What Now? Moving Forward with Reform

Time to Implement!Moving Forward with ReformBy Michael Bertaut, Healthcare Economist and Exchange CoordinatorBlue Cross and Blue Shield of LouisianaPro Audience 2014

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.

2Disclaimerthis presentation not for distributionSetting The FieldHealthcare Financing Pre-PPACAThe US and Louisiana Healthcare Financing Picture that Led to Passage

316 Million seeking Healthcare46 Million Without in 2010Employer Based~160mGovernment~100mIndividual~10mHealthcare.Gov!

The Affordable Care Act was NOT designed, nor is there enough money allocated, to replace the Employer-Based Health Insurance System.5The Uninsured: Who were They?

46.3M Uninsured @ the end of 2009, Census 9/10/10September 10, 2009 Census Bureau Conference Call: 2008 Update on Poverty and the UninsuredChildren in modest-low income householdsBlind Disabled (Receive SSI)Low income SeniorsLow income pregnant women WHILE they are pregnantFoster children to 26Uninsured with breast or cervical cancerLouisiana Medicaid Today: 1.3 million Enrolled

The No Coverage ZonePLANNED EXPANSION (PPACA)Coverage GapIn 2014, 100% of FPL is $11,670 for a single person, $19,790 for a family of 3.0% to 138% New Medicaid Expansion139% to 400% Exchange Subsidy Eligible401% of FPL and above, you are on your own!Federal Poverty Level Income0%0 to 99% of FPL100 to 400% of FPLIn the States with No Medicaid Expansion, there is a coverage gapHere is our ACTUAL expansion.7Simulation:Would You Take this Deal?Exchange Performance and Louisiana Membership Results from BCBSLA on www.healthcare.gov

Millions of new subsidized customersMitigation once losses hit a certain thresholdFed will build a well-advertised online marketplace and guarantees a level playing field.A law that requires (sort of) almost all Americans (sort of) own your productA federal commitment to improving the market, products, and the process with fair rules.

Decision Time:PPACA Participation-- The OfferFederally specified caps on Gross MarginFederally specified product design Non-market based federal limits on executive salaries and deductibilityFederally funded competitorsFed contract products in direct competitionConstant demolition of forecasting models by political reaction to unanticipated issues.Federally specified sales periods, 3 month per yearAbsolutely no pre-sale risk adjustment allowed$Billions in new taxes, indexed to revenue/market shareMillions of hours of compliance work, and reporting requirements pre- and post- enactmentIf you fail to participate, you surrender at least 1/3rd of your market share to your competition.Decision Time: Part 2Full Participation and Implementation since CEO directive in Summer 2010Early Recognition of Tight Deadlines and resource challengesRecognition of potential for competitor gains from non-participation. 1m La. already locally controlled.Very interested in recapturing any dissolved small group members.BCBSLA and Healthcare.Gov

Its the Law of the Land until somebody tells us differently(Reitz, May 2010)Multiple products in all 64 parishes. Bronze, Silver, Gold, Platinum across the board.Avoided pushing narrow network products to minimize disruption and confusion. 1 out of 10 per metal level.Worked closely with national lobbyists and CMS to get smooth launch.BCBSLA and Healthcare.Gov

Through 4/7/2014:51,000 individual members paid.37,000 on-exchange, 14,000 off-exchange39% are age 51-64.More than half are female.About 70% of submitted exchange contracts are paid.93% of on exchange include federal subsidies, average 70% of premiums covered.78% NEW BUSINESS.

BCBSLA and Healthcare.Gov

Roughly 40% of applications are using representation of any type (Agent, Broker, Navigator)OFFICIALLY CLOSES 4/15/2014! TRIGGERING EVENTEFFECTIVE DATE OF COVERAGETIMEFRAMELoss of Coverage(Date of eligibility loss)If loss is in past, 1st of the month following enrollment. If loss is in future, 1st of the month following loss of coverage.60 days before and 60 days after loss of coverage (120 day window).Marriage(become or gain a dependent)Denial of Medicaid/CHIP1st of the month following plan selection60 days after the event.Birth, Adoption, Foster Care (become or gain a dependent)Date of Birth, adoption, placement for adoption or placement in foster care60 days after the event.Gaining lawfully present statusChanges in APTC eligibilityChanges in CSR eligibilityChanging state of residenceIncarceration releaseNative American options1st to 15th enrollment, 1st of month effective16th to 31st of month, 1st of month following60 days after the eventExchange ErrorsContract ViolationsExceptional circumstances1st to 15th enrollment, 1st of month effective16th to 31st of month, 1st of month following; or date of eventHHS Determined Case-By-CaseSPECIAL ENROLLMENT TYPES AND TIMEFRAMES (Next open 11/15/14)Deadline 3/31/2014 !!Current Exemptions:

Low-income individuals in states that are not expanding Medicaid; Holding a plan to be cancelledUndocumented immigrants;Indian tribal members;Members of certain religious sects who do not participate in SS or Medicare.Individuals who are in prisonVictims of Domestic ViolenceHomeless You have a shut-off notice from a utility companyDeath of a close family memberHave an eviction notice.

