Convergence

Today. Tomorrow. Together.

The Affordable Care Act:

What does it mean to your business?

Deborah WilkinsonVP Health Plan Options, URL Insurance Group

Sarah Lockwood ChurchPartner, Saul Ewing LLC

Dr. Paul KaplanSr. VP of Provider Strategy & Integration,

Highmark

The Employer’s Changing Role

Deb Wilkinson

VP Health Plan Options

November 6th 2014

Notes: Survey of 583 Organizations w a collective $103billion in total 2012 health care expenditures.Source: Towers Watson/NBGH

Confidence among employers that they will be offering health care benefits a decade from now

What is Your Strategy?

Group Coverage

• Non-ACA Grandmothered Plans

• SHOP Plans = Access Small Biz Tax Credit

• ACA Option (Non-SHOP)

• Self-Funded

Individual Coverage

• Sole-Prop?

• Individual or Family

• Dissolving Group Coverage

- Group vs. Individual

- Disadvantages & Challenges

Defined Contribution vs. Defined Benefit

• Fixed Budget for Employees & Employers

• Outlets for Coverage Options

• Hybrid Approach

Wellness Programs

• Bending the Cost Curve?

• Tobacco vs. Non-Tobacco

• Absenteeism = Lost Productivity

What IS your strategy?

Thank you for your time!

Questions?

The Employers Changing Role

Paul Kaplan MD MBA

Senior VP Provider Strategy

November 6, 2014

The Employers Changing Role … partnering with a Health Plan to impact:

Cost

Quality

Experience

15

16Proprietary & Confidential

Provider Relationships

Product Innovations

Key Considerations

Technology & Capabilities

Provider Relationships

17

Cost & Quality : The Highmark’s Pay-for-Value (P4V) Program is a Differentiator in the Marketplace

18

Spectrum of Reimbursement Contracting Opportunities

19

More than 60% of members in Central Pennsylvania now receive care within a Pay-for-Value program

Highmark’s P4V programs are making an impact

West Virginia Quality Blue PCMH

• 92 practices representing 30 PCMH entities

• 383 practitioners• 36,437 attributed members

Central Pennsylvania Quality Blue PCMH

• 334 practices representing 57 PCMH entities

• 2,002 practitioners• 335,402 attributed

members

Western Pennsylvania Quality Blue ACA/PCMH

• 438 practices representing 68 PCMH and 77 ACA entities

• 1,538 practitioners• 548,540 attributed members

More than 900 practices

More than 4,000 practitioners

More than 1,000,000 members membersNote: figures are current as of September 30, 2014,

Delaware PCMH Pilot• 38 practices • 113 practitioners• 35,320 attributed members

More than 69% of members in Western Pennsylvania now receive care within a Pay-for-Value program

20

Product Innovation

21

PROPRIETARY & CONFIDENTIAL

Product InnovationReference-Based Benefit (RBB) - a benefit feature that allows the plan sponsor to set a ‘reference cost’ on selected medical procedures

PLAN SPONSOR:• Potential to reduce costs when employees select lower cost/ high

value providers; or partial cost shift to employees who elect to utilize higher cost providers

• May encourage providers to become more competitive (cost & quality) resulting in lower ‘reference cost’ on selected medical procedures

22

Community Blue Premier Flex: A tiered benefit design that helps groups and their employees control costs.

• The enhanced-value tier includes low cost providers and the standard-value

tier includes higher cost providers.

• There is also an out-of-network tier which tends to be more expensive.

• This tiered benefit design maintains choice since members continue to have

access to all network care providers, even at the standard value level.

• Members can choose high-quality providers from any tier but the enhanced-

value tier will offer the lowest cost.

Technology and Innovation

23

Experience … partner with a health plan that provides

24

• Administrative flexibility with National access

• Clear understanding of accountable care act

• More productive through wellness programs

• Data/reporting capabilities

Questions

25

THE AFFORDABLE CARE ACT

What does it mean to your business?

