September 2013 Strategic Considerations in Health Insurance Walking Through Changes and Options for 2014 and Beyond Janet Trautwein National Association

September 2013 Strategic Considerations in Health Insurance Walking Through Changes and Options for 2014 and Beyond Janet Trautwein National Association of Health Underwriters

Recap/Political Overview Whats About to Change For Individuals Whats About to Change in the Marketplace Whats About to Change for Employers Whats About to Change for Agents/Brokers Resources and Questions

Political Landscape Washingtons political dynamic is fractured House actions are tempered by conservative pressure and tight Democratic majority in the Senate and President Obama Show Me mentality when it comes to the health reform law. Demonstrating business impact extraordinarily important States are dealing with a host of health reform issues Exchanges Medicaid Expansion Budget Concerns Lack of Information from the Federal Government Extreme variances in attitudes about implementation including amongst branches of state government

Preparing for the Big Year Ahead! 2014 is going to bring great changes to the world of health benefits The kinds of coverage available will change, as will the requirements and options for individuals, employers and employees Change can be scary but its also a time of great opportunity The need for an educated insurance broker to guide consumers and help them make strategic plan decisions is greater than ever

Health Reform Implementation Already Implemented Being Implemented This Year Still to Come Grandfathered plan requirements and consumer-directed plan changes Summary of coverage requirements for all plans Individual mandateAuto-enrollment for groups 200+ Small business tax credits for purchasing private coverage Exchange notification requirements for all employers Employer responsibility/ minimum value requirements for 50+ groups Automatic expansion of state small group markets to 100 employees Sept. 23 rd reforms- all plans Dependent coverage to 26 No pre-ex for children Restrictions on rescissions and annual/lifetime limits Employee FSA contributions capped at $2,500 Health insurance exchanges, private coverage subsidies and Medicaid expansion in willing states States can let large group join exchanges, triggering market reforms for all fully- insured large groups Sept. 23 rd reforms for non- grandfathered plans Preventive care 105h nondiscrimination rules (enforcement delayed) New coverage appeals process Comparative effectiveness research funding tax impacts all plans Insurance market reforms and new coverage standards for individual/small group market plans The Cadillac 40% excise tax goes into effect for all high-value group plans, including self-insured plans Medical loss ratio requirementsExpanded W2 reportingNew national premium tax for fully-insured plans

What Has Actually Been Delayed So Far? Employer Mandate PENALTIES Mandatory Employer Reporting to Exchanges SHOP employee choice and premium aggregation (for FFM and Partnership States) Other Federal Exchange Pare-Downs Out-of-pocket Limit Transition

What Happened With OOP Limits? Rules on how health reforms out-of-pocket limit provision would be implemented were announced in February, but they just got a lot of national coverage due to a New York Times story about them on August 13th OOP Limits apply to all non-grandfathered group plans, including large groups and self- funded plans New rules call for a limit calculation that is stricter than what is traditionally applied todayall individual copays count toward the total The February rules include transition relief for health plans with more than one benefits administrator. These plans don't have to combine their tallies of members out of pocket spending into one total until 2015. If a plan does not impose an OOP maximum for RX, they do not need to apply one until 2015. An exception to the new rule is for plans that use a separate provider to run their behavioral health benefits. Under the Mental Health Parity and Addiction Equity Act of 2008, health plans can't apply separate out-of-pocket maximum limits for those benefits This is not a true delay, but more of a phase-in that applies to certain carriers and employer-sponsored plans

What is still happening? Individual mandate. The laws health insurance market reforms that go into effect as of the first day of the plan year that begins in 2014 Health insurance exchanges. The marketplace notice. All employers subject to the Fair Labor Standards Act (not just PPACAs employer mandate provisions) are required to send a marketplace notice to all employees by October 1, 2013. The affordability/minimum value tests. These terms don't just relate to the mandate, they are concepts relevant to ANY employee if ANY employer (regardless of size) who is eligible for employer sponsored coverage and who wishes to apply for a subsidy in the exchange. Summaries of Benefit and Coverage PCORI Fee. The transitional reinsurance fee, the new national health insurance premium tax and other new taxes W-2 Reporting requirements. The limit on Health FSA salary reductions.

