TN MS MA RI ME GA LA FL AK HI State-based Marketplace State Partnership Marketplace Federally-facilitated Marketplace State Exchange, but not certified by HHS No Exchange The document discusses how the Affordable Care Act aims to address the issues of uninsured Americans and rising healthcare costs. It does this through expanding Medicaid eligibility, providing subsidies for private insurance, creating state-based health insurance exchanges, and mandating coverage. It provides details on eligibility for subsidies and Medicaid expansion. It also outlines the penalties for those who remain uninsured and timeline for implementation of key provisions.

1. How does Health Care
Reform Affect You?
Scott Smith, CPA/PFS, CFP®

2. Agenda
• Why health care reform?
• Timeline for implementation
• Focus on insurance changes
–
–
–
–
–
–
Eligibility
Coverage
Subsidy
Penalty
Marketplaces/Exchanges
Effect on employees/organizations
• Questions?

3. Why Health Care Reform?
• Our medical costs per capita are
the highest in the world
– Almost double that of other
developed nations
– Many issues drive higher costs
• Overall health nothing to brag
about
– Can’t argue we pay the most
because we get the best results

4. Why Health Care Reform?
• Cost drivers of high medical costs
– We pay providers in ways that reward
performing more procedures, tests, etc.
rather than being efficient
– As a country we’re growing older,
sicker, and fatter
– We want new drugs, technologies,
services and procedures
– Administrative complexity adds costs

5. Per Capita Total Current Health Care Expenditures, U.S. and
Selected Countries, 2010
^ 2009 data
Notes: Amounts in U.S.$ Purchasing Power Parity, see www.oecd.org/std/ppp; includes only countries over $2,500. OECD defines Total Current
Expenditures on Health as the sum of expenditures on personal health care, preventive and public health services, and health administration and
health insurance; it excludes investment.
Source: Organisation for Economic Co-operation and Development. “OECD Health Data: Health Expenditures and Financing”, OECD Health Statistics
Data from internet subscription database. http://www.oecd-library.org, data accessed on 08/23/12.

6. Why Health Care Reform?
• Health care costs are rising faster
than our economy
– Not only do we pay a lot, but costs
are rising
• More and more of a burden for
households

7. National Health Expenditures per Capita,
1960-2010
NHE as a Share of GDP
5.2%
7.2%
9.2% 12.5% 13.8% 14.5% 15.4% 15.9% 16.0% 16.1% 16.2% 16.4% 16.8% 17.9% 17.9%
Notes: According to CMS, population is the U.S. Bureau of the Census resident-based population, less armed forces overseas and population of outlying
areas, plus the net undercount.
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at
http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; NHE summary including share of GDP, CY 1960-2010; file nhegdp10.zip).

8. One Quarter Of Public Reports Having Problems
Paying Medical Bills, Majority Have Delayed Care Due
To Cost
In the past 12 months, did you or another family
member in your household have any problems
paying medical bills, or not?
Percent who say they or another family member
living in their household have done each of the
following in the past 12 months because of the cost:
Relied on home remedies or
over-the-counter drugs instead of
going to see a doctor
38%
Skipped dental care or checkups
No, did not
have
problems
paying
medical
bills
73%
Yes, had
problems
paying
medical
bills
26%
35%
Put off or postponed getting
health care you needed
29%
Skipped a recommended medical
test or treatment
Not filled a prescription for a
medicine
Dk/Ref.
1%
25%
24%
Cut pills in half or skipped doses
of medicine
Had problems getting mental
health care
Yes to any of the above
SOURCE: Kaiser Family Foundation Health Tracking Poll (conducted May 8-14, 2012)
16%
8%
58%

9. Why Health Care Reform?
• Majority of the costs are found
with half of the population
– Primarily based on age and/or
those with chronic conditions
• Older, sicker, fatter problem
– Uninsured that seek emergency
treatment after procrastinating care
also contribute

10. Percent of Total Health Care Spending
Concentration of Health Care Spending in
the U.S. Population, 2009
(≥$51,951) (≥$17,402) (≥$9,570)
(≥$6,343)
(≥$4,586)
(≥$851)
(<$851)
Note: Dollar amounts in parentheses are the annual expenses per person in each percentile. Population is the civilian noninstitutionalized
population, including those without any health care spending. Health care spending is total payments from all sources (including direct payments from
individuals and families, private insurance, Medicare, Medicaid, and miscellaneous other sources) to hospitals, physicians, other providers (including
dental care), and pharmacies; health insurance premiums are not included.
Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and
Quality, Medical Expenditure Panel Survey (MEPS), Household Component, 2009.

