the affordable care act: what happens now? kansas insurance department kansas state department of...
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The Affordable Care Act:
What Happens Now?
Kansas Insurance Department
Kansas State DepartmentOf Education
October 18, 2012
2010 Affordable Care Act Provisions—in effect NOW
2010 ACAProvisions
Exchanges
• Federal Pre-existing Condition High Risk Pools (PCIP – KS)
• No lifetime limits and phase-out of annual limits
• No rescissions, except in cases of fraud
• Coverage of preventive health services with no out-of-pocket costs
“Reasonable” unpaid breaks for nonexempt, nursing mothers and private location
2014 ACA Provisions
• No pre-existing condition exclusions for children
• Dependent coverage to age 26
• Small Business Tax Credit• For businesses with 25 or fewer employees• Average wages less than $50,000• Employer must contribute at least 50% of premium• Tax credit phases out as number of employees and wages increases• 2010-2013: Up to 35% of total employer contribution; 2014-2016 – up to 50%
2010 Affordable Care Act Provisions—in effect NOW
2010 ACAProvisions
Exchanges
2014 ACA Provisions
2014 ACA Provisions
• Elimination of pre-existing condition exclusions
• Guaranteed issue and renewability of coverage
• Rating factors limited to age, tobacco use, geography and family structure
• Tax credits and subsidies for individuals to help pay premiums and out-of-pocket costs; up to 400% of the Federal Poverty Level
• Employers can offer increased wellness incentives; permits rewards or penalties up to 30% of cost of coverage
2010 ACAProvisions
Exchanges
2014 ACA Provisions
2014 ACA Provisions
• Mandated coverage for “essential health benefits”
• Uniform explanation of benefits and standardized definitions
• Individual mandate to ensure consumers do not wait until they are ill to seek coverage
• You will be penalized for no coverage (with some exceptions)
• Establishment of an exchange—federalor state-run
2010 ACAProvisions
Exchanges
2014 ACA Provisions
2014 ACA Considerations
Lawsuit heard by U.S. Supreme Courtduring March—June 28th ruling upheld individual mandate as a tax• The law builds on an employer-based system that is
intended to standardize and equalize benefit coverages.
• The individual market will work better because pre-existing conditions are not an issue.
November general election considerations still on the table, definitely affecting exchange activity
2010 ACAProvisions
Exchanges
2014 ACA Provisions
What’s an Exchange?
• An exchange is an online marketplace where individuals and small employers will be able to buy health insurance products sold by insurance companies.
• People who apply to buy insurance through the exchange who are eligible for a public program (like Medicaid) will be enrolled in that program.
2010 ACAProvisions
Exchanges
2014 ACA Provisions
What’s an Exchange?
• Under the Affordable Care Act each state shall establish an American Health Benefit Exchange by January 1, 2014
• The Secretary of Health and Human Services must certify by January 1, 2013, if a state will be able to operate a qualified Exchange
If a state does not build an exchange, the federal government will operate it for the state
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Attention Small Businesses!
• Employers with fewer than 50 workers are exempt from employer responsibility taxes. They don’t have to pay a penalty if their employees get tax credits through a health insurance exchange.
• Small employers are exempt from the insurance mandate, but their employees are not.
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Individual & Small Group Exchange Basics
• Individuals may enroll in any qualified health plan offered in a state Exchange, with or without subsidy
or tax credits
• Employers may choose coverage level OR one or more qualified health plans• Employees choose from carriers offering at that
coverage level OR plan(s) selected by employer
• Employees individually rated (limited to the four allowed rating Factors—age, tobacco use, geography,family structure)
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Levels of Coverage
Bronze – covers 60% of actuarial value of benefits
Silver – covers 70% of actuarial value of benefits
Gold – covers 80% of actuarial value of benefits
Platinum – covers 90% of actuarial value of benefits
Catastrophic – high-deductible plan for young (under age 30) and those exempt from individual mandate
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Essential Health Benefits• “Essential Health Benefits” in health plans must
contain at least the following 10 categories:--Ambulatory patient services--Emergency services--Hospitalization--Maternity and newborn care--Mental health and substance use disorder services, including behavioral treatment--Prescription drugs--Rehabilitative and habilitative services and devices--Laboratory services--Preventive and wellness services and chronic disease mgmt.--Pediatric services, including oral and vision care
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Essential Health Benefits• Essential health benefits benchmark election
was due September 30, 2012, no election made
• States could choose one of the following benchmark insurance plans:
• One of the three largest small group plans in the state by enrollment.
• One of the three largest state employee health plans by enrollment.
• One of the three largest federal employee health plan options by enrollment.
• The largest HMO plan offered in the state’s commercial market by enrollment.
2010 ACAProvisions
Exchanges
2014 ACA Provisions
2014 ImplementationSmall Group (SHOP) Exchange
• States must establish SHOP exchange in 2014• May be combined with individual market exchange• Until 2016, exchanges may be restricted to employers
with 1-50 employees• In 2016, exchanges serve employers with 1-100
employees• States may expand exchanges to larger employers
beginning in 2017
• Employees may be given choice of carrier by their employer
• Employer may choose coverage level• Employees choose from carriers
offering at that level
2010 ACAProvisions
Exchanges
2014 ACA Provisions
Exchange Timeline
IT Systems Architecture
Federal Rulemaking
State Legislation and Regulations
Federal & State IT Buildouts Secretary Determines
if State will Establish
Enrollment Begins
Federal Policymaking
Coverage Effective
Outreach & Education
Plan Bidding/Contracting
Certification of Health Plans
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
Planning & Establishment Grants
Definition of Full-Time Employee
2010 ACAProvisions
Exchanges
2014 ACA Provisions
ACA defines full-time employee as an employee who works 30 hours per week, per month, on average
However, ACA also looks to part-time employees to determine full-time employer equivalent. If total full-time and full-time equivalent employees > 50, business IS subject to employer mandate penalty and coverage provisions
If an employee is hired on part-time, temporary or seasonal basis, need not be offered coverage. But . . . need to monitor hours
How many full-time employees do you have?