Individual Mandate Are you: Part of a religious group with an exception Incarcerated Undocumented resident American Indian Pay more than 8% of take-home pay for employer coverage So low-income you dont pay federal income taxes Someone who fall into a Medicaid expansion coverage hole Some other hardship exemption Do you have: Coverage through a job Coverage through an exchange/at least bronze individual coverage Medicaid, Medicare, CHIP Tricare or VA Care Student Health Plan Grandfathered plan No Penalty Penalty 2014Greater of 1% family income or $95 adult/$285 family maximum 2015Greater of 2% family income or $325 adult/$975 family maximum 2016Greater of 2.4% family income or $695 adult/$2085 family maximum or YES NO

Proposed Rule on Minimum Essential Coverage Minimum Essential Coverage Includes: Insurance policies sold in the small or large group market Employer-sponsored group health plans (a group health plan is a welfare arrangement under ERISA that provides medical care to employees or dependents through insurance, reimbursement or otherwise) Minimum Essential Coverage Does Not Include: Stand-alone HRAs that are not integrated with a group health plan HIPAA-excepted benefits such as: stand-alone vision or dental, cancer-only policies, indemnity plans (hospital or disease), accident or disability plans, on- site medical clinics and other types of coverage listed in PHSA 2791(c)

The new availability of tax credits for qualified low income people purchasing individual coverage through exchanges could be a game changer. QUALIFIED individuals with family incomes between 100-400% of the federal poverty level will be eligible for sliding scale premium tax credits that will cap the amount they may pay for coverage. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing.

The Congressional Budget Office estimates that individual market premiums are going to be between 27-30% higher in 2014. The Congressional Budget Offices Take on the Subsidies On average, Exchange subsidies will only cover approximately 2/3 of premiums The CBO says [new health care law market reforms will] have a much greater effect on premiums in the nongroup [individual] market than in the small group market, and they would have no measurable effect on premiums in the large group market.

Who Gets A Subsidy? Subsidy Eligible?YesNo Single individual who works for a company with 30 FTE employees that offers an affordable bronze plan. X Spouse and children of an individual who work for a company with 30 FTE employees that offers the whole family affordable bronze coverage even though the cost of the family coverage is too much for them because their family income is 275% FPL X Spouse of an individual who works for a large employer with a spousal carve-out. Family income is 350% FPL X Employee and family who are offered family coverage by a company with 30 FTE employees, but even the single employee premium for the low-cost bronze plan is unaffordable. X Individual with income of 85% FPL in a state that does not expand Medicaid. X Single 25 year old male with no employer coverage and an income of 125% of FPL that wants to buy the exchanges young and invincible catastrophic plan. X

Premium Tax Credits Varying Impact Source: Kaiser Family Foundations Subsidy Calculator IndividualFamily StatusIncomePercentage of income dedicated to premium Estimated value of the employees annual tax credit in 2014 30 year old with qualified employer coverage Married, two children $35,0009.5% of household income No one in the family qualified to buy subsidized exchange coverage 30 year old with no employer coverage Single$35,0009.5% of household income $945 (based on Kaiser Family Foundations projection of a $3,426 annual single nonsmoker premium in 2014) Individuals annual premium costs would be $2480 30 year old with no employer coverage Married, two children $35,0002% of household income $9,269 (based on the Kaiser Family Foundations projection of a$9869 annual family nonsmoker premium in 2014) Familys annual premium costs would be $600 45 Year old with qualified employer coverage Married, three children $55,0009.5% of household income $0 --No one in the family qualified to buy subsidized exchange coverage 45 year old with no employer coverage Single$55,000N/A$0 Individual may buy coverage in the exchange but would not qualify for subsidy Individuals annual premium payments would be $5,609 based on Kaiser Family Foundations projection of 2014 single premium 45 year old with no employer coverage Married, two children $55,0007.36% of household income $6059 (based on Kaiser Family Foundations projection of a $10,108 annual family premium in 2014) Familys annual premium costs would be $4,049

How Will the Subsidies Work? Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and get a subsidy. Qualified individuals with family incomes between 100-400% of the federal poverty level are eligible for a premium tax credit. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing. While consumers can buy any type of policy, the amount of the tax credit received is based on the premium for the second lowest cost silver plan in the rating area where the individual is eligible to purchase coverage. The law requires consumers to contribute a specific percentage of income to the premium. Its a sliding scale based on the federal poverty level. The subsidy then makes up the difference between that amount and the cost of the benchmark plan. The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individuals insurer.

