Gbrshrm ppaca presentation 7.20.13


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Healthcare Update with Jim Casadaban for Greater Baton Rouge Society for Human Resource

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Gbrshrm ppaca presentation 7.20.13

  1. 1. PPACA (The Patient Protection and Affordable Care Act) Presented by Jim Casadaban, MBA HUB International Gulf South July 18, 2013 Greater Baton Rouge SHRM
  2. 2. Overview & Historical Look Back PPACA (The Patient Protection and Affordable Care Act) 2
  3. 3. Status of Federal Health Care Reform  Supreme Court Upheld the Law - Except as to Medicaid expansion - More court challenges but won’t delay  Political Landscape - No changes to political makeup in Washington - Possibility of major change to the law is slim - Congress could work to de-fund some provisions  Timing and Rollout Now Proceed - Federal agencies now working to release updated regulations (10,000+ pages) 3
  4. 4. PPACA Provisions Effective in 2011  Coverage of children to age 26 (regardless of marital or full-time student status)  No pre-existing condition exclusions for children under age 19  Removal of lifetime benefit limits  Annual limits phase out begins – complete in 2014  No rescission of coverage (retroactive termination of benefits)  No FSA reimbursement for over-the- counter medications 4
  5. 5. PPACA Provisions Effective in 2011 – Cont.  Minimum Loss Ratio (MLR) requirements for insurance carriers’ on fully-insured medical plans - 80% for small market (<100 employees) - 85% for large market segment  Small employer tax credit  Health carrier administrative changes (many plans already allowed) - Primary care provider designation, if required, allowed for any contracted provider - Access to any OB/GYN provider - Access to pediatric specialists as child’s primary care provider 5
  6. 6. PPACA Provisions Effective in 2013  60 day prior notification of plan modifications  Summary of Benefits and Coverage distribution (SBCs) - Must be distributed to all eligible employees - Carrier responsibility to prepare form for insured plans  Implement $2,500 limit on employee contributions to health flexible spending accounts (FSAs) for plan years beginning in 2013  Form W-2 reporting requirement - Starting with W-2 reports issued in January 2013 - Delay for employers that have not issued 250 W-2s (look back)  Requirement for employers to notify employees of the availability of health insurance Exchanges - Deadline was March 1st – delayed to October 1st deadline (Wait – we expect modifications!) 6
  7. 7. “Expected” 2014 PPACA Compliance  Taxes and fees – see handout  No waiting period over 90 days for group health plan coverage  No pre-existing condition exclusions  Preventive/wellness benefits  Variable hour/seasonal employee designations 7
  8. 8. “Expected” 2014 PPACA Compliance – Cont.  HIPAA non-discrimination rules relaxed to promote more generous wellness plan safe harbor design  Plan design requirements (maximum OOP amounts, max deductible, clinical trial coverage, essential health benefits for small employers, minimum value)  Additional exchange notification 8
  9. 9. PPACA Taxes and Fees  Comparative Effectiveness Research fees - $1 per covered life/year for first year, then increases to $2/year  Reinsurance fees 2014 - 2016 - $63 per covered life/year regardless of plan funding  Carrier Tax on fully insured plans - 3% beginning September 30, 2014  Cadillac Tax - 40% excise tax on amount over $10,200 for individual and $27,500 for family - Begins 2018 9 9
  10. 10. The Employer & Individual Mandates PPACA (The Patient Protection and Affordable Care Act) 10
  11. 11. Mandates  Individual Mandate - effective January 1, 2014 - All individuals must be covered by a group plan or individual policy - Failure to comply results in penalty when filing Federal taxes  Employer Mandate - effective 1st renewal on/following January 1, 2015 (Just delayed) - Applies to all firms or control groups that regularly employ more than 50 FTE’s of labor - Must offer coverage to all full-time employees (30 hours per week) 11
