2014 Is The "Real" Start of Health Care Reform

2014 IS THE REAL
START OF HEALTH
CARE REFORM
Presented by: JimWisdom, CFP
James L.Wisdom Insurance Services
WestlakeVillage, CA
Thursday, Sept. 26, 2013

OVERVIEW
 I. HC Reform-The Big Picture
 2.What changes in 2014?
 3. How will these changes affect you and your business?
 4. Who will benefit from HC Reform?
 5.Who will be adversely impacted by HC Reform?
 6 How will Covered California impact the insurance marketplace?
 7.What strategies can you employ to effectively navigate HC Reform?
 8. Q & A

HEALTH CARE REFORM- THE BIG PICTURE
 HCR = PPACA=ACA=Obamacare
 Signed into law on 3/23/10
 First came “free benefits”
 Now we get to pay for them ( i.e. many of us will subsidize them)
 HCR Objective: To insure as much of the uninsured as possible
 Estimated 37 Million uninsured in the U.S.
 Very complex law-The opposite of the KISS principle

HC REFORM:THE BIG PICTURE ( CONT’D)
 2010-2012- Enhanced benefits introduced
 2011/2018-Taxes ( Including .9% Medicare Tax, 3.8%Tax on Investment
Income, $8 Billion+Tax on Health Insurers, 2.3%Tax on Medical Device
firm sales, $2.5 Billion+Tax on Pharmaceutical firms; 40% Health Insurer
Tax on “Cadillac Health Plans”)
 2014- Individual Mandate / Penalty
 2015 – Employer “Play or Pay” penalty for groups with 50+ employees
 Note: Employer “Play or Pay” penalty delayed from 1/1/14 to 1/1/15

WHAT CHANGES IN 2014?
 Individual Mandate to buy health insurance
 New state-based exchanges ( i.e.“Marketplaces”) begin ( California’s
marketplace = “Covered California”)
 Guaranteed Issue requirement (i.e. Insurers must take all applicants)
 Renewability and rates based only on age, geographic location and family
tier for individual, small group in/out of Health Care Marketplaces.
 Small Group age banded rates reduced from 7 age bands to 3 age bands
 New MinimumValue Benefits requirement for all Individual, Small Group
 New Essential Health Benefits requirement for Individual, Small Group

WHAT CHANGES IN 2014 ( CONT’D)?
 Subsidies for individuals through Covered California for
incomes between 133% and 400% of FPL ( Federal Poverty
Level)
 Also available to employees if employer offers coverage that is
either “Unaffordable or does not meet “MinimumValue”
 Tax Credits for employers through Covered California with
25 employees or less and average annual salary of $50,000
or less
 Medicaid expansion- for those states that select this option

SUBSIDIES: BASED ON INCOME LEVEL
2013 FED POVERTY LEVEL DATA
 1 Family Member- $11,490
 2 Family Members- $15,510
 5 Family Members- 27,570
 9+ Family Members- Add $4,020 for each additional person
 Note: These figures apply to 48 contiguous states and Wash D.C.

WHAT CHANGES IN 2015?
Individual Mandate Penalty increases ( more on this
later)
Employer “Play or Pay” penalty for groups with 50+
full-time equivalent employees who don’t provide:
 Affordable coverage or
 Minimum Value and
 One or more employees purchase subsidized coverage
through Covered California

2014 MANDATE PENALTY FOR
INDIVIDUALS
 2014- greater of $95 or 1% of income (max fee = 3X flat fee = $285)
 2015- greater of $325 or 2% of income (max fee = $975)
 2016- greater of $695 or 2.5% of income (max fee= $2,085)

