A Blue Cross and Blue Shield Association Presentation

The Affordable Care Act:

2010 and Beyond

National Labor Office Symposium

October 5, 2010
Agenda

• Grandfathering and Effective Dates

• Prevention and Wellness Changes
• 2010 Changes
• Later Changes (2011 and Beyond)

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Grandfathering General Rules on Grandfathering

Plans can lose grandfathered status if:

– Deductibles/cost-sharing increase above certain levels
– Employer contributions decrease by >5%
– Change insurance policies
– Make certain other changes
Grandfathered coverage doesn’t have to comply with:
– Preventive services rules, new appeals requirements (2010)
– Essential benefit categories, cost-sharing rules (2014)
– Certain other requirements
Grandfathered plans have to keep track of their status and disclose to
members

Æ Special rule for insured plans under a CBA (next slide)

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Grandfathering
Special Grandfather Rule for Insured
Collectively Bargained Plans

• Insured collectively bargained plans retain grandfathered status

until last CBA in effect on 3/23/10 terminates -- even if changes
are made that usually would end grandfathered status
– E.g., an insured collectively bargained plan changes its insurer
• After the last CBA ends, the general grandfathering rules apply
• Insured collectively bargained plan still are subject to the same
requirements as other grandfathered plans (e.g., dependent age
change)
• No special rule for self-funded plans

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Grandfathering How ACA Effective Dates Work

ACA effective dates generally are tied to “plan years”:

1. “Plan year” in ERISA document
2. If none, then deductible or limit year
3. If none, then policy year
4. If none, then employer taxable year
5. If none, then calendar year

Example:
– Dependent age extension to age 26 applies to “plan years
beginning on or after September 23, 2010
– If ERISA document says plan year is calendar year, then
changes for that particular ERISA plan must be effective by
January 1, 2011

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Prevention/
Wellness Preventive Services Benefits (2010)

Plans must cover certain preventive services

with no cost-sharing
– Covered Benefits
• High-priority recommendations (“A” or “B”) by U.S. Preventive Services Task
Force
• Immunizations for routine use recommended by CDC
• Preventive care and screenings for children supported by Health Resources
and Services Administration
• Guidelines for women supported by HRSA
– Other Important Information
• Grandfathered plans are exempt
• Coverage for in-network benefit only is permissible
• New recommendations must be covered for the first plan year that’s one
year after adoption by the government
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Prevention/
Wellness
HIPAA Wellness Rule Changes (2014)

Plans may provide rewards up to 30% (previously 20%) for

participation in certain health promotion and prevention programs

• “Reasonable chance” of improving health or preventing disease

Program
• Cannot be overly burdensome or used to discriminate based on a
Design
health factor

• Reward cannot exceed 30% of cost of member-only coverage

• HHS and the Labor Dep’t have an option to increase ceiling to 50%
Premium
• Following rewards are permissible:
Variation
– Premium discount or rebate – Waiver of cost-sharing
– Absence of surcharge – Value of benefit not covered

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2010 Changes Annual and Lifetime Limits

• No annual and lifetime limits on essential benefits

– Essential benefits include: Hospitalization, physician services, emergency
services, Rx drugs, maternity, mental health, etc.
– Limits OK for nonessential benefits
• HOWEVER – There are two options for annual limit exceptions before 2014
1. Follow HHS Schedule:
• 2011: $750,000
• 2012: $1.25 million
• 2013: $2 million
2. Request HHS Waiver:
• Send annual application indicating compliance with annual limit rules
would cause “significant’ decrease in access to benefits or a
“significant” increase in premiums
• HHS will process waiver application within 30 days
• Applies to new and grandfathered group plans
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2010 Changes Dependent Coverage to Age 26

• Must cover adult child to age 26

– Regardless of student status, marital status, tax dependency,
residency
– Not required to cover spouse or child of adult child dependent
• Must provide one-time re-enrollment right to those who previously
aged out or were denied coverage
• Prior to 2014, grandfathered group plans not required to cover if
dependent is eligible to enroll in other group coverage

