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.

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May 20 AAHSA Town Hall: Health Reform and Employers

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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