On February 4, 2011, Pam Silberman, president & CEO of North Carolina Institute of Medicine, made this presentation to Chamber members about federal health reform.

1. 11
Understanding National
Health Reform: A Focus on
Employers
Chapel Hill-Carrboro Chamber of
Commerce
Pam Silberman, JD, DrPH
President & CEO
North Carolina Institute of Medicine
February 4, 2011

2. Agenda
 A word about the NC Institute of Medicine
 Overview of the Patient Protection and
Affordable Care Act (ACA)
 NC Implementation Efforts
2

3. A Word About the NC
Institute of Medicine
 Quasi-state agency chartered in 1983 by the
NC General Assembly to:
 Be concerned with the health of the people of North
Carolina
 Monitor and study health matters
 Respond authoritatively when found advisable
 Respond to requests from outside sources for
analysis and advice when this will aid in forming a
basis for health policy decisions
NCGS 90-470
3

4. Agenda
 A word about the NC Institute of Medicine
 Overview of the Patient Protection and Affordable
Care Act (ACA)
 Background
 Coverage
 Other ACA provisions
 Cost containment and financing
 Congressional Budget Office estimates
 NC Implementation Efforts
4

5. 55
Background
 Estimates of the uninsured:
 Recent Census numbers showed approximately 1.7
million non-elderly uninsured in NC (2009)
 Lack of health insurance impacts on a person’s health
 People who are uninsured are less likely to receive
preventive services, more likely to end up in the hospital
for preventable conditions or late stage cancer, and
more likely to die prematurely
 Lack of insurance coverage affects a family’s financial
security
Source: US Census. Health Insurance Coverage Status and Type of Coverage
by State—Persons Under 65. Table HIA-6.

6. 66
US Health Care Costs Rising
More Rapidly Than Inflation
or Earnings (1999-2009)
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2008. Bureau of
Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to
April), 2000-2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current
Employment Statistics Survey, 2000-2008 (April to April). Claxton G. et. al. Job-Based
Health Insurance: Costs Climb at a Moderate Rate. Health Affairs. Sept. 15, 2009.

7. 77
National Health Reform
Legislation
 Patient Protection and Affordable Care Act (HR
3590) (signed into law March 23, 2010)
 Health Care and Education Affordability Act of
2010 (HR 4872) (also referred to as
“reconciliation”)
 The combined bills are often referred to as the
Affordable Care Act (or ACA)

8. 8
Overview of Health Reform
 By 2014, the bill requires most people to have health
insurance and large employers (50+ employees) to
provide health insurance--or pay a penalty.
 Builds on our current system of public coverage,
employer-sponsored insurance, and individual (non-
group) coverage
 New funding for prevention, expansion of the health
workforce, long-term care services, increasing the
healthcare safety net, and improving quality
8

9. Agenda
 A word about the NC Institute of Medicine
 Overview of the Patient Protection and Affordable
Care Act (ACA)
 Background
 Coverage
• Public
• Private
 Other ACA provisions
 Cost containment and financing
 Congressional Budget Office estimates
 NC Implementation Efforts
9

10. Expansion of Public
Coverage
 Currently, childless, non-elderly, non-disabled
adults are not eligible for Medicaid—regardless of
how poor they are
 Beginning in January 2014, adults will be able to
qualify for Medicaid if their income is no greater
than 138% of the federal poverty guidelines (FPL)*
 138% FPL = $30,429/year for a family of four
 Undocumented immigrants are not eligible for
Medicaid or any other insurance coverage made
available through this bill
10
The ACA mandates that states expand coverage up to 133% FPL, but also
includes a 5% income disregard, effectively raising eligibility limits to 138% FPL.