15Who Has to Obtain Coverage?

Fines:2014 = 1% or $952015 = 2% or $3252016 = 2.5% or $695All Individual and Small Group Plans MUST match the Benchmark Essential Health Benefits Plan in breadth of coverage.For 2014/15, in Louisiana, the Benchmark will be the coverage offered in BLUE CROSS GROUPCARE PPO on 12/31/2011This is a very rich plan. Includes pregnancy coverage on all members, mental/nervous/ autism spectrum disorder, and a very wide formulary.What is covered in a Qualified Health Plan?

Qualified Health Plans MUST offer anything that USPSTF classifies as A or B level preventive service, screening, or immunization at ZERO cost to the member.Originally, this included 40 different immunizations, screenings, and tests.Research is ongoing, the standard is a moving target. Just since 2012 they have added:Free thoracic CT Scan for heavy smokersFree ultrasound for aortic aneurism Free chemo drugs BEFORE at-risk women get cancerFree screening for gestational diabetes for the not at risk.Free cervical cancer immunizations for boysGrandfathered Groups are NOT subject to this authority.The Zero Cost Conundrum: USPSTF Schedules A and BTax/FeeCostWhen?Who Pays?PCORI Fee$2 PMPY2013 and BeyondCarrier for Fully Insured; Sponsor for Self-FundedTransitional Reinsurance Fee$63 PMPY 2014; Lower afterwards2014 and BeyondCarrier for Fully Insured; Sponsor for Self-FundedHealth Insurer Fee$40M La 2014$8B Nationally;$70M+ La 2017 $14.3B Nationally2014 and BeyondCarrier for Fully InsuredExchange Fee3.5% of Premiums in Exchange (FFE)2014 and BeyondCarrier for fully insuredDME Taxes2.3% VAT on all medical devices2012 and BeyondAll patients, providers, insurance carriersPrice Impact: New Taxes and FeesFamilyAdult 1Adult 2Child 1Child 2Ages4038108IssuerB B(Benchmark)BBMetal LevelBronzeSilverGoldPlatinumTypical Sample Premium$10,908$11,952 $13,332 $15,350 Family Income $35,000/year (149% of FPL)Annual Premium Tax Subsidy$10,566 $10,566 $10,566 $10,566 Family pays (annually):$342$1,386 $2,766$4,784 Payment % of Income0.4%4.0%7.4%13.2%Family Income $88,000/year (375% of FPL)Annual Premium Tax Subsidy$3,592 $3,592 $3,592 $3,592 Family pays (annually):$7,316 $8,360 $9,740 $11,938 Payment % of Income8.1%9.5%10.9%13.2%19How Does Healthcare.gov Work?Plan TYPEIncome of ApplicantDeductibleIn Network CO-INSURANCEIn Network MAX OUT OF POCKETSample Benchmark Silver Individual251% of FPL or above$2,00060%$6,350201% to 250% of FPL$2,00060%$4,800151% to 200% of FPL$75095%$2,150100 to 150% of FPL$0100%$2,150Cost Sharing Reductions/VariantsNote: Cost Sharing Reductions are ONLY available on Silver Plans, not Bronze, Gold, or Platinum plans.Incarcerated.Income above 400% of FPL.Income below 90% of FPL.Offered coverage at work that is affordable and at least 60% AV. Medicaid or CHIP eligible (income up to 138% FPL in states that have agreed to expand).Failed to file required tax returns in previous year.Unable to attest to residency in a single state.In the country unlawfully.21NOT Advanced Tax Credit Eligible

Subsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old MaleAssumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old MaleAssumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old FemaleAssumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)How many full time Employees do I have (average FTEs per month)? Am I an Applicable Large Employer (ALE)? How Large?Have I the processes and record-keeping in place to PROVE MY STATUS?The 3 Questions Every Employer Must Begin With:

Section 26 USC 4980h Compliance; The employer mandateMonthBenefit EligibleCommon Law Hours/120 FTETotal FTEAVERAGEJAN 201422330027.5049.50FEB 201423280023.3346.33MAR 201423325027.0850.08APR 201423345028.7551.75MAY 201424310525.8849.88JUNE 201422327127.2649.26JULY 201423365530.4653.46AUG 201424370530.8854.88SEPT 201425300025.0050.00OCT 201426380031.6757.67NOV 201427395032.9259.92DEC 201430425035.4265.4253.18How Many Average FTEs Do I have?Controlled , Affiliated and Associated Groups Must be COMBINED for this computation!!!Notice must be accurate to the hundredth of a FTE.If I work for different members of the same aggregated group, my hours must be combined to see if I am full time.No obligations to provide affordable coverageNo obligations to provide valuable coverageNo federal obligations to offer coveragestate law appliesNo danger of fines under 4980HYou must still be able to demonstrate your Non-ALE status.

