Health Care Reform Pay or Play Flowchart

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Health Care Reform Pay or Play Flowchart

  1. 1. 6/27/2013 1 YourYourYourYour PresenterPresenterPresenterPresenter Brent Heurter, CBWABrent Heurter, CBWABrent Heurter, CBWABrent Heurter, CBWA President, Healthy Halo Insurance Services brent@healthyhalo.com 323.319.6626 2222
  2. 2. 6/27/2013 2 AgendaAgendaAgendaAgenda • History of Health Insurance and Costs • Individual Mandated Health Insurance • Tax Credits and Subsidy Programs • The Exchange: Covered California • Pay or Play for Large Employers • ACA Compliance Checklist • Strategies for Containing Costs • Resources & Tools Available 3333
  3. 3. 6/27/2013 3 A Brief History of HealthA Brief History of HealthA Brief History of HealthA Brief History of Health InsuranceInsuranceInsuranceInsurance • EmployerEmployerEmployerEmployer sponsored health insurance was born during World Warsponsored health insurance was born during World Warsponsored health insurance was born during World Warsponsored health insurance was born during World War IIIIIIII • Medicare and Medicaid passed inMedicare and Medicaid passed inMedicare and Medicaid passed inMedicare and Medicaid passed in 1965196519651965 • ACA signed into law on March 23,ACA signed into law on March 23,ACA signed into law on March 23,ACA signed into law on March 23, 2010201020102010 • Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28, 2012201220122012 WorldWar IIWorldWar II 19651965 20102010 20122012 5555 Cumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to Inflation Family Coverage, California, 2002 toFamily Coverage, California, 2002 toFamily Coverage, California, 2002 toFamily Coverage, California, 2002 to 2012201220122012 • California Employer Hearth Benefits Cost of Health Insurance • Since 2002, health insurance premiums in California have increased by 169%, more than five times the 31.5% increase in the state's overall inflation rate. 6666
  4. 4. 6/27/2013 4 How Much Will Premiums Increase?How Much Will Premiums Increase?How Much Will Premiums Increase?How Much Will Premiums Increase? • One state report shows that premiums will go up 30% in 2014 • Age banded rates cannot vary more than 3:1 for adults for individual and small group • Eliminates “Risk Adjustment Factor” for small groups (2 50 ees) • Essential Benefits • New health insurance taxes 7777 Essential BenefitsEssential BenefitsEssential BenefitsEssential Benefits8888
  5. 5. 6/27/2013 5 Taxes andTaxes andTaxes andTaxes and FeesFeesFeesFees9999
  6. 6. 6/27/2013 6 Other Employer Cost ConsiderationsOther Employer Cost ConsiderationsOther Employer Cost ConsiderationsOther Employer Cost Considerations • Must offer benefits to those working 30 hours or more per week • Maximum waiting period 60 days in CA • Adjusting contributions to avoid penalties • Individual mandate may cause employees to join the plan • Automatic enrollment for companies with 200 plus employees • More administration for reporting and eligibility mandates 11111111 Individual MandateIndividual MandateIndividual MandateIndividual Mandate • Jan. 1, 2014 all individuals are required to have health insurance • Exceptions: o Family income is below threshold of having to file a tax return o Currently enrolled in Medicare or Medicaid o Enrolled in a plan offered by an employer 12121212
  7. 7. 6/27/2013 7 Individual/Family Penalties for Not HavingIndividual/Family Penalties for Not HavingIndividual/Family Penalties for Not HavingIndividual/Family Penalties for Not Having HealthHealthHealthHealth InsuranceInsuranceInsuranceInsurance13131313 YearYearYearYear Percentage ofPercentage ofPercentage ofPercentage of IncomeIncomeIncomeIncome Set Dollar Amount perSet Dollar Amount perSet Dollar Amount perSet Dollar Amount per AdultAdultAdultAdult Set Dollar Amount perSet Dollar Amount perSet Dollar Amount perSet Dollar Amount per ChildChildChildChild YearYearYearYear 2014201420142014 1%1%1%1% $95$95$95$95 $47.50$47.50$47.50$47.50 2014201420142014 2015201520152015 2%2%2%2% $325$325$325$325 $162.50$162.50$162.50$162.50 2015201520152015 2016201620162016 2.5%2.5%2.5%2.5% $695$695$695$695 $347.50$347.50$347.50$347.50 2016201620162016 Health Insurance Penalty PhaseHealth Insurance Penalty PhaseHealth Insurance Penalty PhaseHealth Insurance Penalty Phase In ScheduleIn ScheduleIn ScheduleIn Schedule Pay the greater of the two amountsPay the greater of the two amountsPay the greater of the two amountsPay the greater of the two amounts Covered CaliforniaCovered CaliforniaCovered CaliforniaCovered California • Public, state run Exchange • Guaranteed Issue for ALL Individuals/Families • Provides online “apples to apples” comparison • Begins open enrollment 10/1/13 for coverage effective 1/1/14 • Must have coverage before 3/1/14 or wait until next open enrollment • 13 carriers state wide with 7 carriers in LA County • Rates based on age and 19 territories 14141414
  8. 8. 6/27/2013 8 Levels of CoverageLevels of CoverageLevels of CoverageLevels of Coverage15151515 CategoryCategoryCategoryCategory Percentage of expensesPercentage of expensesPercentage of expensesPercentage of expenses paid by health planpaid by health planpaid by health planpaid by health plan Percentage of expenses paidPercentage of expenses paidPercentage of expenses paidPercentage of expenses paid by individualby individualby individualby individual PlatinumPlatinumPlatinumPlatinum 90% 10% GoldGoldGoldGold 80% 20% SilverSilverSilverSilver 70% 30% BronzeBronzeBronzeBronze 60% 40% HigherHigherHigherHigher percentage ofpercentage ofpercentage ofpercentage of expensesexpensesexpensesexpenses paidpaidpaidpaid bybybyby planplanplanplan Lower monthlyLower monthlyLower monthlyLower monthly premiumpremiumpremiumpremium paymentpaymentpaymentpayment Individual PlanIndividual PlanIndividual PlanIndividual Plan RatesRatesRatesRates16161616 PlanPlanPlanPlan BronzeBronzeBronzeBronze SilverSilverSilverSilver GoldGoldGoldGold PlatinumPlatinumPlatinumPlatinum Health NetHealth NetHealth NetHealth Net HMO __ $242 $276 $311$311$311$311 AnthemAnthemAnthemAnthem HMO __ $259 $327 $374 Molina HealthcareMolina HealthcareMolina HealthcareMolina Healthcare HMO $204 $259 $285 $342 L.A. CareL.A. CareL.A. CareL.A. Care HMO $196$196$196$196 $265 $301 $332 Blue ShieldBlue ShieldBlue ShieldBlue Shield PPO $240 $287 $342 $392 AnthemAnthemAnthemAnthem EPO $225 $299 $363 $420 KaiserKaiserKaiserKaiser HMO $245 $325 $399 $429 Health NetHealth NetHealth NetHealth Net PPO $301 __ __ __ South Los Angeles CountySouth Los Angeles CountySouth Los Angeles CountySouth Los Angeles County –––– 40 Year Old40 Year Old40 Year Old40 Year Old
  9. 9. 6/27/2013 9 2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group RatesRatesRatesRates 17171717 AreaAreaAreaArea Avg. Cost of Silver PlanAvg. Cost of Silver PlanAvg. Cost of Silver PlanAvg. Cost of Silver Plan Average cost of 2013 Comparable SmallAverage cost of 2013 Comparable SmallAverage cost of 2013 Comparable SmallAverage cost of 2013 Comparable Small Group PlansGroup PlansGroup PlansGroup Plans DifferenceDifferenceDifferenceDifference Los Angeles (North)Los Angeles (North)Los Angeles (North)Los Angeles (North) $242$242$242$242 $311$311$311$311 22%22%22%22% Los Angeles (South)Los Angeles (South)Los Angeles (South)Los Angeles (South) $253$253$253$253 $362$362$362$362 29%29%29%29% FINANCIALFINANCIALFINANCIALFINANCIAL ASSISTANCE PROGRAMSASSISTANCE PROGRAMSASSISTANCE PROGRAMSASSISTANCE PROGRAMS AVAILABLE ONLY INAVAILABLE ONLY INAVAILABLE ONLY INAVAILABLE ONLY IN COVEREDCOVEREDCOVEREDCOVERED CALIFORNIA EXCHANGECALIFORNIA EXCHANGECALIFORNIA EXCHANGECALIFORNIA EXCHANGE 18181818