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2010 Changes Emergency Services

• Must cover emergency services without prior

authorization (including non-network)
• Member non-network cost-sharing cannot exceed in-
network
– However, non-network providers can balance bill patients
• Plans must pay non-network providers a “reasonable
rate,” defined as the greater of:
– Negotiated payments for in-network providers
– Amount using the method the plan generally uses to determine
non-network payments, but substituting in-network cost-sharing
– Medicare payments for emergency services

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2010 Changes Provider Choice

Primary Care Provider

– Must allow member to choose own primary care physician from
those in network

Pediatrician
– Must allow child to have a pediatrician as primary care provider

OB-GYN
– May not require authorization or referral for in-network OB-GYNs

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2010 Changes Internal Claim Appeals

New rule clarifies which health plan decisions can be appealed

– Decisions regarding eligibility, claims or coverage denials including
medical necessity, health care setting, level of care, and
effectiveness of a covered benefit
New rule included some key changes from the ERISA rules that
plans have been following for almost a decade
– Denial notice content expanded
– Urgent care claim decision timeframe reduced from 72 to 24 hours
– Claimants may present testimony during appeal
– New conflict of interest criteria
– Plans must “strictly adhere” to new rule or members can go straight
to court (e.g., small procedural mistakes might not pass, even if
member not harmed)

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2010 Changes External Review of Claim Decisions

Determining Whether State or Federal Rules Apply

• Federal: ERISA self-funded plans and insured group plans in states where
external review does not certain NAIC standards or where there is no process
• State: Insured group plans and non-ERISA self-funded plans (state
employee plans, church plans)
State External Review
• Must be based on NAIC Model, but scope is wider
– Includes adverse benefit determinations based on “effectiveness of a covered
benefit” vs. “effectiveness of the health care service”
• Must meet other minimum standards, e.g., no minimum $$ threshold to
appeal
• Existing state external review process considered to be compliant for plan
years beginning before 7/1/11
New Federal Process
• Rule released 7/23/10; additional guidance expected next year

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Later Changes 2011-2013 Changes

Insured plans only – does not apply to self-funded

Medical Loss Ratios Annual rebates to participants, starting 2011, if:
(2011+) – Less than 85% of premium spent on clinical services and
health improvement activities (80% for small group market)
Uniform Coverage New and grandfathered plans will need to provide 4-page
Summaries benefit summaries using HHS standardized format and
(2012+) definitions
Flexible Spending
Account Limits Contributions limited to $2,500/year
(2013+)

Auto-Enrollment Large employers (>200 employees) must automatically enroll

(eff. date not clear) workers in health plans

While there aren’t as many benefit plan changes occurring 2011-

2013, planning for 2014 will take a lot of time and attention
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Later Changes
Additional Group Benefit Plan
Changes Will Go into Effect in 2014

• Pre-Existing Condition Exclusion Period: Not allowed (e.g., no 6-

month wait for Member X to receive asthma benefits due to medical
history and break in prior coverage)
• Waiting Periods: Limited to 90 days (e.g., new members have to wait
90 days before eligible for health benefits)
• Out-of-Pocket Limits: Approx. $5,950 (self), $11,900 (family) (high
deductible plan limits for 2010 shown as example, but will be adjusted for
inflation)
• Small Group Rules: Essential benefits must be covered; deductibles
subject to limits; and “metallic” product requirements related to “actuarial
value” of 60%-90% (member cost-sharing as percent of plan’s covered
benefits)

Note: Coverage will have to provide at least 60% actuarial value to satisfy mandate
to have insurance – but most group plans today are far above that level
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Later Changes
There Will Be Major Changes in How
Health Insurance Works Starting in 2014

