The Affordable Care Act
Region 5 Executive Board Meeting
November 8, 2013
Presenter: Margaret Gannon, Health Benefits Specialist
CSEA Health Benefits Department, Local Government & Private Sector
Information contained in this presentation is subject to change based on changes to the Health Care Reform Act.
Cost of Health Care in US
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Annual Cost $2.7 TRILLION
How much is a Trillion?
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1 Million seconds = 12 days ago, November 10th
1 Billion seconds = Reagan became president
1 Trillion seconds = 30,000 BC
Where We’ve Been
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Patient Protection and Affordable Care Act
(ACA) March 23, 2010
Plans are grandfathered or nongrandfathered
ACA patient protections implemented
Early Retiree Reinsurance Program (ERRP)
funds received
Coverage Mandates Applicable to
All Plans
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Dependent coverage extended to age 26
Lifetime maximums eliminated
Annual maximums restricted now and
eliminated in 2014
No retroactive rescission of coverage
No pre-existing condition exclusions for
individuals under 19 (applies to all ages
for plan years on or after 1/1/2014)
Coverage Mandates for NonGrandfathered Plans
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No cost sharing for preventive
care/immunizations
Patient protections: choice of primary care
physicians (including pediatrician), and
direct access to OB/GYN services
Emergency services without prior
authorization and in and out-of-network
Revised internal and external claims
appeals procedures
Coverage Mandates Effective 1/1/2013
applicable to all plans
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Form W-2 Reporting-NOT TAXABLE
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Informational reporting of aggregate cost of
employer sponsored health care coverage
Employer and employee contributions
 HRA’s excluded
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Generally applies to all federal, state and local
governmental employers
 Applies for 2012 Form W-2’s (issued 1/2013)
 IRS exempts employers that filed fewer than
250 W-2’s in previous calendar year
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Coverage Mandates Effective 1/1/2014
For Non-Grandfathered Plans, beginning plan year
on/after 1/1/2014
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Out-of-pocket maximum may not exceed HSA limits
($6,350 for ind. coverage, $12,700 for fam. coverage).
Allowed to have separate limits for medical and Rx if
administered separately until 2015
Limits on deductibles to $2k/$4k (may only apply to
insured plans in small group market-need regulatory
guidance)
Coverage for services related to clinical trials (for cancer
or other life threatening diseases)
Ban on waiting periods more than 90-days
Coverage Mandates Effective 1/1/2014
Wellness Programs
ACA
clears a path through the minefield of federal and state
antidiscrimination and privacy laws
Effective for plan years beginning on or after 1/1/14
Increases Maximum Reward/Penalty From 20% to 30% of the cost of
coverage
Increases Maximum Rewards/Penalties For Smoking Cessation
Programs to 50% of the cost of coverage
Participatory and Health-Contingent Wellness Programs
Employers Must Offer Alternatives to Similarly Situated Employees
Who Cannot Participate in the Wellness Program or Achieve the Health
Standard Required for a Reward
$200 Million Available for Small Businesses (up to 100 employees) to
create a wellness program
Taxes and Fees
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Patient Centered Outcomes Research Institute (Excise Tax)
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Transitional Reinsurance Fee (Tax Deductible)
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AKA: Comparative Effectiveness Research Fee (2013 – 2019)
Non-profit that conducts research to improve the health care system and to
advance the quality and relevance of evidence based medicine
Fee in 2013 (for 2012) is $1 per the average covered lives
Fee in 2014 is $2 per the average covered lives
Insured and Self Funded
Paid annually by July 31 and filed on Form 720
Beginning in 2014 (continuing in 2015 & 2016)
To fund reinsurance payments to insurers to cover high risk individuals (stabilize
premiums in individual market)
$63 annually ($5.25/month) in 2014 per covered life
Insured and Self Funded
Health Insurance Tax (HIT)
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Insured Plans Only
2 – 3% Impact on Premiums
State Health Insurance Exchanges
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2014: State Health Insurance Exchanges will
allow individuals and small employers to choose
from a menu of insurance products
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Exchange plans must offer “essential health benefits”
at certain levels, and must be community rated
Federal subsidies will be available to help people buy
coverage
Medicaid coverage expands to 133% of FPL
2017: States may allow large employers to buy
through Exchanges
Essential Health Benefits
Individual & Small Groups On & Off Exchange
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Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance abuse disorder services
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease
management
Pediatric services, including oral and vision care
Exchanges Benefit Levels
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Platinum: 90% of the full actuarial value
Gold: 80% of the full actuarial value
Silver: 70% of the actuarial value (keyed
to subsidies)
Bronze: 60% of the full actuarial value
Young Invincible (catastrophic plan for
individuals under 30)
Qualified Health Plans on the
Exchange
Must….
