2014 Update of Affordable Care Act Provisions

South Dakota Association of School Business OfficialsAnnual Fall ConferenceSeptember 25, 2013

Lisa CarlsonDirector of Planning & Regulation

Our discussion today…

2014 Implementation Overview

• Individual mandate to have health insurance• Six Major Changes to Small Group and Individual Insurance • The Public Marketplace (insurance Exchange) and how it will work• Large Employer “Play or Pay” Mandate (Postponed until 2015)• Who’s eligible for subsidies on the exchange?• Notice to Employees of Insurance Exchange Options due Oct. 1

The Individual Mandate Starts in 2014

Penalty for Failing to have Insurance

If you don’t have insurance in 2014, you will pay a tax penalty (that increases over time)

• 2014 - greater of $95 per adult or 1% of taxable income

• 2015 - greater of $325 per adult or 2% of taxable income

• 2016 - greater of $695 per adult or 2.5% of taxable income

• After 2016, the tax penalty increases annually based on a cost-of-living adjustment

Penalty for Failing to have Insurance

• Penalty is pro-rated - a person will only pay one-twelfth of the total annual penalty for each month without coverage

• The penalty for a child is half that of an adult• A maximum penalty would be calculated based

on premiums for plans offered through the Exchange

Penalty for Failing to have Insurance

There are a few exceptions to the penalty, including:• Religious reasons• Not present in the United States• In prison• Not able to pay for coverage that is more than

eight percent of the household income• An income that is below 100% of the poverty

Level• Having a hardship waiver• Not covered for less than three months during

the year

Individual Marketplace

Yes, you’ll be forced to have health insurance, but the government will help you pay for it and make it accessible either through…

• The federal insurance exchange, The Marketplace; or• By making large employers offer coverage to all full-

time employees, i.e. pay or play mandate – NOTE: this has been delayed until 2015

Individual Marketplace

Who can purchase insurance on the exchange?

• Individuals who do not have access (i.e. part time EEs) to “minimum essential coverage” or “affordable coverage” through their employer (large or small)

Who would want to purchase insurance on the exchange?

• Individuals who are eligible for financial assistance:1. Advance premium tax credits and/or2. Cost sharing reductions to out-of-pocket

maximums/• Individuals eligible for Medicaid will also be identified

through the Marketplace

Individual MarketplaceWhat does “affordable access” to insurance mean? • Are you eligible for group-sponsored insurance

where your cost for self-only coverage under the lowest cost option plan does not exceed 9.5% of the employee’s income as reported on their W-2, Box 1 or rate of pay?

• If yes, then neither you nor your family are eligible for subsidies in the Marketplace, regardless of how much you have to pay for family coverage (which may be more than 9.5% of your salary)• Assumes the employer offers coverage to spouses and

children (permissible for small groups)• Even if employer contributes 0% to a family policy,

the spouse & dependents would not qualify for subsidies in the Marketplace

South Dakota’s Federally Run Exchange• 92,441 (13%) of South Dakota residents are uninsured and

eligible (HHS.gov) for insurance coverage through the Marketplace

• 3 companies licensed to sell in South Dakota’s Marketplace

Individual Market• Sanford Health Plan• Avera Health Plans• DakotaCare

Small Group Market• Sanford Health Plan• Avera Health Plans• DakotaCare

Six Major Changes to Health Insurance

South Dakota’s Federally Run Exchangewww.healthcare.gov

The Public MarketplaceAn Online Buying Experience!• Think “Expedia.com” or “Zappos.com”• Facilitate the purchase of Qualified Health Plans (QHPs)• Offer similar Plan and Carrier options side by side for enrolling• Two Types: Individual and SHOP (small business)

• In 2017, states may permit employers in the large group (100+) market to buy group insurance inside the Exchange

• Operate toll-free hotline to provide consumer assistance• Identify those eligible for financial assistance

• Premium Tax Credit• MOOP cost-sharing reductions• CHIP• Medicaid

• No “wrong door” when purchasing through Marketplace

The Public MarketplaceWhat does covering pre-existing conditions mean?• Everyone will have guaranteed access to health

insurance, including coverage for pre-existing medical conditions for those who purchase coverage on their own

• Consumers will be able to purchase health insurance in open enrollment periods even after they become ill or injured

• No one will be denied health insurance or charged more because of a medical condition

The Public MarketplaceWhat does broader benefits mean?• Requiring “Essential Health Benefits” • The ACA expands the list of required benefits, many of

which are not included in the coverage many people currently choose to purchase today

• As a result, millions of Americans will have coverage that is more comprehensive and hence more valuable than they have today

Standardized Metal Plans

Plan Pays:Bronze = 60% coverage of benefitsSilver = 70% coverage of benefitsGold = 80% coverage of benefitsPlatinum = 90% coverage of benefits

Member Pays:Bronze = 40% coverage of benefitsSilver = 30% coverage of benefitsGold = 20% coverage of benefitsPlatinum = 10% coverage of benefits

