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Time to Implement! Moving Forward with Reform

Time to Implement! Moving Forward with Reform. By Michael Bertaut, Healthcare Economist and Exchange Coordinator BCBSLA March 2013. Disclaimer.

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Time to Implement! Moving Forward with Reform

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  1. Time to Implement!Moving Forward with Reform By Michael Bertaut, Healthcare Economist and Exchange Coordinator BCBSLA March 2013

  2. Disclaimer • All information in this presentation INCLUDING THE OPINIONS OF THE PRESENTER are solely for illustrative purposes. The information is based on certain assumptions, interpretations, and calculations that are not necessarily accurate with regard to provisions of PPACA, HCERA, HIPAA, COBRA, ERISA, and other rules, regulations, guidance and all other documents issued by relevant state and federal agencies with regard to these laws and any other relevant laws. The information provided should not be considered as legal, financial, accounting, planning, or tax advice. You should consult your attorneys, accountants, and other employees or experts of this type of this type of advice based on their own interpretations, calculations, and determinations of applicable laws, rules, regulations, guidance, and any other documents and information that they determine may be relevant. The authors make guarantees or other representations as to the accuracy or completeness of the data in this presentation. • BCBSLA expressly disclaims any liability for information obtained from use of this presentation by any BCBSLA employee or by any other person. No warranty of any kind is given with regard to the contents of the presentation.

  3. As an Employer, What 4 Questions Must I Answer? • How many benefit eligible Employees do I have? • Am I an Applicable Large Employer (ALE)? • ALE Yes, or No, What do I do? • To be or not to be Grandfathered?

  4. Who is benefit eligble? • Any employee who averaged 30 hours of service per week or more in the previous look-back period (3 to 12 months.) • Any new hire who, after 90 days, is REASONABLY EXPECTED to work more than 30 hours/week • If a REASONABLY EXPECTED determination cannot be made after 90 days, then another 90 day period may be used to make the call. • If eligibility determination is made, and then hours change, coverage must continue for the LONGER of the look-back period or 6 months.

  5. What is a Common Law Employee? • FOR THE ALE COMPUTATION, the common law definition of employee must be used: • “Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done.This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.” (www.irs.gov)

  6. How Do I Know if I have to Provide Coverage? Controlled Groups and Associated Groups Must be COMBINED for this computation!!!

  7. Ok, I’m not an ALE, what now? • No obligations to provide affordable coverage • No obligations to provide valuable coverage • No obligations to offer coverage • No danger of fines under 4980H • Note: ANY GROUP may offer affordable coverage and lock their employees out of Advanced Tax Credits in the Exchange.

  8. Ok, I’m an ALE, What Do I do now? • You have many new Federal Obligations that can be condensed into 3 major options: • AVOID FINES--Must offer “affordable”, “minimum value” health coverage to 95% of all eligible employees. Must offer coverage to children under age 26 (but not spouse and subsidy not required). • RISK SOME FINES—Offer coverage that fails one of the tests in #1 above. Employer is fined $250 per month per employee who “leaks” to the Exchange. Max fine is total fine computed under “3” below. • PAY THE FINES –Offer no coverage at all, employer must pay $2,000 per year per uncovered employee minus first 30 lives.

  9. What Does “Affordable” Mean? • Federal Poverty Line: • Use 100% of FPL x 9.5% = affordable premium for all employees. • In 2012, would be $11,170 x 9.5% = $1,061.15 • Rate of Pay: • Use hourly rate times 130/month to determine wages x 9.5% to compare to premium. • At $10/hour, $1,300/month x 12 x 9.5% = $1,482.00 • 9.5% of Employee Box 1 W-2 income in premiums for employee-only coverage. • Determined at end of calendar year, and on an employee-by-employee basis. • Partial-year adjustments allowed for new employees who work part of a year. • At $20,800/year ($10/hr, 40 hrs/week) = $1,976.00

  10. What Happens if I fail the Test in 2014? • Scenario 1: I offer coverage but it fails the affordability or AV Test. • Every employee who shops on the Exchange and draws an Advanced Tax Credit becomes a $3,000/year fine in 2015 • The Fine is NOT tax deductible • Scenario 2: I fail to offer coverage at all to a block or all of my employees. • I must pay a fine computed by the following: • (# of eligibles – 30) x $2,000/year) • Fine is NOT tax deductible

  11. When do ALE’s have to comply? • In general, an ALE must comply with the new rules or face fines by his RENEWAL DATE in 2014, not necessarily 1/1/2014 • BUT…… • If a group today has a fiscal year plan, and offers it to less than 33% of their employees (part timers AND full timers) or currently cover less than 25% of employees, then they MUST comply with the new ALE standards for affordability/actuarial value/offer to 95% • or fines will start on 1/1/2014, not on their renewal date.