What About Income Verification? Individual applies for exchange coverage. Self- reports current household income. Income is verified with most recent data from IRS and Social Security. If there is more than a 10% income disparity, further checking ensues. Federal exchanges will check every case. State exchanges may double- check a sample. Additional verification will come through voluntarily reported employer data and Equifax. If needed, the individual may be asked to provide more substantiation data. If none is provided, the tax credit advance payments will be halted. Individuals will have to claim their credit on their annual income tax filings. If income doesnt match-up with what was reported, there will be tax consequences. Inappropriate subsidies must be repaid. Amount is capped based on income, but if you make more than 400% of FPL the full subsidy must be repaid. Exception is there will be no repayment of cost-sharing subsidies.

Medicaid Expansion

The elephant in the room is how is health reform going to impact premium rates and the amount people actually pay for coverage? Right now rate and price predictions are all over the map.

Why can no one agree about the rate/price impact of health reform? Rate comparisons with present-day policies may be hard because in many cases rating factors, plan design requirements, mandated benefit requirements and more will substantially different than what is required today. In most cases, particularly in the individual market, benefit packages will be richer, but networks may be reduced. Many rate analyses do not take into consideration new taxes and fees that will be included in premiums moving forward. Most of the pricing impact will hit the individual and small group markets. There are risk- sharing protections built into those markets to protect against adverse-selection costs, but they are untested. While rates have to be actuarially justified, carriers are making big assumptions about market impact when developing 2014 rates and there are wide variances. Subsidized individuals will be shielded from price impact because the amount they must spend is limited by income. But even though the subsidized consumer wont personally absorb an increase, prices remains the same.

As envisioned, streamlined, easy to use, consumer friendly, neutral online marketplace for health insurance with one-stop shopping for Medicaid, CHIP, subsidized coverage and other individual coverage Subsidized coverage will only available for individuals purchasing through an exchange, not those in an employer group People with adequate and affordable group coverage cannot leave group plan for subsidized individual exchange coverage Obama Administration is attempting to rebrand Exchanges as Marketplaces Three Governance Options: State-Owned and Operated State-Federal Partnership Model Federal Fallback Exchange Certified agents should be able to sell and service exchange-based policies in all states and be compensated via means similar to todays market 23 Exchange Marketplace

State Exchange Decisions Coverage through the exchanges will begin in every state on January 1, 2014, with enrollment beginning October 1, 2013. State decisions and blueprints on oversight of the exchanges were required by January 1, 2013 for a state-based exchange and by February 15, 2013 for a partnership exchange or federally- facilitated exchange. Even if a state elects a state-based exchange, if they are not able to make the exchange operational for consumers in time, or if their efforts are not sufficient for certification by HHS, the federal government will assume operations. Status of state exchange marketplaces Sixteen states plus the District of Columbia declared that they intend to establish a state- based marketplace and have received conditional approval from HHS Mississippis application was rejected due to conflict between the elected Insurance Commissioner and Governor Utah has received conditional approval for a state-based SHOP exchange only Seven states are planning to pursue a state-federal partnership marketplace Twenty-six states will have a federally-facilitated exchange in 2014

