The Patient Protection & Affordable Care Act:

How it affects you, your business, and your clients

02/11/2014

What is the Patient Protection & Affordable Care Act? - Overview

• In March, 2010, Congress passed, and the President signed a law significantly altering many aspects of our health care system. This law – the Patient Protection and Affordable Care Act (ACA) – began to take effect in 2010, with many large provisions taking effect in 2014 and 2015, and will be fully in place in 2018.

• The purpose of the law was to seek to lower the number of uninsured Americans, while keeping care affordable and accessible.

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The ACA – What’s in it?The ACA makes hundreds of reforms throughout the health care and insurance industries. This presentation focuses on the ones that most affect insurance agents and their clients.

• Insurance Exchanges

• Navigators

• Market Reforms

• Essential Health Benefits

• Guaranteed Coverage

• Employer Requirements

• Individual Mandate

• HSA/FSA/HRA/MSA Reforms

• Taxes & Fees

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Insurance Exchanges• The ACA creates two exchanges (marketplaces) in

each state – one for individual policies and a Small Business Health Options (SHOP) exchange for businesses under 100* employees.

• Beginning October 1, 2013, individuals and small business owners may use exchanges to compare and purchase plans.

• Each state chooses to operate their own exchanges, run a partnership with the federal government, or default to federally-facilitated exchanges (FFE).

02/11/2014*States may allow larger business to use SHOP exchanges beginning in 2017

State Decision on Type of Exchanges

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FL

SC

TotalsFederal: 27

Partnership: 7State: 17*

OH

WVVA

PA

NY

ME

NC

SC

GA

TN

KY

IN

MI

WI

MN

IL

LATX

OK

ID

NV

OR

WA

CA

AZ

NM

CO

WY

MT ND

SD

IA

UT

FL

AR

MO

MS AL

NE

KS

VT

NHMA

RICT

NJ

DE

MD

DC

AK

HI

State-federal partnership exchange

Federally-facilitated exchange

State-run exchange

*Includes the District of Columbia

How Do Exchanges Affect Me?

• Agents and brokers must register with exchanges and pass training programs to operate and serve potential customers shopping in exchanges.

• Clients seeking individual plans whose household income is less than 400% of the federal poverty limit may be eligible for premium subsidies if they don’t receive other coverage (e.g. employer)

• Agents licensed in states with FFE or partnership states can go http://tinyurl.com/ExchangeTraining to register for training.

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• Agents licensed in states with state-run exchanges can learn more about their exchanges, as well as registration and training requirements, by visiting the sites below:

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California http://www.coveredca.com/ Minnesota http://www.mnsure.org/

Colorado http://www.connectforhealthco.com/ Nevada http://exchange.nv.gov/

Connecticut http://www.accesshealthct.com/ New Mexico http://www.nmhia.com/

D.C. http://hbx.dc.gov/ New York http://healthbenefitexchange.ny.gov/

Hawaiihttp://

www.hawaiihealthconnector.com/Oregon http://coveroregon.com/

Idaho http://www.healthexchange.idaho.gov/ Rhode Islandhttp://www.governor.ri.gov/

healthcare/message/

Kentucky http://kynect.ky.gov/ Vermont http://healthconnect.vermont.gov/

Marylandhttp://

www.marylandhealthconnection.gov/Washington http://www.wahealthplanfinder.org/

Massachusetts http://www.mahealthconnector.org/

Navigators• Navigators are assistants contracted by exchanges to

assist consumers navigate exchanges, verify if they qualify for subsidies or Medicaid, and identify plans that may potentially suit them.

• Navigators are trained, though not licensed, and may only offer limited guidance to consumers.

• Agents, brokers, and anyone else receiving compensation from insurers may not serve as navigators.

• NAIFA is continuing to monitor and provide input on forthcoming regulations and state laws affecting navigators.

