Ppaca presentation

S
PPACA
Patient Protection and
Affordable Care Act
AKA Healthcare Reform
AKA Obama Care
Presented By:
Christine Price, CEO, CHRS

CHRS
Certified Healthcare Reform Specialist
Being a Certified Healthcare Reform Specialist does
NOT mean that I know everything there is to know
about Healthcare Reform. That would be like saying I
know the speed limit between here and Georgia - it
changes every few miles. But... If you have questions
that I can’t answer, I will get the answers for you.
© 2012 Creative Management Resources, Inc.

Disclaimer
This presentation is intended for informational
and educational purposes. It is not intended to
be a partisan look at the legislation nor is it
intended to project the presenter’s agreement
or disagreement with such legislation.
© 2012 Creative Management Resources,
Inc.

Who will
PPACA
affect?
EVERYONE! In one way
or another, everyone in
the United States will be
affected by PPACA –
business people,
individuals, families and
healthcare providers.

Christine has been in the healthcare industry for over two decades.
Her positions have included Managed Care Director for the largest
internal medicine group in south Georgia, Marketing Analyst for a
proprietary claims adjudication software, COO of a Third Party
Administrator in south Georgia and now serves as President and
CEO of Creative Management Resources, a Third Party Administrator
and Consulting firm based in Las Vegas.
Christine holds a Bachelor’s of Business Administration Degree, has
extreme industry experience and is a Certified Healthcare Reform
Specialist (CHRS). Her passion is assisting clients in making
informed decisions about their healthcare benefits plan as well as
assisting them in controlling the costs of those plans.
Inc.

Preparing for 2014
What is on the
Horizon?
Thus far, only minor regulations
have been implemented
including:
1. Children under 19 can no
longer be subjected to pre-
existing clauses.
2. Dependents must be
covered to age 26 if they do
not have employer
sponsored coverage.
3. Annual maximum coverage
increased to $2M
4. Coverage for preventive
medicine with no cost
sharing.
The more significant changes will
begin in 2014. Let’s look at some
frequently asked questions.
Inc.

Common Questions

Are Health Insurance Costs Going to
Increase Because of PPACA?
According to most experts, health insurance
costs will increase by 2-3% more than they
would have if the legislation had not passed.
Only time will tell but we must put plans of
action in place to minimize these increases.

What Tax Credits are
Available?
Small businesses are eligible for a tax credit for up to six
years. Before 2014, the maximum credit equals 35% of the
business’s contribution to employee health insurance
premiums. After 2014, the maximum is 50%, but only on
policies purchased in SHOP exchanges. The percentages
phase out as the number of employees and FTEs rises from
10 to 25 and as the average wage rises from $25,000 to
$50,000.
The above is only a summary of the Small Business Tax
Credits. A tax credit calculator is available at
http://www.smallbusinessmajority.org/tax-credit-calculator

What are SHOP
Exchanges?(Small Business Health
Option Programs)
Some businesses may not be “small” enough to receive tax credits or “small”
enough to be excluded from the employer mandate of the PPACA but it may be
“small” enough to purchase coverage through SHOP Exchanges. SHOP
Exchanges that will allow small businesses to buy insurance at a “presumably”
lower cost will be required starting in 2014.
In order for a “small employer” to qualify for the small group market, it must have
between 1 and 100 employees in both a calendar year and a plan year. Here’s the
catch. Until 2016, the state SHOP Exchanges can define a “small group” as having
50 employees or less which disqualifies an employer having 51-100 employees
from purchasing insurance through the exchange.
Nevada’s Exchange HAS defined a “small group” as having 50 employees or less
until 2016 at which time it will open up to groups having up to 100 employees.

What are Essential Health
Benefits (EHB)?
The PPACA identifies 10 (ten) categories of Essential Health Benefits
S Ambulatory patient services
S Emergency services
S Hospitalization
S Maternity and newborn care
S Mental health and substance use disorder services, including behavioral health
treatment
S Prescription drugs
S Rehabilitative and habilitative (see note below) services and devices
S Laboratory services
S Preventive and wellness services and chronic disease management
S Pediatric services, including oral and vision care
NOTE: While rehabilitative services help people recover lost skills, habilitative
services help them acquire new ones. Habilitative services can help autistic children
improve language skills, or those with cerebral palsy learn to walk. They can also
help a person with schizophrenia improve his social skills.

