1. Healthcare Reform Update
Leanne Gassaway
Senior Regional Director – State Affairs
America’s Health Insurance Plans

2. AHIP-All Rights Reserved: © AHIP 2010

3. Outline of Presentation:
Overview of Implementation Process
Immediate/Near Term Reforms (2010 – 2011)
Longer-Term Reforms (2014+)
Purchasing Incentives (2014+)
Reforms on Products (CLASS, Dental, & Medigap)
Reform Financing
AHIP-All Rights Reserved: © AHIP 2010

4. Federal Regulatory Process
HHS to develop regulations and guidance in cooperation with DOL and Treasury
NAIC directed to provide standards/definitions for some provisions (e.g., MLRs)
NAIC –
Key federal agency websites:
DOL -
HHS -
White House -
AHIP – All Rights Reserved: © AHIP 2010

5. Federal Regulatory Guidance/Regulations
Topic
Date Issued in
Federal Register
Comment Deadline
Effective Date
MLR RFI
April 14, 2010
May 14, 2010
n/a
Premium Review RFI
Internet Portal IFR
May 5, 2010
June 4, 2010
May 10, 2010
Early Retiree Reinsurance IFR
June 1, 2010
Dependent Coverage to 26 IFR
May 13, 2010
August 11, 2010
July 12, 2010
Grandfathered Plan IRF
June 17, 2010
August 16, 2010
June 14, 2010
Omnibus Market Reform IFR*
June 28, 2010
August 27, 2010
Preventive Care Benefits IFR
July 19, 2010
September 12, 2010
September 12, 2010
*The Omnibus Market Reform IFR includes guidance on the following PPACA provisions: (a) no pre‐existing condition exclusions for children under 19, (b) restrictions on rescissions, (c) prohibition on limitations on lifetime and annual dollar maximums, and (d) other patient protections.
AHIP – All Rights Reserved: © AHIP 2010

6. Federal Regulatory Guidance/Regulations (Cont.)
Topic
Date Issued in
Federal Register
Comment Deadline
Effective Date
Pre-Existing Condition Insurance Plan (PCIP) IFR
July 30, 2010
September 29, 2010
Exchanges RFI
August 3, 2010
October 1, 2010
Premium Rate Review (2010)
TBA
“Restricted” Annual Limit Waiver* (2010)
Internal/External Appeals IFR
July 23, 2010
September 22, 2010
Nondiscrimination in Favor of Highly-Compensated Individuals (2010)
MLRs (2011)
Uniform Coverage Documents/Standard Definitions (2011/2012)
* The “restricted” annual dollar limit regulations allow the HHS Secretary to develop an application and waiver process for limited benefit plans (so called “mini-med” plans).
AHIP – All Rights Reserved: © AHIP 2010

7. 7

8. 8

9. National High Risk Pool
Within 90 days of enactment, the Secretary and the states must administer a pool for high risk individuals until the establishment of the Exchange in 2014
$5 billion in appropriated funding available to carry out this provision
Pool coverage must abide by the following requirements:
Actuarial value of 65%
Deductible levels and out-of-pocket caps that do not exceed those levels allowed for a HDHP-HSA
Abide by 2014 premium variation restrictions (geography, family size, and tobacco use (1.5:1)), but allows a 4:1 age band
Individuals are eligible for high risk pool coverage if they have preexisting conditions, as determined by the Secretary, and have not had creditable coverage for the six months prior to applying for coverage with the pool
Health plans and employers will be penalized for incentivizing enrollees to drop coverage and enroll in the high risk pool or if the premium for prior coverage exceeds the premium level required by the pool
AHIP – All Rights Reserved: © AHIP 2010

10. State Implementation of National High Risk Pool ProgramWA ND MT MN VT WI ME SD OR ID MI WY NY NH IA NE PA MA IN OH IL NV RI UT CO KS WV CT MO CA KY NJ VA DE OK AR TN NC MD AZ NM SC AL MS GA TX LA
States Opting to Participate AK FL
States Opting Not to Participate
Administrative Services Agreement Only HI
AHIP-All Rights Reserved:  © AHIP 2010

