Transcript What Now? Moving Forward with Reform

By Michael Bertaut,
Healthcare Economist and Exchange Coordinator
BCBSLA
March 2013


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.
2




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?




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.


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)
Controlled Groups and Associated Groups Must
be COMBINED for this computation!!!
Month
Benefit
Eligible
Common
/120 FTE
Law Hours
Total FTE
JAN 2013
22
3300
27.5
49.5
FEB 2013
23
2800
23.3
46.3
MAR 2013
23
3250
27.1
50.1
APR 2013
23
3450
28.8
51.8
MAY 2013
24
3105
25.9
49.9
JUNE 2013
22
3271
27.3
49.3
JULY 2013
23
3655
30.5
53.5
AUG 2013
24
3705
30.9
54.9
SEPT 2013
25
3000
25.0
50.0
OCT 2013
26
3800
31.7
57.7
NOV 2013
27
3950
32.9
59.9
DEC 2013
30
4250
35.4
65.4
AVERAGE
53





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.

You have many new Federal Obligations that
can be condensed into 3 major options:
1. 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).
2. 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.
3. PAY THE FINES –Offer no coverage at all, employer
must pay $2,000 per year per uncovered
employee minus first 30 lives.
8

Federal Poverty Line:

Rate of Pay:

9.5% of Employee Box 1 W-2 income in premiums
for employee-only coverage.
◦ Use 100% of FPL x 9.5% = affordable premium for all
employees.
◦ In 2012, would be $11,170 x 9.5% = $1,061.15
◦ 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
◦ 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

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




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.
“You’re Darn Tootin’
Listen to your
Grandfather!!”
• 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%)
20% Below
50% Below
20% Above
+40%!
-18%!
A
$125
G
$275
B
$150
F
$250
C
$175
D
$200
Today, State Law
allows a +/- 50%
Spread in Small
Group Rates
$100
50% Above
E
$225
In 2014, no
Underwriting is
allowed in Groups
2-50
Average Rate
$200
$300
Office: 225-297-2719
Cell: 225-573-2092
14
Including non-business audience slides






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.




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.
17

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?

Who Runs It?
◦ Non-Medicaid eligibles from 100% to 400% of federal
poverty level projected Income who are NOT offered
affordable coverage at work.
◦ 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.
18

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).
19
How Will That Insurance Be Priced?
Risk
Factor
Pre-2014
Post-2014
Rate Changes
by Class
AGE OF
INSURED
RATE MAY VARY UP TO
10X BETWEEN 19 AND
64 YEAR OLD
RATE MAY VARY
ONLY 3X BETWEEN
21 YEAR OLD AND
64 YEAR OLD
YOUNGER
GENDER
HEALTH
STATUS
WOMEN CHARGED MORE
DURING CHILDBEARING
YEARS. MEN CHARGED
MORE POST AGE 55
GENDER MUST BE
IGNORED FOR
RATE SETTING
OLDER
MEN
WOMEN
MEDICAL RECORDS,
HEALTH
HEALTHY
CLAIMS DATA,
INFORMATION
PHARMACY RECORDS,
CANNOT ALTER
ALL USED TO DETERMINE
RATES OR
SICK
RATE OR OUTRIGHT
EXCLUDE ANYONE
EXCLUDE APPLICANT
From this grid we can see the big
FROM COVERAGE
winners are older women with
health conditions, and the biggest
losers the young, healthy males.
Age Rating Effects: Sample Current Moving to 3:1,
Remove Gender
Males get small rate
decreases at ages 5664, peaking at (-11%)
$800.00
S $700.00
t
a
Females get rate
decreases at ages 22
through 54, peaking at
(-35%) at age 40.
n $600.00
d
a
r
$500.00
d
PPACA Age Curve
P $400.00
Male Current
Dramatic
decrease in
Newborn
Rates (-67%)
r
e
m $300.00
Female Current
i
u
m
Males Age
22-42 get
rate increases
up to 38%!
$200.00
$100.00
0
4
8
12
16
20
24
28
32
36
Age of Member
40
44
48
52
56
60
64
Family
Ages
Issuer
Metal Level
Typical Sample Premium
Adult 1
40
Adult 2
36
B
B(Benchmark)
Bronze
Silver
$10,908
$12,120
Child 1
6
Child 2
4
B
Gold
$13,332
B
Platinum
$15,350
Family Income $35,000/year (149% of FPL)
Premium Tax Subsidy $10,734
Family pays: $174
Payment % of Income 0.4%
$10,734
$1,386
4.0%
$10,734
$2,598
7.4%
$10,734
$4,616
13.2%
Family Income $88,000/year (375% of FPL)
Premium Tax Subsidy $3,760
Family pays: $7,148
Payment % of Income 8.1%
$3,760
$8,360
9.5%
$3,760
$9,572
10.9%
$3,760
$11,590
13.2%
22







