Health Care Reform

1. Health Care Reform Jennifer T. Flowers, Associate General Counsel November 14, 2011

2. Health Care ReformDisclaimer This BlueCross BlueShield of Tennessee presentation is for educational and informational purposes only and is not intended to be legal advice. Before making any important decisions related to health care reform, you should consult your own legal counsel.

3. Health Care Reform Agenda • Medical Loss Ratio and Rebates • Grandfathering • Lifetime/Annual Limit Prohibition • Preventive Services • Appeals/External Review • W-2 Reporting • Automatic Enrollment of Employees • Play or Pay Penalties • Questions

4. Medical Loss Ratio & Rebates

5. Health Care ReformMedical Loss Ratios and Rebates • Medical Loss Ratio (“MLR”) requirements established for insurers. • If MLR target is not met, carriers must issue a premium rebate to groups and individuals pro rata based on premium contributions.  Medical Loss Ratio formula: (Dollar value of clinical services + Quality improvement) (Premium dollars – Taxes)

6. Health Care Reform Medical Loss Ratio and Rebates • MLR targets: • Large Group -- 85% • Small Group -- 80% • Individual -- 80%

7. Health Care Reform Medical Loss Ratio and Rebates • Rebates must be paid if the MLR targets are missed • Rebates paid in August 2012 • Paid in the aggregate across entire line of business • Insurer option • Subscribers are entitled to a pro rata share based on premium contribution

8. Grandfathering

9. Health Care ReformGrandfathering • Plans that were in existence on 3/23/10 • Exempt from certain PPACA mandates • Must avoid certain changes to remain grandfathered

10. Health Care ReformGrandfathering • Five things that cause a plan to lose its grandfathered status: • New insurance policy, certificate, or contract • Changing carriers allowed in limited circumstances • Reduction of Benefits • Increases in cost sharing requirements • Decrease in employer contribution rate • New/modified annual limits

11. Health Care ReformGrandfathering • Five things that will not impact a plan’s grandfathered status: • Adding family members, or employees • Changing premiums • Enhancing/increasing benefits • Plan changes to comply with Federal laws • For SF plans, changing carriers or TPAs

12. Health Care ReformGrandfathering • Grandfathered plans get to avoid the following PPACA requirements: • Preventative care • Appeals and external review • Coverage of Adult children (up to 26) if they have access to other coverage • Choice of provider without referral/emergency services • Non-discrimination rules • Non-discrimination rules related to providers • Clinical Trials Coverage • Quality of Care reporting • Transparency Disclosures

13. Annual & Lifetime Limits

14. Health Care ReformNo Annual or Lifetime Limits • Prevents Lifetime or Annual limits • Applies only to essential benefits • No definition of essential benefits • Phased in Annual limits • Must be fully implemented for plan years on or after 1/1/2014

15. Health Care ReformNo Annual or Lifetime Limits • Plans can request waivers on Annual Limits • Multi-year approvals available in 2011 (9/22/11 deadline) • Plan must give notice of waiver • Stand-alone HRAs do not need waivers

16. Preventive Services

17. Health Care Reform Preventive Services • Requires First Dollar Coverage for preventative services • Only required for In-network • Effective for plan years after 8/1/12 • HHS adopted Health Resources and Services Administration (HRSA) guidelines for what constitutes preventative services

18. Health Care Reform Preventive Services • Specific women’s services added to list for first dollar coverage. For example: • Well-woman visits • Breast pumps • Lactation consultation • Birth control • All FDA approved methods • “As prescribed”

19. Appeals & External Review

20. Health Care Reform Appeals/External Review • Internal Appeal/External Review • Medical Necessity only • Tennessee process approved • Notice Requirements • Treatment & Diagnostic codes – only required upon request • Linguistics • Uniform 10% threshold • Only 4 languages: Spanish; Chinese; Tagalog; Navajo • Implementation delayed until 1/1/2012 • Summary of Benefits • Effective 3/23/2012 • 60-day notice of material change

21. W-2 Reporting

22. Health Care ReformW-2 Reporting • Informational only, continues to be not taxable • Optional for all employers in 2011; mandatory 1/1/2012 • Transitional relief to small employers • W-2s for terminated employees

23. Health Care ReformW-2 Reporting • What to Report: • Any employer-sponsored coverage except: • Archer MSAs • HSAs • Salary reductions for FSAs • Long-term care coverage • Dental and vision coverage

24. Health Care ReformW-2 Reporting • Amount to Report: • Amounts paid by employer and employee • Valuation Methods • Premiums Charged • COBRA Applicable or Modified Premium

25. Health Care ReformW-2 Reporting • Additional Resources • www.irs.gov (the PPACA pages) • Notice 2010-69 • Notice 2011-28 • FAQs • www.irsvideos.gov

26. Automatic Enrollment

27. Health Care ReformAutomatic Enrollment • Employees must be automatically enrolled • Employers with 200 full-time employees • New full-time employees and continue present enrollment • Effective once regulations are issued; expected by 2014.

28. Pay or Play Penalty

29. Health Care ReformPay or Play Penalty Employers can pay a penalty under two scenarios: • No coverage offered: $2,000/employee • Coverage offered: $3,000/employee that obtains subsidized coverage in exchange • Sliding scale, up to 400% FPL ($88,000/year for family of 4) • Two types: Tax credit and Reduction in cost share • Only available through exchanges • Not Medicaid eligible

30. Health Care ReformPay or Play Penalty • Employers with 50 or less full-time equivalents are not subject to the penalty • Employers can avoid penalty by offering all full-time employees “affordable minimum essential coverage” with a minimum actuarial value

31. Health Care ReformPay or Play Penalty Therefore, employers must offer a plan that meets the following three requirements: • Affordable • Minimum Essential Coverage • Minimum Actuarial Value

32. Health Care ReformPay or Play Penalty • Affordable = employee’s required contribution is 9.5% or less of household income • Clarification: self-only coverage Affordable

33. Health Care ReformPay or Play Penalty • Minimum Essential Coverage • Includes employer sponsored plans, Medicare, Medicaid • Provides essential health benefits • Limits cost sharing • Small group deductibles • Self-only: $2,000.00 • Family: $4,000.00 • Adjusted upward for flexible spending arrangement funds and premium adjustment percentage • Out of Pocket Maximums (HDHP)

34. Health Care ReformPay or Play Penalty • Minimum Actuarial Value • Referencing required plan levels under the exchange • Plan’s share of allowed costs of benefits is 60% or more

36. Health Care ReformAdditional Resources • BCBST BCBST Customers: Health Care Reform Updates and FAQs are located in Blue Access in the Documents section of the Health Care Reform page. http://www.bcbst.com/about/hcr/ (BCBST health care reform web page) • U.S. Chamber of Commerce http://library.uschamber.com/sites/default/files/100426_critical_employer_issues_ppaca.pdf • The Hill health Watch blog http: //www.thehill.com/blogs/healthwatch • Essential Benefits • www.iom.edu/Activities/HealthServices/EssentialHealthBenefits.onaspy (Institute of Medicine web page)