Spring 2013Health Reform

UpdateFor Health Agents

Presented by Clay Peek, PEEK PERFORMANCE INC.

Our Featured Guest SpeakerKeith Prettyman, Partner,

Woods/Aitken Law FirmMike Benke, BMC

(864)228-2635 PPI officewww.peekperformanceinsurance.com

Thanks for Attending

Some of you are attending this important session at the invitation of one our valued marketing partner/agencies. Please learn all you can from this session, then return to them for your product contracting. We’re here to help you – and them – succeed!

If you’re not affiliated with the TSS/Wilhelm, NMG/CLA/Hagy, Hopkins, HPA/Hilgers, Tey Warnock and other teams – please contact us directly for all product needs you may have.

Clay Peek, Peek Performance Inc

Opportunities Abound!

Major MedicalThe individual Major Medical plans are still selling – but

there is great uncertainty about the pricing of those plans after Jan. 1, 2014

Agents should anticipate the real possibility of MM commissions going down 1/1/14. However, a reduction in commissions could be more than made up in the increase in volume due to a shrinking Group market.

Subsidies will be available for lower income buyers and may enable many to purchase “qualified” MM plans.

Many people will still not be able to afford a MM plan, even with the subsidies.

PPI agents will be able to sell subsidized MM plans.

Opportunities AboundLimited Medical Plans

Limited Medical plans are still a good idea for “gap filling” on a high deductible MM plan.

Limited Medical plans are an affordable “Primary coverage” alternative to those who can’t afford or medically qualify for a MM plan.

Some excellent Limited Medical plans will persist after Jan. 2014

Limited Medical plans are not ACA qualified plans

Citizens who don’t purchase a “qualified plan” may be subject to ACA tax/penalties, depending on health plan cost and their income.

How American’s Get Health

Insurance Now

Group ER Personal Policies

Medicare Medicaid

Uninsured

1. Group Employer – 145 million (incl. dependents)

2. Personal Policies – 40 million (up from 12 million in 2002)

3. Medicare – 47 million (incl. 12 million in MA)

4. Medicaid – 45 million (incl. 8 million over 65 or disabled)

5. Uninsured – 40 million (PC #, closer to 10 million)

How American’s Will Get Health

Insurance 2015

Group ER Personal Policies

Medicare Medicaid

Uninsured

2. Personal Policies – May increase to 185 million (more with GOP plans)

3. Medicare – 47 million (incl. 12 million in MA)

4. Medicaid – 45 million (less with GOP plans)

1. Group Employer – May drop to 20 million (incl. dependents)

Lose 125M here

5. Uninsured –20 million

Lose 20m

How American’s Will Get Health

Insurance 2015

Group ER Personal Policies

Medicare Medicaid

Uninsured

1. Group Employer – 20 million (incl. dependents)

2. Personal Policies – 185 million (more with GOP plans)

3. Medicare – 47 million (incl. 12 million in MA)

4. Medicaid – 45 million (less with GOP plans)

5. Uninsured –20 million

From 28 million1 to 125 million2 consumers will

change how and where they get

their insurance in 2014

Sources: 1Congressional Budget Office, 2McKinsey Consulting

ACA’s Impact on Individuals

Example: Family of 4 making $55k a year premium of $14,556. Single premium $5400

Employer Contribution

Employee Contribution

Government Contribution

Minimum contribution

from ER (9.5% AGI)

$175 $14,381 $0

50% of single $2,800 $11,756 $0

100% of single $5,400 $9,156 $0

50% of family $7,278 $7,278 $0

Offer no coverage $0/2k $4,135 $10,421

The “Private Insurance Exchange” Opportunity

AON Hewitt survey of 562 U.S. Employers, Nov 2011

23%

69%

77%

31%CHANGERising CostsReformExchanges

New/OtherBenefitModels

TraditionalGroup

Benefits

20152012

Disruptive SolutionsDynamic Marketplace

OPPORTUNITY

72% - Planning on Exchanges

What Models?

86% - Reduce costs45% - Improve access to quality plans43% - Enhance wellness programs43% - Increase healthcare choicesWhy?

About the Penalty/Tax

Very severe for Employer Groups 50+

In 2014, $2000 per ee (less 30) who don’t provide qualified coverage

$3000 per ee (less 30) if ER offers coverage, but the cost to ee is above 9.5% of income.

Fewer individuals/families than you might think (who don’t purchase an ACA qualified MM plan) will end up paying the tax because of the “8%” guideline on policy cost.