2015 PLAY OR PAY PENALTY (FOR EMPLOYERS
WITH 50+ EQUIVALENT EMPLOYEES)
 “No Offer” Penalty- $2,000 X the total # of employees minus the first
30 employees
 Example -100 employee group: Annual Penalty = ( 100-30) X $2,000=
$140,000 ( not deductible to the Corp.)
 “Unaffordable Coverage” Penalty-The lesser of $3,000 per subsidized
full-time employee OR $2,000 X the total # of employees minus the
first 30 employees
 Note: An employer penalty is only triggered if at least one employee
purchases federally subsidized coverage in the marketplace ( i.e.
Covered California)
 Equivalent employee definition: ex. 2 P/T Employee = 1 F/T Employee

HOW IS AFFORDABILITY DEFINED?
 If an employee is offered coverage and he/she pays less than 9.5% of
his/her income (for employee-only coverage), that’s deemed affordable.
 If the cost to an employee is 9.5% or more of his/her income ( for
employee-only coverage), that’s not deemed to be affordable.
 When a group health plan is either 1) Not affordable or not 2)
MinimumValue to an employee, the employee can purchase subsidized
health insurance through Covered California.

HOW ARE ESSENTIAL HEALTH BENEFITS DEFINED?
 Starting in 2014, all insured small group and individual plans must include:
 Ambulatory patient services
 Emergency services
 Hospitalization
 Maternity and newborn care
 Mental health /substance abuse services, and behavioral health treatment
 Prescription drugs
 Rehabilitative and habilitative services and devices
 Laboratory services and devices
 Preventive and wellness services and chronic disease management
 Pediatric services, including oral and vision care

HOW IS MINIMUMVALUE DEFINED?
Four Metal Tiers of Plans will be offered for
Individual and Small Group in 2014:
 Platinum: 90% ActuarialValue ( AV)
 Gold: 80% ActuarialValue ( AV)
 Silver: 70% ActuarialValue ( AV)
 Bronze: 60% ActuarialValue ( AV)
 Note: MinimumValue= Bronze Level Plan or greater

HOW WILL THESE CHANGES AFFECTYOU
ANDYOUR BUSINESS
 Answer: It depends on such factors as the following:
 1. Are you in an industry that uses benefits to “A.R.M.” employees?
 2. Are you in an industry that historically has never offered benefits?
 3. Are you a low wage employee or individual?
 4.Are you a high wage employee or individual?
 5. For business owners: Do you prefer to offer your employees one
option or many health care options?
 6. Do you prefer a large network of providers?
 7.Are quality ratings important to you?

WHO IS LIKELY TO BENEFIT FROM HC REFORM?
 The uninsured- who may be eligible for subsidies or get
care at no charge through Medicaid
 The poor- who will be eligible for subsidies or get care at
no charge through Medicaid
 Some individuals/employees will benefit from added
insurance protections
 Those with pre-existing conditions( i.e. uninsurable)- will
now be covered regardless of health status
 Small employers who are eligible for tax credits

WHO MAY BE ADVERSELY AFFECTED BY
HC REFORM?
 Employers with greater than 50+ employees- subject to “Play or Pay”
 Medicare recipients – Approx. $500B in spending cuts
 Employer-Based Plans-Taxed for first time, some may drop coverage
 Medicaid/CHIP Recipients-System could be overwhelmed
 Employers with rich plans- Will be subject to 40% CadillacTax (2018)
 Low wage industries such as Restaurant, Construction, Hospitality, etc.
 Companies that don’t offer Employee Benefits to “Attract, Retain and
Motivate” ( A.R.M.) their employees
 Employees who may be forced to buy a richer plan ( i.e. $2,000 Deductible
or less)
 Those laid off due to HCR Changes in 2014
 Those whose hours are reduced to less than 30 hours/week due to HCR

2014 INDIVIDUAL RATE ANALYSIS-- COVERED
CALIFORNIAVS. CURRENT RATES
 Assumes Zip Code 91361 ( WestlakeVillage, CA)
 Comparison of individual plans based on Age, Income, Family Size
Individuals
 Compared Lowest Priced Covered California Plan ( “Bronze 60”) vs.
Lowest Priced Current Plan
 This comparison applies today- Not necessarily after all the 2014
Individual and Small Group rates ( in the exchange and outside the
exchange) are released to the marketplace.

