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