Health Care Reform: The Journey Continues

Areas of Expected Impact (9:57)


So as we think about the areas of expected impact to small groups and individuals, we move over to slide 7. One of which is the essential health benefits and network adequacy requirement. So as we think about coverage today on the individual market, the essential health benefits are likely to expand the coverage that they have today. And we'll talk a little bit more about that as we go on through the presentation, but that's just one of the things that will be expanding benefits, which will also increase premiums.

So there are 11 broad categories for individual and small group called essential health benefits both off and on exchanges. For right now, what's included in each one of those buckets are subject to good faith interpretation, and we're really going to be relying on the state's benchmark plans to define them.

On the network adequacy side - so exchanges need to make sure that a service area has a qualified health plan. The network requirements are around five of the networks, which providers are included and it has to include both essential community providers like community health centers and federally qualified health centers. And all of that will vary by state. So as you look at the addition of essential health benefits as one component, it will certainly provide a broader benefit level, but again increasing the cost of that coverage.

As we move over to slide 8 around the area of share responsibility. So certainly the individual mandate, that was the topic of discussion in the Supreme Court last year that said it looked like a tax, it smells like a tax, it will continue as a tax, will become effective on 1/1/14. That will say that all Americans -- with some exceptions -- need to have a minimum essential coverage or be assessed a tax of $95 for the first year or 1 percent of their income, whichever is greater. That will gradually go up to $325 per adult -- half that for a child -- in 2015 or 2 percent of family income. In 2016 beyond, up to $695 per adult -- half that for a child -- or 2 ½ percent of the family income, whichever is greater.

So that will be assessed through the tax process, so when you file your taxes in 2015 for 2014, you'll have to show that you did either have minimum essential coverage or be penalized with this tax. So there are some within the regulations -- some individuals that are exempt from the individual mandate -- so there's a list of those available within the requirements.

Some examples might be members of, you know, certain religious sects -- as long as there are certifications through the exchange -- health care sharing ministries. if you're incarcerated, if you're household income is below a certain federal income, which requires that you wouldn't have to submit a federal tax return -- a variety of other things, whether you're, you know, a resident of a U.S. territory, things like that would be the only folks across the country that would be exempt from that provision.

The lower half of slide 8 is around the employer-shared responsibility. So the first test there -- if you will -- is if you, a small group has more than 50 employees and are working more than 30 hours a week, and if so then they would be subject to the employer shared – employer-shared responsibility provision. This will say that, if they do have more than 50 employees that they must provide both adequate and affordable coverage. The affordability is based on a 9½ percent. The contribution that the employee pays is not more than 9½ percent of household income.

Because employers generally don't have household income, there are a couple of safe harbors that can be used. One of which is the W-2 - using that box one to determine if the out of pocket - if the contribution -- excuse me -- is less than 9½ percent. There's also a rate of pay and a federal poverty line that can be used for self-only coverage. So that's the affordability piece.

Around the adequacy, it must meet a minimum value of 60 percent. And there's a minimum value calculator that's available out on the government website as well as an actuarial calculator. Actuarial calculator is a little bit different and that applies to small groups and individual plans on the exchange, whereas the minimum value calculator is for large groups to assess the value of a plan as it relates to the employer shared responsibility provision.

If you think about that line of, are you over or under 50 lies on this provision applies to you, there are some - there is some guidance available. It's within the Internal Revenue Code, that gives the rules on how to count the period of time, you know, looking back on, which would actually start this year. But it does give some, give plan sponsors some flexibility to define that look back period -- anywhere from three to 12 months -- to assess how many employees they had. So as you're looking at that, 4980H of the Internal Revenue Code outlines the rules around that.

As we move over to slide 9, this is some of the areas of impact for reporting. So the summary of benefits and coverage - that applies to everyone in the group market. It's an additional our-page benefit document along with some coverage examples on -- if you're going to have a baby or if you have diabetes -- on how the benefits will pay. That was implemented last year. Recent rules that came out last week extend the non-enforcement grace period for one more year, which basically means as long as you're complying in good faith effort, an additional penalty would not be assessed. I think that recognizes the complexity of building a summary of benefits coverage and all the related documents.

W-2 reporting applies only for those groups that have more than 250, so we move over to the notice of coverage options. So for - every employer this year will need to give each of their employees a notice that says they could be eligible for a plan on the exchange. This was originally effective - planned to be effective on March 1st of this year. That has been put on hold. We continue to advocate for model notice -- model information -- to say here's what needs to be included in that notice, and we're expecting that sometime in the late summer, early fall. When that notice comes out -- again, it'll be the plan sponsor, the employer's responsibility to get that to all of their employees.

The reporting of health insurance coverage -- the Internal Revenue Code 6055 -- has been updated to include rules around reporting through the tax process if you have minimum essential coverage. So this again is how that individual tax will be assessed. The 6056 applies for the large groups -- or those groups that are over 50 -- to make sure that they are complying with the employer-shared responsibility requirements. The other notices there apply more for large groups.

Moving over to slide 10, one area of great interest is around all of the taxes, fees, and penalties that will become effective, one of which already has become effective, others of which will become effective next year. So the first of which is the patient-centered outcomes research institute fee , hat was a dollar for covered life, going up to $2 and up, until policy years ending after September 2019. So that one is temporary and it's a smaller fee compared to some of the others that are more impactful.

 One of which is the health insurance provider fee. This impacts insured plans only. It starts 1/1/14, so for Aetna we have started to build that into our insured renewals beginning 12/1/13 for those months that are in 2013. And this is expected -- just to give you a rough order of magnitude -- to generate about $30 billion over the first three years of existence, but it's expected to continue on forever. This money will be used to help offset the premium tax credits and subsidies that are going to be available on the individual and small group exchange.

And then moving over, the transitional reinsurance contribution program. So this impacts both insured and self-funded groups. It starts, again, in January. And this is the piece that will fund the reinsurance program around the risk management to help stabilize the marketplace over these first three years as we have a lot of the pricing changes and benefit changes. And it will assess across the marketplace on, you know, risks coming into the system and how that's being monitored. So that is expected to generate about $25 billion over the first three years, and then it goes away.

So for 2014, that's $5.25 per member, per month. Overall, these three taxes and fees are expected to generate about 4 percent of premium overall. So another thing that will continue to increase premium rather than bring it down.