If the Answer is 0 to 49.99 FTEs.

Administration is delaying your enforcement until 1/1/16 : IFYou didnt get to 99 by reducing your workforce except for bona fide business reasons; AND.You keep in place any coverage offered on 2/9/2014; ANDYou pay at least 95% of the premium contribution you were paying on 2/9/2014.On 1/1/16 you must comply in full with 26 USC 4980h sections a) and b) and offer to 95% of your full time workforce and dependants. (not spouses)Non-compliance means fines.You must track membership beginning 1/1/14.

If the Answer is 50 to 99.99 FTEs

You must offer to 70% of full timers in 2015.You must offer to 95% of full timers in 2016.At that point, you must comply in full with 26 USC 4980h sections a) and b) and offer to dependants (not spouses).If you lay off people to get below 100, IRS will demand proof of bona fide business reasons.Non-compliance means fines.You must track membership at all times beginning now.

If the Answer is 100+ FTEs

An employer can wait until his non-1/1 renewal date to comply, IF:Renewal date was not modified after 12/27/2012As of February 9, 2014, in the preceding 12 months at least 25% of all employees are covered; or33% of all full time employees are covered; or33% of all employees are offered coverage; or50% of all full time employees are offered coverage.If you do not comply by renewal date, fines apply retroactively to 1/1/15.Transitional Relief for Non-Calendar Year Plans

Your legally adopted or birth-children until the last day of the month in which they turn 26 years old.Your non-US Citizen children who are a citizen of Mexico or Canada.Excludes foster children.Excludes Step children.Who is a dependant under 4980H?

Any common law employee except:Leased Employees (Section 414(n)(2))Sole ProprietorPartner in a Partnership2% S-Corporation ShareholderSection 3508 Worker (real estate agents, certain other direct sales relationships)

Who is an employee under 4980H (that is, who must be offered coverage?)

Note that H-2A and H-2B workers are employees under this standard unless they are seasonal.4980h a) Fine ALPHARequires that all ALEs offer minimum essential coverage to AT LEAST 95% (70% for 2015) of their benefit eligible employees.If no compliance, only ONE benefit eligible employee has to draw an advanced tax credit from an Exchange to trigger the fine.Fine is ENTIRE BENEFIT ELIGIBLE WORKFORCE COUNT minus 30 x $166.67/month without coverage.4980h b) Fine BRAVORequires that the offer in a) be affordable and at least 60% actuarial value.If no compliance, each benefit eligible employee drawing an ATC from Exchange will trigger a $250/month fine, up to a max of the fine computed in a).The Price of Failure-2015 and Beyond (ALEs 50-99.99 start 2016)Federal Poverty Line:Use 100% of FPL x 9.5% = affordable premium for all employees. Use FPL number up to 6 months in advance.In 2014, would be $11,670 x 9.5% = $1,108.65 ($92.38/mo)Rate of Pay:Use hourly rate times 130/month to determine wages x 9.5% to compare to premium, or 9.5% of monthly salary.Cannot be used for tipped employees.At $10/hour, $1,300/month x 12 x 9.5% = $1,482.00 ($123.50/mo)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, based on THIS YEARs wages.Partial-year adjustments allowed for new employees who work part of a year.At $20,800/year ($10/hr full time) = $1,976.00 /$164.67mWhat Does Affordable Mean?Final Safe Harbors as of 2/10/14)

Prove you are under 50 FTEs or under 100 FTEs in 2015 only.Prove the employee in question was never full time when he worked for your firm.Prove the employee in question was offered an insurance plan that met the federal definitions of affordability, and offered at least 60% AV.Preparing for the Inquiries: 2016 and Beyond (How to NOT pay fines)

