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The Affordable Care Act Managing the New Normal January 14, 2014

The Affordable Care Act Managing the New Normal January 14, 2014. Introduction. Health reform is big and comprehensive. Under the new law, health reform is achieved through three primary mechanisms: New Coverage, New Funding, New Regulators

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The Affordable Care Act Managing the New Normal January 14, 2014

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  1. The Affordable Care Act Managing the New Normal January 14, 2014

  2. Introduction Health reform is big and comprehensive. Under the new law, health reform is achieved through three primary mechanisms: New Coverage, New Funding, New Regulators Acting together, these mechanisms will create a profoundly different world for the health industry and its customers. We are 3.5 years into rule-making and implementation of health reform that stretches into 2018; many variables exist which will further establish the law.

  3. Today’s Discussion Stages of Health Care Reform Implementation The ACA: 2010-2013 (Quick Review) Price Implication of the ACA Looking Ahead • Individual Market • Small Group Market • Large Group Market Employer Considerations Questions

  4. Stages of Implementation

  5. Phase 1 Implementation Recap: 2010-2013 *Delayed

  6. Phase 2 2014 Premium Projections Individual Market Small Group Market Large Group Market +/-116% 25% to 50% Rating Rules/Product 100%+* Rating Rules/Product 100%+* Rating Rules for Healthiest Groups 25% * Individual rates expected to increase 100% to up to 200% due to product and rating changes.** May be partially offset by reinsurance payments, net impact not yet known. 20% to 25% Product 4% to 11% Product 3% to 6% Taxes/Fees 3.8%** Taxes/Fees 3.8% Taxes/Fees 3.8% 15% 15% 12% Avg. Rate Increase 15% Avg. Rate Increase 15% Avg. Rate Increase 15% Avg. Rate Increase 15% Avg. Rate Increase 12% Avg. Rate Increase 12% Pre-Reform Post-Reform Pre-Reform Post-Reform Pre-Reform Post-Reform

  7. Looking Ahead:Individual Market Impact

  8. Phase 2 What is the “Individual Mandate”? Beginning in 2014, most individuals must obtain acceptable health insurance coverage for themselves and their family members or pay a tax penalty. If you are covered under a health plan offered by your employer, orif you are currently covered by a government program such as Medicare, you can continue to be covered under those programs.

  9. Phase 2 Is financial assistance available? • Federal subsidies in the • form of premium tax credits • and cost-sharing reductions • will be available to low-income individuals • who purchase health insurance • through an Exchange.

  10. Phase 2 Who is eligible for a subsidy? Must generally have household income for the year between 100% and 400% of the federal poverty line (FPL) for the taxpayer’s family size May not be claimed as a tax dependent of another taxpayer Must file a joint return, if married Must enroll in one or more qualified health plans through an Exchange Cannot be eligible for minimum essential coverage (including a government-sponsored program or an eligible employer-sponsored plan)

  11. Subsidy Income Eligibility • Qualifying for lower costs on monthly premiums will depend on the size of your household and your annual income amount.

  12. Health Insurance Marketplace To aid low-income individuals, “Exchanges” or “Marketplaces” are created Available for individuals and small business (2-50 FTE’s in 2014) SHOP Exchange Missouri: Federal Exchange Illinois: State/Federal Partnership Exchange

  13. Plan Design – Actuarial Value • Mandated Plan Design Structure • Beginning January 1st, 2014 • What is Actuarial Value? For a general population, the plan will pay the % indicated of health care expenses while the enrollee pays the remaining • Why Actuarial Value? • Intended to establish minimum benefit and plan design standards • Allows easy comparison of plans • Who is affected? • Entire Individual and Exchange Market • Small Group (2-50 FTE’s) Market

  14. Individual and Marketplace Products • Identical Plans On and Off Exchange • Different Rates (Reinsurance Program) • Introduction of Narrow Networks (Pathways) • Huge Rate Volatility in 2014 • Open Enrollment Period (October Through March 31st)

  15. Marketplace Products and Pricing by Region • Different Carriers | Different Products | Different Pricing • Area 6 • Anthem • No BJC • No Mercy • Coventry

  16. Area 6 Pricing

  17. Small Group (2-50 Employees) Market Impact

  18. Phase 2 New Pricing Rules GuaranteeAvailability of Coverage andRenewability of Coverage

  19. Phase 2 Caravus 2014 Pricing Study The numbers are quite staggering as 36% of small employers should brace for at least a 35% pricing increase in 2014 and 50% of small employers should expect at least a 20% increase as a result of the new regulatory requirements. Average Increase: 28%

  20. Phase 2 Premium Calculations • All Plans Move to Age Table • Separate Tobacco Rates for Some Carriers • Dependents Charged Based Upon Their Age • Age Segments Every Year of Life • Metal Tier Plan Designs

  21. Phase 2 Essential Health Benefits

  22. Small Group To-Do List         

  23. Large Group (51+ Employees) Market Impact

  24. Phase 2 Employer Mandate - DELAYED UNTIL 2015! Is the company a large employer? Yes No No penalty Penalty assessed Is coverage offered to employees? No Yes Does the coverage meet minimum benefit criteria? No Penalty assessed Yes No penalty Yes Does it provide affordable coverage? Penalty assessed No

  25. Phase 2 Employer Mandate: Pay or Play Companies with >50 Full-Time Equivalents Must offer acceptable coverage at an affordable price or pay penalties Affordable Coverage Employee contribution cannot exceed 9.5% of W-2 Income Minimum Essential Benefits Plan must pay at least 60% of covered health care expenses DELAYED UNTIL 2015

  26. Phase 2 Employer Mandate: Pay or PlayPenalties DELAYED UNTIL 2015

  27. Large Group To-Do List           

  28. Phase 2 Auditing and Testing Full Time Equivalent Testing Will a company fall under Small or Large Group rules? Affordability Testing Will contribution formula need adjustment to ensure affordability? Essential Benefits Audit Does current plan design meet the minimum required benefits?

  29. Phase 2 Potential Strategies Early Renewal Strategies Analyze impact of renewing plan at the end of 2013 and Analyze renewing plan at the beginning of 2014 Contribution Formula Sliding scale contribution from 9.5% of income to a cap and Cost shifting from dependent contribution towards employee Develop Individual Channel for Dependents Allow a path for employees to purchase individual coverage for dependents as an alternative to the group plans

  30. Phase 2/3 Potential Strategies Single Carrier Options Multi-Carrier Options Private ExchangesDefined Contribution Model

  31. Phase 2/3 Private Exchange Concept STEP 1 STEP 2 Defined Contribution Risk Analysis

  32. Phase 2/3 Private Exchange Concept STEP 3 Plan Selection with Decision Support

  33. Caravus is committed to providing our clients with the most up-to-date information available on Health Care Reform. The information included in this presentation is based upon industry communication materials and government sources. The situation is fluid, as all new legislation is, so we expect changes to occur.

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