11. Distribution of Average Spending Per
Person, 2009
Average Spending
Per Person
Age (in years)
<5
$2,468
5-17
1,695
18-24
1,834
25-44
2,739
45-64
5,511
65 or Older
9,744
Sex
Male
$3,559
Female
4,635
Note: Population is the civilian noninstitutionalized population, including those without any health care spending. Health care spending is
total payments from all sources (including direct payments from individuals and families, private insurance, Medicare, Medicaid, and
miscellaneous other sources) to hospitals, physicians, other providers (including dental care), and pharmacies; health insurance
premiums are not included.
Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare
Research and Quality, Medical Expenditure Panel Survey (MEPS), 2009.

12. Health Care Coverage and Personal Health Care
Expenditures in the U.S., 2011
Health Spending
Health Coverage
Consumer
Out-ofPocket
13%
Uninsured
16%
Medicaid
16%
Medicaid
16%
EmployerSponsored
Insurance
49%
Private
Health
Insurance
35%
Medicare
13%
Medicare
24%
Other
Public
1%
Private
Non-Group
5%
Total = 307.9 million
Other
Private
Funds
8%
Other
Governme
nt
Programs
4%
Total = $2.3 trillion
NOTE: Health spending total does not include administrative spending.
SOURCE: Health insurance coverage: KCMU/Urban Institute analysis of 2011 data from 2012 ASEC Supplement to the
CPS. Health expenditures: KFF calculations using 2011 NHE data from CMS, Office of the Actuary

13. Why Health Care Reform?
• Purpose of the Affordable Care
Act was to address primarily:
– Uninsured
– Preventative care
– Small changes to the fee-for-service
model that encourages volume of
procedures/services over the
quality of care
• Primarily through Medicare

14. Timeline
• Passed in March of 2010 after
extremely contentious debate
Vote by Senate
Vote by House

15. Timeline
• Supreme Court upheld most of the
law in June 2012 as a type of tax
– Did away with requirement for states
to accept Medicaid expansion or forfeit
all Medicaid funds
• Timeline for implementation very
gradual
– Some pieces of the law are not fully
functional until 2020
– Components most obvious in everyday
lives of most Americans happen in
2014

18. Focus on Insurance Changes
• In 2012, 47.3 million people were
uninsured (roughly 16% of the
population)
– Various reasons
Disability
Unemployment
Pre-existing conditions
Self-employed or work for small
businesses
• Young adults
•
•
•
•

19. Focus on Insurance Changes
• Almost half of Americans have
insurance through work
• 30% have coverage through
Medicare, Medicaid or other
public programs
• Only 5% have private insurance
not through an employer

20. Affordable Care Act
Solution
• Make large organizations cover
health insurance
• Expand Medicaid to help lowincome households
• Provide assistance for middleclass households through tax
credits (subsidies)

21. Affordable Care Act
Solution
• Define low-income and middle
class using the federal poverty
level
• Poverty level is the minimum
amount of income that a family
needs for
food, clothing, transportation, she
lter and other necessities.

22. Poverty Level
Percent Of The National Poverty Level
Household
Size
1
2
3
4
5
6
7
8
100%
133%
150%
200%
250%
300%
400%
$11,490
15,510
19,530
23,550
27,570
31,590
35,610
39,630
15,282
20,628
25,975
31,322
36,668
42,015
47,361
52,708
17,235
23,265
29,295
35,325
41,355
47,385
53,415
59,445
22,980
31,020
39,060
47,100
55,140
63,180
71,200
79,260
28,725
38,775
48,825
58,875
68,925
78,975
89,025
99,075
34,470
46,530
58,590
70,650
82,710
94,770
106,830
118,890
45,960
62,040
78,120
94,200
110,280
126,360
142,440
158,520
For each
additional
person, add
4,020
5,347
6,030
8,040
10,050
12,060
16,080
Maximum
Premium as
a percent of
income
2.0%
3.0%
4.0%
6.3%
8.1%
9.5%
9.5%