State Exchange Decisions for 2014 MissouriDefault to Federal Exchange MontanaDefault to Federal Exchange 1 1 NebraskaDefault to Federal Exchange 1 1 NevadaDeclared State-based Exchange New HampshirePlanning for Partnership Exchange New JerseyDefault to Federal Exchange New MexicoDeclared State-based Exchange New YorkDeclared State-based Exchange North CarolinaDefault to Federal Exchange North DakotaDefault to Federal Exchange OhioDefault to Federal Exchange 1 1 OklahomaDefault to Federal Exchange OregonDeclared State-based Exchange PennsylvaniaDefault to Federal Exchange Rhode IslandDeclared State-based Exchange South CarolinaDefault to Federal Exchange South DakotaDefault to Federal Exchange 1 1 TennesseeDefault to Federal Exchange TexasDefault to Federal Exchange Utah State-based SHOP and Default to Federal Individual Exchange VermontDeclared State-based Exchange VirginiaDefault to Federal Exchange 1 1 WashingtonDeclared State-based Exchange West VirginiaPlanning for Partnership Exchange WisconsinDefault to Federal Exchange WyomingDefault to Federal Exchange AlabamaDefault to Federal Exchange AlaskaDefault to Federal Exchange ArizonaDefault to Federal Exchange ArkansasPlanning for Partnership Exchange CaliforniaDeclared State-based Exchange ColoradoDeclared State-based Exchange ConnecticutDeclared State-based Exchange DelawarePlanning for Partnership Exchange District of ColumbiaDeclared State-based Exchange FloridaDefault to Federal Exchange GeorgiaDefault to Federal Exchange HawaiiDeclared State-based Exchange IdahoDeclared State-based Exchange IllinoisPlanning for Partnership Exchange IndianaDefault to Federal Exchange IowaPlanning for Partnership Exchange KansasDefault to Federal Exchange KentuckyDeclared State-based Exchange 1 1 LouisianaDefault to Federal Exchange MaineDefault to Federal Exchange 1 1 MarylandDeclared State-based Exchange MassachusettsDeclared State-based Exchange MichiganPlanning for Partnership Exchange MinnesotaDeclared State-based Exchange MississippiDefault to Federal Exchange 2 2

SHOP Exchange Update Statute gives great flexibility to states regarding SHOP exchanges, but there are requirements for states in the new final exchange rules. On May 31, 2013 HHS released final rule on SHOP exchange establishment http://www.ofr.gov/OFRUpload/OFRData/2013- 13149_PI.pdf http://www.ofr.gov/OFRUpload/OFRData/2013- 13149_PI.pdf The final rule delays the provision of the law that would allow a small employee to choose multiple health plans to offer its employees, as well as the required premium aggregation. Until 2015, the federal SHOP Exchange will, instead, assist small employers in choosing a single qualified health plan to offer their employees. State-operated SHOP Exchanges may, but are not required to, apply the same restrictions.

Inside and Outside Exchanges Changes Are Looming that Will Impact Premiums Community rating that limits rate variability to age, family status, smoker status and geographic area with an overall variation of 3 to 1 meaning that the highest rate offered for a product may be no more than three times the lowest rate. Impacts Individual and Small Group plans Pricing Changes New national premium tax, reinsurance fees, and comparative effectiveness tax will impact rates in 2014 and beyond. Average tax cost will be over $500 for a family premium in 2014 Premium tax impacts all fully insured plans. Other insurer taxes and fees hit all plans Other looming taxes like the medical device and RX taxes will impact all consumers New Tax Burden

Other Changes Will Impact The Marketplace and Product Design Qualified individual and small group plans will have to meet: Essential health benefit requirements Actuarial value requirements Cost-sharing limitations Separate small group deductible cap of $2000/$4000 HHS may provide some relief, on the deductible cap, but details are still unclear Recent HHS decision means all plans, including large group and self funded, will have to meet Out-of-pocket limits tied to the HSA deductible limits with transition relief for 2014 Plan Design Changes Qualified individual market purchasers with family incomes between 100-400% of FPL through the new exchanges. Subsidies are not available to Medicaid-eligible individuals. Subsidies

Participation Requirements HHS rules have prohibited participation and contribution requirements for large group market issuers and required small group carriers to have a requirement-free open enrollment period from Nov 15-Dec 15 annually Unknowns right now include: Will carriers limit small group participation/contribution requirement reprieves to the one month November 15-December 15 open enrollment window? Will exchange coverage be counted as a valid waiver? Is the stop-loss marked affected and in any case how will it react?