Net Result?Prices are going up on MM plans.

Still, more “Individual” (as opposed to “Group”) plans will be sold.

Our “Private Insurance Exchange” may help you capture some of those sales. Yes, even MM plans with subsides. (www.ppihealthexchange.com)

( You don’t need no stinkin’ Navigator ! )

Many people will still not be able to afford / or will simply choose to not to purchase a MM plan … and many of them won’t pay a penalty

A Limited Medical plan is much better than no plan at all!

Adding Cancer plans, Accidental Injury, Critical Illness, etc., helps provide coverage for some of the exposures, when a MM is not an option.

OVERVIEW OF HEALTHCARE REFORM – Keith Prettyman

General Approach of PPACA

Individuals must have mandated coverage or pay an income tax penalty.

No employer mandate per se, but employers with 50+ employees face penalties if employees are not provided mandated coverage

Plans in existence at the time of enactment (3/23/10) are “grandfathered”

Expands Medicaid to 133% of federal poverty level (“FPL”)

Establishes state-based “Exchanges” for individual and small group insurance purchases. Federal subsidies apply to low income individuals who purchase coverage through the exchange.

New federal health insurance regulations and mandates

OVERVIEW OF

HEALTHCARE REFORMGrandfathered Plans

“If you like your current coverage, you can keep it.”

Defined: Coverage provided by a health plan in which an individual was enrolled on March 23, 2010

Grandfathered plans are exempt from some, but not all, of the mandates

Loss of grandfathered status results from elimination of all benefits for a particular condition, increases in deductibles, co-pays or coinsurance amounts, increasing employee contributions by more than 5% or changing dollar limits on benefits

OVERVIEW OF

HEALTHCARE REFORMExchanges (RE: State &/or Federal, not Private)

Effective 2014, states must have an “American Health Benefit Exchange”

24 states have indicated that they’d construct one – 26 may not.

CO indicates 1.4% excise tax to pay for exchange, Feds – 3.5%

Brings health insurance buyers and sellers together via web-based standardized policies, applications and processes

Pools risks and offers individuals access to “group – type” rates

Allows ONLY “qualified health plans” to be sold

Eliminates underwriting practices

Subsidizes premiums for households with incomes up to 400% FPL

Premium subsidies in the form of tax credits provided on a sliding income scale

Private sector plans only; OPM will develop and offer two multi-state plans

NAVIGATORS State/Federal Exchanges must establish a Navigator

program

Navigators will advise (but not enroll) applicants

Navigators can be professional associations, community nonprofit groups, fishing/ranching/farming organizations, chambers of commerce, unions and licensed agents

Funding may not be from the federal funds used to establish the exchange

Navigators CANNOT be compensated by carriers for their service

Feds have indicated $50.00 per applicant is sufficient

Fees and Costs Colorado has recently announced a 1.4%

excise fee on the cost of health plans

Other states will likely follow a similar pattern

Feds have indicated that they will likely place a 3.5% excise tax on health premiums on plans sold on the Federal Exchange.

Other fees will also apply: Cadillac Coverage fees, Reinsurance fees … and more.

Fees and Costs

(Source, “News from the Blues, BCBS of Texas” 4/17/13)

HHS has published it’s final rule on regulations for the “Transitional Reinsurance Program Contribution Fee” or “Reinsurance Fee.”

“HHS has established a per capita contribution rate of $5.25 per member, per month for the 2014 benefit year. Market segments affected include Fully Insured and Self Insured Group, Cobra and Individual under 65 market … unless exceptions apply.”

COVERAGE CHANGES 2010-2013

Prohibition on Lifetime and Annual Dollar Limits on Benefits

Prohibition on Pre-Existing Condition Exclusions for Children Under 19

Coverage of Preventive Health Services

Extension of Coverage for Children up to Age 26

Mandated Appeals Process

Prohibitions on Certain Rescissions

Patient Protections

W-2 Requirement

Summary of Benefits and Coverage

COVERAGE CHANGES 2010-2013

Prohibition of Lifetime and Annual Dollar Limits on Benefits

Effective for plan years beginning after 9/23/2010

Applies to grandfathered plans

Absolute prohibition on lifetime limits

Phase-in of annual limits

- 9/23/10 – 9/23/11 - $750,000

- 9/23/11 – 9/23/12 - $1,250,000

- 9/23/12 – 12/31/13 - $2,000,000

Restrictions on annual limits only applies to “essential benefits”

