Intecare PPACA Webinar 11/20/12

PPACA: What Every
Employer Needs to
Know Now. A
Comprehensive Guide to
Healthcare Reform

November 20, 2012

© 2012 Proskauer. All Rights Reserved.

Today’s Presenters

LINDA KELLER
EVP, Consulting & Account Management
Intercare Insurance Solutions

SHANNON TAYLOR
EVP, Sales, Health & Performance
Intercare Insurance Solutions

Intercare Insurance Solutions • Private & Confidential • CA Insurance Lic #0D80830 • intercaresolutions.com pg. 2

PPACA: What Every Employer Needs to Know Now!
A Comprehensive Guide to Healthcare Reform


Agenda

 Current Law Reminders
 New Taxes & Fees
 The Individual Mandate
 PPACA and the Exchanges
 Pay or Play
 Strategies

Intercare Insurance Solutions • Private & Confidential • CA Insurance Lic #0D80830 • intercaresolutions.com 4

Poll

How confident are you in
your understanding of the
provisions of the Affordable
Care Act?


Questions #2

How many employees at
your company?

Medical Loss Ratio Rebates

MLR = % of premium revenue spent Claims/Medical Care

Rebate < 85%
(large groups)

Rebate <80%
(small groups or
individuals)

Intercare Insurance Solutions • Private & Confidential • CA Insurance Lic #0D80830 • intercaresolutions.com

NOW!
August
2012

Preventive
Care
Rules


Initially
 Immunization
 Screenings & preventative care for
infants, children & adolescents
 Additional care for women

Later expanded by HHS to include
all FDA approved contraceptives
 Intrauterine devices
 ―Morning-after pill"
 Newer forms of long-acting implantable
hormonal contraceptives

Summary of Benefits and Coverage

Distributed first open
enrollment following
September 23, 2012

Not exceed 4 double-sided
pages

―Culturally and linguistically
appropriate―


Timing - Summary of Benefits and Coverage
 Open Enrollment – Before the 1st day on/after September 23, 2013
 For participant who enroll other than open enrolment – 1st day of plan
year on/after September 23, 2013 SBC must be provided at the
following times:

 Upon request - no later than 7 days

 Within 90 days of enrolling under a HIPAA special enrollment

 With open enrollment materials

 If the SBC cannot be timely provided because the plan terms have not
been finalized, the SBC must be provided within 7 days of finalizing the
plan terms


2012 Forms

Small Employer
Exception
W-2 Reporting of Health Costs

Entire cost of
the coverage

Determined under rules similar to COBRA premiums

$2,500 Health FSA Limit

Effective for plan years
beginning in 2013
 Limits annual employee
contributions to $2,500
 Indexed to the CPI starting
in 2014
 Does not limit employer
contributions

Medicare Payroll Tax Increase

 0.9% FICA & SECA
tax on wages over
$200,000
 Employer withhold
on wages over
$200,000


90 Day Requirement

Plan year on or after January 1, 2014

90 days within the 1st day they are eligible

If employees can elect within 90 days but
fail to elect within 90 days it is not a
violation

16
Private & Confidential • TX Insurance Lic #18311 • intercaresolutions.com

Mandates Still
Requiring
Guidance

Non Discrimination Rules

 Prohibits discrimination in favor of ―highly
compensated employees‖ with respect to
eligibility & benefits

 Fully-insured plans after release (already
apply to self-insured)

 Penalty: up to $500,000 Under ACA


Employer Auto Enroll

 Employers must automatically enroll all full time eligible
employees in the default medical plan
 Must provide adequate notice to employees and
opportunity to opt out


New Taxes & Fees with Employer Impact

Comparative
Health Insurance Reinsurance
Effectiveness
Research Fee Industry Fee Assessment

Annual fee on insured & Annual fee on all
Who self-insured plans insured plans beginning
Annual fee on insured &
self-insured plans, 2014
beginning on/after 2014
What 10/2/11
– 2016
Includes Dental/Vision
When HRA/FSA nuances, etc. Excludes ASO
Excludes Dental/Vision

