Affordable Care Act Is Your Local Government Prepared?

1. Appalachian State University Local Government Alumni Association September 6, 2013 Affordable Care ActIs Your Local Government Prepared? Brad Roehrenbeck General Counsel Vice President Legal Services & Compliance Proprietary information of MedCost, LLC. Do not distribute or reproduce without express permission of MedCost.

2. Part Part Part 1 2 3 Part 4 Overview & Recent Implementation Updates What Lies Ahead for 2014 2015: The Employer Mandate Questions

3. 1 Overview and Recent HCR Implementation Updates Part

4. Goal #1: Patient Protection Measures • Elimination of annual & lifetime dollar limits • Retiree reinsurance • Coverage for adult dependents • Preventive care mandate (Adults, Women & Children) • Prohibition on rescissions • Nondiscrimination rules • Elimination of pre-existing condition exclusions (2014) • Guaranteed issue (2014) • Essential benefit coverage requirements (2014) • Coverage of clinical trials (2014) • Maximum waiting periods (2014) Goals of PPACA

5. Goal # 2: Access to Affordable Care • Individual mandate & tax credits • Employer mandate (pay or play) w/ affordability requirements • SHOPs & Small Business Tax Credit • Exchanges, CO-Ops, etc. • Community rating requirements • Medical Loss Ratio (MLR) • Transitional Reinsurance • Medicaid expansion • Outcomes-based healthcare delivery - ACOs, PCORI, etc. • Cost-sharing limits Goals of PPACA

6. Individual Mandate Challenge • Decisions from 4 Circuit Courts (11th, 6th, 4th, DC Circuits) • Record speed • Supreme Court Decision (Nat’l Fed’n of Ind. Bus. v. Sebelius) • Other Court Challenges • Contraceptive coverage requirement (Nonprofits & for-profits) • Tax credits through federal exchanges • Congressional efforts to repeal • Prime issue during election season • State battles – Exchanges & Medicaid expansion Legal Challenges to PPACA

7. State Exchange Decisions • 17 states – state-based exchange • 7 states – state-federal partnership • 27 default to federal exchange (FFE) • State Medicaid Expansion • 25 states expanding Medicaid • 22 states not expanding • 4 states still in ongoing debate Exchanges & Medicaid Expansion As of September 3, 2013 Source: Kaiser Family Foundation http://www.statehealthfacts.org

8. Exchanges & Medicaid Expansion As of April 1, 2013 Source: Kaiser Family Foundation http://www.statehealthfacts.org

9. 2 Part What Lies Ahead for 2014

10. Notice: Employers to provide a Notice to employees about the Exchange by October 1, 2013 • Separate model notices for employers who do and do not offer coverage • NC/SC/VA/TN – Federally Facilitated Exchange Health Benefit Exchanges

11. PAGE 1 Health Benefit Exchanges

12. PAGE 2 Health Benefit Exchanges

13. PAGE 2 Health Benefit Exchanges

14. PAGE 3 Eligibility & Waiting Period Health Benefit Exchanges Minimum Value Affordability Plan Changes

15. PCORI Fee (Comparative Effectiveness Tax) • $2 per member assessment ($1 for 1st year) • Purpose: to finance Patient Centered Outcomes Research Institute (PCORI) • 3 calculation methods • HRAs, FSAs and Excepted Benefits • Key dates: • Effective: plan years ending on/after 10/1/12. • Payment deadline: July 31 for plans ending prior year • Sunset: plan years ending after 9/30/19 (7 years) Taxes & Fees

16. Transitional Reinsurance Program • Per-covered life assessment on all employer-sponsored health plans • 3 years beginning 2014 • $63 per covered life in 2014 (expected to decrease after 2014) • Covered Lives Calculation – similar to PCORI Assessment • Payable by Insurers/TPAs • Schedule: • Submit calculation to Government: November 15 • Notice from Government: by December 15, 2014 • First payment due January 2015 (30 days from notice) Taxes & Fees

17. Health Insurance Provider Fee (Insurer Fee) • Assessment on large insurers • Effect on premiums  1.9% - 2.3% Increase • Affects insurance market only Taxes & Fees

18. Maximum Incentives - Health-contingent Wellness • Maximum incentive increased from 20% to 30% (eff. 2014) • Tobacco cessation programs up to 50% • Reasonable Alternative Standard • If unable to meet usual standard due to medical reasons • Notice required • Health-contingent programs only (versus participatory programs) • Activity-only v. outcomes-based programs • Medical hardship v. failure to meet initial standard • Medical verification Wellness Incentives

19. No Pre-Existing Condition Limitation: Elimination of any limitation for pre-existing conditions for plan participants of any age. • Out-of-pocket Maximum: Annual out-of-pocket maximums may not exceed the amount applicable to coverage related to HSAs (2014 amounts are $6,350 for single coverage and $12,700 for family coverage).(Non-GF Only) • Clinical Trials: Plans will be required to cover routine costs of participation in clinical trials for qualified individuals. (Non-GF only) Other Provisions Effective On or After 01/01/2014

20. W-2 Reporting (starting 2012) • Coverage Reporting to IRS (to monitor mandates) • Delayed to at least 2015 • Quality of Care Reporting to Participants/HHS • Effective: 9/23/10. Implementing regulations pending • Non-GF Plans Only • Transparency in Coverage Reporting to HHS  • Delayed to at least 2015 • Non-GF Plans Only Reporting

