May 20 AAHSA Town Hall: Health Reform and Employers

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Presentation to be used in conjunction with AAHSA's May 20, 2010, Health Reform Town Hall on Employer Provisions.

Presentation to be used in conjunction with AAHSA's May 20, 2010, Health Reform Town Hall on Employer Provisions.

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  • 1. Health Care Reform Town Hall Update What Does It Mean For You As An Employer? Thursday, May 20 2:00 – 3:00 p.m. ET 1
  • 2. Speakers Barbara Gay, Director of Advocacy Information, AAHSA Dave Sanders, National Tax & Erisa Practice, Aon Consulting Thora Johnson, Partner, Employee Benefits and Executive Compensation, Venable, LLP 2
  • 3. Structure of Today’s Program Introduction: Barbara Gay Key Employer Provisions Overview: Dave Sanders Timeline Implementation: Thora Johnson Questions and Closing: Barbara Gay 3
  • 4. Implementation of Health Reform Implementation Challenges  Complex and challenging law to implement  2,400 pages plus 153 page reconciliation bill  HHS (Health and Human Services) on point for implementation  Date of enactment was 3/23/10, with 6 month effective date for some provisions (9/23/2010)  Plans in existence on 3/23/10 are exempt from many rules, if remain unchanged ("grandfathered" plan) 4
  • 5. Key Employer Issues – Market Reforms Dependent Coverage Annual and Lifetime Maximums  Coverage of adult children up to  No lifetime maximums permitted age 26, regardless of marital or for overall benefits (annual/ student status lifetime limits on specific benefits permitted) – If not eligible for other group plan (this condition expires 12/31/13) – Effective 6 months after – Applies even if the child is not a enactment (1/1/11 for CY plans) tax dependent  Complete elimination of annual  Effective 6 months after limits beginning January 1, 2014 enactment (1/1/11 for CY plans)  Restrictions on annual limits prior to 2014 TBD by regulation – Effective 6 months after enactment (1/1/11 for CY plans) 5
  • 6. Key Employer Issues – Market Reforms Pre-existing Conditions Exclusions Waiting Periods  Not permitted for children under  Waiting periods greater than 90 days age 19 are not permitted – Effective 6 months after  Effective 1/1/2014 enactment (1/1/11 for CY plans)  Not permitted for all plan enrollees – Effective 1/1/2014 Preventive Benefits  Must provide first dollar coverage for evidence based preventative care  Effective 6 months after enactment (1/1/11 for CY plans)  Grandfathered plans exempt 6
  • 7. Key Employer Issues – Impactful Provisions Free Rider Provision Employee Voucher  Applies to employees working 30+  Applies to employees working 30+ hours/week hours per week  Employer pays $3,000 for each  Employers would convert health EE with coverage <60% of coverage subsidy to cash for any allowed costs or if EE pays >9.5% employees who would pay of their household income for between 8% and 9.8% of their health coverage household income for health coverage and opts out of  Employers not offering health employer sponsored coverage for coverage pay $2,000 per EE coverage in an Exchange based  First 30 employees not included in plan calculation of assessment  Effective 1/1/2014  Effective 1/1/2014 7
  • 8. Key Employer Issues Auto Enrollment Health Accounts  Applies to new hires  OTC drugs no longer  Employees can opt-out reimbursable under FSA, HRA or HSA, unless prescribed by  Employer can choose plan for physician auto enrollment – Effective 1/1/2011  Effective 1/1/11 or issuance of regulations by DOL, if later  Penalty on withdrawal of HSA funds for non-medical expenses Employee Notification increased to 20%  Employers must notify employees – Effective 1/1/2011 at time of hire of the availability of  Annual contributions to health Exchanges and their potential FSAs limited to $2,500 annually eligibility for a subsidy – Effective 1/1/2013  Effective 3/1/2013 – Indexed to CPI as of 1/1/2014  No requirement to offer same coverage as Exchange plans 8
  • 9. Key Employer Issues W-2 Reporting Uniform Explanation of Coverage  Employers required to report the  Annual distribution of summary of “value” of health benefits provided benefits and coverage to each employee – Not to exceed 4 pages – Value defined as COBRA cost  Uniform Explanation is in addition  Effective 1/1/2011 to the SPD required by ERISA  Effective 3/23/2012 Transparency Requirements  Same HHS transparency Small Employer Tax Credit requirements as Exchange based plans  Employers with <25 employees  Claims payment policies and data earning < $50,000 each are eligible for tax credit  Information on cost sharing and payment for OON  Applies to employer contributions  Information on rating policies toward cost of health insurance  Effective 1/1/2014  Available for 2010-13 tax years 9
