Patient Protection and Affordable Care Act

1. Patient Protection and Affordable Care Act Presented by Jennifer Kluge Michigan Business and Professional Association

2. PPACA Overview • The Purpose of the Act is to: • Establish American Health benefit exchange to facilitate the purchase and sale of qualified health plans for both individual and small group markets • Intent is to reduce the number of uninsured, provide transparency, consumer education, assist individuals with access to coverage • Goal for cost is premium assistance tax credits and cost sharing reductions

3. A bit more on the Exchanges • A state may choose to participate in either the Federal Exchange or may create their own. • State Exchanges have richer goals such as increasing competition, reduce health care costs, portability and simplicity of products • The State of Michigan is planning on creating its own exchange; one for individuals and one for small groups

4. What’s Happening • Work group discussions held in March and April on the formation of the exchanges by experts, health industry, consumers and business groups • MBPA served on these workgroups and provided critical data to assist in the discussions of a State Exchange.

5. What’s Happening • The workgroups made suggestions to the State through a facilitation company. A summary of those suggestions are being compiled to be presented to key state departments: • OFIR • Department of Community Health • Budget and Finance • Governor’s office

6. How will this impact business? • Exchange is expected to be up and running by 2014 • Until then rates will continue to rise as carriers comply with provisions and requirements of the law • Plan designs will be overhauled to be compliant with the law. HHS has not yet released the minimum requirements of plans inside the exchange

7. How will this impact business • Insurance carriers are making changes now to predict these changes required by HHS • Plans inside the Exchange may or may not be more affordable to small business compared to the non exchange market. • The type of Exchange implemented is critical to determine the market changes

8. How will this impact business… • Individuals/families can receive premium credits in the exchange • Employers can receive tax credits • Employers will most likely have penalties • These in combination create incentive for individuals and employers to purchase insurance through an exchange.

9. Subsidies/Premium Credits • Individuals are ineligible for premium credits who are enrolled in the exchange through an employer that contributed toward that coverage. (small group exchange products) • No individual or family will pay more than 9.5% of their income for a health insurance plan with an actuarial value of 70% (silver plan design) • PPACA will extend Medicaid coverage to 133% of poverty, which will permit individuals to enroll with relatively little or no premiums and cost sharing

10. Subsidies/Premium Credits • Families with incomes 400% of poverty and above ($80K) will be ineligible for premium subsidy support and their premiums will be the same as they would have faced before PPACA

11. Subsidies/Premium Credits • Employers who provide coverage through an exchange will be provided a tax credit for up to 50% of their premium contribution for the first two years of coverage. The full 50% credit is provided to employers with ten or fewer employees and phases down by firm size.

12. Example Subsidy for a Family of Four • Assume the second-lowest-cost silver plan in an area charged a premium of $12,000 for family coverage and that premium credits were currently available. A family of four at 100% Federal Poverty Level (FPL) ($22,050) in that plan would be required to pay no more than $441 per year toward the $12,000 premium and would therefore receive a credit of $11,559.

13. Example Subsidy for a Family of Four A family of four just below 400% Federal Poverty Level ($88,200) would be required to pay $8,379 toward their premium and would therefore receive a credit of approximately $3,621 (i.e., $12,000-$8,379).

14. Employer Penalties • Employers with at least 50 full time equivalent employees will most likely face penalties beginning in 2014 • Equivalent to 50 full time employees can be comprised of hours of part-time employees, For example 35 full time employees and 20 part time employees will most likely pay penalties

15. Employer Penalties • Those with 50 full time employees must pay penalties only if at least one of its full-time employees obtains coverage through an exchange and receives a premium credit. (which is likely for many employers)

16. Employer Penalties • In 2014, a penalty of $3000 per year paid monthly for each full time employee that receives a premium credit. • The total penalty cap would be limited to the total number of full time employees minus 30 multiplied by $2,000 per employee.

17. Employer Penalties • For those firms with more than 200 full-time employees that offer coverage, they must automatically enroll new full-time employees in a plan and continue enrollment of current employees. (this provision might start before 2014 with a legislative change.)

18. Employer Penalty: Examples 50 Full time employees • The Company does not offer coverage, but no full-time employees receive credits for exchange coverage-No penalty (highly unlikely) • They do not offer coverage and one or more full-time employees receive credits for exchange coverage. The penalty is the number of full time employees minus 30 times $2,000. (50-20 x$2k= $40,000)

19. Employer Penalty Examples 50 Full time employees • They offer coverage and no full-time employees receive credits for exchange coverage. No penalty would be assessed.

20. Employer Penalty Examples 50 Full time employees • The employer offers coverage but one or more full-time employees receive credits for exchange coverage. The number of employees receiving the credit IS used in the penalty calculation for an employer that offers coverage

21. Employer Penalty Examples 50 Full time employees • The penalty is the lesser of: • 50-30 multiply by 2K $40,000 or • The number of full-time employees who receive credits for exchange coverage multiplied by $3,000 For 10 employees on credits $30,000 For 30 employees on credits it calculates to $90,000 which exceed $40,000 cap. So it would be $40,000.

22. Employer Penalties • There are no penalties for employers with less than 50 employees

23. Options allowed to Exchanges • Active Purchaser: Exchange purchases insurance and negotiates price on behalf of members (like a large employer) • Market Organizer: Marketing portal of products; impartial source of information (Utah) • Selective Contracting Agent; Controls the vendors, products offered, cost, quality (Mass.)

24. Options allowed to Exchanges • Multi-state, Regional, State Exchange options • Multiple Exchanges within one State (individual and group) • Monitor their own risk, selection and actuarial functions • Determine their own governing structure

25. The Process • Through the state legislature a bill must be made into law to establish an exchange • The governor must sign this bill into law • The Department of Community Health will be leading the development of this law • OFIR will be regulating the Exchange once it is implemented • If a law is not implemented by Jan 2013, Michigan will be forced to the Federal Exchange

26. Currently… • The State of Michigan led by the Department of Community Health is determining how to implement the Michigan Exchange • No legislation has been presented • Governor is not focused on issue until the Fall of 2011

27. Important Dates • Individual and Small Group Exchanges Must be operational by January 2014 • By January 2013 states must demonstrate sufficient progress towards implementation or the Federal government will oversee the exchange. • Exchanges must be self-sufficient by 2015

28. Important Dates • By 2016, small group expansion to coverage to 100 employees from 50 employees • After 2017, states have the option of expanding the exchange to employer with more than 100 employees

29. Areas of Concern • Long term financial viability of exchanges • The ability to choose coverage that is right for your employees/company • The risk pools within the exchange could be adversely selected against which could cause problems with rising costs

30. Areas of Concern • Product benefits within the exchange have not been released by Health and Human Services • Deadlines are closing fast and the amount of work necessary to comply with these dates is unrealistic • Companies tax penalties essentially fund the credits for poverty level, but is it enough?

31. Areas of Concern • The costs involved in setting up the exchanges • Poverty levels include $80K household income • Tax Penalties on Employers

32. Open Discussion