The Brave New World of Health Benefit Exchanges

1. The Brave New World of Health Benefit Exchanges (Resistance is Futile: Ready or Not, Here Comes Covered California)

2. Summary of PPACA • No pre-existing condition exclusions; • No lifetime benefit caps; • MLRs (80% individual/small group; 85% large group); • Dependent coverage up to 26; • Mandate to buy coverage or pay a penalty 2014: > of 1% income or $95; 2016: > of 2.95% or $695.

3. Summary of PPACA • Businesses with 50 or more FTE employees (ramping up to 100 in 2016) must offer minimum affordable coverage to employees or pay fine ($2,000 per employee > 30). • This requirement suspended until after 2014.

4. Summary of PPACA • Mandate to purchase coverage and development of health benefit exchanges are, fundamentally, conservative ideas: Use of the marketplace to achieve greater efficiency. • Idea developed by the Heritage Foundation; implemented by then-Gov. Mitt Romney (R-Mass.).

5. Summary of PPACA • Affordability promoted by (1) expansion of Medicare, (2) subsidies for low-income consumers, (3) expanded tax credits for small business, (4) standardization and simplification of product offerings, and (5) marketplace competition.

6. Summary of PPACA • Medicaid is a joint federal and state funded program that provides health care for over 60 million low income Americans. • Every State has different eligibility requirements; PPACA would have required all states to increase eligibility levels to 138% of the Federal Poverty Line ($23,550 for a family of four).

7. Summary of PPACA • Expansion designed to "cover the gap" between those who qualify for Medicaid and those who qualify for Exchange subsidies. • About half of the uninsured in America would be covered by Medicaid Expansion; because every State already covers those who have no income, expansion would almost exclusively be covering the working poor and their families.

8. Summary of PPACA • Millions of Americans would be able to get care before they are forced to use costly last minute emergency services. • The uninsured currently cost state taxpayers billions in unpaid hospitals bills—one of the main causes of rising premium costs.

9. Summary of PPACA • The federal government pays 100% of expansion costs for the first three years and 90% thereafter until 2022. • The US Supreme Court ruled that the Medicaid expansion could not be Constitutionally required, so states have the option of to expand or not. • 25 states & DC have expanded; 23 have refused; two pending.

10. Summary of PPACA • Until 3/31/14, Americans earning < 400% of the federal poverty level (FPL) can get a type of subsidy called advanced premium tax credits. • Those making < 250% FPL can get subsidies to lower out-of-pocket costs. • Those making less than 138% FPL (in some States) may be eligible for Medicaid.

11. Summary of PPACA • Current small-business tax credit program: Up to 35% of premium (or 24% if non-profit) if employer pays at least half of the total premium. Small business = 25 or fewer FTE employees, paid on average less than $50,000. • In 2014, the tax credit increases to 50% (or 35% for non-profits) for two years.

12. Summary of PPACA • Subsidies and tax credits for small business are only available through health exchanges.

13. Summary of PPACA • Standardization: All plans cover 10 categories of essential health benefits: ambulatory patient care; emergency service; hospitalization; maternity & newborn care; mental health & substance abuse; prescription drugs; rehab services & devices; lab services; preventative & wellness care with no co-pay or deductible; chronic disease support; pediatric care, including dental and vision.

14. Summary of PPACA • All health exchange plans fall into one of four “metal tiers”—Platinum, Gold, Silver, and Bronze. • Coverage is identical in all plans; the only difference is in the amount of deductibles and co-pay requirements, scaled from most expensive to least. • QHPs agree to offer identical plans outside the Exchange—without subsidies.

15. Summary of PPACA • California divided into 19 geographic areas; QHPs set their own rates and compete with one another on price, medical network, and other service terms—just as they do today. • Exchanges hope to use the power of competitive marketplace by simplifying comparative shopping, use of multiple distribution channels, and unprecedented marketing & outreach.

16. Summary of PPACA • Two separate exchanges are being created: 1) for individuals; 2) for small business (SHOP = Small Business Health Options Program). • Within SHOP, the employer decides whether and when to participate (no open/closed enrollment), which tier of coverage (if any) it wishes to financially support, and whether it wishes to also contribute to dependent care.

17. Summary of PPACA • Within SHOP: Employees then choose the plan or plans that meet their needs. Covered California aggregates premium and commission payments and collections. Any licensed, certified agent may sell policies—even without a direct appointment. • Within the individual exchange, appointment are still required, and the insurer sets commissions—as is done currently.

18. Summary of PPACA • Many states were reluctant or hostile to PPACA—but not California. • Covered California embraces “No Wrong Door” approach, and has taken several important steps to ensure agents play a meaningful role in selling individual and small-group exchange policies.