COVERAGE CHANGES 2010-2013

Prohibition on Pre-Existing Exclusions for Children under 19

Coverage of Preventive Care

Does not apply to grandfathered plans

Definition of “preventive” is extensive

- Evidence based services having an “A” or “B” rating from U.S. Preventive Services Task Force

- Immunizations recommended by Advisory Committee on Immunization Practices

- Screenings for infants, children and women recommended by the Health Resources and Services Administration

Must be provided without any cost-sharing (100%)

COVERAGE CHANGES 2010-2013

Extension of Coverage for Children up to Age 26

“Children” are natural children, adopted children and stepchildren

Dependency is NOT required

For grandfathered plans, until 2014, extension is not required if the adult child has employer-based coverage available

Does NOT extend coverage to adult child’s spouse or children

Does not mandate that dependent coverage must be provided (until 2014), but if it is provided these rules apply

COVERAGE CHANGES 2010-2013

Mandated Appeals Process - Delayed

Does not apply to grandfathered plans

Internal process as required by ERISA

External process at a level of the NAIC External Review Act

Prohibition on Certain Rescissions

Applies to grandfathered plans

Rescission is a retroactive termination

Rescissions can only be made for fraud, material misrepresentation or nonpayment of premium

COVERAGE CHANGES 2010-2013

Patient Protections

Does not apply to grandfathered plans

Pediatricians and OB-GYN’s as primary physicians

Coverage of emergency services without preauthorization (no differential in PPO/HMO for out of network emergency costs)

ER’s must provide W-2 re value/cost of insurance if more than 250 EE’s

ER’s must provide adequate Uniform Summary of Benefits documents to EE’s,

INDIVIDUAL MANDATE

“Cornerstone” of national health care reform

All “applicable individuals” are required to have “minimum essential coverage” or pay a tax penalty

- “applicable individuals” are American citizens other than those who

qualify for an exemption

- “minimum essential coverage”

- Government sponsored programs (Medicare, Medicaid, Tricare)

- Qualifying employer coverage

- Grandfathered coverage

- Qualifying individual coverage

INDIVIDUAL MANDATEPenalty Unless “exempt” an individual who does not have minimum

essential coverage will pay an annual penalty as part of their tax return which is the greater of:

Year Dollar Amount or % of Income

2014 $95 1%

2015 $325 2%

2016 $695 (indexed) 2.5%

Exempt

- Those whose lowest premium would exceed 8% of household income

- Those who do not file a 1040 due to income

- Members of Indian Tribes

- Those with religious exemptions

- Incarcerated individuals - Undocumented aliens

EMPLOYER PAY-OR-PLAY MANDATE

Applies to “large employers” – those with more than 50 FTEs

Waiver for 30 FT EE’s

Full time is defined as 30 or more hours per week

Part time hours are combined for any month and divided by 120 to determine FTE

Must include part time to determine if employer is subject to mandate, but the penalty only applies to full time

EMPLOYER PAY-OR-PLAY MANDATE - Illustration:

1. Currently 100 employees – If ER reduces hours to save FT # (keep below 50) - 49 are now Full Time Calculate hours of the 51 PT ee’s – Pay penalty based 49 FT – (30 ee’s

exemption)

2. 60 ee’s - 30 waiver = 30 FT EE’s = No penalty

EMPLOYER PAY-OR-PLAY MANDATE

Two types of penalties

$2,000 per year ($166.67/month) for each FT employee (over the first 30) who is not provided minimum essential coverage AND at least one FT employee gets subsidized coverage through an exchange. Applies to employers who DO NOT provide qualifying coverage.

3,000 per year ($250/month) for each employee who acquires coverage through an exchange if the employee’s required contribution for the employer’s coverage would exceed 9.5% of W-2 income or the employer pays less than 60% of the premium. Applies to employers who DO provide qualifying coverage.

(Clay – the “No good deed goes unpunished” rule)

What about exposure to the ER who offers qualified & affordable coverage that the EE chooses not to use? No penalty to ER. EE can’t go to the exchange.

OTHER JANUARY 1, 2014 MANDATES

Prohibition of pre-existing condition exclusions for adults Guaranteed issue and renewal of all qualified insurance Prohibition on charging higher premiums based on

health status of an applicant Limits on premium differentials - Cannot vary by more than 3 to 1 for age - Cannot vary by more than 1.5 to 1 for tobacco use

No waiting periods in excess of 90 days (There will be pre-set “Open Enrollment Periods”) 1st year Oct. 1 – March 30, 2014

Limits on deductibles for group health plans (does not apply to grandfathered plans or “Self Funded” group plans). $2,000 per individual and $4,000 per family.

