What Small Employers and Self-Employed Individuals Need to Know About Healthcare Reform

What Small Employers and Self-Employed Individuals Need to Know About Healthcare Reform Patricia Decensi Vice President, Assistant General Counsel August 7, 2013

Š2013 Medical Mutual of Ohio

Legal Disclaimer This document was created to accompany a presentation on the subject described herein. It was designed to provide accurate and authoritative information regarding the subject matter covered and is provided with the understanding that neither the presenter nor Medical Mutual of Ohio is engaged in rendering legal, accounting, or other professional advice. If such advice is required, a competent professional should be consulted. Anyone using this document in dealing with a client's specific situation should also research original sources of authority. ‧ 

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Overall Approach §

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Requires most U.S. citizens and legal residents to obtain health insurance § Must either maintain “minimum essential coverage” (satisfied in a number of ways) or § Pay a mutual “shared responsibility” penalty The most ambitious elements are effective January 1, 2014 During the period 2010-2014, the law seeks transformation of the U.S. health delivery system from pay-for-procedures to paying for quality Relies heavily on the states to expand Medicaid and establish Exchanges

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The Individual Insurance Market 16.7 million people under age 65 were covered by an individual health insurance policy in 2008, according to the U.S. Census Bureau.

According to Deloitte, the Affordable Care Act (ACA) could increase the number of individual policy holders by five times to approximately 72 million in 2020.1

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1The Impact of Health Reform on the Individual Insurance Market: A strategic assessment,” The Deloitte

Center for Health Solutions, 2011

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Key Changes for Individuals, Small Groups §

Guaranteed Issue § No pre-existing conditions § Individual mandate § §

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2014: $95 or 1% of AGI which ever is greater 2015: $325 or 2%; 2016 - $695 or 2.5%

Rating § Adjusted community rating by January 1, 2014 § Changes in age band: 3 to 1, uniform age curve § Charge for tobacco use: Rate Variation limit of 1.5 to 1 Benefit Design § Limits on annual cost-sharing: Total co-pays, deductibles and coinsurance may not exceed $6,350/single, $12,700/family for 2014 (Tied to HSA Limits) § Limits on deductibles (small group plans only): $2000/$4000

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Key Changes for Individuals, Small Groups Essential Health Benefits •

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Ambulatory patient services

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Emergency services •

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Hospitalization •

•

•

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Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment

•

Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care (to age 19)

Prescription drugs

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Guaranteed Issue Impacts all plans

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Insurers must accept virtually every individual and group that applies for coverage.

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Coverage of Pre-Existing Conditions Impacts All Plans

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Plans cannot exclude coverage for pre-existing health conditions, regardless of the age of the covered individual. Pre-existing condition exclusions were removed for children under age 19 beginning with 9/23/10 plan years.

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Marketplace (Exchanges): What are they?

The Exchange is available to individuals and small groups beginning January 1, 2014. ‧

Individuals who don’t have healthcare coverage, employees not offered healthcare coverage by their employer or U.S. citizens who don’t have healthcare coverage that meets the Affordable Care Act’s definition of Minimum Essential Coverage will be able to purchase healthcare coverage on their state’s Exchange. ‧

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Subsidies on the Exchange §

Who is eligible for premium subsidies?

– Individuals with incomes between 133% and 400% of the federal poverty level (FPL) – Received in the form of a tax credit and can be applied to any level of coverage on the Exchange (but tied to the cost of a silver plan).

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Cost-sharing subsidies – Available to those individuals who earn up to 250% of FPL – Must enroll in a silver plan on the Exchange

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Subsidies on the Exchange 2013 Federal Poverty Guidelines

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Household Size

100%

133%

150%

200%

300%

400%

1

$11,490

$15,282

$17,235

$22,980

$34,470

$45,960

2

15,510

20,628

23,265

31,020

46,530

62,040

3

19,530

25,975

29,295

39,060

58,590

78,120

4

23,550

31,322

35,325

47,100

70,650

94,200

5

27,570

36,668

41,355

55,140

82,710

110,280

6

31,590

42,015

47,385

63,180

94,770

126,360

7

35,610

47,361

53,415

71,220

106,830

142,440

8

39,630

52,708

59,445

79,260

118,890

158,520

For each additional person, add

$4,020

$5,347

$6,030

$8,040

$12,060

$16,080

Source: www.familiesusa.org

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Ohio Marketplace Exchanges Ohio’s Marketplace will be managed by the federal government, with strong oversight

by Ohio Department of Insurance. Medicaid expansion has not been decided.