PNA Annual ConventionNovember 6, 2014

Sarah (Sally) Lockwood Church

Disclaimer: The content of presentation materials has been prepared by Saul Ewing LLP for information purposes only.  The provision and receipt of the information in these presentation materials should not be considered legal advice, does not create a lawyer-client relationship, and should not be acted on without seeking professional counsel who have been informed of the specific facts.  Should you wish to contact a presenter to obtain more information regarding your company's particular circumstances, it may be necessary to enter into an attorney/client relationship.

27

Procrastination, Problems & Politics

• Constitutional Challenge to ACA• Presidential Election• Attempts to repeal, defund or

modify• Enforcement delays • Other Litigation:

• Contraceptive Coverage• Subsidies in Federally-facilitated

Exchanges28

Procrastination, Problems & Politics

• Impact of Mid-Term Elections. • Repeal of ACA – unlikely; but on the

list of potential changes: the definition of ACA full-time employee may change.

• What should employers do? Continue good faith compliance

efforts.Work with industry groups.

29

What is the Employer Mandate?

In a Nutshell: Generally, beginning in 2015, in order to avoid the risk of penalties called “assessable payments,” each separate member of an “applicable large employer” (as determined on a benefits controlled group basis) must “offer” “minimum essential coverage” that provides both “minimum value” and is “affordable” to its “ACA full-time employees” and their “dependents.”

30

What is the “pay” in pay or play?

• “No Offer” or “A” Penalty - $2,000 x all ACA full-time employees (minus 30, minus 80 for 2015 – allocated pro-rata among all ALE members) if minimum essential coverage is not offered to substantially all (95%/5, 70% for 2015) ACA full-time employees (and dependents), and just one ACA full-time employee gets subsidized Marketplace Coverage.

• “Inadequate Coverage” or “B” Penalty – Coverage is offered to substantially all ACA full-time employees (and dependents) but it either does not provide minimum value or is not affordable - $3,000 x each ACA full-time employees who get subsidized Marketplace Coverage.

• Both penalties are non-deductible• Penalties are assessed for each calendar month coverage is not

offered• Penalties apply separately to each member of the ALE’s

controlled group (ALE Member)31

Are you subject to pay or play rules?

• Are you an ALE? OR – How to Count to 50! • 50 or more ACA full-time (at least 30 hours of

service a week) and/or full-time equivalent (FTE) employees

• Based on employees and hours of service during the preceding calendar year (for 2015 – look at 2014).

• Add all hours of service of part-time employees (up to 120 per employee a month) and then divide by 120 - FTEs

• Looks at your organization’s benefits “controlled group”- same as for testing retirement plans

32

When do you have to comply?

• Generally, 2015, but special transition rule MAY be available for ALEs that have 50 or more full-time/full-time equivalent employees, but less than 100.

• Non-calendar year transition rules MAY apply to avoid penalties being assessed for months prior to beginning of 2015 non-calendar year plan year.

• Transition rules require satisfaction of a number of requirements.

33

• An ACA full-time employee is a common law employee who is credited with an average of at least 30 hours of service a week or 130 hours of service per month.

• NOTE: All hours of service paid or to which an employee is entitled to be paid (vacation, paid leaves, etc.) have to be counted, also unpaid hours for FMLA, Military Leave and jury duty.

34

Who are your "ACA full-time employees?

How do I determine who is full-time?

• Two Methods: Monthly and Look-back • Monthly: ACA full-time status is determined by

looking each month at an employee’s hours of service. (Cannot average hours).

• Look-back: ACA full-time status is determined for a future time period (called a “stability period”) by counting average hours of service in a prior period (“measurement period”) – part-time, variable hour and seasonal employees.

35

Who are your employee’s dependents?

• Children under age 26 (sons, adopted sons, daughters, adopted daughters – does not include stepchildren or foster children)

• Does not include spouses.• Transition rule MAY delay offering

dependent coverage for 2015 plan year, if employer taking steps to provide coverage in 2016.

