Health Insurance Exchanges 101

December 2012

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Agenda

• Impact of presidential election

• What exchanges are and health plan requirements

• Individual and employer penalties

• Big picture for small and large groups

• Underwriting changes

• Exchange functions and models

• Broker role

• How we’re preparing

• Our private insurance exchange solution

• State timeline

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Impact of election results

President Democrat

Senate Democrat

House Republican

Implications • Least disruptive implementation of the health care reform law• HHS, as expected, began releasing some long-awaited

regulations for comment after election, such as:• Insurance Market Reforms• Exchanges Part II• Essential Health Benefits• Wellness programs• FMAP Percentages for 2014

• President Obama will have the ability to both control regulations and veto any changes to the law coming out of Congress

• With control of the House, Republicans may try de-fund portions of the law, but it is unlikely larger changes will make it through the Senate

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What’s an Exchange: Individual vs. SHOP vs. Private

Individual SHOP Local Agencies Employers

Example

Overview • One example of what is referred to when people say Exchanges

• Defines benefit design tiers and products within state rating guidelines

• Similar to Individual Exchange, but participation determined by employers vs. individuals

• Details still to be defined (employees may have same options as Individual consumers or may purchase option(s) employers select)

Online store for specific population with options (products & health plans) pre-determined by the sponsor agency;

• Online store supporting what is typically referred to as Defined Contribution coverage from employers

• Often will contain just a single health plan’s products

Who’s Eligible?

All U.S. citizens, but subsidy eligibility is limited

Employees of Small Group employers (<100 FTE to start) that elect SHOP option

Determined by sponsor agency

Determined by employer

Subsidies? Yes, for income levels <300% FPL and if not offered qualifying employer coverage

• SG employers with <25 FTEs may receive tax credits in 2014 to 2016

• No Individual subsidies

No Federal subsidies, but eligible consumers will receive a contribution amount with which they can use to help purchase coverage

Market Size

Potential to be significant as long as coverage subsidies exist

Limited; Employers likely to drop to Individual or consider their own defined contribution solution

Limited; Requires an unique set up like a CalPERS

Potential to be significant if employers find the defined contribution model viable

PrivateGovernment Sponsored

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Health plan requirements: Product tiers

All will include Essential Health

Benefits

Platinum 90%

actuarial value

Gold 80%

actuarial value

Bronze60%

actuarial value

Silver70%

actuarial value

Actuarial Value** =Total Expected Payments by Health Plans for EHBs

Total Costs of EHBs for the Standard Population

•Plus catastrophic plan offering for individuals younger than 30/ financial hardship

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Health plan requirements continued

* The health care reform law does not require carriers to offer plans with at least a 60% actuarial value, nor does it require employers to provide health coverage. However, it

imposes penalties on 50+ employers that do not provide minimum coverage.

Outside exchange – Fully insured

Large Group and self-insured

Inside exchange

Outside exchange – Fully insured

Small Group and Individual

Include essential health benefits

Provide 60% actuarial value minimum

Adhere to deductible and out-of-pocket maximum limits

Comply with “metal levels” – benefit tiers with specified actuarial values (60% 70% 80% 90%)

Be certified by the exchange through which the plan is offered (certification requirements to be determined)

*

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Penalties for individuals

Outside exchange – Fully insured

Large Group and self-insured

Outside exchange – Fully insured

Small Group and Individual

2014:Greater of $95 or 1% of taxable income

2015:Greater of $325 or 2% of taxable income

2016:Greater of $695 or 2.5% of taxable income

2017 and beyond:Annual adjustments

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Subsidies for individuals

For exchange plans only

• To be eligible, individuals must:

– Have incomes between133% and 400% of federal poverty level (FPL)

– Not have access to minimum essential coverage through their employer or have access to coverage, but it is not affordable

• Premium credits – for any level plan

• Cost-sharing subsidies – Silver Plan only

Income ranges for 133% to 400% FPL

•Individual:$14,856 to $44,680

•Family of four:$30,656 to $92,200

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The big picture for individuals

Americans not covered under a government plan will have three options for health insurance in 2014:

1. Get coverage through their employer if available

2. Buy an individual market plan through either:

• The individual market exchange – Purchaser may be eligible for subsidy

• The off-exchange market

3. Go uninsured (will pay penalty unless they qualify for anindividual exemption)

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Penalties for employers

• Lesser of $2,000 x total FTEs

– or –

• $3,000 x number of employees receiving tax credit

50 or more full-time employees

• Employer doesn’t provide minimum coverage to full-time employees (FTEs)

• $2,000 x total number of FTEs (minus first 30 FTEs)

Employer provides coverage, but it is not “affordable”

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Subsidies for employers

25 or fewer employers + average wage less than $50,000:

• Available on the exchange only

• Only for first two years they offer coverage though an exchange

• Credit up to 50% of employer cost

• Credits decrease on a sliding scale as group size and employee wages increase

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Underwriting changes

For Small Group and Individual markets:

Guaranteed issue

No health status rating

Also known as modified community

rating

3:1 age rating bands

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The big picture for small groups

Employers who have 49 or fewer employees will have at least three health insurance options in 2014:

1. Offer a fully insured plan through either:

• A SHOP exchange – Employer may be eligible for a temporary two-year tax credit to offset part of the employer premium contribution

• The off-exchange market

2. Offer an ASO plan, if allowed by state law, where essential health benefits and metal level requirements don’t exist

3. Stop offering coverage and let employees buy through the Individual market

• Other options may exist, such as defined contribution, adjusting contribution levels by employee, etc.

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The big picture for large groups

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Exchange functions

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March 23 Health care law enacted

AugustHHS started issuing planning grants to states

Exchange timeline

2010 2011 2012 2013 2014 2015 2016 2017

Dec. 14Deadline for states to submit state exchange applications

Jan. 1Exchange coverage begins

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What type of public exchange will exist by state?

Trending State-based Active Purchaser

Trending State-based Facilitator, non-FFE

State Exchange board in place

Trending towards Pure FFE

State Partnership FFE (retaining Plan Management)

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Exchange models

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Producer role

• Each exchange will decide how producers will be involved

• Potential producer activities may include:• Helping people enroll in QHPs

• Assisting people with their applications for credits and subsidies

• Working with individuals and small group employers look for coverage on the exchanges

▪ HHS will provide more guidance on the producer role, including how states will oversee licensing of producers

2020

How we’re preparing

Product development• Providing plan information

for healthcare.gov tool (may serve as foundation for exchange)

• Updating plan designs to comply with pre-2014 benefit requirements

• Developing and maintaining plan designs that meet the post-2014 benefit requirements

Our Private Exchange SolutionHealth Marketplace powered by Bloom Health

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What is a private exchange with defined contribution?

Employees can shop, compare, and enroll in

health insurance coverage and ancillary products that best meet

their needs

The private exchange provides an online

marketplace experience

The employer contributes a defined amount per employee

toward the cost of health care benefits

Employers deposit defined contribution funds into a health account or payroll

deduction

Retail shopping experience

Online marketplace

Defined contribution

Health account

Private Exchange

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Health Marketplace solution optimizes employer & consumer product selection

Broker/Consultant Employer

Employee uses funds to purchase benefits

Online or via call center

Employee

Generates tailored list of recommendations

Health Marketplace

Employees enroll in medical plan that aligns with their unique needs

Employer funds employee’s account

Medical and Pharmacyenrollment

•This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.

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•Services provided by Empire HealthChoice HMO, Inc. and/or Empire HealthChoice Assurance, Inc., licensees of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield plans.