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.
23
Dual Eligibles,
161k
Pregnant
Females,
13%
Would Add new
Category of Low
Income Healthy Adults
Up to 138% of FPL
Potentially 550k new
196k
16%
Blind/
Children (LIH)
Disabled,
713k
160k
58%
13%
The Healthcare Income Continuum (PPACA)
0-11%
Existing
Medicaid
0%
11% to 138% New
Medicaid
Expansion
139% to 400% Exchange
Subsidy Eligible
401% of FPL
and above, you
are on your
own!
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.
Yes EXPAND!




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
No, Don’t EXPAND!






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?
27
27






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.




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

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?

Who Runs It?
◦ Non-Medicaid eligibles from 100% to 400% of federal
poverty level projected Income who are NOT offered
affordable coverage at work.
◦ 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 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?
Risk
Factor
Pre-2014
Post-2014
Rate Changes
by Class
AGE OF
INSURED
RATE MAY VARY UP TO
10X BETWEEN 19 AND
64 YEAR OLD
RATE MAY VARY
ONLY 3X BETWEEN
21 YEAR OLD AND
64 YEAR OLD
YOUNGER
GENDER
HEALTH
STATUS
WOMEN CHARGED MORE
DURING CHILDBEARING
YEARS. MEN CHARGED
MORE POST AGE 55
GENDER MUST BE
IGNORED FOR
RATE SETTING
OLDER
MEN
WOMEN
MEDICAL RECORDS,
HEALTH
HEALTHY
CLAIMS DATA,
INFORMATION
PHARMACY RECORDS,
CANNOT ALTER
ALL USED TO DETERMINE
RATES OR
SICK
RATE OR OUTRIGHT
EXCLUDE ANYONE
EXCLUDE APPLICANT
From this grid we can see the big
FROM COVERAGE
winners are older women with
health conditions, and the biggest
losers the young, healthy males.
Age Rating Effects: Sample Current Moving to 3:1,
Remove Gender
Males get small rate
decreases at ages 5664, peaking at (-11%)
$800.00
S $700.00
t
a
Females get rate
decreases at ages 22
through 54, peaking at
(-35%) at age 40.
n $600.00
d
a
r
$500.00
d
PPACA Age Curve
P $400.00
Male Current
Dramatic
decrease in
Newborn
Rates (-67%)
r
e
m $300.00
Female Current
i
u
m
Males Age
22-42 get
rate increases
up to 38%!
$200.00
$100.00
0
4
8
12
16
20
24
28
32
36
Age of Member
40
44
48
52
56
60
64
Family
Ages
Issuer
Metal Level
Typical Sample Premium
Adult 1
40
Adult 2
36
B
B(Benchmark)
Bronze
Silver
$10,908
$12,120
Child 1
6
Child 2
4
B
Gold
$13,332
B
Platinum
$15,350
Family Income $35,000/year (149% of FPL)
Premium Tax Subsidy $10,734
Family pays: $174
Payment % of Income 0.4%
$10,734
$1,386
4.0%
$10,734
$2,598
7.4%
$10,734
$4,616
13.2%
Family Income $88,000/year (375% of FPL)
Premium Tax Subsidy $3,760
Family pays: $7,148
Payment % of Income 8.1%
$3,760
$8,360
9.5%
$3,760
$9,572
10.9%
$3,760
$11,590
13.2%
34







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
Dual Eligibles,
161k
Pregnant
Females,
13%
Would Add new
Category of Low
Income Healthy Adults
Up to 138% of FPL
Potentially 550k new
196k
16%
Blind/
Children (LIH)
Disabled,
713k
160k
58%
13%
The Healthcare Income Continuum (PPACA)
0-11%
Existing
Medicaid
0%
11% to 138% New
Medicaid
Expansion
139% to 400% Exchange
Subsidy Eligible
401% of FPL
and above, you
are on your
own!
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.
Yes EXPAND!




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
No, Don’t EXPAND!






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?
39
39