  12. Grandfathering: Current Benefits to Groups • Not required to add USPTF Schedule B Tests and screenings to the Plan at zero dollar • Not required to add new women’s coverage to the Plan at zero dollar • Not required to add new coverage for FDA clinical experimental trials • Not required to reimburse ER docs at higher rates, especially out of network docs • Will not be charged transitional reinsurance fees • Will be pooled for rates (2-50) with much healthier groups • Avoid sharing cost of exchange fee on premiums. • Will not be subject to rate compression due to Age Rating, or dissolution of State UW Laws (+40% to -18%) “You’re Darn Tootin’ Listen to your Grandfather!!”

  13. Who Pays? Sample Rate Compression Scenario for Louisiana 20% Below 20% Above 50% Above 50% Below +40%! -18%! A $125 G $275 B $150 F $250 C $175 D $200 E $225 Today, State Law allows a +/- 50% Spread in Small Group Rates In 2014, no Underwriting is allowed in Groups 2-50 Average Rate $100 $300 $200

  14. Michael R. BertautHealthcare EconomistLINKED-INRecommendations WELCOME!!!Michael.bertaut@bcbsla.com Office: 225-297-2719 Cell: 225-573-2092

  15. Appendix and Additional Material Including non-business audience slides

  16. What Will We Talk About? • What are the Rules? • New Requirements for Businesses • New Requirements for Health Insurance Companies. • New Requirements for Consumers. • Partner/Agent/Broker web site maps. • Financial Impacts of the Act on all stakeholders.

  17. Do I as an Individual HAVE to have Health Insurance? • Yes. The Individual Responsibility Requirement mandates all Americans to have health insurance policy • Starts 1/1/2014 • Exemptions for unaffordable coverage (above 8% of income), certain religious groups, native Americans. • Failure to comply means confiscation of tax refund starting at $95 for first year and rising to $695 or 2.5% of income by 2017.

  18. Where Do I Buy It? • Exchanges are designed to remove the two most common barriers to entry for health insurance coverage: • COST-through the use of federal advanced tax credits • UNDERWRITING-by making all coverage guaranteed issue with no medical questions or underwriting on the application. • Who Qualifies? • Non-Medicaid eligibles from 100% to 400% of federal poverty level projected Income who are NOT offered affordable coverage at work. • Who Runs It? • In Louisiana the Federal Government will operate our exchange. In some other states, Exchanges will be locally operated. • WHEN DOES IT OPEN? • 10/1/2013 with open enrollment through 3/31/14 • Coverage effective 1/1/14.

  19. What’s an Exchange? • WHAT’S THE PLAN? • To create a streamlines, easy to use, consumer friendly, health neutral, gender neutral, FEDERALLY REGULATED market for health insurance. • HOW’S IT GOING? • Lots of bugs to work out. Test applications appear to take over an hour and seem more complex than expected. Many unanswered questions. • WHO PAYS FOR IT? • Hospitals, Doctors, Insurance companies, Medical Device Manufacturers, Large Employers, Drug Companies. • In other words, we all will pay for it. • HOW MANY PEOPLE WILL USE IT? • CBO estimates 6 million families in 2014 (low).

  20. How Will That Insurance Be Priced? From this grid we can see the big winners are older women with health conditions, and the biggest losers the young, healthy males.

  21. Males get small rate decreases at ages 56-64, peaking at (-11%) Females get rate decreases at ages 22 through 54, peaking at (-35%) at age 40. Dramatic decrease in Newborn Rates (-67%) Males Age 22-42 get rate increases up to 38%!

  22. How Will Insurance Be Priced?

  23. Who Can’t Get Help? • Incarcerated. • Income above 400% of FPL. • Offered coverage at work that is affordable and at least 60% AV. • Medicaid or CHIP eligible (income <138% fpl in states that have agreed to expand). • Claimed as a dependant on someone’s taxes. • Unable to attest to residency in a single state. • In the country unlawfully. Once a Subsidy is Accepted, Individual MUST file Tax Return for That year.

  24. Can I Qualify for Free Insurance?

  25. Who Gets Left Out? The Healthcare Income Continuum (PPACA) 401% of FPL and above, you are on your own! 11% to 138% New Medicaid Expansion 0-11% Existing Medicaid 139% to 400% Exchange Subsidy Eligible 0% Federal Poverty Level Income PPACA when fully enforced provides coverage and assistance for most Americans from 0 to 400% of Federal Poverty level Income Without Medicaid expansion Louisiana will have no insurance help for citizens between 11% and 100% of FPL unless they have employer coverage. Coverage Gap Around 200,000 people considered “Working Poor” will be without insurance.