  12. 12. Individual Mandate  Requires individuals hold health coverage or pay a penalty (limited exceptions) - Fines (assessed as “taxes”) for failure to purchase at greater of:  $95 or 1.0% of adjusted income in 2014  $325 or 2.0% of adjusted income in 2015  $695 or 2.5% of adjusted income in 2016  Annual election for exchange  Individual subject to penalty unless he shows evidence of coverage for at least nine (9) months of the year - Generous grace periods for Exchange premium payment  Employee can still waive employer coverage - No tax credits for employee or family:  If affordable coverage offered by employer or,  If the person actually elects coverage 12
  13. 13. Employer Mandate – Delayed to 2015  To comply, an employer must offer (key word is “offer” – employees can still waive coverage): - A minimum level of health plan coverage to full-time employees and their dependents (children to age 26, not spouses) that is also - Affordable for the employee – 9.5% (but not the family members)  No coverage offered results in $2,000 annual penalty per employee, minus 30  Failure to comply and employee purchases coverage through the Exchange with a Federal premium subsidy results in $3,000 penalty (per applicable employee)  Plans tested on “base” option only 13
  14. 14. Play or Pay? Penalties may seem lower than cost of coverage…  Lost tax advantage  Reporting burden’s remain  Recruitment and retention challenges  Counting employees can be complex  Cost of coverage can be adjusted  Other financial implications  Carriers will address plan designs 14
  15. 15. The Exchange – aka “Marketplace” PPACA (The Patient Protection and Affordable Care Act) 15
  16. 16. Positioning for Reform: Exchanges (Marketplace)  Employers may face penalties because of what the government learns from Exchange-collected data  Individuals report on their annual income tax returns  Annual Employer Reporting Requirement (Jan. 2016 for 2015 data) - Report on health coverage of each eligible employee and family members, broken out on a monthly basis – Reporting to IRS:  Name/address/SSN  All covered individuals (employees and dependents)  Detail of coverage (month-by-month)  Describe individual coverage and premiums - Reporting rules still unclear 16
  17. 17. Positioning for Reform: Exchanges (Marketplace)  Exchanges used for enforcement against individuals & employers: - Exchange will know individual’s household income (IRS data check), whether employed (using IRS information), and whether employer coverage is affordable - Law directs state exchanges to report to federal government  Enforcement will be after the fact 17
  18. 18. States’ Positions on Exchanges As of June 14, 2013… 18 Source: Center on Budget and Policy Priorities
  19. 19. States’ Positions on Medicaid Expansion As of June 24, 2013… 19 Source: Center on Budget and Policy Priorities
  20. 20. The Healthcare Income Continuum 20 Coverage Gap PPACA when fully enforced provides coverage and assistance for most Americans from 0 to 400% of Federal Poverty level Income If Medicaid expansion is refused, Louisiana will have no insurance help for citizens between 11% and 138% of FPL 0-11% Existing Medicaid 11% to 138% New Medicaid Expansion 139% to 400% Exchange Subsidy Eligible 401% of FPL and above, you are on your own! Federal Poverty Level Income 0% 11% 138% 400%
  21. 21. Sample Exchange Purchases (Benchmark) “Metal” Level Bronze Silver Gold Platinum Typical Sample Annual Premium $10,908 $12,120 $13,332 $15,350 Family Income $35,000/year (149% of FPL) Premium Tax Subsidy $10,734 $10,734 $10,734 $10,734 Family pays: $174 $1,386 $2,598 $4,616 Payment % of Income 0.4% 4.0% 7.4% 13.2% Family Income $88,000/year (375% of FPL) Premium Tax Subsidy $3,760 $3,760 $3,760 $3,760 Family pays: $7,148 $8,360 $9,572 $11,590 Payment % of Income 8.1% 9.5% 10.9% 13.2% 21 Expect Exchange coverage to be priced like group coverage (no plans/rates released yet). Family members offered coverage CANNOT use tax credits to access Exchange coverage – Even if affordable to employee only 21 1 2 Example for a Family of 4 (ages 40, 36, 6, 4):
  22. 22. Ineligible for Subsidies  Incarcerated  Income above 400% of FPL  Offered coverage at work that meets employer mandate criteria  Medicaid or CHIP eligible (income <138% FPL)  Claimed as a dependant on someone’s taxes  In the country unlawfully (but you do get 90 days of Medicaid coverage while your citizenship is being verified)  Unable to attest to residency in a single state  Once a subsidy is accepted, individual MUST file tax return for that year 22 22
  23. 23. IRS Measurement Guidance PPACA (The Patient Protection and Affordable Care Act) 23 23