Essential Health Benefits
(con’t)
The Affordable Care Act requires that all individual and small-
group plans sold in a state, including those offered through the
Exchange, cover certain defined health benefits. States must
decide whether to benchmark their EHB plan to one of ten plans
operating in the state or default to the largest small-group plan in
the state. States were encouraged to select the benchmark EHB
plan by the end of September 2012. The Exchange Board
analyzed all plan options and the top scoring plans, in order, were
the Health Plan of Nevada POS C-XV small group, State of
Nevada Public Employee Benefits Program High Deductible PPO
Plan and Hometown Health Plan 25 HMO Public Employees
Benefits.

(con’t)
The Nevada Health Plan small group plan is basically a
$500 deductible, office visit, diagnostic testing and
prescription co-pays with the majority of the remaining plan
having an 80/20% coinsurance for in-network and 60/40%
coinsurance for out-of-network with a $2000 out-of-pocket
maximums.
As of September 19, 2012, the NHP Plan was ranked #1 as
the choice for a benchmark plan but a final decision had not
been made. If that plan is chosen, it will have to be
supplemented with the Nevada CHIP dental plan.
Inc.

(con’t)
The Healthcare Exchanges will have four levels of coverage that
they can offer, which vary depending on how much the insurer
pays, include:
1. Bronze: benefits equivalent to 60% of the full actuarial value of
plan benefits,
2. Silver: benefits actuarially equivalent to 70% of full value
3. Gold: benefits actuarially equivalent to 80% full value, and
4. Platinum: benefits actuarially equivalent to 90% of full value.
Qualified health insurers must offer at least one plan at the Silver
level and one plan at the Gold level in each Exchange in which
their plans are offered.
NOTE: SELF-FUNDED PLANS ARE NOT SUBJECT TO THE
EHB PORTION OF THE PPACA

What is the Health Insurance
Tax (HIT)?
PPACA assesses a tax on all health insurance companies based on
their “net premiums” written. This tax will raise $8 billion in 2014, rise
to $14.3 billion in 2018, and the amount will continue to increase by
the rate of premium growth for subsequent years. The amount of the
tax that the insurance company is responsible for is equal to the
percent of the market that the insurance company covers. The larger
the insurance company’s market-share, the higher their annual HIT.
One thing insurers have made clear throughout the healthcare
debate: new taxes will result in new costs passed along to
customers. The group that experiences the most cost-shifting is the
fully insured market.
NOTE: THE HEALTH INSURANCE TAX DOES NOT APPLY TO
SELF-FUNDED PLANS

What is the Individual
Mandate?
Individual taxes for failure to obtain health insurance begin in 2014 and rise in years
following. In each year, the tax consists of the higher of a dollar amount or a
percentage of household income. For a given household, the tax applies to each
individual, up to a maximum of three.
2014: $95 per person (up to 3 people, or $285) OR 1.0% of taxable income,
whichever is greater.
2015: $325 per person (up to 3 people, or $975) OR 2.0% of taxable income,
whichever is greater
2016: $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income,
whichever is greater.
After 2016: The same as 2016, but adjusted annually for cost-of-living increases.

My company has less than 50 employees –
Will PPACA affect me?
Yes and No. The number of full time employees is determined by the number of
full time “equivalent” employees. This is calculated by totaling the number of
hours of “regular time” your employees have worked in the past 12 months (in
2013). The new federal definition of “full-time” is 30 hour per week. PPACA
regulations require that part time employees’ hours be used in the calculation of
full time “equivalents”. For example: a company employs 35 full-time workers
(working on average of more than 30 hours per week) and 20 part-timers (working
on average 24 hours per week, or 96 hours per month). These 20 PTE are the
equivalent of 16 FTE. (20 x 96 / 120 = 16). So for calculation purposes, this
employer has 35 + 16= 51 full-time equivalents. In this case, the employer must
provide insurance coverage to its employees or pay a penalty of $2000 per
employee for 21 employees. (the first 30 employees are not subject to a penalty).
NOTE: These rules do not apply to seasonal workers that worked less than 120
days during the prior year.