  26. Should Louisiana Expand Medicaid? • 100% FMAP for First 3 years, settling at 90% FMAP going forward. • DiSH money reduced by 50% by 2016, eventually eliminated • PPACA built with expansion in mind, covers working poor. • 500,000+ will get access to no-premium health insurance • Fed does not fund administration of new population • La. Budget already $1.0B in the red • 90% match may not be permanent • 180k+ of expansion population already has private insurance. • Another 90k will be Exchange eligible. • Medical Capacity? Yes EXPAND! No, Don’t EXPAND! 27

  27. What Will We Talk About? • What are the Rules? • New Requirements for Businesses • New Requirements for Health Insurance Companies. • New Requirements for Consumers. • Partner/Agent/Broker web site maps. • Financial Impacts of the Act on all stakeholders.

  28. Do I as an Individual HAVE to have Health Insurance? • Yes. The Individual Responsibility Requirement mandates all Americans to have health insurance policy • Starts 1/1/2014 • Exemptions for unaffordable coverage (above 8% of income), certain religious groups, native Americans. • Failure to comply means confiscation of tax refund starting at $95 for first year and rising to $695 or 2.5% of income by 2017.

  29. Where Do I Buy It? • Exchanges are designed to remove the two most common barriers to entry for health insurance coverage: • COST-through the use of federal advanced tax credits • UNDERWRITING-by making all coverage guaranteed issue with no medical questions or underwriting on the application. • Who Qualifies? • Non-Medicaid eligibles from 100% to 400% of federal poverty level projected Income who are NOT offered affordable coverage at work. • Who Runs It? • In Louisiana the Federal Government will operate our exchange. In some other states, Exchanges will be locally operated. • WHEN DOES IT OPEN? • 10/1/2013 with open enrollment through 3/31/14 • Coverage effective 1/1/14.

  30. What’s an Exchange? • WHAT’S THE PLAN? • To create a streamlines, easy to use, consumer friendly, health neutral, gender neutral, FEDERALLY REGULATED market for health insurance. • HOW’S IT GOING? • Lots of bugs to work out. Test applications appear to take over an hour and seem more complex than expected. Many unanswered questions. • WHO PAYS FOR IT? • Hospitals, Doctors, Insurance companies, Medical Device Manufacturers, Large Employers, Drug Companies. • In other words, we all will pay for it. • HOW MANY PEOPLE WILL USE IT? • CBO estimates 6 million families in 2014 (low).

  31. How Will That Insurance Be Priced? From this grid we can see the big winners are older women with health conditions, and the biggest losers the young, healthy males.

  32. Males get small rate decreases at ages 56-64, peaking at (-11%) Females get rate decreases at ages 22 through 54, peaking at (-35%) at age 40. Dramatic decrease in Newborn Rates (-67%) Males Age 22-42 get rate increases up to 38%!

  33. How Will Insurance Be Priced?

  34. Who Can’t Get Help? • Incarcerated. • Income above 400% of FPL. • Offered coverage at work that is affordable and at least 60% AV. • Medicaid or CHIP eligible (income <138% fpl in states that have agreed to expand). • Claimed as a dependant on someone’s taxes. • Unable to attest to residency in a single state. • In the country unlawfully. Once a Subsidy is Accepted, Individual MUST file Tax Return for That year.

  35. Can I Qualify for Free Insurance?

  36. Who Gets Left Out? The Healthcare Income Continuum (PPACA) 401% of FPL and above, you are on your own! 11% to 138% New Medicaid Expansion 0-11% Existing Medicaid 139% to 400% Exchange Subsidy Eligible 0% Federal Poverty Level Income PPACA when fully enforced provides coverage and assistance for most Americans from 0 to 400% of Federal Poverty level Income Without Medicaid expansion Louisiana will have no insurance help for citizens between 11% and 100% of FPL unless they have employer coverage. Coverage Gap Around 200,000 people considered “Working Poor” will be without insurance.

  37. Should Louisiana Expand Medicaid? • 100% FMAP for First 3 years, settling at 90% FMAP going forward. • DiSH money reduced by 50% by 2016, eventually eliminated • PPACA built with expansion in mind, covers working poor. • 500,000+ will get access to no-premium health insurance • Fed does not fund administration of new population • La. Budget already $1.0B in the red • 90% match may not be permanent • 180k+ of expansion population already has private insurance. • Another 90k will be Exchange eligible. • Medical Capacity? Yes EXPAND! No, Don’t EXPAND! 39

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