Does A Renewal Date Change Help? Employers and carriers have contemplated the idea of changing renewal dates to delay PPACA compliance and related costs Changing a renewal date is a complicated decision and a responsible broker needs to help clients weigh all involved factors Market reforms are generally implemented on a plan-year basis, but individual mandate is not. There are some employer mandate transition relief options for non-calendar year plans, but a renewal date switch generally negates them. Its still unclear how transition relief will work with the mandate penalty delay. There may be Cafeteria plan considerations Current rules require documentation of a sound business reason for a renewal date change and a switch may trigger a DOL audit. Recent HHS changes to participation and contribution requirements and the creation of a November 15-December 15 open enrollment period could be a business reason for a change.

What about Self-Funding? Increased interest in self-funding amongst smaller and midsized groups Increased interest in the integration of self-funded options with other group coverage options Participation requirement changes in the fully-insured market could change dynamics DOL requested more information about small group self-funding last year and is conducting annual market studies Market interest in self-funded workarounds has already resulted in DOL guidance about changes for HRAs. They need to be attached to a group chassis. Some states are looking at regulation of attachment points as a way of limiting smaller group self-funding More increased interest may bring even more increased regulatory scrutiny

Employer Responsibilities Under PPACA Its Not Just The Mandate Employers are also responsible for maintaining a PPACA-compliant plan, which includes adherence to market reform requirements, notice requirements, MLR requirements, etc. While health insurance carriers assume some responsibility for fully insured plans, there are compliance burdens for all size employers too The Department of Labor has the primary responsibility for enforcing plan compliance via audits and other means Significant funds have been directed to the DOL for health-reform specific audits, and Audit triggers include employee complaints, DOLs memorandum of understanding with the IRS, and plans relationships with third-parties including agents There can be significant penalties for noncompliance, with fines of up to $100 per day per violation. Educating and assisting employers with their compliance responsibilities can be a significant opportunity for a producer

Employer Coverage Market Requirements Employer Coverage Requirements Policies sold in the small or large group market and employer-sponsored group health plans must comply with market reforms under the ACA and certain other HIPAA/ERISA/COBRA benefit rules (including but not limited to): dependent child coverage to age 26, prohibition on preexisting condition exclusions, preventive services with no cost sharing, prohibition on annual/lifetime dollar limits on any EHBs offered, waiting period limitations, cost-sharing limits group health plan reporting and disclosure clinical trials coverage mental health parity, etc. Policies sold in the small or large group insurance market must also comply with state insurance market reforms and state benefit mandates

Other Employer Requirements Currently delayed enforcement but rules governing all fully insured plans expected before 2014 IRS Nondiscrimination Rules Large employers must report health plan value on 2012 W2s on forward Requirement currently optional for employers that issue less than 250 W2s For informational purposes, not the taxation of benefits W2 Reporting Employers with more than 200 employees will have to begin auto-enrolling new employees in benefit plans Still need regulations on how opting out will work, coverage waivers, waiting periods, etc. Effective date is unclearnot until 2015 at least Auto Enrollment

Employer Responsibilities Regarding Exchanges All employers that offer group health benefits are going to have responsibilities regarding the exchanges, even if they do not want to purchase exchange-based coverage or isnt eligible to purchase exchange coverage. Exchange Notices Coverage Verification Individual Mandate Employer Mandate Subsidies Quality reporting

Employers Have To Provide Exchange Notices All employers subject to the Fair Labor Standards Act must provide notice to current employees and new hires about exchange and subsidies. Requirement is based on FLSA applicability, not based on whether or not the employer offers coverage. Employers must provide a notice of coverage options to each employee, regardless of plan enrollment status (if applicable) or of part-time or full- time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees Current employees must receive the notice by October 1, 2013. Employers are required to provide the notice to each new employee at the time of hiring beginning October 1, 2013. For 2014, the DOL will consider a notice to be provided at the time of hiring if the notice is provided within 14 days of an employees start date.

FLSA Applicability FLSA covered enterprises are unified operations or common controlled organizations for a common business purpose and: 1. Whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated); or 2. Who is engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises; a school for mentally or physically disabled or gifted children; a preschool, an elementary or secondary school, or an institution of higher education (whether operated for profit or not for profit); or 3. Who is an activity of a public agency. The #1 section of FLSA applicability was revised in 1990 to include the $500,000 test. Entities that were subject to the FSLA before that test was implemented continue to be subject to the overtime pay, child labor and recordkeeping provisions of the FLSA, but they are not subject to the PPACA exchange notice provisions. The notice requirement does apply to the following, regardless of their dollar volume of business: hospitals; institutions primarily engaged in the care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state, and local government agencies.

