Health Care Reform Presentation
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  • 1. Presented by Kristine Bingman Health Care Reform Update
  • 2. Vigilant a We counsel companies on employment issues across the Northwest and California. Learn more about Vigilant and the benefits of membership at: www.vigilantcounsel.org
  • 3. What We’ll Cover Today
    • The status of federal health care reform
    • What’s new
    • Upcoming mandates
    • Planning for the future
  • 4. Federal Health Care Reform
    • Patient Protection and Affordable Care Act (PPACA) – enacted March 23, 2010
    • PPACA amended by the Health Care and Education Reconciliation Act of 2010 – March 30, 2010
  • 5. Status of Federal Health Care Reform
    • Various federal legislative efforts to repeal entire law or certain sections
      • Republican-controlled House passed a repeal bill (January 2011)
      • Senate blocked the bill from going further
      • Many of the provisions that affect employers are still relatively popular—not likely to be repealed
    • Budget pressure to stall implementation
    • Much will depend on the outcome of U.S. Supreme Court decision and 2012 elections
  • 6. Status of Federal Health Care Reform
    • Two main types of court challenges:
      • Individual mandate to maintain health insurance (effective 2014)
      • State vs. federal control of health care; unfunded mandates
    • Appeals courts are split
    • U.S. Supreme Court has agreed to hear three of the five cases submitted for appeal
      • Federal power vs. state power
  • 7. Supreme Court – Issues Under Review
    • Is the suit barred by the Anti-Injunction Act?
    • Did Congress had the constitutional authority to impose the individual mandate? (Federal power vs. state power)
    • If no, then should the entire law be struck down?
    • Arguments to be heard in March, decision expected in late June
  • 8. Status of Federal Health Care Reform
    • Federal government is moving forward with implementation
    • 17 states have passed legislation opposing various parts of federal reform
    • Climate in Oregon is generally supportive of reform
      • Oregon Health Policy Board: established in 2009 to set policy for reform in Oregon
      • SB 99 established the legal framework for the Exchange
  • 9. Recent Updates
  • 10. Form W-2 Reporting Delayed
    • Employers must report “aggregate cost” of employer-sponsored health coverage on Form W-2
    • Employers who file <250 Forms W-2 for the preceding calendar year are exempt from reporting until further guidance is issued
    • First applies to coverage provided in 2012, as reported on 2012 Form W-2, issued by February 1, 2013
  • 11. CLASS Program Defunct
    • Federally-run long term care program
    • October 14: Health and Human Services (HHS) Secretary Sebelius recommends ending the program due to concerns over its financial sustainability
    • Would have gone into effect in October 2012
  • 12. Summary of Benefits and Coverage Delayed Delayed
    • Distribution deadline for Summary of Benefits and Coverage has been delayed indefinitely, pending issuance of final regulations
      • Final regulations will give lead time to ensure compliance
    • Previously scheduled to go into effect March 23, 2012
    • 60-day advance notice of material plan changes also delayed
  • 13. Summary of Benefits and Coverage
    • Plan and insurer must distribute a summary no more than 4 pages, 12-point type, containing:
      • Uniform definitions of insurance and medical terms
      • Description of coverage, exceptions, limitations on coverage, cost-sharing provisions, renewability and continuation provisions
      • Illustrations of common benefit scenarios
      • Contact numbers
  • 14. Summary of Benefits and Coverage
    • When to distribute?
      • As part of enrollment materials
      • Within 7 days of request for special enrollment
      • As soon as practicable upon request, but not later than 7 days following the request
      • Upon renewal:
        • As part of enrollment materials if written application is required
        • 30 days prior to the first day of coverage under the new plan year where renewal is automatic
  • 15. Employer Mandates: On the Horizon
  • 16. Nondiscrimination Rules for Insured Plans
    • Effective date: plan years beginning on or after Sept. 23, 2010
      • Delayed indefinitely pending guidance
      • Will become effective the first day of the first plan year beginning some time after guidance is issued
    • No discrimination in benefits or eligibility in favor of highly compensated individuals (HCIs):
      • 5 highest paid officers;
      • 10%+ shareholders; and
      • Highest paid 25% of employees
    • Applies to plans that are:
      • Insured; and
      • Not grandfathered
  • 17. Nondiscrimination Rules for Insured Plans
    • Rules will be “similar to” existing rules for self-insured plans
    • Penalty for noncompliance is serious: $100 excise tax per day, per individual discriminated against
    • Mandatory reporting of rule violations and excise taxes on IRS Form 8928
    • Red flags—differences in:
      • Eligibility terms
      • Premium contribution
      • Plan options
  • 18. Automatic Enrollment
    • Effective date: Delayed until regulatory guidance issued (sometime before 2014)
    • Employers with more than 200 full-time employees (30+ hours/week) must automatically enroll employees in employer-sponsored coverage
    • Employee may be required to pay any premium contribution and serve any waiting period
    • Employees must receive notice and opportunity to opt out
  • 19. State Insurance Exchanges
    • Online marketplace for individuals and businesses to shop, compare options and purchase private health insurance
    • Individuals and small employers (up to 100 employees) can purchase coverage from a state-run exchange in 2014
    • Large employers (100+ employees) can participate in 2017
    • Individuals can use federal tax credits to help pay for coverage
  • 20. Oregon Insurance Exchange - Governance
    • State corporation—not a state agency (similar to SAIF or OHSU)
    • Governed by nine-member citizen board
      • Appointed by Governor, confirmed by Senate
      • At least two consumer members, no more than two members with ties to insurance or health care industry
  • 21. Oregon Insurance Exchange - Duties
    • Screens, certifies plans as “qualified health plans” (QHPs)
    • Makes QHPs available to individuals and small businesses, beginning in 2014
      • 2014: 2-50 employees
      • 2016: up to 100 employees
    • Determines eligibility for QHP enrollment and administering tax credits
    • Provide customer service for internet-based program
    • Provide information to consumers to help them make informed decisions
    • Manage a Navigator program to provide education, awareness, assistance
  • 22. Oregon Insurance Exchange – Prohibited Functions
    • Cannot prohibit non-exchange market
    • Cannot compel enrollment in the exchange
    • Cannot limit individual enrollment choice
    • Cannot impose premium price controls
      • Rate regulation is still the responsibility of the Oregon Insurance Division
  • 23. Oregon Insurance Exchange - Funding
    • Planning and implementation grants funded by federal government through 2013
    • Federal grant for first year of operation: 2014
    • Self-sustaining January 2015
    • No access to general fund
  • 24. Oregon Insurance Exchange
    • Much left to be determined:
      • Business plan due to Oregon legislature Feb 2012, due to HHS by Aug 2012, for federal approval by 2013
      • Risk sharing/market stability
      • QHP standards
      • Role of agents and brokers
      • Sustainable funding
      • Transformation of delivery system: how to handle Medicaid shortfalls, etc.