11. 11
Medicare
 Enhances preventive services (Effective Jan 1, 2011 Sec. 4103-4105, 10402,
10406)
 Phases out the gap in the Part D “donut hole” by
2020 (Sec. 3301, 3315, as amended by1101 Reconciliation)
 Strengthens the financial solvency of the Medicare
program by 12 years (2017-2029)
11

12. Agenda
 A word about the NC Institute of Medicine
 Overview of the Patient Protection and Affordable
Care Act (ACA)
 Background
 Coverage
• Public
• Private
 Other ACA provisions
 Cost containment and financing
 Congressional Budget Office estimates
 NC Implementation Efforts
12

13. 13
Essential Benefits
Package
 HHS Secretary will recommend an essential health care
benefits package that includes a comprehensive set of
services:* (Sec. 1302)
 Hospital services; professional services; prescription drugs;
rehabilitation and habilitative services; mental health and substance
use disorders; and maternity care
 Well-baby, well-child care, oral health and vision services for children
under age 21 (Sec. 1001, 1302)
 Recommended preventive services with no cost-sharing and all
recommended immunizations (Sec. 1001, 10406)
 Mental health parity law applies to qualified health plans (Sec. 1311(j))
13
* With some exceptions, existing grandfathered plans not required to meet
new benefit standards or essential health benefits.

14. 14
Essential Benefits
Package
 Four levels of plans, all must cover essential benefits
package: (Sec. 1302(d))
 Bronze (minimum creditable coverage): must cover 60% of the
benefit costs of the plan
 Silver: 70% of the benefits costs*
 Gold: 80% of the benefit costs
 Platinum: 90% of the benefit costs
 Catastrophic plan (only available to people up to age 30 or if
exempt from coverage mandate) (Sec. 1302(e))
 With some exceptions, existing grandfathered plans
not required to meet new benefit standards
(Sec. 1251, 10103 as amended Sec. 2301 of Reconciliation)
14*Subsidies tied to second lowest cost silver plan in the HBE.

15. 1515
Individual Mandate
 Citizens and legal immigrants will be required to pay
penalty if they do not have qualified health insurance,
unless exempt. (Sec. 1312(d), 1501, amended Sec. 1002 in Reconciliation)
 Penalties: Must pay the greater of: $95/person or 1% taxable
income (2014); $325 or 2.0% (2015); or $695 or 2.5% (2016),
increased by cost-of living adjustment*
 Some of the exemptions include people who are not required
to file taxes, and those for whom the lowest cost plan exceeds
8% of an individual’s income (Sec. 1501(d)(2)-(4),(e))
*Families of 3 or more will pay the greater of the percentage of income, or
three times the individual penalty amount. The maximum penalty is equal to
the amount the individual or family would have paid for the lowest cost bronze
plan (minus any allowable subsidy).

16. Subsidies to Individuals
 Refundable, advanceable premium credits will
be available to individuals with incomes up to
400% FPL on a sliding scale basis ($43,320/yr. for one
person, $58,280 for two, $73,240 for three, $88,200 for a family of four in
2010).* (Sec. 1401, as amended by Sec. 1001 of Reconciliation)
 Individuals are generally not eligible for subsidies if
they have employer-based coverage, TRICARE, VA,
Medicaid, or Medicare (Sec. 1401(c)(2)(B)(C), 1501)
 In comparison: North Carolina’s median household
income in 2008 was $46,574 (avg. household = 2.5 people).
16
*2010 Federal Poverty Levels are: $10,830 for an individual, $14,570 for a
family of two, $18,310 for a family of three, or $22,050 for a family of four. US
Census Bureau. North Carolina. Quick Facts.
http://quickfacts.census.gov/qfd/states/37000.html

17. 17
Employer Responsibilities
 Employers with 50 or more full-time equivalent
employees required to offer insurance or pay penalty
(Sec. 1201, 1513, amended Sec. 1003 Reconciliation)
 Must offer affordable coverage to employee and dependents
 May not have waiting period of more than 90 days
 Not required to pay for any part of the premium
 However, subject to a penalty if:
• Employer does not offer coverage that meets essential
coverage requirements (premium covers 60% of the actuarial
costs of the plan)
• Employees qualify for and receive a subsidy in the health
insurance exchange
• Employer penalty only for full-time employees, not dependents