  • 10. Key Employer Issues Wellness Incentives Appeals Process  Employers permitted to increase  Employer plans must have HHS employee reward for participation in approved external review process wellness programs to 30% of total plan cost  Effective 1/1/2011 – HHS may increase to 50%  Grandfathered plans exempt  Effective 1/1/2014  Grandfathered plans exempt Cost Sharing Limitations Nondiscrimination  Out of pocket expense cannot exceed HSA related coverage  Insured plans are subject to same  Deductibles cannot exceed $2,000 nondiscrimination rules as self- single & $4,000 family as indexed funded plans  Effective 1/1/2011  Effective 1/1/2014  Grandfathered plans exempt  Grandfathered plans exempt 10
  • 11. Key Employer Issues CLASS Act  Voluntary federal LTC insurance program  EEs can purchase via payroll deductions  All auto enrolled EEs can opt-out  Lifetime benefit payments  5-year vesting period  Eligible for benefit if at least 2 ADLs for 90 days  Estimated revenue: $71 billion  Effective 1/1/2011 11
  • 12. Other Key Provisions 2010  Adoption assistance plan dollar limit increased from $12,170 to $13,170  Nursing mothers entitled to unpaid breaks and private lactation room 2014  Medicaid expansion to 133% of FPL  Individual Mandate begins with penalties in 2015  State-based Insurance Exchanges are operational 2017  Employer plans of any size can participate in Exchanges (state approval) 2018  High cost excise tax with revised thresholds of $10,200/individual and $27,500/family 12
  • 13. Other Key Provisions New Taxes on High Income Individuals  Adjusted gross income >$200k for individuals and >$250k for couples  Additional Medicare payroll tax on wages of 0.9% (employee-share only)  New surtax on investment income of 3.8%  New taxes on higher income individuals replaces lost revenue from delayed enactment of high cost plan excise tax (estimated $210 billion)  Effective 1/1/2013 13
  • 14. Impact on Post-Retirement Health Plans  Taxation of Medicare Part D retiree drug subsidy  Temporary reinsurance program for pre-Medicare retirees (at least age 55) – Re-insurance for claims covering 80% of costs between $15,000- $90,000 for pre-65 retirees – Only funded up to $5 billion  Cutbacks to Medicare FFS providers and Medicare Advantage plan funding  Closure of Medicare Part D “donut hole” 14
  • 15. Timeline for Next Steps Applies to Effective Grandfathered Date Action Items Plans? Now If you have 25 or fewer FTEs, work with your  Finance Department to evaluate whether you are eligible for the small employer tax credit and if so, apply for credit  If you offer retiree coverage and apply for the Medicare Part D subsidy, work with your Finance Department and auditors to evaluate the current impact on your financial statements under the FASB rules because the Medicare Part D subsidy will effectively become taxable in 2013 6/23/2010  If you offer retiree coverage for retirees ages 55-65 who are not eligible for Medicare, apply for the retiree reinsurance program, work with your Finance Department and obtain claims data from your insurance company/TPA and consider appropriate plan design changes 14
  • 16. Applies to Effective Grandfathered Date Action Items Plans? 1/1/2011  Evaluate what plans you are going to offer, and for determine whether any plans need to be calendar restructured year plans • Determine what grandfathered plans you have • Determine whether you have any dental and vision coverage that you want to convert to “stand-alone” plans so that they are exempt from the new rules on annual and lifetime limits • Determine whether you have any fully-insured plans that need to be restructured to comply with the nondiscrimination coverage rules, such as executive-only plans • CLASS Act (voluntary long-term care program) • New wellness programs (grants available for small employers). 15
  • 17. Applies to Effective Grandfathered Date Action Items Plans? 1/1/2011 Amend medical plan documents for  calendar year plans • Remove lifetime maximum limits for essential health benefits (and define what those are) • Revise annual limits for essential health benefits to reflect HHS standards • Remove pre-existing condition limits for children under age 19 • Limit right to rescind coverage only to fraud or intentional misrepresentation of a material fact • Expand dependent eligibility to cover adult children up to age 26 (applicable to grandfathered plans only if the dependents are not eligible for coverage under another employment-based plan) • Remove cost sharing, and implement first-dollar coverage, for preventive care (deductibles, copays, and co-insurance can't apply) • Permit designation of any participating primary care provider • Remove restrictions on emergency care • Update internal and external appeals procedures 16