LOWEST PRICED PLAN- 28YR. OLD
ANNUAL SALARY = $50,000
Current- Anthem Core Guard 5000 Covered CA- Anthem Bronze 60
 PlanType = PPO
 Monthly Premium= $116
 Deductible- $5,000
 Out-of-Pocket Max- $8,500
 Routine Preventive Care- No
Charge
 Dr. OfficeVisit- 50% Copay
 Rx- $15/$40/$60 Copay
 Rx Deductible – $7,500 ( Tier 2
and 3)
 Plan Type = PPO
 Monthly Premium = $209
Charge
 Dr. OfficeVisit- $60 Copay ( 3/Yr.)
 Rx- $50-$75 Copay
 Rx Deductible- $5,000 ( Tier 2 )

LOWEST PRICED PLAN- 35YR. OLD COUPLE
Current:- Anthem Core Guard 5000 Covered CA- Anthem Bronze 60
 PlanType = PPO
 Deductible- $5,000 ( X2 )
 Out-of-Pocket Max- $8,500 ( X2)
Charge
 Rx- $15/$40/$60 Copay
 Rx Deductible- $7,500 ( Tier 2
and 3) X 2
 PlanType = PPO
 Out-of-Pocket Max- $6,350( X2)
Charge
 Dr. OfficeVisit- $60 Copay( 3/Yr.)
 Rx- $50-$75 Copay
X 2

LOWEST PRICED PLAN- 45YR. OLD
Current- Core Guard 5000 Covered CA- Anthem Bronze 60
 PlanType = PPO
Charge
 Rx- $15/$40/$60 Copay
 Rx Deductible- $7,500 ( Tier 2
and 3)
 PlanType = PPO
Charge
 Rx- $50-$75 Copay

LOWEST PRICED PLAN- 55YR. OLD FAMILY
 Plan Type = PPO
 Deductible:- $5,000 ( X 2)
 Out-of-Pocket- $8,500 ( X 2)
Charge
 Dr. OfficeVisit Copay- 50% Copay
 Rx- $15/$40/$60 Copay
 Rx Deductible $7,500 (Tier 2 and 3
( X 2)
 Plan Type = PPO
 Out-of-Pocket Max- $6,350( X2)
Charge
 Rx- $50-$75 Copay
 Rx Deductible-$5,000 ( Tier 2) X2

BEST PLAN COMPARISON- 62YR. OLD
 Plan Type = PPO
 Monthly Premium =$582
Charge
 Rx- $15/$40/$60 Copay
 Rx Deductible- $7,500 ( Tier 2 and
3)
 Plan Type = PPO
 Less Subsidy= $530
 Equals Net Premium: $23
Charge
 Rx- $50-$75 Copay

BENEFIT PLAN COMPARISON- 35YR. OLD
Current:Anthem Core Guard 5000 Covered CA:Anthem Bronze 60
 Plan Type = PPO
 Monthly Premium =$134
Charge
 Rx- $15/$40/$60 Copay
 Rx Deductible- $7,500 ( Tier 2 and
3)
 Plan Type = PPO
 Less Subsidy= $170
 Equals Net Premium: $65
Charge
 Rx- $50-$75 Copay

STRATEGIESTO CONSIDER FOR
NAVIGATING 2014 HCR CHANGES
 Covered CA vs. Non-Exchange Plans
 Alternate Funding vs. Fully Insured
 Wellness / Value Based Benefit Plans
 Professional Employer Organization ( PEO)
 Consumer Driven Health Plans ( H.S.A., H.R.A.)
 Drop coverage and direct employees to Covered CA
 A combination of the above

COVERED CAVS. NON-EXCHANGE PLANS
 Covered CA- Pro: Able to utilize individual subsidies and business tax
credits if eligible;
 Covered CA Con: Pricing, Skinny Networks, Quality and Service
(Unknown at this time); Limited number of carriers for SHOP
Marketplace; Plan Design Inflexibility in SHOP ( one MetalTier only)
 Non-Exchange Plans- Pro: Plan Design Flexibility; Full Networks;
Competitive Pricing anticipated for unsubsidized individuals
 Non-Exchange Plans- Con: No individual subsidies or business tax
credits available; Pricing may be uncompetitive vs. subsidized plans on
Covered CA