18. 1818
Employer Responsibilities
 Potential penalties for employers with more than 50 full-
time equivalent employees (Sec. 1513, amended by Sec. 1003 Reconciliation)
 If employer does not offer coverage, the employer must pay $2,000
per full-time employee, excluding first 30 employees.
 If an employer does offer coverage, but at least one full-time
employee qualifies for and receives a subsidy, then the employer
must pay $3,000 for any full-time employee who receives a subsidy
(but in no event more than $2,000 per FT employee, excluding the
first 30 employees).
 Penalty determined on monthly basis.
 Employers with 50 or fewer employees exempt from
penalties. (Sec. 1513(d)(2))

19. 19
Free Choice Voucher
 Employers that offer essential coverage and pay a
portion of the costs must provide a “free choice
voucher” to certain employees. (Sec. 10108)
 If premium is between 8-9.8% of the employee’s annual
household income
 Employee does not participate in the employer-sponsored
insurance (ESI)
 Amount of free choice voucher equal to amount employer
would have paid if the individual participated in ESI
 Employee can use the free choice voucher to purchase
insurance through the Health Insurance Exchange
19

20. 20
Additional Employer
Responsibilities
 New reporting requirements. For example: (Secs. 1502, 1512,
1514, 9002)
 Employers must report full value of employer-
sponsored health insurance (including employee and
employer share and contributions to FSAs) on W-2
forms (2011)
 Employers will be required to report on whether they
offer essential minimum coverage to full-time
employees and dependents, length of the waiting
period, information about each full-time employee who
was covered (2014)

21. 21
Special Rules for Different
Sized Employers
 Small employers (<100 employees): Deductibles
cannot exceed $2,000 (individual) or $4,000 (family)
in small group market (Sec. 1302(c)(2), 1304)
 Large employers (200+ employees): If employer
offers coverage, the employer must automatically
enroll employees into health insurance plans if
offered by the employers. (Sec. 1511)
 Employees can opt out of coverage

22. 22
Tax Credits for Small
Employers
 Employers with 25 or fewer employees and average
annual wages of less than $50,000 can receive a tax
credit (Sec. 1421, Sec. 10105)
 Phase I (2010-2013): 35% tax credit if for-profit employer provides
coverage and pays at least 50% of total premium cost. (Full credit
limited to employers with 10 or fewer employees and average annual
wages of less than $25,000. Credit phases out for larger employers
or higher average wages. Non-profit organization only eligible for
25%.)
 Phase II (2014-later): Maximum of 50% tax credit for up to 2 years
(with similar targeting and phase-out, non-profits eligible for up to
35% tax credit). Subsidies only available for coverage purchased
through the Health Insurance Exchange.
22

23. 23
Health Benefits Exchange
(HBE)
 States will create a Health Benefits Exchange for
individuals and small businesses. (Sec. 1311, 1321)
 Limited to citizens and lawful residents who do not
have access to employer-sponsored or governmental-
supported health insurance and to small businesses
with 100 or fewer employees. (Sec. 1312(f))
 Exchanges will:
 Provide standardized information (including quality
and costs) to help consumers choose between plans
 Determine eligibility for the subsidy

24. Health Benefits Exchange
 The following individuals or groups must obtain
coverage through the HBE:
 Individuals seeking premium and cost-sharing subsidies
 Small businesses seeking tax credit
 Individuals given the free choice voucher
 The following individuals or groups may obtain
coverage through the HBE:
 Any other qualified individual (ie, a citizen or lawfully
present immigrant)
 Small business (as defined by the state)
24

25. Immediate Insurance
Provisions: 2010 (Selected Provisions)
 New federal website with standardized format to help
consumers identify affordable insurance (Sec. 1103)
(www.healthcare.gov)
 Effective July 2010, $5B to create a temporary reinsurance
program for employers providing health insurance
coverage to early retirees ages 55-64 (2010). (Sec. 1102)
25

26. 26
Immediate Insurance-
Related Provisions
 Effective for plan years that begin after September 23, 2010:
 Prohibits insurers from imposing pre-existing condition
exclusions for children (Sec. 10103(e))
 Prohibits insurers from dropping coverage to people when
they get sick (Sec. 1001)
 Prohibits plans from imposing lifetime caps; and restricts use
of annual caps (annual caps prohibited 2014) (Sec. 1001, as amended
Sec. 2301 of Reconciliation)
 Extends coverage for young people up to 26th birthday through
parents coverage (Sec. 1001)
 New private plans must cover preventive services with no cost
sharing (Sec. 1001)
26

27. 2727
Insurance Reform: 2014
(Selected provisions)
 Insurers are prohibited from:
 Discriminating against people or charge them more
based on preexisting health problems (Effective 2014; Sec.
1201)
 Including annual or lifetime limits for essential benefits (Sec.
1001, 10101)
 Insurers are required to:
 Limit the differences in premiums charged to different
people based on age (3:1 variation allowed), and certain
other rating factors (Effective 2014; Sec. 1201)

28. Grandfathered Plans
 Some of the new insurance protections do not apply to
grandfathered plans. For example:
 Coverage of clinical preventive services
 New appeal rights
 Grandfathered plans are group and non-group plans
that were in effect on March 23, 2010
 Maintains grandfather status even if some new people enter
and others leave the plan, as long as plan has continuously
covered someone since March 23, 2010.
 Loses grandfather status if changes made in covered benefits
or significant changes in cost sharing arrangements
28

29. 2929
Basics of National Health
Reform--Overview
 Overview of health reform legislation
 Immediate implementation
 Private coverage
 Other provisions
 Cost containment and financing
 CBO estimates
29

30. 30
Prevention and Wellness:
Overview
 Federal government will provide more funding to
support prevention efforts at national, state and
local levels
 Grant funds will be made available for prevention,
wellness and public health activities
 Some of the focus areas include: healthy lifestyle
changes, reduction and control of chronic diseases,
health disparities, public health infrastructure, obesity
and tobacco reduction, improved oral health,
immunizations, maternal and child health, worksite
wellness
30

31. 31
Prevention and Wellness:
Employers
 Worksite wellness initiatives
 CDC to provide technical assistance, and there may be
grants available to small businesses to offer wellness
programs (Sec. 4303; Authorizes $200M FY 2011-2015, Sec. 10408)
 Employers can have wellness programs that include
requirements that enrollees satisfy health status factors (i.e.,
tobacco cessation or weight) if the financial consequences
(reward or penalty) do not exceed 30% of the costs of
coverage (Sec. 1201)
 Employer requirements for breastfeeding employees
for businesses with 50 or more employees. (Sec. 4207)
31

32. 32
Workforce Overview
32
 Provisions aim to expand and promote better training for
the health professional workforce
 By enhancing training for quality, interdisciplinary and integrated
care and encouraging diversity
 By increasing the supply of health professionals in underserved
areas
 By offering loan forgiveness and scholarships to train primary
care, nursing, long-term care, mental health/substance abuse,
dental health, public health, allied health and direct care
workforce

33. 33
Quality Overview
 Providers and payers will be required to report data to
measure quality of care
 HHS Secretary will develop quality measures for
different populations and organizations
 Data will be made available to the public
 Increased emphasis on value-based payments to
providers and insurers
 Efforts to test new models of care to improve quality
and efficiency
 Patient-centered medical home, accountable care
organizations, bundled payments
33

34. 3434
Long-Term Care
 Establishes a national voluntary insurance program to
purchase community living assistance services and
supports (CLASS) financed through payroll deduction.
(Sec. 8001-8002, 10801)
 Plans provide for a 5-year vesting period and cash benefits
of not less than an average of $50/day to purchase non-
medical services and supports
 Financed through automatic payroll deduction (unless opt-
out)

35. 3535
Basics of National Health
Reform--Overview
 Overview of health reform
 Immediate implementation
 Private coverage
 Other provisions
 Cost containment and financing
 CBO estimates
35