My company has less than 50 employees –
Will PPACA affect me? (con’t)
As stated before, some small employers may qualify for tax credits if they provide
their employees with insurance coverage; however, they are not required to do
so by the PPACA.
CAUTION: Many employers with more than 50 employees have had an initial
reaction to “lay off full time employees and bring them back as part time, thereby
avoiding the impact of PPACA. Because of the way the number of full time
employee equivalents is calculated, this is not a feasible option. In addition, the
current penalty for failing to provide coverage is $2000. That amount can, and
will likely, be increased as we move forward.

What is Pay or Play?
The Pay or Play mandate refers to the requirement of the PPACA to either “pay”
a penalty tax for either dropping or not offering health insurance to its employees
or “play” by continuing or beginning to offer health insurance to its employees.
If an employer chooses not to provide group health coverage in 2014, and at
least one full-time employee obtains federally subsidized coverage through a
Health Exchange, the employer will have to pay a $2,000 “free rider” penalty for
each full-time employee. The employer’s first 30 employees are excluded from
this calculation. The penalty is assessed on a monthly basis. This is the so-
called Pay scenario.
In addition, the coverage offered must meeting minimum coverage levels or face
other penalties.

What is Pay or Play (con’t)
If an employer offers group health coverage in 2014 and at least one full-time
employee obtains subsidized coverage through an Exchange, the employer will
incur a monthly penalty.
An employee is eligible for the tax credit (subsidy) if at least one of the following is
met:
1. The employer offers group health plan coverage that meets EHB (Essential
Health Benefits) requirements but the plan premium for single coverage is
greater than 9.5% of the employee’s household income.
2. The employer’s contribution is less than 60% of the actuarial plan value.
The employer penalty will be the lesser of $3000 times the number of full-time
employees receiving subsidized coverage OR $2000 times the number of full-time
employees (again, the employer will not be penalized for the first 30 employees).

What is the “Cadillac Tax”?
The “Cadillac Tax” is a nondeductible tax that will be levied
on health plan costs for employees that exceed $10,200 for
single coverage or $27,500 for family coverage beginning in
2018.
Because of this new tax, it is imperative that employers start
controlling their healthcare costs NOW so that the costs of
their plans do not increase to a point that will trigger this tax.

Options
The options of dealing with the PPACA are:
1. “PAY” the penalties and drop coverage
2. “PLAY” and continue to offer same coverage as normal
or change benefits to meet new guidelines
3. “PLAY” and look at other coverage options (Self-
Funding)
Inc.

Be careful
not to Pay
AND Play
Before making a decision to pay,
think about the following.
Deciding to “Pay” could mean
you’re “Playing with Fire” Don’t
get burned.
1. What happens if Congress
decides to raise the penalty
amount?
2. Will you lose quality
employees to companies that
are offering coverage?
3. Will you have to increase
employees’ pay to cover any
shortfalls in paying for
Exchange coverage?

A Push Toward Self Funding?
An article in Business Insurance Magazine in February, 2012, stated in
part:
“The passage of health care reform is likely to further accelerate the
growth of middle-market self-funding.
Although self-funded benefits will be subject to many of the same
coverage requirements imposed on insured plans,” the cost of self-
funded benefit plans will continue to remain lower than that of insured
plans because self-funded plans are not subject to state benefit
mandates or premium taxes that add to plan costs, experts say.

Fully Insured vs. Self-Funding
Now, more than ever before, employers, including employers with as few as 25
employees, are looking at Self-Funding (partially Self-Funding) for several
reasons:
1. More plan flexibility. Self-Funded ERISA plans are not subject to all of the
PPACA mandates.
2. Ability to control costs.
3. Medical, dental, vision and prescription coverage's can all be self-funded.
4. Elimination of most premium tax
5. Lower administration costs
6. Profit goes to employer
7. Exempt from most State mandates
Inc.