 Offer “essential benefits”
 Offer at least 1 silver plan and 1 gold plan, and certain
child only plan
 Charge the same premium whether a plan is sold
through the Exchange or offered outside the Exchange
 Guaranteed issue and renewal
 Follow underwriting rules
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Rates vary only by the following:
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Individual v. family
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4 Tier Premium Structure in NYS
Geographic rating area
Age no more than 3 to 1 (Not in NYS)
Tobacco use, no more than 1.5 to 1 (Not in NYS)
Individual vs. Small Business
Exchanges
Individual Exchange
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Open to individuals who are
citizens or legal immigrants
Not open to undocumented
individuals
Buy through home state exchange
Federal subsidies are available to
help individuals/families buy
coverage
People who are eligible for
decent, affordable coverage,
for example, through an
employer-sponsored plan-do
not qualify for these subsidies
Small Business (SHOP)
Exchange
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Initially, open to small businesses
States may allow large employers
to buy beginning in 2017
Employer buys through:
 Exchange where employer has
principal place of business, or
 Exchanges in the states where
employees have their principal
worksite
No federal subsidies to help
employees buy coverage
Exchange Options
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State Exchange: State establishes and runs the
Exchange, but communicates with federal government
on certain issues like eligibility
Federally Facilitated Exchange (FFE): Federal
government runs the state exchange (27 States)
Partnership Exchange: A form of FFE, with division of
eligibility, enrollment, plan management, consumer
assistance and financial management functions between
State and Federal governments. Federal government is
ultimately responsible
New York State of Health
The Official Health Care Marketplace
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Governor Cuomo issued Executive Order on April 12,
2012
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Lower premiums for individuals and small businesses
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Tax credits and cost sharing subsidies
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Expand coverage to 1.1 million uninsured New Yorkers
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http://www.healthbenefitexchange.ny.gov/
Exchanges
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Employers were required to send notices to
employees about the Exchanges by October
1, 2013
Exchanges open for enrollment on October 1,
2013 for six months for both individuals and
small employers
Insurers will be marketing their coverage to
the uninsured
Individual Mandate
Starting in 2014, most individuals will have to purchase insurance or pay a penalty
2014
2015
2016
The greater of
The greater of
The greater of
Adult
$95
Adult
$325
Adult
$695
Child
$47.50
Child
$162.50
Child
$347.50
Family
$285
Family
$975
Family
$2,085
or
or
or
1% of income
2% of income
2.5% of income
Beyond 2016
Penalties
Indexed to
Inflation
 Employer-sponsored coverage satisfies an individual’s obligation
to have health insurance
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They don’t have to do anything and won’t pay a tax penalty
Employer Shared Responsibility
Penalty
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Applies to “applicable large employers”
Generally, applies to large employers who employed at
least 51 FTE’s, including full-time equivalent employees,
on business days during the preceding calendar year
A full-time employee with respect to any month is an
employee who is employed on average at least 30
hours of service per week
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Must aggregate hours of part-time employees to create total
number of FTE’s
When Does the Penalty Apply
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4980H(a) Penalty
If a large employer does not offer coverage to
substantially all of their FTE’s and one FTE
receives a premium assistance tax credit in an
Exchange
Penalty is $2,000 (annualized) times the total #
of full-time employees; minus the first 30
workers
When Does the Penalty Apply
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4980H(b) Penalty
If a large employer does offer Minimum
Essential Coverage to substantially all of their
FTE’s but it’s either unaffordable (over 9.5%
of W-2 income for self only coverage) or has an
actuarial value of less than 60% (Minimum
Value) and just one FTE receives a tax credit in
the Exchange
Penalty is $3,000 (annualized) times the # of
FTE’s getting a tax credit in the Exchange
The “Affordability” Standard
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IRS Notice 2011-73 created a safe harbor* from
the employer penalty if coverage is affordable
based on the employee’s form W-2 wages (as
reported in Box 1) instead of household income
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W-2 rule only applies for the penalty, not for the
Premium Assistance Tax Credit
Relates to the cost of self-only coverage of
employers cheapest plan offering
No guidance yet on how this affects dependent
coverage
*Three affordability safe harbors: Form W-2, rate of pay safe harbor and the federal
poverty line safe harbor.