Annual fee of $1, then
$2 indexed, per Estimated costs:
Estimated costs:
participant until 2019 2 – 2.5% of premium
in 2014
How Much 2014 - $60 - $90 PMPY
First payable July 2015 - $40 - $60 PMPY
2013 Increasing to 3 – 4%
2016 - $25 - $35 PMPY
Sunset after 2019 in future years


The Individual
Mandate

Beginning 2014

Individual Mandate

Individuals must maintain health insurance

Those who do not
maintain minimum
essential
coverage, and who are
not exempt from the
mandate, will be
required to pay a
penalty for
noncompliance


24

Individual Mandate – Exceptions:

 Not lawfully present in the U.S
 Incarcerated
 Residing outside of the U.S
 HHI is less than the federal income tax filing
threshold

 Determined by HHS to have suffered a
hardship
 Health care sharing ministry
 Members of Indian tribes
 Bona fide residents of any possession of the
U.S

No penalty imposed without coverage for > 3 months - Only one 3-month period allowed in a year

Individual Mandate Penalty

 The penalty for noncompliance is the greater of either:

A. percentage of the amount by which HHI exceeds the personal
exemption amount ($5,950 in 2012, doubled for joint filers) plus the
standard deduction amount ($3,800 in 2012),
• Percentage is 1% in 2014, 2% in 2015, and 2.5% thereafter, or

26

Individual Mandate Penalty

B. A flat dollar amount assessed on each taxpayer and any dependents.
• The annual flat dollar amount is phased in—$95 in 2014, $325 in 2015, and $695 in
2016 and beyond (adjusted for inflation)
• Reduced by one-half for children under 18, and
• For families, capped at 300% of the annual flat dollar amount

Penalty cannot exceed national average for bronze exchange plans

27

Sample Calculation of Individual Penalty

Personal exemption is $5,950 in 2012 (doubled for joint filers)
The standard deduction amount is $3,800 in 2012


PPACA & Exchanges

All states to establish an Exchange by January
1, 2014
• The American Health Benefit Exchange
• Small Business Health Options Program (SHOP) Exchange
for individuals and small businesses

Types of Exchanges:
• State Exchange
• Partnership Exchange
• Federally Facilitated Exchange


30

Will The State Be Ready?

Source: Kaiser Family Foundation; Accurate as of 11/16/2012 31

PPACA & Exchanges

Qualified Health Plans:
• Certified as qualified by an Exchange;
• Provides the essential health benefits package; and
• Offered by a licensed insurer that agrees to offer at least
one ―silver‖ and one ―gold‖ level plan in the Exchange
Essential Health Benefits:
 Defined by a Benchmark Plan selected by each
State;
 Benchmark would serve as reference plan to
determine if employers plan meets minimum
requirements


32

Essential Health
Benefits

33

PPACA & Exchanges

 Prior to 2016, small employers are 100 or less but states may
limit to 50 employees or less
 Prior to 2017, only small employers (100 employees or fewer)
can participate
 Starting in 2017 and thereafter, states may allow all
employers
 Initial open enrollment period: October 1, 2013 through
March 31, 2014.
 For benefit years in 2015 or later, the annual open enrollment
period will be from October 15 to December 7
 Special enrollment provisions will be included


34

The Metals

Exchanges to Offer Four Levels of Coverage:


35

Poll

Will healthcare reform law
require all businesses, more
than 50 employees, to
provide health insurance?


Employer ―Pay-or-Play‖ Mandate

 In 2014, the pay-or-play mandate requires employers of
50 FTE (Full Time Equivalents) or more to offer
quality, affordable health insurance coverage to full
time employees (those working on average at least 30
hours per week) and their families
 Failure to offer such coverage potentially subjects the
employer to a tax penalty for a given month if a full
time employee receives a federal premium tax credit or
cost-sharing reduction and is enrolled in coverage
through a health insurance exchange


38

When is an Employer Subject to Pay-or-Play?