23. Focus on Insurance Changes
• How will the government help
directly with health insurance
costs?
Without Medicaid Expansion
0-27% of poverty
Medicaid
28-99% of poverty
Unsubsidized
100-400% of poverty
Exchange
>400% of poverty
Unsubsidized

24. Focus on Insurance
Exchanges
• Idaho did not expand Medicaid
– One of 25 states
– Idaho Medicaid eligibility as low as
27% of poverty level (roughly $3K)
• For adults, not kids or pregnant women
• Coverage gap estimated at 77,000
people in Idaho (5 million nationwide)

25. Eligibility
• Insurance companies cannot vary
premiums or deny coverage based
on health status
• No denial for preexisting conditions
• The only factors affecting cost will
be:
–
–
–
–
–
Age
Policy type
Geographic location
Tobacco Use
Income

26. Coverage
• “Essential Health Benefits”
– Typically expanded coverage vs. existing
plans (i.e. Maternity, Mental Health will
be standard)
– If plans don’t meet these
minimums, they’re cancelled – notices
already sent
• Focus on preventative care
– $0 or reduced copays for preventive
services
• No lifetime maximums
• Still wide variation in benefits, READ
THE PLAN DETAILS

27. Coverage
• Plans will be grouped into
“precious metal” categories to help
make comparison shopping easier.
– Based on the percentage of healthcare
expenses each plan will cover:
•
•
•
•
Bronze, 60%
Silver, 70%
Gold, 80%
Platinum, 90%
– 146 plans in Idaho

28. Subsidy
• Eligibility
– Not eligible if you’re covered by an
employer plan (60% of actuarial cost
“Bronze” equivalent, AND your
responsibility is less than 9.5% of your
income)
– Not eligible if you’re covered by public
plans (Medicaid, Medicare)
• Even though Idaho didn’t elect to pick up
the addition Medicare coverage
– Income has to be between 100% and
400% the Federal poverty level for
your family size

29. Subsidy, contd.
Percent Of The National Poverty Level
Household
Size
1
2
3
4
5
6
7
8
100%
133%
150%
200%
250%
300%
400%
$11,490
15,510
19,530
23,550
27,570
31,590
35,610
39,630
15,282
20,628
25,975
31,322
36,668
42,015
47,361
52,708
17,235
23,265
29,295
35,325
41,355
47,385
53,415
59,445
22,980
31,020
39,060
47,100
55,140
63,180
71,200
79,260
28,725
38,775
48,825
58,875
68,925
78,975
89,025
99,075
34,470
46,530
58,590
70,650
82,710
94,770
106,830
118,890
45,960
62,040
78,120
94,200
110,280
126,360
142,440
158,520
For each
additional
person, add
4,020
5,347
6,030
8,040
10,050
12,060
16,080
Maximum
Premium as
a percent of
income
2.0%
3.0%
4.0%
6.3%
8.1%
9.5%
9.5%

30. Subsidy, contd.
• How much?
– Based on the premium for the
second lowest cost silver plan (70%
actuarial value) in the exchange
– The amount of the tax credit varies
with income - the premium a person
would have to pay for the second
lowest cost silver plan would not
exceed a specified percentage of
their income.

31. Subsidy Example 1
• Household income = $80,000
(290% of Federal Poverty Level)
– Family Size = 5 (2 parents, 3 kids)
– Estimated silver plan cost =
$9,875.04/year or $822.92/month
– Estimated family responsibility =
$7,368/year or $614/month
– Subsidy = $2,507.04/year or
$208.92/month

32. Subsidy Example 2
• Household income = $55,000
(199% of Federal Poverty Line)
– Family Size = 5 (2 parents, 3 kids)
– Estimated silver plan cost =
$9,875.04/year or $822.92/month
– Estimated family responsibility =
$3,454/year or $287.83/month
– Subsidy = $6,421.04/year or
$535.09/month

33. Subsidy Example Review
• Both families had the same plan with
the same base cost
• The government subsidy for the family
making $80,000 was
$2,507/year, $208/month
– The family’s responsibility was
$614/month
• The government subsidy for the family
making $55,000 was
$6,421/year, $535/month
– The family’s responsibility was
$287/month

