2. PAGE 2
OVERVIEW
• Federal Funding
• Other Funding Sources
• Exchange Funding for 2015 and Beyond
• Premium Payments
• Medical Loss Ratio
• Rate Review Program
• Key Dates
4. PAGE 4
FEDERAL FUNDING
• Federal funding for ACA provisions will be from mandatory and
discretionary spending, grants, funds, and loans
o Mandatory funding sources created through the ACA to
provide for its provisions and implementations:
The Health Insurance Reform Implementation Fund
The Prevention and Public Health Fund
The Community Health Center Fund
• The Kaiser Family Foundation has created a tracker of federal
funds that have been received to implement ACA provisions
o This tracker, which provides breakdowns by state and funding
category, can be found at http://healthreform.kff.org/federal-
funds-tracker.aspx
5. PAGE 5
FEDERAL FUNDING:
GRANTS
• Grants are made available to states for:
o premium rate review programs
o Exchange planning and set-up
o consumer assistance
o prevention and wellness
o long-term care
o infrastructure and capacity
6. PAGE 6
FEDERAL FUNDING:
EXCHANGE GRANTS
• There are four federal grant programs to which a state may apply
for assistance with the development of their Exchange program
o State Planning Grant Allows the state to start developing how it will
create an Exchange program
o Level One Establishment Grant Funding for one year to start the
execution of the Exchange Plan
o Level Two Establishment Grant Helps state continue funding for
continuing their Exchange plan as long as they meet certain
requirements
• Federal funding for Exchanges is available until December 31, 2014
o State Exchanges can find funding available through Funding
Opportunity Announcements at Grants.gov - Cooperative Agreement
to Support Establishment of the Affordable Care Act's Health Insurance
Exchanges
7. PAGE 7
FEDERAL FUNDING:
GOVERNMENT-BASED HEALTH
CARE
• ACA §2001 allows for the expansion of Medicaid coverage
to individuals between the ages of 19-64 that:
o are not pregnant
o not disabled
o do not have dependent children
o income is at or below 133% of the Federal Poverty Level
• The federal medical assistance percentage (FMAP)
calculation will determine the amount of federal
assistance states will receive for social and medical
programs
8. PAGE 8
FEDERAL FUNDING:
GOVERNMENT-BASED HEALTH
CARE
States choosing to implement the ACA Medicaid expansion
would be eligible to receive enhanced funding from the
government
Starting in 2017 states will be responsible for the remaining
portions
MEDICAID EXPANSION ENHANCED FMAPS
Fiscal Year
Funding Percentage per
Calendar Quarter
2014 – 2016 100%
2017 95%
2018 94%
2019 93%
2020 and after 90%
Source: Social Security Act §1905 (see page 17 – subsection (y))
9. PAGE 9
FEDERAL FUNDING:
CO-OPS
• ACA §1322 establishes a CO-OP program to provide low-
interest loans and grants to non-profits to establish health
plans
o No later than July 1, 2013, HHS will award loans and grants.
o By January 1, 2014 CO-OPs will be able to offer plans in and
out of the Exchanges.
• CO-OP requirements include:
o Audits
o Reporting requirements outlined in loan agreements
o Profit Standards
10. PAGE 10
FEDERAL FUNDING:
CO-OPS START-UP LOAN
• Will assist with start-up funds for developing a CO-OP
o Repayment term – 5 years from each draw
o Interest Rate – Fixed; 1% point below the Benchmark 5-year
Treasury rate
o Disbursement Schedule – Based on the business plan in
loan application and final loan documents
Source: CMS/CCIIO - Consumer Operated and Oriented Plan (CO-OP) Program (see page 15)
11. PAGE 11
FEDERAL FUNDING:
CO-OPS SOLVENCY LOAN
• Will assist with funding for state reserve requirements
o Repayment term – 15 years from each draw
o Interest Rate – Fixed; 2% point below the Benchmark
Treasury rate
o Disbursement Schedule – Based on core capital needed to
meet each year’s risk based capital requirements
o Loan Structure – Structured to ensure that these loans are
recognized by each state’s insurance regulators as
contributing to state reserve requirements and other
solvency requirements
Source: CMS/CCIIO - Consumer Operated and Oriented Plan (CO-OP) Program (see page 15)
12. PAGE 12
FEDERAL FUNDING:
HEALTH AND EDUCATION PROGRAMS
• Funding will be appropriated to the following program
types to help with the ACA’s goal of improving the nation's
health care system:
o Educational Programs
o Training and Education of the Health Care Workforce
o Health Programs/Resource Centers
o Health Care Quality Reforms
o Other Health Care Related Projects
14. PAGE 14
OTHER FUNDING SOURCES:
FEES
The following ACA sections establish fees to be paid by the
applicable party:
• ACA §6301 - Patient-Centered Outcomes Research
• ACA §9008 – Imposition of Annual Fee on Branded
Prescription Pharmaceutical Manufacturers and Importers
• ACA §9009 – Imposition of Annual Fee on Medical Device
Manufacturers and Importers
• ACA §9010 – Imposition of Annual Fee on Health Insurance
Providers
15. PAGE 15
OTHER FUNDING SOURCES:
TAX PROVISIONS
In order to fund the requirements in the ACA, additional taxes have
been enforced
• Net Investment Income Tax
• Additional Medicare Tax
• Excise Tax on Indoor Tanning Services
• Excise Tax on High Cost Employer-Sponsored Health Coverage
• Increase in Additional Tax Distribution from HSAs and MSAs not
used for Qualified Medical Expenses
• Additional Hospital Insurance Tax on High-Income Taxpayers
16. PAGE 16
PENALTIES:
INDIVIDUALS, FAMILIES, AND
EMPLOYERS
• Individuals/Families
o Penalties will be imposed for failure to maintain the
minimum level of individual coverage
Penalties will either be a flat rate or a percentage of income,
whichever is higher
Penalty rates will be adjusted annually
IRS will administer and collect the penalty
• Employers (50+ employees)
o If coverage is inadequate or not provided, a penalty will be
assessed based on the annual applicable dollar amount and
number of full-time employees
17. PAGE 17
PENALTIES:
QHP NONCOMPLIANCE
Penalties for QHP noncompliance will be assessed by:
• Withheld Information Penalties – Fine of $10,000/day fee
and if the information is not received within 90 days, the
QHP will be terminated
• Inaccurate Information Penalties – Fine of $100,000 for
every piece of incorrect information received
• QHP Certification Penalty – If the certification is late, there
will be a daily fee of $1 per covered life until the
certification is complete
19. PAGE 19
ACA §1311 – Affordable Choice Health Benefit Plans
• Starting January 1, 2015, all Exchanges must be
financially self-sustaining
• Exchanges can generate funding by assessing fees,
utilizing state funding, or by other means as
determined by the State.