Model Exchange Notices DOL has model notices available online http://www.dol.gov/ebsa/newsroom/tr13-02.htmlhttp://www.dol.gov/ebsa/newsroom/tr13-02.html Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements. Required notice content includes: Informing the employee of the existence of the Exchange including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance; If the employer plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit and If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes. Model language allows for the employer to skip the questions about minimum value its not known and allows the employer to project what 2014 benefits and employer contributions will be if the plan year will change within three months

Coverage Concepts All Employers (and Employees) Need to Know The concepts of minimum essential coverage, affordable coverage and minimum value coverage arent just important for employers who are subject to the laws shared responsibility requirements. All employers of all sizes who offer any type of coverage will need to know if the coverage they offer meets these concept tests. All employees of all types (FT, PT, seasonal, etc.) will need to know what kinds of coverage has been offered to them (if they if they seek a subsidy through the exchanges.

Coverage Tests Affordable Minimum Value Employees share of the premium cannot exceed 9.5% of household income. Affordability test is based on the cheapest minimum value plan the employer offers. HRA contributions under certain circumstances are factored into the affordability calculation. Proposed rule only allows nondiscriminatory tobacco cessation programs, not other wellness programs to count towards affordability Test is also based on the employee-only rate, regardless of whether or not the employee selects family or dependent coverage Lowest tier plan must be at least a 60% actuarial value Actuarial value is based on cost-sharing and out-of pocket expenses, not premiums Employer contributions to account-based plans will factor into actuarial value Proposed rule only allows nondiscriminatory tobacco cessation programs, not other wellness programs to count towards actuarial value, with some transition relief for 2014. Administration has a calculator and there are other safe harbors employer can use Small groups that offer Bronze QHPs or higher meet the minimum value standard

Minimum Essential Coverage Minimum essential coverage is the standard individuals need to meet to complete the individual mandate requirements and employers need to meet to avoid a no coverage penalty. It includes the following: Employer-sponsored coverage (including COBRA coverage and retiree coverage) Coverage purchased in the individual market Medicare Part A coverage and Medicare Advantage Most Medicaid coverage Children's Health Insurance Program (CHIP) coverage Certain types of veterans health coverage administered by the Veterans Administration TRICARE Coverage provided to Peace Corps volunteers Coverage under the Nonappropriated Fund Health Benefit Program Minimum essential coverage does not include coverage providing only limited benefits, such as coverage only for vision care or dental care, Medicaid covering only certain benefits such as family planning, workers' compensation, or disability policies. The Department of Health and Human Services (HHS) has authority to designate additional types of coverage as minimum essential coverage.

Employers Will Also Have To Help The Exchanges Verify Coverage HHS will use data from insurance exchange markets to determine whether people have coverage when the individual mandate takes effect in 2014 Determining whether an individual has coverage for individual mandate enforcement will involve getting information from both employees and employers These procedures are separate from the IRS procedures for determining employer penalties under the employer play-or-pay mandate Mandatory employer reporting for both the individual and employer mandates will not begin until 2015 In 2014, employees will be able to present a voluntary reporting form to employers to assist with verification Voluntary reporting will help preserve the stability of employer groups and help prevent employees from being awarded subsidies inappropriately that will eventually have to be paid back

Is It Party Time? The delay of the employer mandate penalties has many employers and brokers wondering if we can we all stop counting employees right now, relax for a year and then start back up with all of this next summer? NAHU strongly urges our membership to use 2014 as a transition year with your clients. Its a great opportunity to test employee counting strategies, managing hours worked, etc. and to assess liabilities and system vulnerabilities without significant financial consequences!

