired on part-time, temporary or seasonal basis, need not be offered coverage. But... need to monitor hours

How many full-time employees do you have? If ≥ 50 Business is subject to ACA ACA looks to part-time employees to determine full-time employee equivalents. If total full-time and full-time equivalent employees ≥ 50 Business is subject to ACA employer mandate penalty and coverage provisions If total full-time and full-time equivalent employees ˂ 50 Business is exempt from ACA employer mandate penalty and coverage provisions Slide Courtesy of National Retail Federation Separate businesses under common control are considered one business if determined so by IRS rules Rules may vary by structure (e.g. corporation or partnership) of business. Generally requires 80% control to be considered common control. If less than50 Are You a Large Employer?

Large Employer Responsibility (50 or more FTEs)—difficult formula If an employer doesn’t offer minimum coverage and one of its employees receives a subsidy through the Exchange, the employer will be subject to a penalty: $2,000 annually, times the number of employees, minus 30. If an employer does offer coverage, but an employee receives a subsidy through the Exchange to pay for the premium, the employer will be subject to a penalty of $3,000 annually for each employee receiving a subsidy, up to a maximum of $2,000 times the number of full-time employees, minus ACA Provisions Exchanges 2014 ACA Provisions

A full-time employee is defined under the Affordable Care Act (ACA) as an employee who works 30 hours per week, per month, on average. Slide Courtesy of National Retail Federation If an employee is hired for – or promoted to – a full-time position (for an ACA-covered employer), then the employee will be eligible for the employer’s health plan after the employer’s waiting period (maximum 90 days) if applicable. If an employee is hired on other than a full-time basis (e.g. on a part-time, temporary, or seasonal basis), then they need not be offered coverage. But, employers may have to monitor their hours to determine if they become eligible for coverage. The Department of Treasury is considering a method of tracking hours on average to recognize eligible employees without the expense of enrolling and dis-enrolling employees into coverage, as they gain or lose eligibility. This proposed “look-back” method would allow employers to average hours over a set period (not to exceed 12 months) in exchange for an equal or greater period of stable coverage without regard to eligibility for coverage. Seasonal employees working fewer than 120 days per year are excluded from calculation of whether an employer is an ACA- covered large employer and from penalty calculations. Employer responsibility penalties

What are the employer responsibility penalties? Failing to offer coverage to full-time employees Offering coverage to full-time employees where the cost of the coverage exceeds 9.5% of family income The penalty for the failure to offer coverage is $2,000 x full-time employees not covered, minus the first 30 employees, i.e. your first 30 full time employees are exempt from the calculation. The penalty for the failure to offer “affordable” coverage is the lesser of two penalty calculations: $3,000 per applicable employee or $2,000 times every full-time employee, minus the first 30 employees. At least one employee must receive subsidized coverage in the exchange to trigger penalties. Slide Courtesy of National Retail Federation Applicable employers can be penalized for : Key considerations: What is your mix of full and part-time employees? Could an adjustment of employee status reduce your penalty exposure? If you provide coverage today, how does the cost of that coverage compare to your total penalty exposure? Consider all options, including non- monetary concerns. NRF maintains a Health Mandate Cost Calculator at which can model the penalty effect on your business. Employer responsibility penalties

An applicable employer who offers qualifying coverage to full-time employees can still be penalized if that coverage fails a two-part “affordability” and “minimum value ” testaffordabilityminimum value Slide courtesy of National Retail Federation Coverage must be “affordable.” The employee’s cost for coverage (self-only coverage) must not exceed 9.5% of family income. Coverage must also be of “minimum value.” The plan’s share of total allowed benefit cost must be more than 60 percent. This is generally understood to be a 60% actuarial value test. The Departments of Treasury and Health and Human Services are considering several approaches to defining the standard, including: a minimum value calculator; a safe-harbor checklist; and actuarial certification. Actuarial value is based on plan payments for a standard population and charges minus individual share of premiums, co- insurance and co-pays. A potential regulatory safe harbor under consideration for employers would base this on 9.5% of the employee’s current W-2 wages. Low-income employees not eligible for Medicaid or Exchange tax credits may be able to access catastrophic or limited benefit coverage. The question of dual income/coverage households has not yet been addressed. Employer responsibility penalties

Kansas Insurance Department goal in federal health reform: Do what’s best for Kansas consumers, Kansas agents and Kansas companies by keeping reforms at the state level ACA Provisions Exchanges 2014 ACA Provisions

420 SW 9 th St. Topeka, KS Phone: Consumer Assistance: Fax: Kansas Insurance Department