36

What do you have to offer?

• ALE members required to offer “minimum essential coverage” to substantially all ACA full-time employees or risk assessable payments (“A” Penalty)

• “Minimum essential coverage” or MEC means (at least until further guidance) any health care coverage – but not vision or dental – “Skinny” plans.

• “Minimum value” - plan’s share of total allowed cost of benefits is at least 60% (“B” Penalty)

• If you have never offered coverage, what coverage is available and at what cost?

37

What is “affordable coverage?”• Coverage is “affordable” if the employee pays

no more than 9.56% of household income for employee-only coverage under the lowest cost minimum value plan offered.

• Three safe harbor rules for determining affordability.• W-2 (Box 1) – Year-End Determination• Rate of Pay – 9.56% x 130 hours x hourly rate or

9.56% x monthly salary• Federal Poverty Level for a single person (based upon

current FPL of $11,670) – 9.56% x $11,670 = $1,115.65 divided by 12 = $92.97 per month – can use FPL in effect up to six months before beginning of plan year.

38

Avoiding a “pay or play” penalty• You are not required to offer group health coverage to

any employee, but if you “play” – only have to offer coverage to employees who are ACA full-time employees.

• No penalty unless an ACA full-time employee receives a premium tax credit or cost-sharing reduction for Health Insurance Marketplace (Exchange) coverage.

• Individuals will not qualify for a premium tax credit or cost-sharing reduction unless their household income equals 100% to 400% of the federal poverty line

• Penalties do not apply for ACA full-time employees who qualify for Medicaid.

39

Who should be on your ACA team?

• Your ACA compliance game plan requires input from individuals with decision-making authority from:

Finance, Human Resources, Benefits, Tax, Legal, Payroll and (if applicable) Labor Relations

40

Your ACA compliance game plan• Recordkeeping will be a key element to

successfully navigating employer mandate.• Prepare for new employer reporting and

employee statement requirements. • Be able to substantiate whether or not an

employee was ACA full-time and if there was an offer of coverage and why coverage was not offered during certain periods of time.

• Be prepared to adjust to changes in the law and additional guidance.

41

Questions?

42

BaltimoreLockwood Place • 500 East Pratt Street, Suite 900 • Baltimore, MD 21202-3171 • (tel) 410.332.8600 • (fax) 410.332.8862

Boston131 Dartmouth Street, Suite 501 • Boston, MA 02116 • (tel) 617.723.3300 • (fax) 617.723.4151

HarrisburgPenn National Insurance Plaza • 2 North Second Street, 7th Floor • Harrisburg, PA 17101-1619 • (tel) 717.257.7500 • (fax) 717.238.4622

New York245 Park Avenue, 24th Floor • New York, NY 10167 • (tel) 212.672.1995 • (fax) 212.372.8798

NewarkOne Riverfront Plaza • Newark, NJ 07102 • (tel) 973.286.6700 • (fax) 973.286.6800

PhiladelphiaCentre Square West • 1500 Market Street, 38th Floor • Philadelphia, PA 19102-2186 • (tel) 215.972.7777 • (fax) 215.972.7725

Princeton750 College Road East, Suite 100 • Princeton, NJ 08540-6617 • (tel) 609.452.3100 • (fax) 609.452.3122

Washington1919 Pennsylvania Avenue, N.W. Suite 550 • Washington, DC 20006-3434 (tel) 202.333.8800 • (fax) 202.337.6065

Wilmington222 Delaware Avenue • Suite 1200 P.O. Box 1266 • Wilmington, DE 19899• (tel) 302.421.6800 • (fax) 302.421.6813

Chesterbrook1200 Liberty Ridge Drive, Suite 200 • Wayne, PA 19087-5569 • (tel) 610.251.5050 • (fax) 610.651.5930

PittsburghOne PPG Place • 30th Floor • Pittsburgh, PA 15222 • (tel) 412.209.2500 • (fax) 412.209.2570

43