11. Early Retiree Reinsurance
90 days after enactment, Secretary establishes a temporary reinsurance program to reimburse employment-based plans for the cost of health benefits to retirees (and to eligible spouses, surviving spouses and dependents)
$5 billion appropriated to carry out this section
Program ends on January 1, 2014
Eligible employers must have coverage offering that includes demonstration programs that generate cost savings for chronic and high-cost conditions
Reinsurance amounts apply only to claims for individuals between ages 55 and 64 who are not active workers or dependents of active workers and are not Medicare eligible
Secretary reimburses employers for 80% of the portion those costs that are between $15,000 and $90,000 annually adjusted by medical inflation (CPI)
AHIP – All Rights Reserved: © AHIP 2010

12. AHIP – All Rights Reserved: © AHIP 2010
Internet Portal
By July 1, 2010, the Secretary is required to create an Internet Portal to facilitate consumer and small employer purchase of coverage
Portal shall make information available about different coverage options including access to public programs, high risk pools and private market coverage options
No later than 60 days after enactment, the Secretary shall develop a standardized format for presentation of coverage options and include information on the percentage of total premium revenue expended on nonclinical costs
Ongoing efforts by plans and HHS to upload accurate information on carriers and products available on:
AHIP – All Rights Reserved: © AHIP 2010

13. Federal Guidelines for Reasonableness of Rate Process
Upon enactment (March 23, 2010), the HHS Secretary and the states have the authority to review “unreasonable” premium increases beginning with the 2010 plan year
The term “unreasonable increases” has yet to be defined
$250 million is provided to fund grants over a five-year period (beginning in FY2010) to assist states with the review and, if appropriate under state law, the approval of rate increases and to establish medical data reimbursement centers
Medical Reimbursement Data Centers are established to develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services accounting for geographic variation
Health plans must submit a justification for an unreasonable premium increase prior to the implementation of the increase
Beginning in 2014, the Secretary and the states will monitor premium increases for coverage offered inside and outside the Exchange.
AHIP – All Rights Reserved: © AHIP 2010

14. State Responses to Phase 1 Rate Review Grant OpportunityWA MT ND VT MN ME OR WI SD ID MI WY NY NH IA NE MA PA IL OH NV IN UT CO RI KS MO WV CA CT KY VA NJ OK TN NC DE MD AZ AR NM SC DC MS AL GA TX LA AK FL HI
States Applying for a Federal Rate Review Grant
States Opting Not to Apply for Federal Rate Review Grant
AHIP – All Rights Reserved: © AHIP 2010

15. AHIP – All Rights Reserved: © AHIP 2010
Grandfathered Plans
“Grandfathered Plans” are group health plans or group or individual health insurance coverage in which an individual was enrolled on March 23, 2010.
PPACA allows for the addition of family members and employees to
grandfathered coverage without impacting the plan’s special status,
but does not provide guidance regarding other changes
Grandfathered plans are exempt from many of the PPACA near-term
(2010) and longer-term (2014) reforms
AHIP – All Rights Reserved: © AHIP 2010

16. Grandfathered Plans – Proposed Rules
Near Term Reforms (2010) that APPLY to Grandfathered Plans:
MLR/Reporting Requirements
Extensions of Dependent Coverage to Age 26
Restrictions on Rescissions
No Lifetime Dollar Limits
“Restricted” Annual Limits (Group Only)
No Pre-Existing Condition Exclusion for Children (Group Only)
Near Term Reforms (2010) that DO NOT Apply to Grandfathered Plans:
Preventive Services Mandate
Emergency Service Mandate
Internal/External Appeals Requirement
Direct Access to OB/GYN
“Restricted” Annual Limits (Individual Only)
No Pre-Existing Condition exclusions for Children (Individual Only)
Access to Pediatricians
Access to Primary Care Physicians

17. Grandfathered Plans – Proposed Rules
Long-Term Reforms (2014) that APPLY to Grandfathered Plans:
Prohibition on Excessive Waiting Periods
Auto-Enrollment for Large Groups
No Annual Dollar Limits (Group Only)
No Pre-Existing Condition Exclusions (Group Only)
Long-Term Reforms (2014) that DO NOT Apply to Grandfathered Plans:
Adjusted Community Rating
Essential Benefit Package Mandate
Cancer Clinical Trials Mandate
Guarantee Issue (Individual Only)
No Pre-Existing Condition Exclusions (Individual Only)
No Annual Dollar Limits (Individual Only)
Federal Risk Corridor Program
Transitional Reinsurance Program
Risk Adjustment Program