HSA plans still viable

ESSENTIAL HEALTH BENEFITS

Ambulatory patient services

Emergency services

Hospitalization

Maternity and newborn care

Mental health and substance abuse services

Prescription drugs

Rehabilitative services and devices

Laboratory services

Preventive and wellness services and chronic disease management

Pediatric services, including oral and vision care

4 “Ferrari” Plan Formats

Bronze - 60/40 Coinsurance

Silver - 70/30 Coinsurance

Gold - 80/20 Coinsurance

Platinum - 90/10 Coinsurance

All plans have the same “out of pocket max” which is $6250 for Individuals, $12,500 family

Perhaps some companies will offer “Non ACA Qualified” plans … ?

THE “PRICE OF

OBAMACARE’S BROKEN

PROMISES” Congressional study dated March, 2013

Increased premiums in the individual market due solely to PPACA will be between 30 – 106%

Even after subsidies Americans earning as little as $25,000 will pay more under PPACA

Premiums for 20-29 year-olds will average individual premium increases of 189% (200% = 3 x the original cost!!)

(Clay – Call from your Stock Broker – “Buy Gillette!! NOW!”)

Increases are due to guarantee issue, community rating, essential health benefits and taxes and fees on plans, drugs and medical devices.

IS “CUL’s FIRST CHOICE” VIABLE AFTER 1/1/14?

FC is an “excepted benefit” – but not an ACA Qualified Plan

- Excepted Benefits are NOT subject to PPACA. They are:

- Accident or disability income insurance;

- Limited scope dental, vision and LTCI If offered separately and are not part of the health plan ;

- Coverage for specified disease, hospital indemnity and other fixed indemnity if offered as independent, non-coordinated benefits

FC is guaranteed issue (for those who are employed 27+ hours/week)

FC is guaranteed renewable (once you get it, you can keep it, regardless of work through age 65)

IS “FIRST CHOICE” VIABLE AFTER 1/1/14?

Many will forgo mandated coverage and pay the penalty. Why? Premiums will be very expensive. Overall estimates are the premiums will rise 30% - 106% or more based on mandated coverages, restricted rate differentials, inability to underwrite and other factors

Many (especially the healthy and young) will avoid the high cost. Rather than go without any form of coverage, FC becomes a viable alternative at a much lower cost to cover many high out-of pocket medical costs

Even of those who purchase required coverage, most will buy the least expensive option (60% of “full” benefits or catastrophic coverage for those under 30) and will have a need for a supplement

The PPI ValueWe’ll keep you abreast of the new “Health Reform” era

marketplace.

We’ll offer marketing instruction for greater sales

The best product offerings to meet market needs

Free Lead support for all of our best Limited Benefit (also Senior and Life) plans

Management opportunities … with “Turn Key Marketing” programs … and we’re eager to work with small agencies too. All tools and training available 24/7 online!

Our “Private Insurance Exchange”

PPI Resourceswww.peekperformanceinsurance.com Primary Agency site

www.ppisales.info/direct “Limited Med” focused site

www.ppihealthexchange.com Our “Private Insurance Exchange”

www.ppiplans.com/ppi Our duplicate-able Accident & Discount RX/Lab site

Rachael Wadsworth – Limited Medical Contracting rachaelw@ppisales.info

Gary Peek - Agent Services, garyp@ppisales.info

Terri Schlarb – Contracting Manager & Senior Market, terris@ppisales.info

Clay Peek – Agency Marketing & Training, clayp@ppisales.info

864-228-2635 Office, 800-539-1021 Fax

Other Important Webinars

Term Life with FREE LEADS – Monday April 22 @ 3 PM est

Our “Private Insurance Exchange” class with Mark and Josh of HPA --- “You Don’t Need No Stinkin’ Navigator” Tuesday April 23 @ 2 PM est

CUL’s Affordable Choice SI Plan! Friday April 26 @ 1 PM est

Sign up for all of them at our primary website:

www.peekperformanceinsurance.com

Thanks for Attending

Some of you are attending this important session at the invitation of one our valued marketing partner/agencies. Please learn all you can from this session, then return to them for your product contracting. We’re here to help you – and them – succeed!

If you’re not affiliated with the TSS/Wilhelm, NMG/CLA/Hagy, Hopkins, HPA/Hilgers, Tey Warnock and other teams – please contact us directly for all product needs you may have.

Clay Peek, Peek Performance Inc