PPACA* Outlook for Oklahoma(* Obamacare, ACA, Healthcare Reform)

• How did we get here?• What is the cost?

• Implementation challenges• Oklahoma City Health Underwriters

• March 12, 2013

OKLAHOMA FAST FACTS

• 84% of Oklahomans have health insurance (1)

-82% under age 65-private or public-99% over age 65-federal or ESI-600,000 uninsured

• $24 billion-Oklahoma Healthcare Expenditures-2009 (1)

-5% annual average increase• $15,745/year- U.S. Average for Family Coverage- 2010 (1)

-Premiums up 97%;2002-2012

Source-(1) Kaiser Family Foundation; Health Research & Educational Trust

Oklahoma has “opted out” of the ACA• In 2012, State Question 756- 65% yes; 35% no• No legislative actions in 2011, 2012• No selection of EHB- Oct. 30th, 2012• No ‘Exchange Blueprint’- Nov. 19th, 2012

– Gov Fallin letter to Sec. Sebelius, “Opposed by majority of Oklahomans”“Threatens to erode the quality of American healthcare and the fiscal stability of the

nation”― Default to Federally Facilitated Exchange

• No Expansion of Medicaid- Nov. 19th, 2012

HEALTHCARE INSURANCE IS EVOLVING• Passage of PPACA most significant regulatory

overhaul of U.S. healthcare since Medicare/Medicaid in 1965

• Seeks to achieve the “Trifecta of Change”o Control of Costso Improved Qualityo Universal Coverage

• Major challenges for each element of change

PPACA Chronology

• 2009- HR 3590 (9-17-09) S 1790 (12-24-09) PL#111-148 (3-21-10)• 2010- Signed into law: Mar. 23rd, 2010

Immediate Provisions Age 26 dependents No lifetime dollar limits No pre-ex for <19 years old Many other mandates

• 2011 Medical Loss Ratio Rule- 80%/85% -$22 Mil –OK $1.1 Bil – U.S. Rate Review Rule- reasonable criteria>10% increase Medicare Rx Discounts & Free Preventative Care - $1.86 Bil

Chronology Cont’d

2012 New Rules Implemented Tax- W2 Reporting; 1099 Hospital Readmission Penalty

Accountable Care Organizations - Medicare

2013 Final rules for Health Plans:EHBs

http://cciio.cms.gov/resources/data/ehb.htmlMarket ReformsBenefit and Payment ParametersMEWAMultistate Plan

Proposed rules on Eligibility (“Application Counselors”),

SHOP

Chronology Cont’d• 2013- Taxes and Mandates coming Self employed tax increase- 0.9% Medicare tax- 3.8%- Hi-Incomes: 250K/200K DME tax- 2.3% excise tax FSA capped @ $2500/year Contraceptive exemption ends Exchange Open-Enrollment 10/1/13

• 2014- Exchanges begin operation on 1/1/14 No pre-ex, health status or gender discrimination

• 2015- Physician payment reform measures

PPACA Costs

Cost- CBO EstimatesOverall Coverage Cost- For 10 yr period beginning:

2010 2012$938B $1.76T

$754 Billionin Subsidies

Implementation Cost: Unknown

PPACA CoverageWho Is- Is Not Covered Post-Implementation

• 2014 - 22 million Americans move to insured status• 2015-2019 - Add’l 10 million move to insured status * • 2020 - 23 million remain uninsured

Exchange Business Functions

Communication- Outreach, notification, educationOversight- Goverance & management support, resource

managementEligibility & Enrollment- Individual + SHOP exchange eligibility

determination and enrollmentCustomer service- Consumer support, broker/navigator

relationship mgmtFinancial Mgmt- Transaction processing, risk mgmt & reporting,

payment stream monitoring, rules mgmt, anti-fraud programsPlan Mgmt- QHP certification, rate/form review, licensing/

solvency, A/V reviews

Exchange Implementation Challenges

I. Funding- $1 billion in funding grants available to SBE states• Ohio- $63 million to establish; est. $43 million to operate• Minn.- $110 million to establish; $54-$60 million to operate

II. Timely Delivery- By Oct. 1st, 2013, no later than Jan. 1st, 2014 (Statutory deadline)• Bandwidth @HHS will be seriously challenged• Only one-third of regs have been issued• Central hub specs not issued

III. Technology Build – Central Hub

“Miracle of Central Planning?”

IV. Legal ChallengesReligious Liberty & Contraceptive Mandate• 40 Cases-11- Plaintiffs representing hospitals, universities, businesses and

some schools• Proposed rules issued February 1, 2013, open for public comment through April 8,

2013

V. Implementation Challenges• State of Oklahoma v. Kathleen Sebelius & Timothy Geithner• Seeks to uphold Section 1311 of PPACA- Restricts “Premium

assistance tax credits” to [only] exchanges established by states.”• IRS has no authority to offer those entitlements to states that opt-out

VI. Marketplace Sticker Shock• CBO 2009 Report on premium increases in the individual and

small group markets: -2% to +2%• Milliman Actuaries now estimate increases in the 30-40% range

for CY 2014.• Example: Ohio’s individual market will increase 55-85% by 2017;

10-20% in small group. (Exclusive of medical inflation)• Drivers of Increase:

— Benefit expansion— Risk pool composition change— Adverse selection— Carrier fee pass-through— Provider cost shifting

VII. Exchange Regulatory Environment• Federally Facilitated Exchange run and operated by HHS• QHP Management (Regulatory Functions) will be HHS

responsibility.1. Licensing 5. SERFF2. Solvency 6. Rate Review3. Mkt. oversight 7. A/V Review4. Consumer Protection 8. Network Adequacy

• Dual Regulatory Environment?― Exchange business- HHS― Non-exchange business- OID

General ACA Requirements• Two Exchanges

— American Health Benefit Exchange — SHOP (Sm. Bus. Health option) Small group

• Exchange/Non-exchange Requirements— Guaranteed Issue & Renewability— Modified Community Rating ( age, smoker, etc.)— Risk Sharing Among Carriers

• Large Groups Input— 50 FTE’s ( FTE+PTE hours > 50 FTE)— Play or Pay— > 200 FTE’s = auto enrollment— Not subject to EHB, rating rules, limits on deductibles

• Small Group/Individual Impact— Increased offerings— Employers have no requirement to offer or contribute to cost of their workers coverage— Tax Credits to employer— Premium subsidies to low-income EE’s

ACA Impact on ESI

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