Affordability Test Example
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W-2 Income
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Divide the current monthly single contribution of the employers
least expensive plan by 9.5% (.095)
Multiply by 12 to arrive at annual salary which qualifies as
“unaffordable”
Example: Monthly contribution is $145.00 for single coverage
$145 ÷ .095 = $1,525.32
$1,525.32 x 12 = $18.316
Anyone making less than $18.315.84 may be eligible for an
advance premium tax credit
Part-Time/Variable Hour Employees
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Statutory Definition of Full-Time = 30 Hours per Week Average
Measurement Period (Look Back Period)
 Employer must determine each employee’s full-time status by
looking back at a defined period
 3 to 12 Months
Stability Period
 If employee is determined to be full-time during measurement
period, then the employee would be treated as full-time during a
subsequent “stability” period
 At least 6 consecutive months and no shorter than the
measurement period
 Stability period begins after the measurement period and any
applicable administrative period (up to 90 days)
Determining Full-Time Status
Employee who works an average of >30 hours per week
1st
Measurement Period
12 Months
Administrative Period
3 Months
Stability Period
Employee is considered FT
12 Months
2nd Measurement Period
12 Months
1/1/2014
12/31/2014
4/1/2015
12/31/2015
3/31/2016
Federal Subsidies
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Federal government to subsidize insurance
companies for low-income citizens in the statebased Exchanges
Premiums and Cost-Sharing Reductions
Potentially more than 50% of US households
could qualify (based on Bureau of Labor
Statistics estimates)
Depending on the income, age and family size,
the subsidy can be substantial
The “Subsidy”
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Applies to low-income people between 100%
and 400% of Federal Poverty Level (FPL)
Tied to Silver Metal Level
Not available to undocumented people
Only available through the Individual Exchanges
(not SHOP)
Silver plan provides less rich benefit packages
than the typical employer-sponsored plan
provides today (which is platinum plus)
Poverty Guidelines
2014 ESTIMATED* POVERTY GUIDELINES FOR
THE 48 CONTIGUOUS STATES AND DC
Persons in
Family
100% FPL
133% FPL
250% FPL
400% FPL
1
$11,735
$15,608
$29,338
$46,940
2
$15,896
$21,142
$39,740
$63,584
3
$20,056
$26,674
$50,140
$80,224
4
$24,217
$32,209
$60,543
$96,868
5
$28,377
$37,741
$70,943
$113,508
6
$32,538
$43,276
$81,345
$130,152
7
$36,698
$48,808
$91,745
$146,792
8
$40,859
$54,342
$102,148
$163,436
*2014 estimate based on 2012 levels increased by 2.5% per year
Premium Assistance Tax Credit
Advanced premium assistance tax credit is based on:
•Premium cost of the second-lowest-cost silver plan offered
through an Exchange, and
•The household income level of the applicant
Household Income Level
(% above FPL)
Maximum Premium as % of
Income
Less than 133%
2.0%
At least 133% but less than 150%
3.0% - 4.0%
At least 150% but less than 200%
4.0% - 6.3%
At least 200% but less than 250%
6.3% - 8.05%
At least 250% but less than 300%
8.05% - 9.5%
At least 300% but less than 400%
9.5%
Cost–Sharing Reductions (CSR)
Per ACA rules, insurers must offer silver level plans with cost-sharing
reductions to certain low income individuals
Household Income Level
Normal Cost-Share Reduction
100% - 150% FPL
94% Coverage Value
150% - 200% FPL
87% Coverage Value
200% - 250% FPL
73% Coverage Value
250% - 300% FPL
Standard Silver Plan
>300% FPL
Standard Silver Plan
The Federal Government will pay the difference at the end of the year to
insurer
Minimum Value Safe Harbor
Certain proposed safe harbor plan designs will automatically
satisfy ACA’s 60% minimum value requirement
$3,500
medical & drug deductible, 80% plan cost sharing and $6,000
maximum out-of-pocket limit for employee cost sharing
$4,500
medical & drug deductible, 70% plan cost sharing, $6,400
maximum out-of-pocket limit and $500 employer contribution to an
HSA
$3,500
medical deductible, $0 drug deductible, 60% plan medical
expense cost sharing, 75% plan drug cost sharing, $6,400 maximum
out-of-pocket limit and drug copays of $10/$20/$50, with 75%
coinsurance for specialty drugs
Excise Tax on High Cost Plans
“Cadillac Tax”
Effective in 2018
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40% tax on excess over threshold
Based on total cost of coverage; employer plus employee premium
share
Excludes dental and vision; includes health HRA’s, HSA’s and FSA’s
Cost threshold for tax (indexed after 2018)
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$10,200 single, $27,500 family
Increased by $1,650 single, $3,450 family:
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For retired individuals age 55 or older and not eligible for Medicare
If majority of employees covered by the plan are:
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Engaged in high-risk profession (list in statute), or
Employed to repair/install electrical or telecommunications lines
2019 – Indexed by CPI + 1%, 2020 and thereafter –
Indexed by CPI only
Issues For Labor
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Contract Proposals Pertaining to the ACA
Re-openers
Cadillac Tax
Tactically Reducing Hours (below 30 hours/week)
Dropping Coverage Entirely
Pre 65 Retirees
Plan Designs
Eliminating/Limiting Spousal Coverage (UPS, Kroger)
Matching Exchange Benefit Levels
Small Group Product Consolidation/Elimination
Defined Benefit vs. Defined Contribution
HRA’s