 FTE employees are determined by taking the sum of the
employer’s full time employees (using a 30 hour per week
standard) and the number determined by dividing the hours
of service of employees who are not full time employees by
120

 Employer employs 40 full time employees and 20 part-time
employees who each work 60 hours per month.

 50 FTE: 40+(20×60÷120)=50

 Employer employees 35 full time employees and 20 part-time
employees who each work 96 hours per month

 51 FTE: 35+(20×96÷120)=51


Determining Full Time Employee Status For Purpose
of the Pay or Play Tax

Proposed ―Look-back/stability period safe harbor‖ method
 The employer selects a 3-12 month ―measurement‖ period to
determine which employees averaged at least 30 hours per
week

Look-Back

Nov 2012 May
May 2013
2012

40

What are the Pay-or-Play Penalties?

Employers who “opt out” of providing
benefits
 Employers who do not provide quality
health coverage to all full time employees
(and their dependents) are penalized
 If at least 1 full time employee is eligible for, or
receives, a tax credit and enrolls in exchange
coverage, the employer is subject to an annual
penalty of $2,000 × all full time employees (except
for the first 30) applies
 Penalty is assessed monthly (i.e., $167.67 per full
time employee per month)



 Example 1: No full time employee receives a tax credit
 No penalty assessed

 Example 2: One or more full time employees receive a tax
credit
 The annual penalty is calculated by taking the number of full time
employees minus 30, multiplied by $2,000
 If there are 50 full time employees, the penalty would not vary if only one
employee or all 50 employees received the credit; the employer’s annual
penalty would be (50-30) × $2,000, or $40,000



Employers who provide
“unaffordable” coverage
 Coverage is affordable only if the
premium for single coverage under
the employer’s lowest cost plan with
at least a 60% ―actuarial value‖ does
not exceed 9.5% of individual W-2
wages
 Annual penalty is the lesser of $3,000
for each full time employee who
receives a tax credit and enrolls in
exchange coverage, or $2,000
multiplied by all full time employees
(subtracting first 30)
 Penalty is assessed monthly (i.e., $250 per
subsidy-receiving full time employee per
month)



 Example 1: No full time employee receives a tax credit
• No penalty assessed

 Example 2: One or more full time employees receive a tax credit
 For an employer with 50 full time employees, annual penalty is
lesser of:
• the number of full time employees minus 30, multiplied by $2,000, or
• the number of full time employees who receive tax credits multiplied
by $3,000
 Assuming 10 full time employees received tax credits, the
potential annual penalty on the employer would be $30,000
 However, if the employer had 30 full time employees who received
tax credits, then the potential annual penalty on the employer
would be capped at $40,000 (20 employees $2,000) rather
than $90,000 as calculated (30 employees $3,000)


Affordability

Affordable (Income exceeds 400% of FPL)
No Penalty to Employer
Household Income as a % of FPL

400%
Potential Penalty to Employer
(Income is 100-400% of FPL and
employee contributes more than
9.5% of W-2 wages

133% (100-138%*)

State Medicaid Expansion

100%
Medicaid (At or below 100% of Federal Poverty Level)
No Penalty to Employer

0% 9.5% and above

Contribution as a % of Household Income

*Medicaid expansion by State and interpretation

Impact of Medicaid Decision on Employers

 Medicaid Expansion Requirements
 States must cover all individuals under age 65 with income below 133% of
the poverty line
 "Essential benefits" must be provided to all Medicaid recipients


Impact of Medicaid Decision on Employers


Premium Credit Eligibility

 Must be a part of a tax filing unit
 Must be enrolled in a public exchange
 Cannot be eligible for Medicare, Medicaid, CHIP, coverage
related to military service, an employer-sponsored group
health plan, a grandfathered plan, and other coverage
recognized by HHS
 Employer doesn't have minimal essential coverage


Sample Calculation of Credit

a) Federal Poverty Level 200%

b) Family Size 4

c) Maximum Premium $2,778

d) Actual cost of Insurance Plan $5,000

e) (d) minus (c) is tax credit $2,222


What Comes Now?

