Overview of Patient Protection and Affordable Care Act of 2009 Presentation for Rates and Form Filers Updated with corr

1. Overview of Patient Protection and Affordable Care Act of 2009Presentation for Rates and Form FilersUpdated with corrected information May 12, 2010 Beth Berendt, Deputy Commissioner for Rates & Forms Office of the Insurance Commissioner April 29, 2010 1 Updated 07/20/10 with corrections

2. The �Fine Print� The Washington State Office of Insurance Commissioner (OIC) presents this information as a service to the companies we regulate. Much is unknown about this sweeping new law and thus we do not have all of the answers. Recognizing that we are trying to provide guidance through uncharted waters, some of this information may change as more becomes known. No company may rely on this presentation as a defense against future enforcement action that may be taken by the OIC. 2

3. Presentation Overview High level overview of the changes brought about by the Patient Protection and Affordable Care Act Alert Health Carriers Filers to the short term changes that will impact their products. Define our Working Definition of �Grandfathered Plans� and why this is important Define �Plan Year� for Group and Individual Products Identify Immediate Changes to eligibility, benefit design, rating and grievance and appeals process Discuss implementation of �Groups of One� � ESSB 6538 Discuss current thinking of how to expedite the filing review and approval process Address Information Sharing � and acknowledge that we don�t have all the answers! 3

4. Health care reform: What does it mean? Sets Forth an Individual mandate Establishes exchanges Mandates Insurance market reforms Creates Essential health benefit package Provide subsidies/tax credits Addresses Employer responsibility 4

5. Health care reform: What does it mean? Expands access to Medicaid Provides Medicare improvements Improves quality & contains health care costs Invests in healthcare workforce development 5

6. Implementation There are things we know . . . and There are things we don�t know. HHS will develop rules & guidelines Input from NAIC Input from state governments Some provisions will require legislative changes and some will require rule making 6

7. Implementation Enactment date is March 23, 2010 Most of the new law begins in 2014 There are some immediate benefits Some within 90 days Most within 6 months of enactment. For plan years beginning on or after September 23, 2010. Many will see the changes in Jan. 2011 when most group policies renew. 7

8. Immediate Changes Insurance market reforms Within 90 days Access to coverage in high risk pool Within 6 months No discrimination against kids No lifetime aggregate benefit limits preventive care without cost-sharing in new plans Expand dependent coverage to age 26 Minimum Loss Ratio standards 8

9. Individual MandateJanuary 1, 2014 Penalty: $695/year or 2.5% household income Phased in: $95 in 2014; $325 in 2015 Excluded from mandate & penalty: Financial hardship Religious objections Without coverage for less than 3 months The lowest cost plan exceeds 8% of income 9

10. How will people get coverage?In the individual or small group market those under age 65, beginning Jan. 2014: 10

11. Health Insurance Exchanges Goal of the Exchange: Create a one stop shopping experience for individuals and small groups that has standardized, easy to understand information on what is available. Health Insurance Partnership (HIP) WA�s mini-exchange becomes operational January 1, 2011 for small groups with low income employees. 11

12. Health Insurance Exchanges Applies to individual & small group in 2014 Large groups may enter in 2017 Range of plans: bronze to platinum Includes catastrophic for those under age 30 12

13. Health Insurance Exchanges Plans comply with WA law Exists side-by-side with private market outside of exchange States may choose to combine markets Establish reinsurance & risk adjustment mechanism 13

14. Insurance Market Reforms:As of January 1, 2014 All immediate benefits PLUS� Guaranteed issue & renewability Preventive care � without cost sharing Adjusted community rating: age 3:1 Prohibition on pre-existing condition waiting period exclusions Caps on out-of-pocket expenses 14

15. Insurance Market Reforms:As of January 1, 2014 Prohibition on excessive waiting periods Small group definition: 1-50 or 1-100 Washington�s small group definition will change October 1, 2010. Preservation of right to maintain existing coverage 15

16. Employer Responsibility 16

17. Medicare Improvements 2010 Eliminates co-pays for prevention services Provide $250 rebate for Rx 2011 50% discount on brand name Rx 2020 Rx �donut hole� completely eliminated. Overall Strengthen Medicare�s financial health

18. Grandfathered Plans: What are they and why do we need to know? HCR establishes two categories of Plans � which have different Regulatory Requirements A �Grandfathered Plan� � is an individual policy or master group policy that was in force on or before March 23, 2010 � the date of enactment of the legislation. A �Non-Grandfathered Plan� � is an individual policy or master group policy that was issued and became effective (in-force) on or after March 24, 2010 18

19. Grandfathered Plans: What are they and why do we need to know? For Group Policies � it is the effective date of the Master Policy issued to the Group or Association and not when the employee or member (or employer) joined the existing group � A new employee may be covered on either a Grandfathered or Non-Grandfathered Plan � depending on when the Master Contract providing the benefits was effective. The impact of HCR on each type of plan must be understood to avoid regulatory pitfalls 19