• Many individuals will be required to have coverage under federal

law
– Federal Subsidies: Sliding scale of subsidies for people with
incomes 100% to 400% poverty level (about $43,000/individual and
$88,000 today. People with employment-based coverage can
qualify under certain circumstances
– Exemptions: Affordability, financial hardship, other
– Noncompliance Penalties: Greater of: (1) flat $ amount (from $95
in 2014 to $695 in 2016) or (2) % of household income (from 1% in
2014 to 2.5% in 2016)
• New rules for health insurance policies sold to small employers and
outside the employment context (AKA “individual market”)
– Insurers will sell regardless of health status during open enrollment
periods
– Premiums not based on health status of applicants
– Certain essential benefit categories must be covered
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Later Changes Employer “Pay or Play” (2014)

Employers with more than 50 FTEs must offer minimum

coverage
– Part-time workers included in count, but seasonal workers are not
“Play”
– No minimum employer contribution requirement
– On average, plan must pay 60% of covered benefits (i.e., copays and deductibles
equal no more than 40%)

If not, the employers must pay a penalty

1. Employer doesn’t offer coverage and at least one full-time employee
receives a tax credit: $2,000 x total # of FTEs (minus first 30)
“Pay” 2. Employer does offer coverage, but at least one FTE receives tax credit
due to 60% covered benefit requirement or employee cost exceeds
9.5% of household income: Lesser of $2,000 x total # of FTEs (minus
first 30) or $3,000 x # of FTEs receiving tax credit

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Later Changes
“Exchanges” in 2014 Will Make Finding
Insurance Easier

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 Exchanges Will Perform Many Functions Regarding
Later Changes
Small Group and Individual Health Insurance

Offer health plans

options
Help consumers Exclude health plans
choose & enroll in with “excessive” rate
coverage increases

The
Collect health plan Exchange Help eligible
data individuals enroll in
Medicaid/ CHIP

Run websites that Help eligible

allow consumers to individuals get federal
shop for health plans subsidies

• States have a lot of flexibility in designing Exchanges – which insurers and policies to include, who
runs the Exchange, what areas they cover, etc.
• Starting in 2017, large groups may be allowed to use Exchanges
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 Federal Agencies and States Share Oversight
for Many Reforms
The Affordable Care Act and HIPAA (1996) allocate responsibilities between
federal and state officials and define scope of federal preemption
HHS DOL Treasury/IRS
• Enforcement for insurers, state • Enforcement for self-funded and • Enforcement for group plans, church
employee group plans insured ERISA group plans plans
• Individual/group plan standards (with • Group plan standards (with • Group plan standards (with HHS/DOL)
DOL/Treasury) HHS/Treasury)
• Excise tax of $100 per day per
• Penalties of $100 per day per • DOL can sue if noncompliance with individual if noncompliance with plan
individual if noncompliance with plan plan standards standards
standards
• Other “employer” focused rules (e.g., • Enforcement of individual/ employer
• Exchange standards autoenrollment) mandates
• Individual/small employer subsidies

States
• State options (“federal fallback” if states don’t act):
– Implement health plan standards
– Run Exchanges
• States not needed to enforce the employer and individual mandates/subsidies
• NAIC has statutory role advising HHS on some issues, informal role on many other issues

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The Affordable Care Act:
2010 and Beyond

National Labor Office Symposium

October 5, 2010

21
Agenda

• Grandfathering and Effective Dates

• Prevention and Wellness Changes
• 2010 Changes
• Later Changes (2011 and Beyond)
• Healthcare Reform and the Role of the States

22
 Federal Agencies and States Share Oversight
for Many Reforms
The Affordable Care Act and HIPAA (1996) allocate responsibilities between
federal and state officials and define scope of federal preemption
HHS DOL Treasury/IRS
• Enforcement for insurers, state • Enforcement for self-funded and • Enforcement for group plans, church
employee group plans insured ERISA group plans plans
• Individual/group plan standards (with • Group plan standards (with • Group plan standards (with HHS/DOL)
DOL/Treasury) HHS/Treasury)
• Excise tax of $100 per day per
• Penalties of $100 per day per • DOL can sue if noncompliance with individual if noncompliance with plan
individual if noncompliance with plan plan standards standards
standards
• Other “employer” focused rules (e.g., • Enforcement of individual/ employer
• Exchange standards autoenrollment) mandates
• Individual/small employer subsidies