EXCHANGE FUNDING FOR
2015 AND BEYOND
20. PAGE 20
EXCHANGE FUNDING FOR 2015
AND BEYOND:
FEDERALLY-FACILITATED EXCHANGES
• HHS has determined that issuers operating in those
States opting for a Federally-Facilitated Exchange
will be assessed a user fee.
• For 2014, the fee will be 3.5% of the monthly
premium charged for the QHP regardless of the
plan level. This fee is subject to change.
• HHS will release the user fee in the annual notice of
benefit and payment parameters for each upcoming
benefit year.
22. PAGE 22
PREMIUM PAYMENTS
• ACA §1312 – Consumer Choice
o Individuals have the opportunity to pay their premiums
directly to the Exchange or directly to the issuers
• Two examples of how states are handling the premium
payments:
o District of Columbia – developed processes for both options
and is in process of deciding which premium payment
option to employ
o Nevada – outsourcing premium billing and payments
process to Xerox State Healthcare, LLC
24. PAGE 24
MEDICAL LOSS RATIO (MLR)
• MLR is the amount of premiums that issuers must spend
on healthcare activities in relation to the amount of the
premiums
o Issuers must spend 80-85% of premium dollars on
healthcare improvement or activities
• In addition to the current MLR policy, an additional
requirement will be enacted in 2012.
• If an issuer spends more than the allowed amount on
administrative expenses, a rebate will be due to the
policyholder
26. PAGE 26
PREMIUM RATE REVIEW
• Premium rate review programs are established to keep
issuers from raising rates by more than 10%
• If issuers want to raise rates by more than 10%, an
independent state or federal rate review of the increase
will be completed
• Issuers will have to present the following for a rate review:
o Rate increase summary
o Justification for rate increase
o Rate filing documentation
27. PAGE 27
PREMIUM RATE REVIEW:
GRANTS
• State governments can apply for grants from the federal
government for establishing a premium rate review
program
o Federal grants of $250 million are available to assist states
with the program through 2014
• States will conduct an independent review of issuers who
wish to raise premium rates to ensure the rate increase is
justified
• States that do not wish to set up a program can defer the
rate review process to HHS
29. PAGE 29
KEY ACA FUNDING RELATED
DATES
DATE EVENT
Fiscal Years
2010 - 2019
Funding periods for the ACA provisions, programs, funds, and Exchanges.
January 1,
2013
Additional hospital insurance tax on high-income taxpayers is in effect.
March 1,
2013
Deadline for States to issue annual Notice of Benefit and Payment
Parameters
July 1, 2013 Deadline for allocation of CO-OP loan program funding.
August 31,
2013
IRS sends out final annual fee calculations to branded prescription drug
manufacturers and importers.
October 1,
2013
Open enrollment period begins for the Exchanges.
30. PAGE 30
KEY ACA FUNDING RELATED
DATES
DATE EVENT
January 1, 2014
ACA Exchanges are in effect.
Any U.S. citizen/legal resident who does not have health
insurance and is not exempt will be liable for a penalty that will
be assessed on their tax return.
Employers that do not provide health insurance coverage will
be fined.
Premium stabilization programs are in effect.
CO-OPs to start offering health plans in and out of the
Exchanges.
Temporary high-risk insurance under ACA §1101 ends.
Temporary early retiree health insurance coverage program
under ACA §1102 ends.
December 31, 2014
Deadline for allocation of Exchange funding and rate review
grants from federal government.
January 1, 2015 Exchanges are to be financially self-sustaining.
July 31 – following a
benefit year
MLR calculations are due to Secretary of HHS.
September 30 –
following a benefit year
MLR rebates are due to policyholders.
31. PAGE 31
KEY ACA FUNDING RELATED
DATES
DATE EVENT
April 30
July 31
October 31
January 31
Beginning with the April 30, 2013 quarter end:
o Quarterly taxes due to IRS from medical device manufacturers and
importers for the medical device excise tax.
o Quarterly taxes due to IRS from tanning service providers for the
excise tax on indoor tanning services.
September
30
After the 2010 calendar year, annual fees on branded prescription
pharmaceutical manufacturers and importers are in effect.
Beginning September 30, 2012, annual fees for insured and self-insured
health care plans are in effect.
After the 2013 calendar year, annual fees on health insurance providers
are in effect.
32. PAGE 32
REED & ASSOCIATES, CPAS
For more information on Reed & Associates, CPAs please
contact us at:
inquire@reedassociatescpas.com
Phone: 860-395-1996
Or visit our website:
reedassociatescpas.com
Quality. Integrity. Experience.