20. �Plan Years on or After September 23, 2010� (Revised May 12, 2010) For Large Group Single Employer Plans & Large Group Association Plans � the OIC considers the �Plan Year� to be the annual renewal date of the large group master contract. For Individual Contracts or Policies �As set forth in the: Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 under the Patient Protection and Affordable Care Act �These interim final regulations define �policy year� as the 12-month period that is designated in the policy documents of individual health insurance coverage. If the policy document does not designate a policy year (or no such document is available), then the policy year is the deductible or limit year used under the coverage. If deductibles or other limits are not imposed on a yearly basis, the policy year is the calendar year. The Affordable Care Act uses the term �plan year� in referring to the period of coverage in both the individual and group health insurance markets. The term �plan year�, however, is generally used in the group health insurance market. Accordingly, these interim final regulations substitute the term �policy year� for �plan year� in defining the period of coverage in the individual health insurance market.� As a result, the OIC believes most individual plans in the Washington Market will default to the calendar year for the �policy year� benefit designs must be modified for a January 1, 2011 effective date.  20

21. What are the immediate changes required for Non-Grandfathered Plans? No � Pre-existing Condition Waiting Period exclusions for enrollees under age 19 No � Lifetime limits on overall plan benefits. Restricted annual limits on �essential benefits� permitted until 2014 New Grievance and Appeals Process compliant with new Federal Law Young Adults may remain on their parent�s health coverage through age 25 Must cover Preventive Services and immunizations- without cost sharing Compliance with specific internal claims appeals processes and external review requirements. 21

22. What are the immediate changes required for Grandfathered Plans? These plans must comply with all the above noted components, with the exception of: No-cost sharing for Preventive health services Restricted annual limits on essential benefits and the prohibition of pre-existing exclusions for enrollees under 19 do not apply to individual �grandfathered� plans. The requirement to offer coverage to dependents up to age 26 in group grandfathered plans is limited to dependents that are not eligible for the child�s employer�s health plan. � 22

23. What is the New Preventive Services Benefit? Plans must provide coverage without cost-sharing for:  � Services recommended by the US Preventive Services Task Force � Immunizations recommended by the Advisory Committee on Immunization Practices of the CDC � Preventive care and screenings for infants, children and adolescents supported by the Health Resources and Services Administration � Preventive care and screenings for women supported by the Health Resources and Services Administration � Current recommendations from the US Preventive Services Task force for breast cancer screenings will not implemented. 23

24. What Are the Changes for Grievance and Appeals? Washington�s Patient Bill of Rights and Independent (External) Review Processes will need to change � the OIC is contemplating emergency rule making to accommodate the change � but in general: Internal claims appeal process: Group plans must incorporate the Department of Labor's claims and appeals procedures and update them to reflect standards established by the Secretary of Labor. Individual plans must incorporate applicable law requirements and update them to reflect standards established by the Secretary of HHS. � External review: All plans must comply with applicable state external review processes that, at a minimum, include consumer protections in the NAIC Uniform External Review Model Act (Model 76) or with minimum standards established by the Secretary of HHS that is similar to the NAIC model. 24

25. What are the eligibility changes? Plans that provide dependent coverage must extend coverage to adult children up to age 26. Carriers are not required to cover children of adult dependents. The Secretary will define which adult children � to whom coverage must be extended. For plan years beginning before 2014, group health plans will be required to cover adult children only if the adult child is not eligible for employer-sponsored coverage. 25

26. What Are the Changes Mandated by ESSB 6538 - Chapter 292, Laws of 2010? Effective September 29, 2010 � all carriers in the small group market must offer coverage to eligible small groups of one New application and underwriting requirements will need to be established by carriers � including a verification process for the eligibility of the individual or sole proprietor Refer to the newly passed legislation for more information: http://apps.leg.wa.gov/documents/billdocs/2009-10/Pdf/Bills/Session%20Law%202010/6538-S.SL.pdf 26

27. What are the restrictions to pre-existing condition waiting periods for children? Carriers may not impose pre-existing condition waiting period exclusions for enrollees up to age 19 (except for �grandfathered� individual plans) HHS Secretary has indicated that she intends to adopt rules that require that enrollees with pre-existing conditions be afforded guaranteed issue into the individual market. National trade associations have indicated they will go along with this request. 27

28. What are the Rating Changes? New minimum medical loss ratio standards for individuals and groups beginning plan year on or after September 23, 2010 80 percent for individual and small group plans 85 percent for large groups � The Definition of Medical Loss Ratio to be defined by HHS in consultation with NAIC � is different from current Washington State Law � and most likely the individual loss ratio will be roughly equivalent May result in increased regulatory oversight of the large group rates in Washington State � and could curtail the use of �negotiated rates� � we just don�t know at this time Rebates will be required if the medical loss ratio does not meet the minimum loss ratio & rebates go to the individual enrollees (for either individual or group) note this is a significant change for individual market � which currently goes to WSHIP to off set the High Risk Pool Assessments 28

29. What are the Rating Changes (cont.)? Individual and Small Group products continue to be subject to Community Rating Standards � but Carriers will be permitted to change rates outside of their normal annual rate change cycle � to reflect the change in benefits mandated by law � IF the rate change section of the benefit contract permits such changes. Secretary of Health and Human Services in consultation with the NAIC developing standards � request for comments is currently open with comments due by May 14, 2010. Commissioner Kreidler is Chairing an NAIC working Group on Rate Review Standards Changes to rate based on new benefits and eligibility will be closely scrutinized by OIC actuaries. Carriers must be prepared to justify there rate requests and assumptions. 29

30. Questions?? 30