Evaluate your company culture and align
incentives accordingly

Don’t just focus on 2014 – think beyond

Ramp up your communication plan – there’s a lot
more to come!


Poll

How likely are you
to terminate your
medical plan in or
after 2014?
pg. 51

Strategies

Shannon Taylor, EVP of Sales, Health & Performance

Financial Impacts of PPACA

 As a result, we are focused on solutions in 3 core areas with
our clients:
1. Optimized PPACA and benefits strategy
2. Integrated Health & Performance program
3. Active promotion of consumer accountability


Elements of the Perfect Storm
$20,000

The Calm Before
the Storm
• PPACA effective
$15,000
• MLR compliance
Plan Cost Per Enrollee*

Kaiser Family
• Medical Foundation predicts
utilization health care costs per
trends slow enrollee will increase
$10,000
+26%
from 2013–2014

$5,000
2011 2012 2013 2014 2015 2016 2017 2018
The chart is for informational purposes only and is intended as an aid in understanding and analyzing impacts of the changing aspects of current health care
regulations and requirements. *Employer Cost per Enrollee for a PPO Plan (2011–2018) Source: Kaiser Family Foundation (premium data)


Elements of the Perfect Storm
$20,000

$15,000
Plan Cost Per Enrollee*

The Perfect Storm - 2014
• Declining Population Health

$10,000 • Employer Requirements

• New Industry Taxes & Fees

• Cost Shifting

$5,000
2011 2012 2013 2014 2015 2016 2017 2018
The chart is for informational purposes only and is intended as an aid in understanding and analyzing impacts of the changing aspects of current health care
regulations and requirements. *Employer Cost per Enrollee for a PPO Plan (2011–2018) Source: Kaiser Family Foundation (premium data)


Key Questions to Answer - PPACA

1. What is the estimated household income distribution of your employee
population?
2. How many employees may qualify for Medicaid or significant premium
subsidies in the state or federal exchange?
3. How many employees will elect to enroll in Medicaid or purchase an individual
policy in the exchange using a premium subsidy?
4. Will the number of employees and dependents covered change
significantly beginning in 2014?
5. What is the actuarial value of your benefit plans in relation to the plans offered
in the health insurance exchanges?
6. How does modifying required employee contributions or benefit
designs change estimated future plan costs?
7. How will employer penalties, affordability requirements, individual mandate
penalties, and premium tax credit percentages change over time?
8. Will any plans be subject to the excise tax on high cost health plans beginning
in 2018?
9. What steps can employers take to minimize the financial impact of
healthcare reform?
10.How will your plans be impacted if your state(s) do not carry out the Medicaid
expansion?
11.Are there other non-financial considerations related to your health plans that
make them a valuable employee retention tool?

Navigating The Perfect Storm

Create Better
Healthcare Consumers

Improve
Population Health

Develop a Multi-Year
Benefit Strategy


Develop a Multi-Year Benefit Strategy

Develop a benefits
strategy that complies
with
regulations, minimizes
adverse cost impacts by
phasing in the right
solutions over time and
delivers the best return on
your investment


Improve Population Health

Implement an integrated
health & performance
program to mitigate health
risks, lower utilization and
improve employee health
and productivity


Create Better Healthcare Consumers

Create a consumer
accountability strategy to
increase employee ownership
of health expenditure
decisions and develop a
culture of
awareness, appreciation and
employee engagement


The Perfect Storm Survival Guide


Q&A
The information provided in this slide presentation is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it
necessarily reflect the opinions of the firm, our lawyers or our clients. No client-lawyer relationship between you and the firm is or may be created by your access to or use of this presentation or any
information contained on them. Rather, the content is intended as a general overview of the subject matter covered. Proskauer Rose LLP (Proskauer) is not obligated to provide updates on the
information presented herein. Those viewing this presentation are encouraged to seek direct counsel on legal questions. © Proskauer Rose LLP. All Rights Reserved.


Intecare PPACA Webinar 11/20/12

Intecare PPACA Webinar 11/20/12

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