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Market ReformsThe ACA makes a great number of reforms to the insurance market. Reforms include:

• Preexisting Conditions – denial or cancellation of coverage based on preexisting health conditions is prohibited (effective 2014)

• Rescissions – rescissions are prohibited, except in cases of fraud or proactive cases for nonpayment (effective 2010)

• Community Ratings – 3:1 age band ratings and 1.5:1 tobacco ratings are established; health and gender ratings are prohibited (effective 2014)

• Dependent Coverage – parents may now keep children up to age 26 on their plans (effective 2010)

• Waiting Periods – waiting periods for beneficiary enrollment exceeding 90 days are prohibited for any plan (effective 2014)

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More Market Reforms• CO-OPs – non-profit, member-run, federally-approved insurance carriers

are established. Funding was cut for the co-op program after 24 were established (effective 2014)

• Benefit Limits – annual and lifetime benefit limits were restricted in 2010; beginning next year, they will be prohibited (effective 2014)

• Highly Compensated Employees (HCE) – all companies now must comply with internal revenue code section 105(h), and cannot discriminate in favor of HCEs (effective TBD)

• Rate Review – insurers must seek state or federal approval and justify rate increases greater than 10 percent (effective 2014)

• Medical Loss Ratio (MLR) – plans must dedicate 85 percent of premiums for large plans, and 80 percent for small/individual plans to health care costs (effective 2011)

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Essential Health Benefits

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• The ACA requires certain minimum coverage requirements, or essential health benefits (EHB).

• Coverage must meet all EHB requirements to be deemed a “qualifying health plan” (QHP), or otherwise may be subject to a penalty.

• EHBs consist of the following components:• 10 categorical areas of mandatory coverage• Minimum value for actuarial benefits

• A recent survey* found that, as of March, 2013, only 2 percent of preexisting health plans meet all EHBs.

*survey conducted by healthpocket.com

What are the Categorical EHBs?

Ambulatory Patient Services

Emergency Services

Hospitalization

Maternity and Newborn Care

Mental Health and Substance Use Disorder

Prescription Drugs

Rehabilitative and Habilitative Services

Laboratory Services

Preventative and Wellness Services

Pediatric Services, Including Oral and Vision

Categorical EHBs are 10 different categories of coverage most plans must contain to be certified as a QHP.

Self-funded, large group, and grandfathered plans are not required to meet EHB standards.

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What are the Actuarial Value EHBs?• All plans must meet a “minimum value” actuarially of the plan

covering at least 60 percent of medical costs.• Beyond the 60 percent minimum, QHPs are rated on a “metal”

tier system rating their minimum actuarial value (MAV):

• There is also a catastrophic plan available only in the individual market for consumers under 30 years of age.

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Bronze Plan

60% MAV

SilverPlan

70% MAV

GoldPlan

80% MAV

PlatinumPlan

80% MAV

Guaranteed Coverage• One ACA reform is guaranteed coverage for all

individuals regardless of preexisting conditions or health history.

• Rescissions are prohibited beginning in 2014, except in instances of fraud or proactive cancellation for nonpayment.

• Beginning in 2015, limits on annual and lifetime benefits are prohibited.

• Most wellness and preventative services are to be provided to beneficiaries without deductibles or copays.

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Employer Responsibilities• The ACA requires that by 2015* employers with 50 or

more full-time (or equivalent) employees provide QHPs to their employees, or face a fine.

• There is also an “affordability” standard, where if any employee’s cost-share exceeds 9.5 percent of their household income, the employer may face a fine.

• Employers may face an additional fine if any employee whose coverage is found to be “unaffordable” is otherwise eligible for a premium subsidy through the exchange.

02/11/2014 *In February, 2014, the Administration delayed this requirement to 2016for employers meeting certain criteria.

 Start Here

Does the employer (including other

subsidiaries/parent) have 50 full-time

equivalent employees?

Does the employer offer health

insurance that meets all 10 mandatory

coverage areas?

Did at least one employee receive a premium tax credit

or cost-sharing subsidy in an

exchange?

 

Employer must pay a penalty for

not offering coverage.

Does the insurance cover at least 60% of covered health

care expenses for a typical population (minimum value)?

Employees can choose to buy coverage in an

exchange and may possibly receive a

premium tax credit.

Do any employees contribute more

than 9.5% of household income

for employer coverage?

These employees can choose to buy

coverage in an exchange and may possibly receive a

premium tax credit.

Employer must pay a penalty for

not offering affordable coverage.

 

Penalties do not apply to small

employers. 

No penalty assessed on employer, as

it offers affordable, qualified coverage.

Yes

Yes

No

The monthly penalty is 1/12 of $2,000 times the number of full-time employees minus 30.

The monthly penalty is 1/12 of $3,000 for each full-time employee receiving a tax credit, up to a maximum of 1/12 of $2,000 times the number of full-time employees minus 30.

YesNo

No

Yes

Yes

No

How DoI KnowIf My

Business Will Be Fined?

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Frequently Asked Employer QuestionsHow Do I Figure Out How Many Full Time

Equivalent Employees I Have?