21. Rule – A group health plan may not apply a waiting period that exceeds 90 days • May impose other conditions on enrollment even if it may result in delay beyond 90 days • i.e. Minimum service hour requirement • Limitation – May not be intended to avoid compliance (1200 hr. requirement will raise red flag) 90-Day Waiting Period Limitation

22. Full Time Employees • Violation? • Employer subject to employer mandate penalty (up to $3,000/year per employee) • Penalty only applies to employees who do not receive coverage w/in 90 days • Effective date: Plan years on/after 1/1/14 90-Day Waiting Period Limitation

23. The Rule: • The ACA requires Individuals to obtain health insurance for themselves and their dependents beginning January 1, 2014. • The insurance must provide “minimum essential coverage” – i.e. , government plan, individual insurance policy, employer-sponsored health plan Individual Mandate

24. Enforcement: Non-compliance will result in a tax penalty • Amount of penalty: • 2014: Greater of $95 or 1% of household income (minus exemptions & deductions) • 2015: Greater of $325 or 2% of household income (minus exemptions & deductions) • 2016 and later: Greater of $695 or 2.5% of household income (minus exemptions & deductions) Individual Mandate

25. Subsidies: Financial assistance available for certain individuals • What kind of assistance is available? • Tax credits for some low-income individuals to subsidize purchase of insurance on the exchanges • Subsidies to reduce cost sharing (deductibles & co-payments) will also be available to some individuals • Who qualifies? • Low-income individuals whose household income is less than 400% of FPL. • Available only if coverage is purchased on the exchange • Effect of employer health plan • No tax credit or subsidy available if affordable coverage offered by the individual’s employer • “Affordable” = self-only employee premium for employer coverage is less than 9.5% of household income Individual Mandate

26. 3 HCR 2015: The Employer Mandate Part

27. Three Basic Requirements for Applicable Large Employers: • Must provide: Minimum Essential Coverage • Coverage must be: Affordable • Plan must provide: Minimum Value Employer Mandate

28. What is an Applicable Large Employer? • 50 or more FT Equivalents • Full time = 30-hour work week • Fewer than 50 FTEs? Mandate doesn’t apply to you! Employer Mandate

29. Three Basic Requirements for Applicable Large Employers: • Must provide: Minimum Essential Coverage • Coverage must be: Affordable • Plan must provide: Minimum Value Employer Mandate

30. What is Minimum Essential Coverage? • Not clearly defined • Most existing plans expected to satisfy • “Minimum Essential Coverage” ≠ “Essential Health Benefits” • Essential Health Benefits – requirement for exchange/small-market insured products • Not required for employer-sponsored plans, but if a category is offered, must offer at no annual limit Employer Mandate

31. Three Basic Requirements for Applicable Large Employers: • Must provide: Minimum Essential Coverage • Coverage must be: Affordable • Plan must provide: Minimum Value Employer Mandate

32. What is Affordable Coverage? • Rule: premiums must be less than 9.5% of gross household income • Safe harbors: • Form W-2: annual premiums* < 9.5 % of W-2 wages • Rate of Pay: monthly premium* < 9.5% of monthly wages (hourly rate x 130) • Federal Poverty Line: premiums* < 9.5% of FPL (currently $90.96/mo.) • * Premiums – self-only coverage, lowest cost option Employer Mandate

33. Three Basic Requirements for Applicable Large Employers: • Must provide: Minimum Essential Coverage • Coverage must be: Affordable • Plan must provide: Minimum Value Employer Mandate

34. What plans provide Minimum Value? • Rule: Employer pays 60% of health plan expenses • 3 calculation methods: • IRS “Minimum Value Calculator” • IRS Design-Based Safe Harbor Checklists • Actuarial Certification Employer Mandate

35. What plans provide Minimum Value? • Does the employer get credit for… • HSA contributions? Yes • HRA credits? Yes • Wellness incentives? No, unless: • Tobacco usage incentives • All 2014 incentives Employer Mandate

36. Who must be offered coverage? Full-Time Employees • Full-time employees + dependents • Dependents of full-timers (up to 26) – including GF Plans • Spouses? Not required • Full-time Standard: • EE reasonably expected to average 30 hours a week = offer coverage Employer Mandate

37. Penalties: • (1) “Sledgehammer” Penalty: • Failure to offer coverage to 95% of FTEs • Amount - $2,000 per employee (minus 30) • (2) “Tackhammer” Penalty: • Employee receives subsidy to purchase coverage through the Exchange • Coverage offered BUT: • Unaffordable = $3,000 per employee who receives a subsidy • Below Minimum Value = $3,000 per employee who receives a subsidy Employer Mandate

38. Pay or play? • Mandate penalty ($1.94M for 1,000 employees) • Tax consequences • For employees – employer coverage pre-tax; exchange coverage not • For employer – coverage deductible; penalties are not • Sharp premium increases in individual market from: • Insurer Tax • Guaranteed issue & community rating • Risk profile of exchange population • Intangibles- talent attraction & retention, culture, productivity, morale Employer Mandate

39. Delay announced early July • Employer mandate (pay or play) delayed to at least 2015 • Reporting obligations to IRS & employees to monitor employer participation 1 Year Transition Relief for Employers

40. What other provisions might be impacted? • 90-day waiting period? • Other reporting obligations (i.e. quality of care reporting)? • Exchange subsidy applications? • Other 2014 implementation delays? 1 Year Transition Relief for Employers

41. County Employees • City Employees • Effective Date HB695/SB353 – Abortion Coverage

42. Questions?