Helping Your Clients Make The Right Decisions There are a number of online calculators out there that can tabulate potential penalties and also potential individual exchange subsidy awards. NAHU has an online decision tool to use with your employer clients. https://members.nahu.org/NAHU_Prod_Imis/?ReturnUrl=https://membe rs.nahu.org/nahu_prod_imis/SSO/BounceBack.aspx?doRedirect=http:// www.nahu.org/members/benefits/acatool.cfm https://members.nahu.org/NAHU_Prod_Imis/?ReturnUrl=https://membe rs.nahu.org/nahu_prod_imis/SSO/BounceBack.aspx?doRedirect=http:// www.nahu.org/members/benefits/acatool.cfm The Kaiser Family Foundation maintains the most accurate subsidy calculator available, although it has its limitations http://healthreform.kff.org/subsidycalculator.aspx But its not just about doing the penalty math. When making coverage decisions you have to work with your employer clients and lead them through a holistic decision making process. All of the new options on the table for employers translate into an excellent opportunity for an educated and motivated broker.

Other Points to Consider About Offering Coverage There are no penalties or employer responsibility requirements now, yet most employers offer coverage today. Penalties may increase over time as more employers choose to pay penalties rather than provide coverage. Penalties do not fully offset coverage costs in exchange, adding incentive for increases in penalty amounts. If employer increases salary to make up for lost benefits, employer FICA tax obligations will also increase; whereas employer-sponsored benefits are excluded from income. Employers who offer coverage rarely, if ever have a 100% take-up rate. However, employers who fail to offer coverage pay penalties for 100% of eligible workers. If employees choose to remain uninsured rather than seek coverage, increased absenteeism and presentee-ism may result. Furthermore, workers compensation costs may go up for what are actually non-work related health costs. Employers that drop coverage generally must drop it for allin all likelihood management carve outs will be tough to maintain post-2014 Competitors may seek an advantage by offering coverage There may be a PR back-lash for not offering coverage

Good brokers have already been talking to their clients about what they know about ACA for some time. Brokers that aren't doing extensive ACA outreach are in danger of losing their clients..

Agents and Brokers and Exchanges Heres what we know and have been able to achieve regarding agents and brokers and marketplaces today: Unless a state specifically acts to exclude agents from marketplaces, it is assumed that agents and brokers can continue to assist their clients and sell and service exchange-based products, including subsidized policies, and be compensated for doing so. So far, no state has acted to exclude agents and brokers, and in fact they have primarily embraced the agent community. Even when the state elects a federally facilitated or partnership exchange, state insurance regulators are expected to maintain their current roles of overseeing agents and brokers in their insurance markets, including licensure requirements, appointments with issuers, and any compensation standards. QHP issuers participating in federally-facilitated and partnership exchanges must pay the same commission for a QHP sold inside and outside of an Exchange.

Agents and Broker Training and Certification State-based exchanges are developing their own specific training and certification requirements for agents. In many cases, they are using NAHU and local brokers as partnership resources with regard to training and certifying agents and brokers. In states that have elected a Federally-facilitated or Partnership exchange, all agents and brokers must register with CMS so that they may assist qualified individuals for individual coverage. Agent registration and training is scheduled to begin in the summer of 2013, prior to open enrollment. In completing the registration process, the agent or broker will: (1) Confirm his or her identity by answering a number of simple questions online (2) Complete a Marketplace-specific online training course (3) Agree to comply with federal and state laws, rules, standards and policies, including those related to privacy and security policies

Agent and Broker Access to Exchanges In FFE and Partnership states, producers will be able to assist consumers in three ways: (a) an issuer-based pathway, through which an agent or broker uses an issuers website to assist the consumer; (b) a Marketplace pathway, through which an agent or broker assists the consumer using the Marketplace website; (c) through the web-based broker State-based exchanges are utilizing similar methodologies to provide broker access. Market-based option is clunkyno long-term access to application data, limited product comparisons, requires consumer to input producer numbers correctly Some carriers are telling us they will not have their Marketplace pathway ready by October 1 Web-broker platform may be most efficient pending the In any case, brokers in federal exchange states will have to use a combination approach to market to clients For successful implementation, broker access is KEY!

Getting People Covered PPACA requires every exchange to have a Navigator program to facilitate health plan enrollment. Agents and brokers are specifically listed by the law as one of the groups that may be Navigators, but the law also stipulates a compensation/financing method that conflicts with traditional agent compensation structures. HHS has also created two new categories of individuals to help people find health insurance coverage via exchangesAssisters and Application Counselors To ensure consumer protection, the law specifies that navigators (and related non-navigator assistance personnel) must meet any state-level licensure or certification requirements.