34. Subsidy, contd.
• Tax credit can be taken as you apply
for insurance on the exchange
– Subsidy is paid directly to the
insurance company
– Based on estimated income for 2014
– On your 2014 return you make up the
difference
• OR the credit is refundable when
you file your 2014 tax return

35. Penalties
• For individuals without coverage
– 2014 it will be the higher of:
• 1% of your income
• OR, $95 per adult and $47.50 per child
– Up to a total of $285 per family
– 2015 jumps to higher of:
• 2% of your income
• OR $325
– 2016 jumps to higher of:
• 2.5% of your income
• OR $695

36. Health Insurance
Marketplaces/Exchanges
• Healthcare.gov, website where you can:
– Estimate your subsidy (tax credits)
– See available insurance plans and enroll
• Open enrollment began October 1
• In Idaho, plans are offered by:
–
–
–
–
Blue Cross
BridgeSpan
PacificSource
SelectHealth
• Plan offerings are not uniform throughout
the state
– Plans and coverage available depend on zip
code

37. States Health Insurance Marketplace Decisions, May 10, 2013
VT
WA
ND
MT
NH
MN
OR
WY
CA
AZ
CO
MI
PA
IA
NE
UT*
NY
WI
SD
ID
NV
IL
KS
OK
NM
TX
IN
OH
WV
MO
KY
DC
SC
AR
AL
VA
CT
NJ
DE
MD
NC
TN
MS
AK
ME
GA
LA
FL
HI
State-based Marketplace (16 states and DC)
Partnership Marketplace (7 states)
Federally-facilitated Marketplace (27 states)
* In Utah, the federal government will run the marketplace for individuals while the state will run the small
business, or SHOP, marketplace.
MA
RI

38. Health Insurance
Marketplaces
• Marketplaces still having problems
– Idaho’s exchange not up and running
yet, opted for Federal government-run site
Healthcare.gov
• For the entire month of October
– 106,185 signed up nationwide
• Roughly 27,000 through healthcare.gov (35 states)
• Rest through state-run exchanges
– Only 338 in Idaho
• Goal is to have the website running
November 30 and 800,000 enrolled
• CBO projected 7 million would enroll by
March 31

39. Health Insurance
Marketplaces
• Alternatives
• For information:
– YourHealthIdaho.org
• Can find plans and estimated rates
without filling out an application
• But you can’t apply here
• Paper or telephone applications
possible
– But you can’t comparison shop

40. Health Insurance
Marketplaces/Exchanges
• Not forced to buy health
insurance through a marketplace
• BUT
– Individuals are only eligible for the
subsidy (tax credits) if they buy
through the marketplace
– Businesses are only eligible for the
tax credit (under 25 employees) if
they buy through the marketplace

41. Effect of ACA on
Organizations
• Roughly Half of Americans have
insurance through work
• Average family premium cost in 2013 =
$16,351
– $11,786 born by the employer (72%)
– $4,565 paid by the employee (28%)
• Comparison with 10 years ago
– Overall cost jumped 80%
– Employee burden jumped 89%
– Coverage decreased
• Deductible went up by nearly 50%
• Soup of co-pays, additional deductibles

42. Average Annual Worker and Employer
Contributions to Premiums and Total Premiums
for Family Coverage
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2002-2012.

43. Distribution of Annual Premiums for Covered Workers
with Family Coverage, 2012
Percentage of Covered Workers:
50%
40%
Average: $15,745
30%
21%
19%
20%
19%
13%
9%
10%
6%
6%
$20,000$21,999
$22,000
or More
4%
2%
0%
Less Than
$8,000
$8,000 $9,999
$10,000$11,999
$12,000$13,999
$14,000$15,999
SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2012.
$16,000$17,999
$18,000$19,999

44. Effect on Organizations
• Costs projected for 2014?
– Insurance companies aren’t broadcasting
group rates
– Anecdotal data support significant
increases in premiums
• Society of Actuaries projected the jump
in claims costs for 2014
– Cost of claims in Idaho projected to jump
62% (uninsured enter the insurance pool)
• Insurance companies will not eat those
costs and stay in business

45. Effect on Organizations
• Insurance costs will become
unaffordable for some
organizations

46. Small Organizations
• If under 50 full-time employees don’t have to
offer insurance – NO penalties
• Disincentive to offer insurance to employees
– Employees could have the same insurance for less
with the subsidies
– Employees on their own have greater choice of
providers, rather than 1 selected by employer.
– Management will question if their competitors are
pushing insurance costs to the government, and
investing the difference in other initiatives.
– There is a tax credit available for those businesses
with under 25 employees
• up to 50% of the costs of insurance
• Only 4% of eligible businesses take the credit because it
costs more to calculate than the credit returns (per the
GAO).