Health insurance coverage by segment for total population (2011) OHIO STATISTICS

Distribution of Population by Federal Poverty Level (2011)

Ohio #

Ohio %

Employer

5,802,600

51%

Individual

516,800

5%

Medicaid

1,720,900

15%

1,634,600

14%

103,800

1%

1,548,100

14%

11,326,800

100%

Ohio #

Ohio %

Ohio % of U.S. Total

Medicare

2,213,700

20%

4%

Uninsured

100-138%

803,700

7%

3%

139-250%

2,373,500

21%

4%

251-399%

2,413,500

21%

4%

400%+

3,522,500

31%

3%

11,326,800

100%

4%

Under 100%

Total

Other Public Total Sources:

Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the Census Bureau's March 2011 and 2012 Current Population Survey (CPS: Annual Social and Economic Supplements).

Source: www.kff.org

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Subsidies on the Exchange §

Premium tax credits (subsidies) Can be an advance tax credit – Individual can elect the advance tax credit and pay a lower amount monthly Can be a refundable tax credit – Individual can elect to pay full premium and then have credit apply when he files his tax return – Better option for those whose subsidy situation is not clear (e.g. between jobs, variable income) If tax credit is advanced and individual is not eligible, credit must be repaid at tax time.

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Examples of estimated subsidies

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Variation of income, household and age from University of Berkley National Health Care Calculator

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Annual Income

Number of People in Household

% of FPL

Age of Adult

Estimated Tax Credit for Silver Plan

Estimated Monthly Silver Plan Premium

$35,000

3

179%

29

$662

$156

$35,000

2

226%

45

$608

$210

$40,000

2

257%

35

$428

$276

$45,000

2

290%

61

$1,214

$346

$45,000

1

392%

61

$453

$356

$55,000

3

282%

45

$476

$411

$60,000

2

387%

59

$977

$475

$65,000

5

236%

38

$855

$409

$85,000

5

308%

45

$708

$673

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Private Exchanges Payer Private Exchange Single Carrier Platform with Multiple Plan Offerings

Third Party Exchange Multiple Options Managed by Third Party

Multi-Carrier Exchange

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Overview of Employer Shared Responsibility §

General requirement Applicable large employer must offer affordable, minimum value coverage to substantially all full-time employees (and, in 2015, their children) or pay a penalty.

– – –

Note that scope of coverage is not defined. There is no requirement that large employers offer essential health benefits.

“Substantially all” = 95% (or, if greater, 5 full-time employees) Children are defined as those in IRC 152(f)(1) and includes stepchildren and foster children

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Overview of Employer Shared Responsibility § What

is the penalty?

No coverage penalty: –

–

An eligible employer-sponsored plan is not offered to substantially all full-time employees AND at least one employee obtains subsidized coverage on the Exchange.

Penalty is equal to $2000 x all full-time employees, minus 30

Inadequate coverage penalty: –

–

An eligible employer-sponsored plan is offered to all full-time employees but the coverage is not “affordable” or does not provide “minimum value” AND an employee obtains subsidized coverage on the Exchange Penalty is equal to lesser of $3000 x number of employees receiving subsidy or the $2000 x all employees penalty set forth above.

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What is Affordable Coverage?

Affordable coverage is coverage for which the employee’s share of the premium does not exceed 9.5% of household income.

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Minimum Value A group health plan provides minimum value if the plan’s share of the cost of benefits is at least 60% of the total cost of plan benefits. § Employers can use U.S. Department of Health and Human Service’s minimum value calculator to test plan. §

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Healthcare Reform Websites https://www.medmutual.com/For-Individuals-and-Families/Health-Insurance-Education/WhatDoes-Healthcare-Reform-Mean-to-Me.aspx ‧

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Healthcare Reform Websites http://kff.org/health-reform/

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http://kff.org/interactive/subsidy-calculator/

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http://laborcenter.berkeley.edu/healthpolicy/calculator/

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http://marketplace.cms.gov/index.html

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http://insurance.ohio.gov/Pages/default.aspx

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