  24. 24. Who is an Employee?  Down the rabbit hole… - Title I of the PPACA leads to - Section 1551 of the PPACA which leads to - Section 2791 of the Public Health Service Act which leads to - Section 3(6) and 3(5) of the Employee Retirement Income Security Act (ERISA) which says an employee is - “any individual employed by an employer”  The Supreme Court’s definition of a common law employee applies 24
  25. 25. IRS Measurement Guidance  Full time employee: Expected to work on average at least 30 hours per week  Variable hour employee: If, based on the facts and circumstances at the start date, the employee is not reasonably expected to work on average at least 30 hours per week  Seasonal: Make a reasonable, good faith interpretation of facts - Can the job only be performed at certain times of the year? - Educational employees are not “seasonal,” but sports coaches might be - Summer camp counselors instructors are seasonal - Golf course workers may or may not be (location?) - Short term workers (duties tied to projects of short term duration) are not seasonal 25
  26. 26. IRS Measurement Guidance  Tracking hours allows an employer to deny coverage to any employee who was not full-time when hours were being tracked  When hours are being tracked, employee may access federal tax credits 26 26 Transitional Initial Annual Track hours to know who should be offered coverage in 2015 Track hours worked for new hires who will be variable hour or seasonal Track hours each year for current employees who will be variable hour or seasonal
  27. 27. IRS Measurement Guidance  High turnover employees An employer cannot simply assume the worker will not be there very long (for example, a substitute teacher, or a project worker, perhaps)  Rehires: After 26 weeks post-termination, a worker can be treated as a new hire - An employer can treat an employee with a short absence of at least 4 weeks as new hire if rehired, provided the employee’s period of non- employment is longer than the period of just-prior employment - If a variable hour employee returns, credit with prior service if required under above rule - If a full-time employee returns, then offer coverage as soon as possible, ideally on date of return to work 27 27
  28. 28. Rules for Counting Hours  For variable hour & seasonal employees, count: - Actual hours of service - Hours of paid time off such as vacation, sick leave, holiday pay, jury duty pay, military leave - Credit for hours of federally- mandated leave (FMLA, etc.) using average hours method - On-call or travel time that is paid under Federal law 28 28
  29. 29. What to Prepare for Now? PPACA (The Patient Protection and Affordable Care Act) 29 29
  30. 30. Have a Strategic Plan 30 2013 2014 2015 2016  Understand your plan and demographics  Know effective date (non-calendar year renewals)  Know who your FT employees are  Budgeting: Who will you offer coverage to?  Begin measuring variable hour workers  Wellness: Outcomes based penalties cap up to 30% (50% for smokers)  Exchange notices (October 2013)  Preventive care rule and benefit mandates  Health FSA limit: $2,500  Pre-existing conditions exclusions removed in 2014  Address possible stop loss issues vis-à-vis clinical trial coverage We are here  Employer Mandate: Affordable minimum coverage to all FT EEs (more than 130 hours/mo) - Minimum coverage to EE + Child(ren) with affordability - Mandate does not require coverage to spouses or PT workers  Exchanges – Public and private coming online - Consider spousal coverage, tax credits and exchange options
  31. 31. Top Employer Strategies to Avoid Financial Impact of Reform 31 Increase dependent coverage costs paid by EE Review retiree coverage options Increase deductibles or copayments to keep costs below “Cadillac tax” threshold Increase employee contributions Offer basic plan along with “buy up” option for executives and management Cut other benefit offerings and steer dollars to medical plan Manage staff: a) Reduce # of FT EEs b) Reduce # of EEs below 50 (beware controlled groups) c) Use more variable hour EEs and delay offering benefits Manage plan design: a) Consider self-funding b) Set EE premiums for plan based on estimated W-2 for affordability c) Offer Flex Credit approach Leverage wellness
  32. 32. Thank you! Jim Casadaban, MBA HUB International Gulf South 504.620.4473 | For more information, visit our website: