Implementation of the Patient Protection and Affordable Care Act (PPACA)

1. Implementation of the Patient Protection and Affordable Care Act (PPACA) Health Insurance Marketplaces How Health Insurance, Getting It and Paying for It will Change on January 1, 2014 Presented By Marlin McKelvy Consumer Directed Benefit Solutions

2. An Overview of Health Care Reform

3. The Affordable Care Act of 2010 • Health Insurance Marketplaces - the PPACA law requires the creation of health insurance marketplaces for each state. If a state does not create its own marketplace then the Federal Government will implement one for it. • For this reason, marketplace management will vary from state to state. Tennessee, Mississippi and 32 other states will have totally or largely Federally managed marketplaces while Arkansas will work in a “partnership” arrangement with the Federal Government.

4. Welcome to American Health Insurance’s New World Order • On January 1, 2014, Phase 2 of implementing PPACA goes into effect. PPACA will significantly change health insurance benefits, expand access to health insurance, impact the cost and practice of health care, and raise insurance premiums for the young & middle aged. • Open enrollment begins October 1, 2013 and ends on March 31, 2014. Those not enrolled by then must wait until January 1, 2015 to get coverage.

5. Previews of Coming Attractions State or Federal Health Insurance Marketplaces Community Rating Guaranteed Issue Essential Health Benefits Small Business Tax Credits Premium Subsidies up to 400% of Federal Poverty Level Limited choice in benefit plan designs (Platinum, Gold, Silver & Bronze plan designs) Out With The Old In With The New • Experience rating • Age & Gender rating • Industry type rating • Pre-Existing Condition Exclusions or Riders • Being declined coverage • A wide selection of benefit plan designs • Wide range of price points

6. Who Will Be Impacted By PPACA? • Persons under 100% or 133% of Federal Poverty Level (depending upon state) -Medicaid • Uninsurable Individuals (pre-existing conditions) • Persons with Individual Insurance (22+ million) • Small businesses with less than 50 employees • Businesses with 50+ FTE Employees (NOTE - employer mandate delayed until 1/1/2015) • Essentially, the vast majority of Americans

7. We’re On Our Way To The Promised Land. Aren’t We? Maybe not as these research results released by the House Committee on Energy and Commerce in March of 2013 indicate.

8. What are the Purposes and Functions of a Health Insurance Marketplace? • To provide an online health insurance supermarket • To offer consumers a choice of health plans that all cover certain “Minimum Essential Benefits” • To focus competition on price & quality • To provide objective information to consumers • To create an administrative mechanism for enrollment and premium payment • To speed the movement towards portable coverage

9. Behold – The Health Marketplace!

10. What Will My Insurance Carrier Options Be In Tennessee’s Exchange? • Blue Cross/Blue Shield – Yes, Individual & Small Group • Coventry – Yes, Individual, NO - on small group • AETNA – No • Humana – Yes, Individual, NO - on small group • CIGNA – Yes, individual, NO - on small group • Tennessee Health Co-Op – Yes, Individual & Small Group (concept product created under health reform law) • United HealthCare – No • Assurant Health – No • StarMark/TrustMark – No • IHC – No

11. Your Choices and Where You Live Tennessee has been divided into 8 marketplace service areas. Insurance carriers can choose which of these service areas they will sell their Marketplace based plans in. So, in some areas of Tennessee, on one side of the county line you may have multiple marketplace carrier choices but someone on the other side of the county line may have only Blue Cross/Blue Shield for their choice.

12. Meet The Metallic Plans While certain variations will be allowed, essentially all fully insured health insurance plans will be built around one of four benefit levels each with a metal name associated with it. These plans will be; PLATINUM – covers approximately 88% to 92% of costs GOLD – covers approximately 78% to 82% of costs SILVER – covers approximately 68% to 72% of costs BRONZE – covers approximately 58% to 62% of costs CATASTROPHIC - lower cost, high deductible plan available only to those age 30 and under. Unclear whether this option will be offered in Tennessee at this time.

13. Meet a Bronze Plan 0 to 20 yrs = $107.33* 25 year old = $169.70* 30 year old = $191.84* 35 year old = $206.54* 40 year old = $216.01* 45 year old = $244.07* 50 year old = $301.87* Monthly Individual Rates by Age • Deductible = $3500 • Out of Pocket Max = $7000 • Co-Insurance = 100% in-network & 50% non-network • Office Visits & Prescription Drugs = covered after $3500 deductible met • Preventive care covered at 100% * = add 15% if tobacco user

14. Meet a Silver Plan 0 to 20 yrs = $118.10* 25 year old = $186.72* 30 year old = $211.08* 35 year old = $227.27* 40 year old = $237.68* 45 year old = $268.55* 50 year old = $332.16* Monthly Individual Rates by Age • Deductible = $5500 • Out of Pocket Max = $6350 • Co-Insurance = 80% in-network & 50% non-network • Office Visits - $10 or $40 • Rx = $3/$50/$100/$200 • Preventive Care = 100% • USES NETWORK “E” A SMALLER NETWORK * = add 15% if tobacco user

15. The Health Insurance World After January 1, 2014 • There will be 2 health insurance worlds. One in the marketplaces and one outside of them. This will require close inspection by the consumer. • All fully insured health insurance issued after 1/1/2014 can not have pre-existing condition exclusions and must cover all health issues immediately. • The main advantage of the government marketplaces for individuals will be premium subsidies for those under 400% of the Federal Poverty Level

16. The Health Insurance World After January 1, 2014 • Where are the Gold & Platinum plans? Some have been filed but rates will be much higher. As subsidies are based on the 2nd least expensive Silver plan’s rates the carriers may offer mostly Bronze, Silver and possibly a Gold plan in the marketplaces to appeal to the subsidized buyers. • Individuals who qualify for little or no subsidy will often find more choices outside the government marketplaces. • EXPECT LESS CHOICE IN PROVIDERS

17. The New Intersection of Insurance, Accounting and the Tax Man Never before has an American’s tax status, income level and health insurance status been so intertwined; • Business Tax Penalties • Business Tax Credits • Individual Tax Penalties (mandate) • Individual Advanced Premium Tax Credits These are just a few areas where businesses and individuals will be looking for information and practical guidance in for 2014 and beyond.

18. PPACA Tax Penalties for Individuals • Smokers can be penalized 50% more on their insurance (Tennessee opted for a 15% penalty) • The Individual Mandate – PPACA mandates that an individual buy health insurance. • In 2014 the penalty for not having health insurance will be $95 per adult and $47.50 per child up to a maximum of $285 or 1% of family income (whichever is greater) • In 2015 the penalty for not having health insurance will be $325 per adult and $162.50 per child up to a maximum of $975 or 2% of family income (whichever is greater) • In 2016 and beyond the penalty for not having health insurance will be $695 per adult and $347.50 per child up to a maximum of $2085 or 2.5% of family income (whichever is greater) • The catch is, you have to be paying income taxes for the IRS to withhold this penalty!

19. Yes, People Are Confused

20. Marketplaces – Ready?

21. Marketplaces – Set?

22. Marketplaces – Go?

23. Public Marketplaces Will Have The Advantage of Being Administered by the Federal or State Governments!

26. Must I Use A Government Marketplace For Health Insurance? • NO! The traditional marketplace for both small group and individual insurance will continue. • At this time, the main advantages the government marketplaces offer are the advanced premium tax credit for individuals and the small business tax credit. • Businesses and organizations are already moving to private health insurance marketplaces tied into the government marketplace to provide one stop shopping for employees of all economic strata.

27. What Will PPACA’s Impact Be On Small Business (less the 50 EE’s)? • In Tennessee an estimated 15% to 50% rate increase due to PPACA requirements discussed. • The maximum employee deductible allowed will be $2000. Many small businesses have passed this and if they keep coverage they will have to lower deductibles & pay even higher premiums. • There is no tax penalty to small businesses who do not offer health insurance. What choice will many make?

28. Take Aways for Individuals and Small Businesses • Health insurance is going up a lot in 2014 • Young to middle aged to be especially hard hit • 50 to 64 year olds may see rates level or decline • Advanced premium tax subsidies may make government marketplace individual health insurance attractive for some income levels, group insurance may no longer be the answer for companies with low wage workforces • Young, healthy groups may be get better rates and benefits outside the government marketplaces

29. What’s A Small Business To Do? • Have an audit of your plan conducted to determine which provisions apply to your company • Go self-funded to avoid much of PPACA • Go with a carrier offering a longer contract period • Request an off-anniversary renewal from your carrier • Implement your own, or join, a private health insurance marketplace (defined contribution plan) • Terminate your group plan and let employees buy their own individual coverage • Purchase group coverage under PPACA guidelines either on or off the government marketplaces.

30. Consumer Directed Benefit Solutions So, get prepared, we’re in for an interesting ride in 2014.