More Plan Flexibility
S Self-Funded plans are NOT subject to Essential Health
Benefits Mandate.
S Self-Funded plans are NOT subject to the MLR (Medical Loss
Ratio) that is imposed on fully insured plans.
S Self-Funded plans will NOT be subject to community rating.
S Self-Funded plans do NOT have to provide justification of
premium increases or benefit decreases.
Inc.

Ability to Control Costs
Unlike fully insured plans where provision of plan and claims
information is scarce, self-funding allows the employer to obtain
their plan information, modify the plan (with 60 days notice) when
needed to control certain benefits, predict with some degree of
certainty what claims and costs will be as well as well as predict to
some degree the amount of increase (if any) in premiums
annually.
This access to plan data can be invaluable when determining
budgets, renewal estimates, cost drivers and the impact of plan
changes to costs and to employees.

Profits Go to Employer
Unlike fully-insured plans, any profits (or savings on
expenditures) are retained by the employer, not the
insurance carrier. An excellent cash flow advantage.
While funds for claims expenses can be accrued, they can
also be “pay as you go” which frees up cash flow.
Mechanisms are put in place to cap monthly and annual
expenses to prevent adverse financial effects for the
employer.

Will Self-Funding Work for a Small Employer
A common myth is that Self-Funding is only for very large businesses, unions or
trade associations. That is simply not true. Below is a graph showing the trend
of “real” costs for an actual client since 2006.
0
2000
4000
6000
8000
10000
12000
14000
2006 2007 2012
National Avg
Client
Note: This client was fully insured in 2006 and became self-funded in 2007

Fully Insured vs. Self Funded under
PPACA
Requirement Fully
Insured
Self-
Funded
Adherence to State benefit mandates ✔
Payment of premium tax ✔ **
Must provide Essential Health Benefits ✔
Guaranteed Issue ✔
Compliance with Minimum Loss Ratio ✔
Compliance with 90 day maximum waiting period ✔ ✔
Compliance with prohibition of pre-existing conditions ✔ ✔
Summary Benefit Comparison Compliance ✔ ✔
Subject to review of premium increases ✔
Required to participate in risk adjustment system ✔
Subject to Health Insurance Tax (HIT) ✔
Subject to minimum reserve requirements ✔
**Self-Funded plans are subject to premium tax but because the premium is much lower, the tax is also much
lower © 2012 Creative Management Resources, Inc.

Possible Disadvantages of
Self-Funding
Self-Funding, while a potential vehicle for huge savings, is not a bed of roses.
With savings and control also comes responsibility.
For all intents and purposes, the employer basically becomes the insurer, and
must take on the responsibilities and financial risks normally held by the
insurance company. These risks can be capped and/or eliminated with
appropriate management and stop loss coverage. There are two types of
stop loss coverage that are necessary to protect you. Specific coverage and
aggregate coverage.
You must have sufficient cash flow to pay larger-than-usual claims when they
occur (and, to continue to fund the plan until you receive any reimbursements
from your stop-loss carrier). Contractual provisions such as advance
reimbursement are put into all policies that Creative Management Resources
presents to its clients to mitigate this risk. © 2012 Creative Management Resources, Inc.

Possible Disadvantages of
Self-Funding (con’t)
The employer becomes involved in healthcare and insurance issues if you self-
fund, which is significantly more responsibility than simply writing the monthly
premium check to the insurer. It is very important to retain a professional TPA
to manage your plan.
If you decide at any point to return to a fully insured plan, you will still be
responsible for "run out" claims plus the new premiums for the fully insured
plan (a possible cash flow challenge).
For employers that are comfortable with additional risk and understand the
short and long term implications, self-funding is a tool that can be used to save
money and better manage the expense of providing their employees with
health care.
Inc.

Conclusion
Thank you for your time today. I hope that I was able to clarify some of
the more confusing issues surrounding the PPACA. If you have any
further questions or would like assistance in making a decision as to how
you will move forward with your employees healthcare coverage, please
contact me.
888-332-8984
www.cmrca.net
christine@cmrca.net

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