The Affordable Care Act in Year 4: Progress and Challenges

1. The Affordable Care Act in Year 4—Are We There Yet? August 2013 Prepared by ConsultingHealth & Benefits Legal

2. Agenda—How We Got Here, How It’s Going, and Where We Go Now What are the ACA’s goals? Is the ACA legal? Will the ACA be repealed? Implementing the ACA (Theory vs. Reality) ACA changes – what happens when the employer mandate is delayed?

3. Goals of the Affordable Care Act—How We Got Here Offer access to health insurance for the uninsured Pay for expanded access through increased taxes and spending cuts Bend the health care cost curve downward

4. Is it Legal?The Supreme Court answered “the Broccoli Question”… A: No, the government can’t make you buy health insurance or broccoli. But if you don’t, they can tax you. Q: If the government can make you buy health insurance, can the government make you buy broccoli too?

5. …And Rewrote the Affordable Care Act—Slightly Paying for Expanded Coverage Expanded Health Insurance Coverage Health Insurance Exchanges with Reformed Rules Federal Subsidies to Buy Health Insurance In Exchanges ACA Penalties and Fees on Employer Medicare/MedicaidPayment Changes Optional State Expansion of Medicaid 2.3% tax on Advanced Medical Devices Increased Medicare Taxes on High- Income Individuals Employer Mandate Taxation of High-Cost EmployerHealth Care Coverage “Tax” on Individuals without health insurance Individual Mandate to buy Health insurance

6. The 2012 Election Answered the “Will It Be Repealed?” Question Mitt Romney 48% 206 Electoral Votes Barack Obama* 51% 332 Electoral Votes

7. Avenues for Access to Health Care in the U.S.—Before 2014 Individuals and employers can buy health insurance policies In all 50 States Medicare covering Americans age 65 and over Medicaid for needy, blind, or disabled Americans Voluntary system of employer-provided health care coverage

8. Avenues for Access to Health Care under the ACA—After 2013 50 State Health Insurance Exchanges Offering Government-Subsidized Health Insurance Policies Medicare covering Americans Age 65 and over Optional State Expansion of Medicaid to Cover Adults Earning up to 138% of FPL Mandate on Employers to Offer Health Insurance to Full Time Employees **Delayed to 2015**

9. “Core” Health Care Coverage Options under the ACA—After 2013 Subsidy Eligible in State Exchange At least 70% Actuarial Value (AV)Costs No More than 9.5% Income Traditional Medicare Approx. XX% AV Cost ?? Typical Medicaid Plan Nearly 100% AV No Cost if Eligible Employer Mandate At least 60% AV Costs 9.5% Income or Less **Delayed to 2015**

10. Less Than Half of the States Are Creating Health Care Exchanges in 2014 ME AK NH WA VT MT ND MN MA OR ID WI NY SD MI WY RI PA IA NE NJ NV OH HI IN UT IL WV CO VA CT KS MO KY CA NC TN OK AZ SC DE AR NM GA AL MS MD Creating Exchange LA TX Won’t Create Exchange FL Partnership Exchange with Feds Democrat Governor Republican Governor

11. Less Than Half of the States Are Expanding Medicaid in 2014 ME AK NH WA VT ND MT MN MA OR ID WI NY SD MI WY IA RI PA NE NJ OH NV HI IN UT IL WV CO VA KS CT MO KY CA NC TN OK AZ SC DE AR NM GA AL MS MD LA TX FL 24 States Are Expanding Medicaid Democrat Governor 26 States Won’t Expand Medicaid Republican Governor

12. CBO Projects Fewer Uninsured Due to Medicaid and Exchanges Source: Congressional Budget Office—February 2013 Will this change with the delay in the employer mandate?

13. Delayed Employer Penalties – What Does It Mean? • Employer “shared responsibility” penalties are delayed until 2015 • No way to enforce the employer “mandate” in 2014 • Employers are unlikely to expand coverage to full-time employees who are not yet eligible • …also unlikely to adjust their benefits to meet the affordability and actuarial value requirements • Employers aren’t off the hook • Group market reforms still apply, including • Maximum 90-day waiting period for coverage; • Coverage in approved clinical trials; and • Cost-sharing limits for group health plans tied to HDHP/HSA deductibles and OOP max. • Fees will still be assessed • Patient Centered Outcomes Research Institute fee • Transitional reinsurance • Fully insured plan fees • And they still have to tell their employees about the Exchanges! • Notify employees of the Exchanges • Inform employees whether employer coverage meets the definition of Minimum Essential Coverage

14. No Delays for the Individual Mandate • The ACA, as interpreted by the Supreme Court, offers individuals a choice • Buy minimum essential coverage or • Pay a “shared responsibility” tax • Most Americans already have minimum essential coverage via, e.g., • Employer group health plans (insured, self-insured, grandfathered, non-grandfathered) • Government health plans (Medicare, Medicaid, CHIP, Tricare) • Individual health insurance policies • U.S. residents or U.S. citizens in foreign nation or U.S. possession • Others are exempt • An individual may be exempt from the requirement to have MEC if cost of coverage exceeds 8% of household income • Certain groups are exempt from the requirement to have coverage • Religious exemption • Prisoners • Aliens • Members of Indian tribes • Insufficient income to file a Federal income tax return • Short gaps in health care coverage • Eligible for a hardship exemption

15. Delayed Employer Penalties – Who Wins and Who Loses in 2014? • Some employers win • Can delay a costly expansion of benefit eligibility • More time to develop a measurement mechanism to identify full time employees • …and more time to convert staffing model to accommodate more part time employees • Many employers are neutral • No change for employers who already offer coverage to most employees • Ineligible employees win (probably) • Subsidized exchange coverage will likely be better and cheaper than employer coverage • Limited data sharing means some employees may be able to game the system for one year • But purchasing insurance on the exchange coverage won’t exactly be an Amazon.com experience • Federal Government loses • Less employer coverage means more subsidies are paid out in the exchanges • More enrollment in the exchanges could tax an under-developed system • Fewer covered in employer plans means lower transitional reinsurance fee revenue • Insurance companies and health care providers– What do you all think? Is this good or bad?

16. Delayed Employer Penalties – What Happens in 2015? • Employers comply with mandate • Offer 60% AV plans • Charge close to 9.5% of employee’s income for coverage • Employees are forced out of exchange subsidies by employer coverage • Unless they switch to part-time employment • Penalty for waiving coverage increases 3-fold • Federal Government rebalances • Pays less in subsidies • Collects more penalties • Where does that leave insurance companies and health care providers?

17. CBO’s Latest Projections Show Cost of Exchange Subsidies Rising CBO’s annual projections of average Exchange subsidy per subsidized enrollee in 2014 Source: Congressional Budget Office February 2013

18. Bending the Cost Curve is Still a Challenge ACA addressed access to health insurance Not the cost of health insurance Source: Aon Hewitt

19. Are We There Yet? No…but It Sure Is an Interesting Drive! QUESTIONS???