If ≥ 50
Business is subject to ACAACA looks to part-time
employees to determine full-time employee equivalents.
If total full-time and full-time
equivalent employees ≥ 50
Business is subject to ACA employer mandate penalty
and coverage provisions
If total full-time and full-time
equivalent employees ˂ 50
Business is exempt from ACA employer
mandate penalty and coverage
provisions
Slide Courtesy of National Retail Federation
Separate businesses under common control
are considered one business if determined
so by IRS rules
Rules may vary by structure (e.g. corporation or
partnership) of business. Generally requires 80% control
to be considered common control.
If less than50
Are You a Large Employer?
Large Employer Responsibility (50 or more FTEs)—difficult formula
If an employer doesn’t offer minimum coverage and one of its employees receives a subsidy through the Exchange, the employer will be subject to a penalty: $2,000 annually, times the number of employees, minus 30.
If an employer does offer coverage, but an employee receives a subsidy through the Exchange to pay for the premium, the employer will be subject to a penalty of $3,000 annually for each employee receiving a subsidy, up to a maximum of $2,000 times the numberof full-time employees, minus 30.
2010 ACAProvisions
Exchanges
2014 ACA Provisions
A full-time employee is defined under the Affordable Care Act (ACA) as an employee who works 30 hours per week, per month, on average.
Slide Courtesy of National Retail Federation
If an employee is hired for – or promoted to – a full-time position (for an ACA-covered
employer), then the employee will be eligible for the employer’s health plan after the
employer’s waiting period (maximum 90 days) if applicable.
If an employee is hired on other than a full-time basis (e.g. on a part-time , temporary, or seasonal
basis), then they need not be offered coverage. But, employers may have to monitor their hours to
determine if they become eligible for coverage.
The Department of Treasury is considering a method of tracking hours
on average to recognize eligible employees without the expense of
enrolling and dis-enrolling employees into coverage, as they gain or lose
eligibility.
This proposed “look-back” method would allow employers to average hours over a set period (not to exceed 12
months) in exchange for an equal or greater period of stable coverage without regard to eligibility for coverage.
Seasonal employees working fewer than 120
days per year are excluded from
calculation of whether an employer is an ACA-covered large employer
and from penalty calculations.
Employer responsibility penalties
What are the employer responsibility penalties?
Failing to offer coverage to full-time employees
Offering coverage to full-time employees where the cost of the coverage exceeds 9.5% of family
income
The penalty for the failure to offer coverage is $2,000 x full-time
employees not covered, minus the first 30 employees, i.e. your first 30
full time employees are exempt from the calculation.
The penalty for the failure to offer “affordable” coverage is the lesser of two penalty calculations: $3,000 per applicable employee or $2,000
times every full-time employee, minus the first 30 employees.
At least one employee must
receive subsidized coverage in the
exchange to trigger penalties.
Slide Courtesy of National Retail Federation
Applicable employers can be penalized for :
Key considerations: What is your mix of full and part-time
employees? Could an adjustment of employee
status reduce your penalty exposure? If you provide
coverage today, how does the cost of that coverage compare
to your total penalty exposure? Consider all options, including non-
monetary concerns.
NRF maintains a Health Mandate Cost Calculator at
www.retailmeansjobs.com/healthcare which can model the penalty effect on
your business.
Employer responsibility penalties
An applicable employer who offers qualifying coverage to full-time employees can still be penalized if that coverage fails a two-part “
affordability” and “minimum value ” test
Slide courtesy of National Retail Federation
Coverage must be “affordable.” The employee’s cost for coverage (self-only coverage) must not
exceed 9.5% of family income.
Coverage must also be of “minimum value.” The plan’s share of total allowed benefit cost must
be more than 60 percent.
This is generally understood to be a 60% actuarial value test. The Departments of Treasury
and Health and Human Services are considering several
approaches to defining the standard, including: a minimum value calculator; a safe-harbor
checklist; and actuarial certification.
Actuarial value is based on plan payments for a
standard population and charges minus individual share of
premiums, co-insurance and co-pays.
A potential regulatory safe harbor under consideration for employers would base this
on 9.5% of the employee’s current W-2 wages.
Low-income employees not eligible for Medicaid or Exchange tax credits may be able to access catastrophic or limited
benefit coverage.
The question of dual income/coverage
households has not yet been addressed.
Employer responsibility penalties
Kansas Insurance Department goal
in federal health reform:
Do what’s best
for Kansas consumers,
Kansas agents
and Kansas companies
by keeping reforms at the state level.
2010 ACAProvisions
Exchanges
2014 ACA Provisions
420 SW 9th St.Topeka, KS 66612
www.ksinsurance.orgcommissioner@ksinsurance.org
Phone:785-296-3071
Consumer Assistance:800-432-2484
Fax:785-296-7805
Kansas Insurance Department
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