47. Small Organizations, contd.
• Incentives to offer insurance to
employees
– Keep quality employees
– Large credit if the business is
eligible, willing to calculate
• Possible trends
– Cut health insurance and offer loads of
other before-tax benefits to compliment
the subsidized health insurance they get
on the exchange
– Gives them a full suite of benefits to
compete with larger employers

48. Big Organizations
• If you have more than 50 “full-time
equivalent” employees
– Penalties if any of your employees get a
subsidy
• Exception: if you offer affordable qualifying
health insurance to full-time employees
• Don’t have to offer insurance to part-time
employees
• Full-time = 30 hours
• No tax credits available for larger
employers
• Can’t simply divide businesses to get under
50 employees
• Can’t lease your employees from a PEO

49. Big Organizations, contd.
• Possible trends
– Reduction in hours to get employees
under 30 hours
• Especially in fast-food, hospitality
industries
– Reduction in workforce to a lean
management team
• Outsource the rest to other companies
– Reduction of other non-health
benefits to pay for insurance

50. Effect on Individuals
• Insurance cost is no longer dependent on
health, but on income
– Winners
• Those with pre-existing/chronic conditions that
made insurance impossible in the past
• Those that were approaching lifetime limits (think
cancer patients with huge lifetime treatment costs)
• Lower income households can receive large
subsidies to make insurance very attractive
– Losers
• Young and the healthy now have to get insurance
and pay higher rates for the previously
uninsurable
• Higher income households receive no subsidies
and pay higher tax rates to fund coverage for
everyone else

51. Effect on Individuals, contd.
• Medicaid largely unaffected
• Those in the Medicaid coverage gap
lose big
– Because Idaho and other states chose
not to expand coverage
– Those in the gap receive no subsidy
and could still be subject to a penalty if
they don’t obtain insurance
• Medicare largely unaffected
– Most benefits are found in preventative
care

52. Effect on Individuals, contd.
• Employees of large organizations will
typically keep health insurance
– Some may see reduced hours to make them
part-time
– Others could see a reduction in non-insurance
benefits to pay for increased insurance costs
• Employees of small organizations could
lose health insurance in the long-term
– May be a better deal for them to get insurance
on the exchange with subsidy help
– Could see benefits they never had as
employers cut insurance but try to keep talent
by offering other perks

53. Recent Developments
• November 14
– Due to political pressure, Pres. Obama says that
insurance companies are allowed to extend policies
customers have now
• These include cancelled policies that do not meet the
minimum essential benefits rules
• Policy extensions depend on insurance commissioners
in every state ignoring the law’s minimum standards
and allowing insurance companies to offer the plans
– Some states have already said they won’t allow the nonqualifying policies to be sold
– Insurance companies call the reversal unworkable
• This comes a few weeks before the new year when the
law has been in effect for over 3 years
• They believe healthy people will simply renew their
cheaper existing policies while the previously
uninsured will sign up for the exchange plans, driving
exchange plan costs up

54. QUESTIONS?
Thank you.

55. More Information
•
•
•
•
•
•
•
Health costs in the U.S.
– http://www.pbs.org/newshour/rundown/2012/10/health-costs-howthe-us-compares-with-other-countries.html
Overview of health reform
– http://kff.org/health-reform/
Federal exchange
– https://www.healthcare.gov/
Idaho exchange (eventually) and other Idaho-specific health reform FAQs
– http://www.yourhealthidaho.org/
Idaho exchange plans and rates
– http://www.yourhealthidaho.org/wp-content/uploads/2013/10/YHIPlan-Information-10_29_2013e.pdf
Idaho calculator for subsidy
– http://www.yourhealthidaho.org/additional-resources/premiumassistance-estimator/#subsidy_results
Society of Actuaries study: Cost of the Future Newly Insured under the
Affordable Care Act (ACA)
– http://cdn-files.soa.org/web/research-cost-aca-report.pdf