18. Grandfathered Plans – Proposed Rules
Changes that May Relinquish Grandfathering Status:
Specified Mergers/Acquisitions
Elimination of benefits
Any increase in coinsurance
Specified Changes to Annual Limits
Increases in deductibles above statutory threshold
Increases in co‐pays above statutory threshold
Increases in OOP limit above statutory threshold
Decrease in employer contribution rate above statutory threshold
Changes that May Not Relinquish Grandfathering Status:
Addition of family members
Addition of new employees
Modification to conform to federal/state requirements
Cessation of coverage of one or more enrollees
Premium adjustments
Voluntary compliance with PPACA
TPA changes
Early compliance with PPACA

19. PPACA No Pre-Existing Condition Exclusion for
Children (Under 19) – Proposed Rules (IFR)
Changes Definition of Pre-Existing Condition Exclusion:
“Preexisting condition exclusion means a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan or group or individual health insurance coverage…whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that day.” -- Citation: 26 CFR § ; 29 CFR § ; 45 CFR §
“A preexisting condition exclusion includes any limitation or exclusion of benefits (including a denial of coverage) applicable to an individual as a result of information relating to an individual’s health status before the individual’s effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan, or group or individual health insurance coverage…such as a condition identified as a result of a pre-enrollment questionnaire or physical examination given to the individual, or review of medical records relating to the pre-enrollment period.” -- Citation: 26 CFR § ; 29 CFR § ; 45 CFR §
Prohibits pre-existing condition exclusions for all enrollees effective January 1, 2014
Provides an early applicability date for children under 19 (plan or policy year after September 23, 2010)
AHIP-All Rights Reserved: © AHIP 2010

20. PPACA Annual and Lifetime Dollar Limits – Rules (IFR)
Prohibits annual dollar limits on essential health benefits, except that “restricted” annual dollar limits for essential health benefits (to be determined by the HHS Secretary) are allowed prior to January 1, 2014.
Applies to GROUP grandfathered health plans
Does NOT apply to individual grandfathered health plans.
Provides that HHS will take into account good faith efforts to comply with a “reasonable” interpretation of essential health benefits
Adopts a 3-year phase-in for “restricted annual limits”
Permits annual dollar limits on benefits that are NOT essential health benefits
Prohibits lifetime dollar limits on essential health benefits
Applies to INDIVIDUAL and GROUP grandfathered health plans
Permits lifetime dollar limits on benefits that are NOT essential health benefits
Permits exclusion of all benefits for a condition (i.e., does not consider an exclusion to be an impermissible limit)
AHIP-All Rights Reserved: © AHIP 2010

21. Long-Term Reforms (2014): Underwriting and Rating Requirements
Guarantee Availability/Guarantee Issue
Mandates that health insurance issuers accept every employer and individual that applies for coverage.
Allows the HHS Secretary to establish open and special enrollment periods to mitigate the potential for adverse selection.
Prohibition on Pre-existing Condition Exclusions
Prohibits the imposition of pre-existing condition exclusions.
Risk Pooling
Requires health insurance issuers to consider all enrollees in all individual market health plans (other than grandfathered plans) as a single pool.
Requires health insurance issuers to consider all enrollees in all small group health plans (other than grandfathered plans) as a single pool.
Transitional Reinsurance/Risk Corridors/Risk Adjustment Programs
Implements various risk spreading mechanisms in individual and small group markets
AHIP-All Rights Reserved: © AHIP 2010

22. Long-Term Reforms (2014): Underwriting and Rating Requirements
Federal Rate Review Process
Beginning in the 2014 plan year, requires the HHS Secretary (in conjunction with the states) to monitor premium increases of health insurance coverage offered both inside and outside the Exchange.
Note: This process will likely build on the rate review process that is developed as part of the immediate/near-term reforms.
Adjusted Community Rating
Allows for the use of the following factors:
Age (up to 3:1)
Family composition
Geography
Tobacco use (up to 1.5:1)
Prohibits the use of any factor(s) not specifically identified.
AHIP-All Rights Reserved: © AHIP 2010

23. Long-Term (2014) Reforms: Benefit Requirements
Essential Health Benefits Package*
Requires the Secretary to define an essential health benefits package (EHBP) that includes coverage for at least the following general categories:
ambulatory patient services;
emergency services;
hospitalization;
maternity and newborn care;
mental health/substance use disorder services;
prescription drugs;
rehabilitative and habilitative services and devices;
laboratory services;
preventive and wellness services and chronic disease management; and
pediatric services, including oral and vision care.
* The EHBP will need to be defined in the context of some of the immediate reforms.