Essential Health Benefits10 Minimum Standards covered as part of the required “Benefit

Design”:1. Ambulatory patient services2. Emergency services3. Hospitalization4. Maternity & newborn care 5. Mental health and substance use disorder services, including

behavioral health treatment6. Prescription drugs7. Rehabilitative and habilitative services and devices8. Laboratory services9. Preventive and wellness services and chronic disease management10.Pediatric dental and vision care (up to age 19)

Limiting Premium Differences• Effective 1/1/2014 for non-grandfathered small group and

individual plans• Can no longer differentiate rates by gender (male vs. female)• In individual market, insurers can no longer underwrite based on

health status (known as guarantee issue)• Premiums may only vary by:

- Age (3:1 maximum) – we’re now at 5:1 in South Dakota- NAIC defined permissible age bands- Tobacco (1:5:1 maximum) – we’re at 1:15:1 now- Geographic rating are determined in each state for all carriers – each carrier currently does their rating regions based on provider contracts- Two coverage tiers (individual or family) using per member rating or community rating

• Rates for these plans sold inside the exchange or outside the exchange must be the same, whether sold direct or through an agent

South Dakota’s Federally Run Exchange

Limiting Maximum Out-Of-Pocket…

Maximum Out-Of-Pocket (MOOP) – For 2014, the annual cost-sharing limits cannot exceed $6,350 for an individual and $12,700 for families. This includes deductible, coinsurance, medical and pharmacy copay amounts.

MOOP Tips:- Applies to non-grandfathered individual, small group and large group markets beginning in 2014- Out-of-network services do not count towards deductible caps or MOOP- All cost sharing does apply towards MOOP, including medical and pharmacy copays- Medical and pharmacy copay amounts apply towards MOOP, but they do not apply towards the deductible caps

Financial Assistance Available through MarketplaceProviding Financial Assistance• New expanded benefits and limits on cost-sharing will

increase premiums for some, and decrease premiums for some as well

• But the ACA provider financial assistance for qualifying applicants through the health insurance exchanges• Individuals can get premium tax credit and/or cost sharing

reductions• Small employers may be eligible for small group tax credit

Financial Assistance Calculationwww.healthcare.gov • Based on 2014 Federal Poverty Levels (FPL)• This table shows the maximum percent of income you should have

to pay for healthcare premiums according to the ACA• When applying for coverage through the Marketplace, the tool

will calculate your options for you

Cost-Sharing ReductionsCost-sharing Subsidies are when the government helps pay the costs of deductibles, coinsurance & copayments (does NOT include premiums, out-of-network provider costs) Which Exchange Plans qualify for reductions?

• Only individual and family Silver plans qualify for cost-sharing subsidies.

Who qualifies for Cost-Sharing Reductions?• Individuals making less than 250% of the federal poverty line

(FPL)

How do the Cost-Sharing Subsidies breakdown?• The Silver plan is set up so that 70% of medical costs are

covered• With cost-sharing subsidies the government will pay of out-of-

pocket health services based on a sliding scale

Cost-Sharing Reductions• If your income is 100-150% of the FPL, the actual coverage of a

Silver plan is 94%• If your income is 150-200% of the FPL, the actual coverage of a

Silver plan is 87%• If your income is 200-250% of the FPL, the actual coverage of a

Silver plan is 73%

Premium Tax Credits

The Marketplace• Initial Open Enrollment Period for Individuals

• October 1, 2013 – March 31, 2014• Outside the open enrollment period only qualified events will

allow an individual to make changes to their plan• Small employer groups can continue to have year-round open

enrollment periods• Individuals and Small employers can continue to shop outside of

the Marketplace. But why would you do that?• Your small business is not eligible for the tax credit• Individuals not eligible for financial assistance• Benefits are the same inside and outside the Marketplace• Premiums are the same inside and outside the Marketplace

The Public MarketplaceHow will people know the Insurance Exchange exists?• Public awareness campaigns• Employers will be required to send a Model Notice to Employees of

Coverage Options to their employees by Oct. 1, 2013• Employers that are subject to the Fair Labor Standards Act

(FLSA), regardless of size, funding type or if they offer health coverage today or not, must provide a notice of coverage options to each employee.

• Employees must receive the notice whether or not they are enrolled in a health plan today or if they are part-time or full-time.

• Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.

The Public MarketplaceAn Online Buying Experience!• Initial Open Enrollment Period for Individuals

• October 1, 2013 – March 31, 2014• Outside the open enrollment period only qualified events will

allow an individual to make changes to their plan• Small employer groups can continue to have year-round open

enrollment periods

Questions? Thank you…

Sanford Health Plan is committed to providing information to help you understand the many layers of Health Care Reform and how it may impact your business. We appreciate your time today and please contact our team at any time or visit the Health Care Reform section of our website at sanfordhealthplan.com