36. 36
Cost Containment &
Financing
 Reduction in existing health care costs through:
 Increased emphasis on: reducing fraud & abuse,
administrative simplification, reducing excess
provider/insurance payments
 Increased revenues through:
 Fees paid by individuals/employers for failure to
have/offer insurance
 Taxes/fees on insurers, pharmaceuticals, tanning
salons, “Cadillac” insurance plans, wealthier
individuals
36

37. 3737
Basics of National Health
Reform--Overview
 Overview of health reform
 Immediate implementation
 Private coverage
 Other provisions
 Cost containment and financing
 CBO estimates
37

38. 3838
Congressional Budget
Office (CBO) Projections
 Covers 92% of all nonelderly residents (94% of legal,
nonelderly residents)
 Would cover an additional 32 million people (leaving 23
million nonelderly residents uninsured by 2019)
 In North Carolina, the ACA may expand coverage to
more than 1 million uninsured.
 Expansion of insurance coverage and new
appropriations included in PPACA will cost $938 billion
over 10 years.
 However, with new revenues and other spending cuts,
PPACA is estimated to reduce the federal deficit by $124
billion over 10 years.*

39. PPACA: Summary of Some
Key Employer Provisions
All employers:
•May not discriminate against
lower-paid employees (2010)
•Payroll deduction for new CLASS
(long-term care insurance) (2011)
•Provide information to
employees about health
insurance exchange (2014)
•Offer free choice voucher if offer
and pay portion of premium costs
(2014)
•New reporting requirements (cost
of health coverage on W-
2s, reporting to IRS if offer
coverage) (2011, 2014)
Large employers:
•Offer affordable health
insurance coverage or pay a
penalty (50+ employees) (2014)
•Auto-enroll employees in
health insurance, if offer
coverage (200+ employees)
(2014)
Small employers:
•Tax credit available to smallest
employers (<25 employees)
with low-wage workers (2010)
39

40. Other NCIOM Resources
 What Does Health Reform
Mean for North Carolina?
North Carolina Medical
Journal, May/June 2010;71:3
 NCIOM: North Carolina data on
the uninsured
http://www.nciom.org/data/uninsured.shtml
 Other resources on health
reform are available at:
www.nciom.org/data/healthreform.php
40

41. 4141
National Health Reform
Resources
 Senate Bill: Patient Protection and Affordable Care Act
(HR 3590 signed into law March 23, 2010)
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3590enr.txt.pdf
 Health Care and Education Reconciliation Act of 2010
(HR 4872 signed into law March 30, 2010)
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4872eh.txt.pdf
 US Health Reform website: www.healthcare.gov
 Kaiser Family Foundation
http://healthreform.kff.org/
 Congressional Budget Office
http://www.cbo.gov/ftpdocs/113xx/doc11379/Manager'sAmendmenttoReconciliationProposal.pdf
http://www.cbo.gov/ftpdocs/114xx/doc11490/LewisLtr_HR3590.pdf
http://www.cbo.gov/ftpdocs/114xx/doc11493/Additional_Information_PPACA_Discretionary.pdf

42. 42
Sliding Scale Subsidies
Individual or
family income
Maximum
premiums
(Percent of
family
income)
Out-of-pocket
cost sharing:*
Out-of-pocket cost sharing
limits**
<133% FPL 2% of
income
6% $1,983 (ind)/ $3,967 (fam)
(1/3rd HSA limits)
133-150% FPL 3-4% 6% $1,983 / $3,967
150-200% FPL 4-6.3% 13% $1,983/ $3,967
200-250% FPL 6.3-8.05% 27% $2,975/ $5,950 (1/2 HSA limit)
250-300% FPL 8.05-9.5% 30% $2,975/ $5,950
300-400% FPL 9.5% 30% $3,967/ $7,934 (2/3rds HSA
limit)
42
*Out-of-pocket cost sharing includes deductibles, coinsurance, copays.
**Out of pocket limits do not include premium costs. Annual cost sharing limited to:
$5,950 per individual and $11,900 family in 2010 (HSA limits) (Sec.
1302(c), 1401, 1402, as amended by Sec. 1001 of Reconciliation)