Health Care Reform: 2014 Overview and Implications

1. Health Care Reform:2014 Overview and Implications

3. In this presentation, we’ll cover: • Health Care Reform at a glance • Impacts to individuals • Impacts to employers • Exchange overview • Market impacts and implications

4. Health Care Reform at a glance • Focuses on coverage expansion and insurance market reform • Largely maintains the employer-based system • Changes purchasing model for individuals and small groups • Financial implications for individuals, employers, providers and insurers

5. 2010-2012: What has been implemented? • Mandated Benefit Changes • Women’s Preventive • Grandfathering • Small Group tax credit began in 2010 • Summary of Benefit Coverage (SBCs)

6. Benefit and Coverage Changes for 2013 and 2014 • 2013 • W-2 reporting requirements for groups filing >250 W2s • FSA contribution limited to $2,500 as of 1/1/13 • Employers required to notify employees of Exchanges • 2014 • No exclusions for pre-existing conditions • Remove dollar annual and lifetime limits • No waiting periods greater than 90 days • Maintaining coverage for clinical trials

7. 2014 Impacts to Individuals

8. Individuals must buy coverage or pay penalty • Individuals must purchase qualified coverage or pay a penalty • Coverage options: • Medicare • Medicaid, Child Health Plus, Family Health Plus • Health care exchanges • Employer based coverage Penalty: greater of flat dollar amount or percentage of income • Starts at $95 maximum in 2014; scales up to $695 in 2016

9. Individuals can receive subsidized coverage • Income-based tax credits for purchasing coverage from a health care exchange • Cost sharing subsidies available on a sliding scale between 100% and 400% of federal poverty level (FPL) 100% FPL 133% FPL 200% FPL 300% FPL 400% FPL 500+% FPL Medicaid expansion* Subsidized private coverage through exchanges Unsubsidized private coverage Tax Credit *Tax credit in 100-133% FPL range only available to non- Medicaid eligible legal aliens 400% FPL = $92,200 for a family of 4

10. 2014 Impacts to Employers

11. Small Group SHOP Opens in 2013 • Small employer groups (<50 employees) able to purchase coverage from SHOP exchange 10/1/2013 for 1/1/14 effective date • If coverage obtained from SHOP exchange, eligible for a tax credit up to 50% of the premiums paid for their employees • Must meet specified requirements including <25 employees, average salary of <$50,000, at least 50% employer contribution to premium • Tax credit sunsets in 2016 • Penalties do not apply to groups with <50 employees

12. Small Group Benefit Changes for 2014 • Small groups must meet Essential Health Benefits on and off exchange • NYS announced that the Oxford Small Group EPO will be used as the model • Small group packages will need to be modified to meet the new standards

13. Large Group Requirements in 2014 • All full time employees must have affordable coverage • Full time = 30 hours a week or more • Equivalency formula will be available to determine how many part-time and seasonal workers equal full time • Essential Health Benefits do not apply to large/self-funded groups

14. Large Group Affordability and Coverage Requirements • Must offer coverage that meets affordability and coverage requirements or pay penalty • Coverage requirement is at least one plan offered to all employees at minimum 60% actuarial value • Employee premium contribution at <9.5% of employee income

15. Large employers begin paying penalties • Penalty paid if at least 1 employee purchases subsidized coverage on the exchange in lieu of employer coverage • Extensive reporting requirements to the IRS

16. Health Care Exchanges

17. Health care exchanges are effective January 1, 2014 • Online health care marketplaces – think Expedia • Individuals and small groups can purchase coverage • Individuals can purchase subsidized coverage if they meet criteria • State administered • Health plans that meet qualifying requirements may offer products on the exchange • RFI process beginning in January 2013

18. Exchanges have four primary roles • Establish web portal for purchasing and enrollment • Manage subsidies and eligibility • Approve health plans for participation • Assist in outreach and education

19. Exchange products must meet specific requirements • All plans must cover essential health benefits • Core service categories established by federal Department of Health and Human Services • Plans may offer up to four coverage tiers • Platinum, gold, silver and bronze • NYS requiring all metal levels for exchange participation • Optional catastrophic policy for certain individuals • Young adults (under 30) • Anyone for whom employer-based coverage does not meet affordability requirements

20. Platinum Gold Silver Bronze Catas- trophic Carrier A Carrier A Carrier B Carrier B Carrier E Carrier C Carrier D Carrier F How Exchanges Work American Health Benefit Exchange Small Business Health Options Program (SHOP) Exchange Purchaser Individuals Small groups Tax Credit/ Subsidy Members below 400% FPL Employers below 25 EEs Product Levels Platinum Gold Silver Bronze Employer Selects Member Selects Carriers Member Selects Member Selects

21. Exchange Individual Grace Period: Background If an individual enrolled in an Exchange product receives a premium tax credit, the issuer must allow a three-month premium grace period. The following considerations apply to the three-month grace period: • Individuals must have paid at least one month’s premium • The issuer is only obligated to pay claims during the first month of the grace period • The rule says that during the grace period, the issuer: • May pend claims during the second and third months of the grace period • Must notify IRS/HHS of non-payment of premium • Must notify providers of the possibility for denied claims during the second and third months • Must notify members when their payment is late • Must notify members if their coverage is terminated

22. Individual Grace Period Requirements and Design: How The Grace Period Works

23. Exchange Regulatory Status

24. Legislative Updates – Health Care Reform • Supreme Court decision that individual mandate is constitutional under “tax” law • Multiple attempts at repeal with no success • New York state updates • Executive order passed in April establishing NYS Exchange • Multiple studies underway to determine exchange structure and operations • Current Medicaid vendor (CSC) announced as Exchange vendor • Regional advisory committees and CEO meetings underway

25. Market Impacts and Implications

26. Estimated Market Shifts (National) Individual Medicaid Medicare Self-funded Large group Small group Uninsured • Individual market growth • Medicaid growth based on increase in eligibility • Medicare growth due to population increase • Relatively stable large group market • Small groups most likely to drop coverage • Uninsured movement into exchanges

27. Shift to retail market will occur • Employers • Possible reduced incentive to offer – but, must weigh costs and benefits • Perceived justifiable alternative for employees • Individuals • Influx of previously/newly uninsured buying direct • Affordability increased through subsidies • Directly making cost and coverage decisions

28. Resulting changes in the market landscape • Diminished barriers to entry • Emerging individual market • Population with unique and diverse segments • Widely available products with price as focal point • Shift from traditional sales channels to retail • Adverse selection threat/difficulty managing risk

29. Stakeholder Implications

30. Implications for Individuals • Coverage vs. penalty decisions • Will need to assume greater control over their health care spending and decisions • Will need to navigate exchanges vs. private insurance • Will need to understand subsidy impacts and processes

31. Implications for Employers • Large employers must make “play or pay” decisions • Small employers must decide if and where to purchase coverage • Must understand qualified coverage requirements and whether they meet them • Must collect and report data and information that they may not currently have

32. Implications For Physicians and Hospitals • New health plans and/or increased price sensitivity may bring new risk to reimbursement • Credit and collection challenges with high cost share • Capacity to meet increased demand • Care delivery models are evolving (e.g., Accountable Care Organizations) • Reimbursement arrangements moving to pay for quality vs. pay for service • Possible reimbursement cuts looming from Medicaid and Medicare • Need to also make decisions as employer group offering coverage to employees

33. Implications for Insurers • Emerging consumer segments • Changes in group purchasing dynamics • Reduced predictability in competitive landscape • Limited product and benefit differentiation • Challenges in managing risk • Direct-to-consumer focus

34. Thank You