  • 18. Applies to Effective Grandfathered Date Action Items Plans? 1/1/2011 for Amend medical plan documents (cont’d) calendar year plans • Any additional design changes that may be made to offset some of the anticipated increases in costs due to limits on annual and lifetime maximums, removal of pre-existing conditions, etc.  Amend medical FSA plan documents • Eliminate reimbursement for OTC drugs • If small employer, consider establishing “Simple” cafeteria plan  Provide notice of changes to participants (by 11/1/2010) • Give at least 60 days’ advance notice of changes (SMMs or new SPDs)  Negotiate insurance costs or stop-loss coverage, as applicable • Removal of annual, lifetime, and pre-existing condition limits, and cost sharing, the addition of other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully- insured plans and stop-loss 17
  • 19. Applies to Effective Grandfathered Date Action Items Plans? 1/1/2011 for  Update contracts with TPAs/claims calendar administrators year plans • Compliance with new internal and external claims processes ● Determine who will prepare HHS reporting on medical loss ratios ● Determine who will handle transparency disclosures to HHS (and public)  Implement auto enrollment (depending on effective date)  Work with payroll to implement changes ● Payroll withholding to implement any “Simple” employer cafeteria plan; voluntary CLASS Act plan ● W-2 reporting of employer-provided health coverage 18
  • 20. Applies to Effective Date Grandfathered Action Items Plans? 1/1/2011 for  Provide required notices to HHS calendar year plans ● Reporting to HHS on medical loss ratios • Reporting to HHS (and public) to comply with transparency provisions  Apply for available grants for small employer wellness program 1/1/2012 for  Amend medical plan documents calendar year plans • Coordination with Medicare  Provide new required (uniform) plan summaries  Update contracts with TPAs/claims administrators • Put systems in place to enable quality of care reports to HHS 19
  • 21. Applies to Effective Date Grandfathered Action Items Plans? 1/1/2013 for  Amend Medical FSA plan documents calendar year plans • Impose cap on contributions  Work with payroll to implement changes • Medical FSA caps • Increased Medicare taxes on earned income  Work with Finance • Taxation of Medicare Part D subsidy • Payment of per-participant fee (premium tax)  Provide required notices by 3/1/2013 to employees regarding availability of insurance exchanges 20
  • 22. Applies to Effective Grandfathered Date Action Items Plans? 1/1/2014 for  Evaluate what plans you are going to offer calendar year plans • Small employers have access to state insurance exchanges • Large employers are subject to play or pay penalties, opt-out penalties, and “free choice” vouchers • Permitted increase in employee reward to 30% for participation in wellness program  Amend medical plan documents • Grandfathered plans must expand dependent eligibility for adult children, even if eligible for other employer-provided coverage 21
  • 23. Applies to Effective Date Grandfathered Action Items Plans? 1/1/2014 for Amend medical plan documents calendar year (cont’d) plans • Remove waiting periods exceeding 90 days • Remove all annual limits on essential benefits • Remove all pre-existing conditions (can no longer impose on individuals age 19 and over) Mandated cost-sharing limits • Add coverage for clinical trials for cancer or life threatening diseases • Any additional design changes that may be made to offset some of the anticipated increases in costs due to changes on annual limits, removal of pre-existing conditions, and limits on cost-sharing  Negotiate insurance costs or stop-loss coverage, as applicable • Removal of annual and pre-existing condition limits, cost sharing and other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully-insured plan and stop-loss  Reporting to IRS on employer-provided coverage 22
  • 24. Applies to Effective Date Grandfathered Action Items Plans? 1/1/2014 for  Provide required notices regarding calendar year employer-provided coverage and plans wellness programs 1/1/2017 for  Evaluate what plans you are going to calendar year offer plans • Large employers have access to state insurance exchanges 1/1/2018 for  Evaluate what plans you are going to calendar year offer plans • Work with Finance and with insurance company or actuarial firm to determine if you offer a "Cadillac" plan subject to penalty tax, or whether you can restructure your plans to minimize or avoid penalty 24
  • 25. Questions? Questions will be addressed by emailing: townhall@aahsa.org. If we cannot get to your question we will respond via email or by providing information on the AAHSA Health Reform Hub located on aahsa.org: http://www.aahsa.org/healthreform 25
  • 26. Resources AAHSA Health Reform Information Hub www.aahsa.org/healthreform AON Consulting Microsite www.aon.com/healthcarereform Venable, LLP www.venable.com 26
  • 27. Speaker Contact Information Barbara Gay, Advocacy, AAHSA (202) 508-9489 bgay@aahsa.org Dave Sanders, National Tax & Erisa Practice, AON Consulting (410) 547-5989 dave.sanders@aon.com Thora Johnson, Employee Benefits and Executive Compensation, Venable, LLP (410) 244-7747 tajohnson@venable.com 27