• A full-time equivalent is defined as an employee who works 30+ hours a week.

• Employers can add up part-time hours worked in a month and divide by 120. That will establish the number of equivalents. These calculations are conducted on a monthly basis.

• The IRS issued a safe harbor* as well, allowing employers to establish a “measurement period” ranging from 3 months to 1 year. If, after tracking during this period, the employer discovers they are obligated to provide coverage, they can then offer coverage for a “stability period” of equal length, though not less than 6 months.

How Do I Figure Out My Employee’s Household Income or Subsidy Eligibility?

• The short answer is you can’t – not accurately or effectively.

• The IRS issued several safe harbors* to assist with this problem, including:

- Using an employees taxable income from their W-2;

- Multiplying an employee’s hourly wage by 130 as a monthly baseline; and

- Using the federal poverty level, as otherwise the employee is Medicaid eligible.

• Employers are not expected to ascertain if employees are eligible for premium subsidies. This takes place at the exchange, and employers are notified if there is a fine.

02/11/2014 * Additional safe harbors also exist – see naifa.org/aca for details

More Employer Responsibilities• Beginning in taxable year 2012, all employers must report the

value of provided health benefits, minus certain benefits/expenses that are exempt (e.g. stand alone vision/dental, wellness programs, HSA/FSA contributions)

• In 2013, employers with 50 or more full-time equivalent employees must also report other data, including a QHP certificate, length of waiting periods, employee contributions, the number of full-time equivalent employees, among other information.

• All employers must provide a notice to all employees and all new employees beginning on October 1, 2013 of their health coverage options. Draft language can be found at http://www.dol.gov/ebsa/.

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Even More Employer Responsibilities

• Employers will now be expected to provide a private place for new mothers to nurse up to one year after giving birth. This does not apply to employers with 50 or less full-time employees if they can demonstrate undue hardship.

• Self-funded plan employers must file to pay a tax for an ACA research program (PCORI) from 2013-2019. For plan years ending before October 1, 2013, the tax is $1 per life covered. For plan years after October 1, 2013, the tax is $2 per life covered.

• Employers with less than 25 full-time equivalent employees may be eligible for a tax credit up to 50 percent of employee premium costs if they provide health coverage meeting certain standards.

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Individual Mandate

Individual Fee Assessment Schedule*

Adult Child Under 18 Family

or

% of Income

2014 $95 $47.50 max $285 1% of income over tax-filing threshold

2015 $325 $162.50 max $975 2% of income over tax-filing threshold

2016+ $695 $327.50 max $2,085 2.5% of income over tax-filing threshold

• Beginning January 1, 2014, all individuals must maintain qualifying minimum essential coverage (MEC), or face a fine.

• MEC can be maintained through an employer or individual plan, Medicaid, Medicare, CHIP, TRICARE, veterans coverage, and so on.

• Fines are assessed when taxes are filed, and account for 1/12 the annual fee multiplied by the number of months an individual lacked qualifying coverage.

02/11/2014*The greater of the two fee values is applied, until the max is reached

HSA/FSA/HRA/MSA Reforms• The ACA prohibits the purchase of over-the-counter

medicines with these accounts. Only prescriptions will qualify.

• FSA contributions will now be capped at $2,500 beginning in 2013, down from $5,000.

• Payouts from these accounts will not count towards an individual/employee’s annual cost-share limits.

• The penalties for all non-qualified withdrawals increased to 20 percent in 2011.

02/11/2014

New Taxes & Fees

02/11/2014

10% tax on all UV indoor tanning Employer Part D retiree drug subsidy eliminated

Seniors earning $85k annually ($170k couples) pay higher Medicare Part D premiums

2.3% excise tax on all medical devices

New annual tax (based on annual sales) on brand name pharmaceuticals

$500k deduction cap on contributions to insurance company executives and officers

Penalties on non-qualified HSA/MSA distributionsIndividual mandate tax for not possessing

qualified coverage

$2 tax on all private health plans (PCORI)Fine for certain employers who fail to offer

qualified coverage

.9% Medicare wage tax & 3.8% investment income tax on individuals earning $200k ($250k couples)

Fine for certain employers who fail to offer qualified coverage that is “affordable”

$2,500 cap on FSA contributionsTax on all private health insurance plans based on

insurers market share

Medical expense tax-deductible only in excess of 10% of adjusted gross income (was 7.5%)

“Cadillac Tax” – 40% tax on aggregated plan benefits > $10,200/individual, $27,500 family