Oversight of Navigators A proposed rule issued on April 3, 2013 outlines federal standards for both Navigators and non-navigator assistance personnel. http://www.gpo.gov/fdsys/pkg/FR-2013-04-05/pdf/2013-07951.pdf http://www.gpo.gov/fdsys/pkg/FR-2013-04-05/pdf/2013-07951.pdf Navigators are subject to conflict of interest standards and will receive annual exam-based training Exchanges must have at least two entities serving as navigators, and least one Navigator must be community/consumer focused non-profit States may impose additional requirements for navigators and/or assisters operating in their state, even if they have elected a federally-facilitated or partnership exchange Over twenty states have

Recap/Political Overview Whats About to Change For Individuals Whats About to Change in the Marketplace Whats About to Change for Employers Whats About to Change for Agents/Brokers Recap and Questions

Which Provisions Apply? ProvisionGroup Size Employer Mandate (Must offer FT employees affordable and minimum value coverage to avoid penalty) 50+ FT Equivalents Uses a new definition of FT employee of 30 hours/week PT employees count on a pro-rata basis to determine applicability but do not need to be offered coverage IRS Controlled Group Rules Apply W2 Reporting (Must report value of health benefitsjust reporting, no taxation) Requirement applicability is currently clear for 2012 (W2 issued in 2013) ONLY Mandatory for groups that issue 250 or more W2s. Optional for other groups for 2012 but will eventually apply to all. Applicability "based upon the rule in 6011(e) that exempts employers from filing returns electronically if they file fewer than 250 returns." Groups should verify with CPA but generally can apply on a separate employer basis unless the group uses a common paymaster. Cadillac Tax (begins in 2018) All group health plans Auto-Enrollment (effective date unclear but at least 2015) All groups of 200 or more employees

Which Provisions Apply? ProvisionGroup Size Applicability Market Reforms (Required to buy a qualified health plan, EHBs, metal levels, MCR, etc.) State definition of small group until December 31, 2015 Effective January 1, 2016 small group definition becomes 1-100 for all states If a state allows large groups in the exchange after 2017, then market rules apply to them too Grandfathered plans exempt Small Group Deductible Cap State definition of small group until December 31, 2015 Effective January 1, 2016 small group definition becomes 1-100 for all states Grandfathered plans exempt HHS has provided some relief to carriers for QHP offerings that cannot meet the cap and still offer a bronze plan through 2016 Maximum Out-of-Pocket Limits Tied to annual HSA limits and includes deductibles and other costs sharing New guidance suggests they apply to all non-grandfathered plans, including large group and self-funded plans Exchanges Individual plans (only policies that are eligible for premium subsidy) State definition of small group for SHOP exchange until 2016 Effective January 1, 2016 small group definition becomes 1-100 for all states Sole proprietors currently not SHOP eligible Post January 1, 2017 a state may elect to allow larger groups into the SHOP exchange Grandfathered plans exempt

Which Provisions Apply? ProvisionGroup Size Applicability 105 H Non Discrimination Rules All fully insured and self-funded group health plans except grandfathered plans Currently not enforced for fully insured plans, but rules specially designed for these plans expected to be promulgated in 2013 Summary of Benefits and Coverage All individual and group plans Age 26, Rescissions, Prohibitions on benefit limits All individual and group plans Preventive Care, Claims appeals and provider choice and out-of-network emergency care All individual and group plans except grandfathered plans New National Premium Tax Individual and fully insured groups Employer Reporting to Exchanges All group plansguidance pending New National Reinsurance Fee All individual and group plans

NAHU Resources to Help Washington Update Compliance Corner Resources and Webinars Customized Answers to Compliance Questions FAQs PPACA Certification Course New Health Reform Decision Tool for Employer Clients

Health reform is complicated. Your can help your clients avoid this situation!

Documents

September 2013 Strategic Considerations in Health Insurance Walking Through Changes and Options for 2014 and Beyond Janet Trautwein National Association