Contact Info: Michael R Bertaut

michael.bertaut@bcbsla.com

Linked-In Recommendations Welcome!Office: 225-297-2719Cell: 225-573-2092

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Appendix SlidesFull Presentation PlusCovering Individual and Group Insurance issuesSubsidized Premiums for Silver Plan Saver $1,900; 30 Yr Old FemaleAssumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)Subsidized Premiums for Silver Plan Saver $1,900; 60 Yr Old FemaleAssumes purchase of Benchmark Silver Plan (2nd Cheapest Silver Plan for that customer)Medicare Part A is considered minimum essential coverage. Part B alone is not.Agents and Brokers may NOT sell QHPs to Medicare eligible clients.A Medicare eligible PAYING FOR PART A may choose to forego Medicare and purchase a subsidized plan from www.healthcare.gov. If they choose to go BACK to Medicare fines may apply.You may not have both Medicare and a QHP with subsidies. If you keep both, any www.healthcare.gov funding will cease.If your employer provides retiree coverage through a SHOP plan, you may keep the plan and Medicare. Medicare will be secondary payer.

Clarity on Medicare

The Employer Mandate and Classifying Your WorkforceSection 4980hTreasury 2014-0308211 February 2014

Any employee who averaged 30 hours of service per week or 130 hours per month.No eligible employee may be required to wait more than 90 days until coverage becomes effective.Coverage not required for Seasonal Workers who are engaged for less than 6 months per year.Volunteer emergency first responders are not coveredTeachers are full time, even if they dont work 3 months/year.Who is benefit eligible (Full Time) and When?(IRS Bulletins 2012-58/59, PHSA 2708)

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)

What is a Common Law Employee?

An employer can wait until his non-1/1 renewal date to comply in 2015, IF:Renewal date was not modified after 12/27/2012; andAs of February 9, 2014, in the preceding 12 months at least 25% of all employees are covered; or33% of all full time employees are covered; or33% of all employees are offered coverage; or50% of all full time employees are offered coverage.If you do not comply by renewal date, fines apply retroactively to 1/1/15.Transitional Relief for Non-Calendar Year Plans

No transitional relief in 2016.Any common law employee except:Leased Employees (Section 414(n)(2))Sole ProprietorPartner in a Partnership2% S-Corporation ShareholderSection 3508 Worker (real estate agents, certain other direct sales relationships)

Who is an employee under 4980H (that is, who must be offered coverage?)

Note that H-2A and H-2B workers are employees under this standard unless they are seasonal.4980h a) Fine ALPHARequires that all ALEs offer minimum essential coverage to AT LEAST 95% (70% for 2015) of their benefit eligible employees.If no compliance, only ONE benefit eligible employee has to draw an advanced tax credit from an Exchange to trigger the fine.Fine is ENTIRE BENEFIT ELIGIBLE WORKFORCE COUNT minus 30 x $166.67/month without coverage.4980h b) Fine BRAVORequires that the offer in a) be affordable and at least 60% actuarial value.If no compliance, each benefit eligible employee drawing an ATC from Exchange will trigger a $250/month fine, up to a max of the fine computed in a).The Price of Failure-2015 and Beyond (ALEs 50-99 start 2016)An employer can REQUIRE participation in his health plan as a condition of employment under the following circumstances:The offer is at least 60% AV; ANDThe offer is provided at no cost to the employee; ORThe offer is provided at a premiums for self-only coverage equal to or less than 9.5% of 100% of FPL for that calendar year ($92.38/month for 2014)Allowable Mandatory Coverage Rules

Grandfathering: Why Keep It?

Youre Darn Tootin Listen to your Grandfather!! Not subject to Rate Compression or New Federal Underwriting Laws Not subject to 3:1 age rating Can keep existing rate/benefit plans Not required to add ANY new coverage for USPTF Schedule B tests, immunizations, or screenings, or treatments. Enjoy limited protections from experimental medicine costs and clinical trial expenses.About 60% of BCBSLA group members and 50% of Individual members are in GF plans.

Grandfathering: How to Keep It?

Youre Darn Tootin Listen to your Grandfather!! Plan must have been in force on 3/23/2010. Plans sold since are NOT Grandfathered.Plan must not eliminate or omit any of the coverage or treatments covered on 3/23/2010.Plan cannot adjust coinsurance against employee/insured at all.Plan cannot increase deductibles or co-payments by more than Medical Inflation plus 15% since 3/23/2010 (currently 25.56% cumulative since 3/23/2010).Employer Plan cannot increase employees share of premiums by more than 5% over the baseline percentage share on 3/23/2010.

Civic Organization designed to provide unbiased information on PPACAHealthcare and Wellness Information Focused on explaining drivers of healthcare costs, the critical importance of personal wellness, and the need for access to quality healthcare for all Louisianas citizens.Solely an educational resource, not seeking to create public policyOver 200 member organizations, including LDOI!JOIN THE EFFORT @ www.lhec.net