States
• State options (“federal fallback” if states don’t act):
– Implement health plan standards
– Run Exchanges
• States not needed to enforce the employer and individual mandates/subsidies
• NAIC has statutory role advising HHS on some issues, informal role on many other issues

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Healthcare Reform and the Role of the States

Key State Activities

• Statutory role advising HHS on insurance market regulation, key
forms, other issues
• Informal advisory role on many other issues
• Strategic planning, information-sharing role to facilitate reform
implementation
Within ACA Framework - State Perspective
• Retain state oversight of insurance market
• Ensure flexibility to reflect unique market environment, needs

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Healthcare Reform and the Role of the States

Key Players - State Consortium on Health Care Reform

Implementation
• National Governors Association – NGA
• National Association of Insurance Commissioners – NAIC
• National Association of State Medicaid Directors – NASMD
• National Academy for State Health Policy - NASHP
Key Players – State Legislators
• National Conference of State Legislators – NCSL
• National Conference of Insurance Legislators – NCOIL
• Council of State Governments – CSG
States are acting NOW to advise HHS on 2010, later changes

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Healthcare Reform and the Role of the States

What / who is NAIC?

• Insurance regulators of 50 states, DC, territories
– Appointed or elected
– Leadership changes annually – currently WV, IA, FL, OK, KS
– Extensive committee structure for debate, taking action
– Develops insurance models for state consideration

NAIC Health Care Reform Principles

• Protect rights of consumers
• Address health care spending
• Promote state innovation
• Stop cost-shifting
• Avoid adverse selection

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Healthcare Reform and the Role of the States

NAIC – Multiple responsibilities in key issue areas

• Medical Loss Ratio (by 1/11 for rebates beginning 1/12)
– Uniform definitions, standard methodologies for calculating MLR,
rebates
– At least 80% (85%) on clinical, quality improvement expenses

• Rate Review (immediate)

– Report on state authority to review, approve/deny rates
– Disclosure form for “unreasonable” premium increase request

• Rating methodology (by 1/14)

– Advise HHS on age bands, rating areas
– Develop models for states

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Healthcare Reform and the Role of the States

NAIC, cont.
• Plan standards (by 3/11 for 3/12 Plan years)
– Definitions, disclosure notices
– Summary of benefits
• Exchanges (immediate, state notice by 1/13 for 1/14)
– RFI response, consult on regulation development
– Model – to reflect ACA requirements, state options
– Uniform enrollment form
• Anti-Fraud (immediate)
– Uniform standards and form for reporting fraud and abuse
• Interstate Compact standards (by 1/13 for 1/16 implementation)

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Healthcare Reform and the Role of the States

NAIC, cont. – Immediate Reforms

• NAIC models, model language for states (immediate)
– External Review
– Internal Appeals – Grievances, UR
– Dependent coverage to Age 26
– No Pre-ex for children <19
– Rescission restrictions
– Lifetime, annual limit restrictions
– Preventive Services
– Choice of provider

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Healthcare Reform and the Role of the States

Consortium, NGA Center for Best Practices

• Facilitator for state networking
– Serving as information clearinghouse
– Identifying best practices, options
– Providing feedback to federal agencies

• State funding opportunities – Grant application process

– Consumer assistance, ombudsman programs
– Temporary high risk pool program
– Rate review process
– Exchange planning
– HIT for developing new, adapting existing technology

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Healthcare Reform and the Role of the States

State Legislators – Implement state reform strategy

• NCSL, CSG, ALEC – information resources for legislators
• NCOIL – model legislation
• Summer-Fall 2010 – educate through webinars, national
conferences
• Challenges of change – elections, litigation
All states in session 2011
• Will conform immediate reforms to retain state oversight
• Will put wheels in motion toward Exchanges, other 2014 activities

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Healthcare Reform and the Role of the States

HHS – looking to state officials, local insurance market

experts for guidance
• Step up to be part of the process!
Consult state officials for information, opportunity to
shape healthcare reform
www.naic.org www.nga.org
www.ncsl.org www.ncoil.org
www.csg.org www.nashp.org

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