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The Affordable Care Act

The Changing Face of Health Insurance in the US . The Affordable Care Act . PPACA Overview. The Patient Protection and Affordable Care Act is enacted March 23, 2010 (PPACA) Main Priorities Expansion of access to health care coverage Reduction of premium costs and make coverage affordable

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The Affordable Care Act

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  1. The Changing Face of Health Insurance in the US The Affordable Care Act

  2. PPACA Overview • The Patient Protection and Affordable Care Act is enacted March 23, 2010 (PPACA) • Main Priorities • Expansion of access to health care coverage • Reduction of premium costs and make coverage affordable • Creation of standardized coverage • Guarantee issue & limited pre-existing • State/Federal based exchanges where you can purchase qualified health insurance

  3. PPACA Timeline

  4. 2014 Individual Mandate • In 2014 all US citizens and legal residents are required to purchase health insurance or face a tax penalty • Tax in 2014 is: • Incomes under $20,000 will pay $95 • Incomes over $20,000 will pay 1% of income • The IRS will issue notices and attempt to collect penalties (individuals failing to pay will not be subject to criminal prosecution)

  5. 2015 + Individual Penalties • In 2015 the tax increases to: • Incomes below $25,000 will pay $325 • Incomes above $25,000 will pay 2% of income • In 2016 the tax increases to: • Incomes below $37,000 will pay $695 • Incomes above $37,000 will pay 2.5% of income • Incomes below the filing threshold of $9,350 in 2010 have no penalty (this threshold will be higher in 2014 but is not known at this time – indexed based on CPI-U each year)

  6. Individual Penalties and Caps • The penalty for an individual will be capped at the national average premium for a bronze-level plan • The CBO (Congressional Budget Office) estimates this amount to be between $4500 and $5000 in 2016 • The following two illustrations show these caps for individuals

  7. Figure A-1. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $50,000

  8. Figure A-2. Illustrative Individual Mandate Penalties for a Single Individual with NoDependents, 2014-2016, with Household Income up to $500,000

  9. Family Penalties & Caps • In 2014: • Incomes below $55,000 will pay $285 • Incomes above $55,000 will pay 1% of income • In 2015: • Incomes below $75,000 will pay $975 • Incomes above $75,000 will pay 2% of income • In 2016: • Incomes below $110,000 will pay $2,085 • Incomes above $110,000 will pay 2.5% of income • Based on a family of four

  10. Figure A-3. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $125,000

  11. Figure A-4. Illustrative Individual Mandate Penalties for a Family of Four, 2014-2016,with Household Income up to $500,000

  12. Affordability • General rule: Employee’s share of the self-only premium for the employer’s lowest-cost plan that provides minimum value cannot exceed 9.5% of household income or the employee may be eligible for a premium tax credit to purchase Exchange coverage • Treasury-proposed safe harbor: No employer penalty if the employee’s share of the self-only premium for the employer’s lowest-cost, minimum value plan does not exceed 9.5% of the employee’s current W-2 wages from the employer • Clarifies that an employer must offer coverage to employees and dependents, but that the affordability test is based on employee contribution to self-only coverage

  13. Affordability

  14. Actuarial Value • The ACA establishes community rates on all qualified health plans which are marketed as tiers with a pre-established Actuarial Value (AV) of the required Essential Benefits • Proposed AV Tiers: • Platinum = 90% • Gold = 80% • Silver = 70% • Bronze = 60%

  15. Actuarial Value • Tiers will be based on Actuarial Value (AV) Scores • AV Tiers will have a variation of +/- 2 percentage points • For example rates for the Silver tier will have an AV between 68 and 72% • This approach greatly reduces rate differentials between plans and carriers

  16. Essential Benefits • Recommended set of 10 benefits in each plan which include: • Ambulatory patient services • Emergency services • Hospitalization • Maternity and newborn care • Mental Health and Substance Abuse (behavioral health)

  17. Essential Benefits (Cont’d) • Prescription Drugs • Rehabilitative and habilitative services and devices • Laboratory services • Preventive and wellness services and chronic disease management • Pediatric services, including oral and vision care

  18. Essential Benefits • No annual dollar limits • Maximum deductible of $2000 individual and $4000 family Employers with 50+ employees: • Employer requirement to offer essential benefits • Penalty of $2,000 per employee for failure to comply

  19. Large Group Tax Penalty Calculation

  20. Additional 2014 Rules • Small group redefined as 1 to 100 • Premium taxes on carriers – can be passed directly to the fully insured plan • Medicaid Program Expansion – state decision to offer coverage to individuals up to 133% of the Federal Poverty Level • Guarantee Issue • No Pre-Existing Conditions for adults

  21. Guarantee Issue • All health insurance plans will no longer be underwritten – coverage is guaranteed regardless of health • No pre-existing condition limitations for adults • Children have been exempt since 2010 • Must have Creditable Coverage • Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days

  22. No Pre-Existing Conditions • No pre-existing condition limitations for adults • Children have been exempt since 2010 • Must have Creditable Coverage • Creditable Coverage – must have had continuous coverage for 12 months with no gap longer than 63 days • Without Creditable Coverage an adult has a 12 month pre-ex limitation

  23. Exchanges • Mechanism to purchase health insurance for individuals and employer groups with 1 to 100 employees • ACA was drafted for states to run exchanges, but a majority of states have refused to comply and deferred to the Federal Exchange, including Ohio

  24. Exchange Functions • Certify that health plans are ‘qualified’ with Essential Benefits • Operate website for comparisons • Operate a toll-free hotline • Determination of consumer eligibility for plans and affordability programs (tax credits, Medicaid, CHIP, etc.) • Facilitation of consumer enrollment

  25. Federal Exchange Rules • Accepts all health insurance carriers • Guidance indicates intent to work with agents and brokers • Will not replace a states Department of Insurance • HHS (Health and Human Services) will manage web site and consumer hotline

  26. Small Business Health Options Program (SHOP) • Exchanges will allow employer groups to enroll • Employees allowed choice among plans • Coverage from multiple carriers but one bill • Employers can also offer a single plan • Includes groups with 1 to 100 employees • In 2017 100+ employee groups can enroll

  27. Role of Brokers • Guidance from HHS suggests a role a ‘Navigators’ • Must pass certification • Recent proposed legislation on MLR and commission exclusion passed Senate in September • HHS will integrate link to web portal for certified agents/brokers

  28. Plan Design Strategies • Defined Contribution Health Plans • For employers with under 50 employees drop coverage altogether and fund a fixed dollar amount into individual medical accounts for employees to purchase their own coverage • Eliminates renewals, fiduciary liability and provides employees more choices • ERISA (self-funded plans) are exempt from ACA regulation • Additional exemptions – Unions, MEWA’s, etc.

  29. Questions? • If you want to learn more about PPACA and receive future updates subscribe to our newsletter or call me: Doug Helser, Life & Health Specialist MMA Insurance 614-834-6624 or 614-961-0339 dough@mmains.net www.mmains.net

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