  • 25. Health Insurance Premium Tax Credits
    • Premium Tax Credits
      • Individuals/families between 100% and 400% of federal poverty level ($22,350 to $89,400 for a family of four in 2011)
      • Enrolled in a qualified health plan through the exchange
      • Legally present in the United States, not incarcerated
      • Not claimed as a dependent by another taxpayer
      • Not eligible for Medicare, Medicaid, CHIP, TRICARE, veterans’ health care or affordable employer-sponsored coverage
        • Affordable employer coverage: plan's share of total cost of benefits is at least 60% or the premium is no more than 9.5% of employee's household income
  • 26. Health Insurance Premium Tax Credits
    • Amount of credit depends on income level and amount of premium for the plan selected
    • Refundable
    • Credit is paid in advance directly to the insurance company by the IRS
  • 27. Employer “Play or Pay” Penalties
    • Effective date: 2014
    • Applies to employers with 50+ full-time employees (30+ hours/week)
      • Seasonal employees (<120 days/yr) do not count toward 50-employee threshold
    • Coverage not required to be offered, but…
    • If employer does not offer coverage to full time employees (30+ hours/week) and their dependents, or if coverage is offered, but is not affordable, penalties are assessed
  • 28. Employer “Play or Pay” Penalties
    • “ Free rider penalty”
      • Employer does not offer coverage and
      • At least one full time employee enrolls in an exchange plan under which they receive a tax credit or premium reduction assistance
      • Penalty = $2,000 per full time employee per year ($166.67 per month in 2014)
      • First 30 full time employees exempt
      • Penalties indexed for inflation after 2014
  • 29. Employer “Play or Pay” Penalties
    • “ Unaffordable coverage penalty”
      • If coverage is offered to full time employees and their dependents, but
      • At least one full time employee has enrolled in an exchange plan under which they receive a premium tax credit
      • Penalty (annual) = $3,000 per full time employee that purchases coverage through the exchange with a tax credit ($250 per month in 2014)
      • Annual penalty capped at $2,000 x (Total FTEs – 30)
  • 30. Employer “Play or Pay” Penalties
    • National Retail Federation’s Health Mandate Cost Calculator:
    • http://www.nrf.com/modules.php?name=Pages&sp_id=1290
  • 31. Tax on High Cost Health Coverage (“Cadillac Tax”)
    • Effective date: taxable years beginning after 1/1/17
    • 40% nondeductible excise tax on high-cost health coverage
    • Initial cost limits: (subject to later adjustments)
      • $10,200/year self-only
      • $27,500/year other than self-only
    • Policy objectives:
      • Revenue raiser (projected to raise $20 billion in 2019)
      • To encourage control of health care costs
  • 32. Employee Benefits: Planning for the Future
    • “ How will health care reform affect my company?”
  • 33.  
  • 34. Employee Benefits: Planning for the Future
    • Should I stop offering health benefits altogether?
      • Outcome of Supreme Court decision and elections
      • Outcome of regulatory guidance
      • Labor market and industry competition
      • Workforce demographics
      • Corporate culture
      • Workforce size
      • Employee health and productivity
      • Workers’ compensation costs
      • Effectiveness of state exchanges
      • Increased tax burden of not offering health benefits
      • “ Play or pay” penalties are not tax deductible
  • 35. Employee Benefits: Planning for the Future
    • What are other employers doing?
      • McKinsey Quarterly survey of 1,329 employers (June 2011):
        • 30% of employers will “definitely” or “probably” stop offering coverage in 2014
        • http://www.mckinsey.com
      • Mercer survey of 894 employers (June 2011):
        • 8% of employers “likely” or “very likely” to terminate employer-sponsored coverage in 2014
        • http://www.mercer.com/press-releases/1421820
  • 36. Employee Benefits: Planning for the Future
    • Can I divide my business into separate small companies to avoid reform mandates?
      • IRS controlled group rules
    • Can I make all or most of my employees part-time to avoid reform mandates?
      • Yes, but …
  • 37. Questions and More Information? Questions about Health Care Reform? Kristine Bingman Benefits & Employment Attorney [email_address] 503.620.1710 Questions about Vigilant membership? Bryon Bailey b.bailey@vigilantcounsel.org  800.733.8620 www.vigilantcounsel.org