24. Long-Term (2014) Reforms: Benefit Requirements
Essential Health Benefits Package*
Coverage must fall into one of four benefit levels
Bronze with an actuarial value of 60%
Silver with an actuarial value of 70%
Gold with an actuarial value of 80%
Platinum with an actuarial value of 90%
In addition, health plans offering coverage through an Exchange must offer a child- only policy (under 21) and may offer a catastrophic-only policy to young adults (under 30).
* The EHBP will need to be defined in the context of some of the immediate reforms.
AHIP-All Rights Reserved: © AHIP 2010

25. AHIP-All Rights Reserved: © AHIP 2010
Exchanges
Requires the HHS Secretary to issue regulations as soon as practical after enactment with respect to Exchanges.
Requires states to establish an Exchange for the individual and small group markets no later than January 1, 2014.
Defines “small group” as employers with at least one full-time employee and no more than 100 full-time employees.
State option for plan years before January 1, 2016, to define "small group" between 1 and 50 FTEs.
State option to expand access to large groups beginning in 2017.
Federal funding is provided to create and operate state-based Exchanges by January 1, 2014.
States exchanges must be self-sustaining beginning on January 1, , by placing an assessment or user fee on participating health insurance issuers or another funding mechanism.
AHIP-All Rights Reserved: © AHIP 2010

26. Exchanges (continued)
Within the Exchange health plans may only sell Qualified Health Benefits Plans – those plans that cover the essential health benefits package – to individuals and small groups.
Health plans must be certified by an Exchange by meeting multiple requirements, including:
specified marketing and network adequacy requirements
use uniform enrollment forms
Implementation of quality improvement strategies
accreditation of, among other things, clinical quality measures, utilization management, consumer access, provider credentialing, and appeals.
AHIP-All Rights Reserved: © AHIP 2010

27. Multi-State Plans and CO-OPs
Multi-State Plans: The Director of the Office of Personnel and Management (OPM) must contract with health plans to offer at least two multi-state qualified health plans within each state Exchange. Such plans must offer individual and small group coverage, meet all requirements with respect to a Qualified Health Benefits Plan, offer the plan in all geographic regions and in all states that have adopted adjusted community rating before the date of enactment, and provide for premium determinations based on specified rating requirements.
CO-OPs: The HHS Secretary must distribute $6 billion in loans and grants to assist in the creation of CO-OPs in each of the states. Entities operating a CO-OP must meet all requirements of state law with respect to solvency, licensure, payments to providers, network adequacy, rate and form filing, and any applicable premium assessments. CO-OPs must meet all insurance market reforms outlined in the Patient Protection and Affordable Care Act.
AHIP-All Rights Reserved: © AHIP 2010

28. Incentives to Purchase Coverage
Personal Coverage Requirement
Requires U.S. citizens and legal residents, by 2014, to purchase coverage or face a penalty (unless otherwise exempt from the mandate).
Examples of exemptions from penalty include individuals:
who qualify because of religious conscience reasons,
below the income tax filing threshold,
whose period without coverage does not exceed 3 months, and
whose premium contributions for the calendar year exceed 8% of household income.
AHIP-All Rights Reserved: © AHIP 2010

29. Incentives to Purchase Coverage
Personal Coverage Requirement
The penalty charged for failing to maintain coverage is the greater of:
a flat fee of $695/year, or
2.5% of income, phased in over time in the following manner
Year
Penalty Amount
2014
The greater of $95 or 1% of income
2015
The greater of $325 or 2% of income
2016
The greater of $695 of 2.5% of income
2017 and thereafter
The greater of $695 (+ COLA) or 2.5 % of income
AHIP-All Rights Reserved: © AHIP 2010