ALTERNATE FUNDINGVS. FULLY INSURED
( GENERALLY FOR GROUPS OF 50+)
 Fully Insured: Pro- Predictable Monthly Cost
 Fully Insured: Con- If claims experience is low, health insurer keeps the
excess as profit
 Alternate Funding: Pro- Lower cost if group has a favorable
Claims/Premium Loss Ratio; Lower taxes and fees vs. Fully Insured
 Alternate Funding: Con- Costs may vary each month; Costs will be
greater if Claims/Premium Loss Ratio is unfavorable

WELLNESS /VALUE BASED PLANS
 Wellness/VBP: Pro:- Creating a culture of health/productivity; employer
incentives to improve health/lifestyle; Potential cost savings
 Wellness/VBP: Con-This concept must receive buy-in from Senior
Management or it will not work well; It’s more difficult to change
employee behaviors as compared with just paying claims

PROFESSIONAL EMPLOYER
ORGANIZATIONS ( PEO’S)
 With PEO’s, your employees work for the PEO and they contract with
your firm for services
 PEO’s offer Payroll,Admin, Insurance ( Property & Casualty, Benefits)
 Pro: Potential to lower costs while maintaining coverage
 Con: Employees no longer have an employer/employee relationship
with your firm;There may be hidden fees/expenses

CONSUMER DRIVEN HEALTH PLANS
 CDHP’s: Pro: Employees tend to be more careful about consuming
health care services; cost-savings potential; tax benefits to employees
and/or employer; ability to save on tax-favored basis for both current
and future health care expenses.
 CDHP’s: Con: These plans are harder to grasp for average employees;
No Copays allowed; Employees must meet an Aggregate ( i.e. Family )
Deductible for coverage to kick in ( other than routine preventive care,
which is covered at 100%)

DROP COVERAGE AND DIRECT
EMPLOYEESTO COVERED CA
 Pro: Employers ( who select this option will no longer have to deal with
their own Group Health Insurance Program; Employees who are
subsidy-eligible may choose to utilize their subsidies in Covered CA
 Con: Competition may continue group health coverage ( potential
competitive disadvantage); tax-free group coverage may no longer be
available if employees purchase coverage through Covered CA ( Note:
Employer can set up Premium Only Plan to pre-tax premium for
employees).

OTHERTHINGS TO CONSIDER
 Employer DOL notifications required on or before 10/1/13
 Congress given preferential treatment regarding access to
Health Care Marketplaces
 Small Business ( SHOP ) Marketplace rates to be released by
about 10/1/13
 Some unions are turning against HC Reform due to cost, 2018
Cadillac Tax
 Insurance Companies offering “early renewal” strategy for
employers to delay implementation of 2014 changes to late 2014
 Loophole – Affordability defined for individuals ( Not Families)

SUMMARY
 The 1/1/14 Open Enrollment Period for Covered California ( CA
Health Care Exchange) is from 10/1/13-3/31/14
 Overview of Individual rates and benefits have been released
 www.hbex.ca.gov
 www.coveredca.com
 You can follow Covered California on Linked In, Facebook and
Twitter

THANKS FORYOUR ATTENTION!
 JimWisdom, CFP
 James L.Wisdom Insurance Services
 4607 Lakeview Canyon Road-Suite 482
 WestlakeVillage, CA 91361
 jim@wisdomhealthplans.com
 Work: (805)497-9264
 Cell: (818)469-6640
 CA License #0699524
 Follow my Health Care Reform Blog at www.jimwisdom.wordpress.com
 Continue the conversation on Linked In,Twitter and Facebook
 Twitter = @Wisdom_InsSvcs

2014 Is The "Real" Start of Health Care Reform

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