30. Incentives to Purchase Coverage Premium assistance percentage
Tax Credits for Health Insurance Premiums
Provides refundable tax credits to individuals with incomes between 100 and 400% federal poverty level (FPL), as follows:
FPL
Percent
Premium assistance percentage
Up to 133 2
133 – 150
3 – 4
150 – 200
4 – 6.3
200 – 250
6.3 – 8.05
250 – 300
8.05 – 9.5
300 – 400
9.5
AHIP-All Rights Reserved: © AHIP 2010

31. Incentives to Purchase Coverage Amount of Subsidy Percent
87%
Incentives to Purchase Coverage
Tax Credits for Health Insurance Cost-Sharing Obligations
Increases cost-sharing subsidies for individuals with household incomes between 100 and 400% of the federal poverty level (FPL), as follows:
FPL Percent
Amount of Subsidy Percent
100 – 150 94
151 – 200 87
201 – 250 73
251 – 400 70
AHIP-All Rights Reserved: © AHIP 2010

32. Incentives to Purchase Coverage
Employer Responsibility Requirement
Large employers that do not offer coverage and that have at least one full-time employee (FTE) receiving a tax credit through the Exchange must pay a penalty equal to the number of FTEs (minus 30 FTEs) for that month multiplied by 1/12 of $2,000.
Large employers that offer coverage and that have at least one FTE receiving a tax credit through the Exchange must pay a penalty equal to the number of FTEs that are receiving the credit for that month multiplied by 1/12 of $3,000.
Applies to employers with at least 50 employees and counts part-time employees for purposes of determining if an employer has 50 employees.
AHIP-All Rights Reserved: © AHIP 2010

33. Provisions Impacting Products
Long Term Care
National, voluntary insurance program established, the CLASS Independence Benefit Plan, to provide community living assistance services and supports, with enrollment beginning in Features include:
Voluntary opt-out for employers/employees
Premiums $123 - $240 per month
Benefit not less than $50/day
No underwriting
No lifetime caps on benefits
HIPAA benefit triggers
Dental
Pediatric dental and visions services required as a part of “essential benefits” packages that will need to be offered in the commercial market and through the Exchange beginning in 2014
These benefits will be allowed to be offered as standalone plans through the Exchange
Medigap
In 2015, calls for increased cost-sharing in Medigap plans C & F
AHIP-All Rights Reserved: © AHIP 2010

34. Timeline for Class Act Implementation
Formation of CLASS Advisory Council and development of alternative CLASS benefit plans
Establishment of CLASS Independence Fund and Formation of Board of Trustees for CLASS Independence Fund
Establishment of procedures on enrollment, disenrollment, payroll deductions
Establishment of eligibility assessment system in all states
Enactment of CLASS ACT
March 23, 2010
Secretary to establish procedures for assessment of eligibility by January 1, 2012
Secretary to designate a CLASS benefit plan by October 1, 2012
Issuance of Annual Secretary Reports to Congress Beginning January 1, 2014
Extension of National
LTC Clearinghouse
funding to 2015
2010
2011
2012
2013
2014
AHIP-All Rights Reserved: © AHIP 2010

35. Financing the Coverage Expansion: Revenue Provisions
Excise tax on high-cost insurance
Beginning in 2018, imposes tax equal to 40 percent of the aggregate value of employer-sponsored health coverage that exceeds the threshold amount of $10,200 (individual policy) and $27,500 (family policy), indexed to CPI plus one percent.
Allows for threshold adjustments for retired persons over age 55 , employees engaged in “high risk professions, and instances in which firms have higher health costs due to the age or gender of the workforce.
Annual fee on health insurance providers
Beginning in 2014, imposes premium tax on health insurance sector, allocated by market share.
Increases industry liability as follows: $8 billion in 2014, $11.3 billion in each of years 2015 and 2016, $13.9 in 2017, and $14.3 billion in 2018 (adjusted in subsequent years per premium growth).
Delay of limitation on health FSAs under cafeteria plans
Imposes $2,500 cap on contributions beginning in 2013.
Annual fee on pharmaceutical manufacturers and importers
Excise tax on medical device manufacturers
AHIP-All Rights Reserved: © AHIP 2010

36. Thank You! Leanne Gassaway Senior Regional Director, State Affairs
AHIP-All Rights Reserved: © AHIP 2010