  10. 10. 6/27/2013 10 Federal Poverty Level (FPLFederal Poverty Level (FPLFederal Poverty Level (FPLFederal Poverty Level (FPL))))19191919 Persons in HouseholdPersons in HouseholdPersons in HouseholdPersons in Household FPLFPLFPLFPL 138%138%138%138% FPLFPLFPLFPL 200% FPL200% FPL200% FPL200% FPL 250% FPL250% FPL250% FPL250% FPL 400% FPL400% FPL400% FPL400% FPL 1111 $11,490 $15,856 $22,980 $28,725 $45,960 2222 $15,510 $21,404 $31,020 $38,774 $62,400 3333 $19,530 $26,951 $39,060 $48,825 $78,120 4444 $23,550 $32,499 $47,100 $58,875 $94,200 Medi Cal Cost Sharing Subsidies Premium Subsidies MediMediMediMedi CalCalCalCal • Free coverage for qualified individuals and children • In 2014, Medi Cal eligibility increases from 100% FPL to 138% FPL for adults and includes adults without children • Eligibility for children is up to 250% FPL, however differs in other states • Estimates range from 1.7 million to more than 3 million Californians will become eligible 20202020
  11. 11. 6/27/2013 11 1111) Cost) Cost) Cost) Cost SharingSharingSharingSharing SubsidiesSubsidiesSubsidiesSubsidies • Eligibility: 138% to 250% FPL • Sliding scale based on FPL • 138% 150% FPL covers 94% of costs • 150% 200% FPL covers 87% of costs • 200 250% of FPL covers 73% of costs 21212121 WhatWhatWhatWhat is the benefit?is the benefit?is the benefit?is the benefit? Allows the purchase of a Silver Plan (which covers the cost of medical services at 70%) to a HIGHER percentage of coverage (which means lower deductibles and copayments) 1111) Cost) Cost) Cost) Cost SharingSharingSharingSharing SubsidiesSubsidiesSubsidiesSubsidies22222222 Coverage CategoryCoverage CategoryCoverage CategoryCoverage Category 94% Silver94% Silver94% Silver94% Silver Covers 94% avg.Covers 94% avg.Covers 94% avg.Covers 94% avg. annual costannual costannual costannual cost 87% Silver87% Silver87% Silver87% Silver Covers 87% avg. annual costCovers 87% avg. annual costCovers 87% avg. annual costCovers 87% avg. annual cost 73% Silver73% Silver73% Silver73% Silver Covers 73% avg. annual costCovers 73% avg. annual costCovers 73% avg. annual costCovers 73% avg. annual cost 70% Silver70% Silver70% Silver70% Silver Covers 70% avg.Covers 70% avg.Covers 70% avg.Covers 70% avg. annual costannual costannual costannual cost Income RangesIncome RangesIncome RangesIncome Ranges 138% 150% FPL 150% 200% FPL 200% 250% FPL 250% 400% FPL Office VisitOffice VisitOffice VisitOffice Visit $3 $15 $40 $45 LabLabLabLab DiagnosticsDiagnosticsDiagnosticsDiagnostics $3 $5 $15 $20 $40 $50 $45 $65 Generic DrugsGeneric DrugsGeneric DrugsGeneric Drugs $3 $5 $20 $25 Annual Out of PocketAnnual Out of PocketAnnual Out of PocketAnnual Out of Pocket Max. Individual/Max. Individual/Max. Individual/Max. Individual/ FamilyFamilyFamilyFamily $2,250 $4,500 $2,500 $4,500 $5,200 $4,500 $6,350 $12,700 Examples based on FPLExamples based on FPLExamples based on FPLExamples based on FPL
  12. 12. 6/27/2013 12 2222) Premium) Premium) Premium) Premium SubsidiesSubsidiesSubsidiesSubsidies (aka Tax(aka Tax(aka Tax(aka Tax CreditsCreditsCreditsCredits)))) • Eligibility 138% to 400% FPL • Amount of subsidy is based on a sliding scale • Applied to the monthly premium • Individual can earn up to $45,960 • Family of four can earn up to $94,200 • Available only in the Exchange • Must be Silver plan or higher 23232323 2222) Premium) Premium) Premium) Premium Subsidy ExamplesSubsidy ExamplesSubsidy ExamplesSubsidy Examples24242424 PlanPlanPlanPlan 150 FPL150 FPL150 FPL150 FPL 200 FPL200 FPL200 FPL200 FPL 250 FPL250 FPL250 FPL250 FPL 400 FPL400 FPL400 FPL400 FPL Health NetHealth NetHealth NetHealth Net HMOHMOHMOHMO $40$40$40$40 $103$103$103$103 $175$175$175$175 $242$242$242$242 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 AnthemAnthemAnthemAnthem HMOHMOHMOHMO $57$57$57$57 $121$121$121$121 $193$193$193$193 $259$259$259$259 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 Molina HealthcareMolina HealthcareMolina HealthcareMolina Healthcare HMOHMOHMOHMO $58$58$58$58 $121$121$121$121 $193$193$193$193 $259$259$259$259 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 L.A. CareL.A. CareL.A. CareL.A. Care HMOHMOHMOHMO $64$64$64$64 $127$127$127$127 $199$199$199$199 $265$265$265$265 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 Blue ShieldBlue ShieldBlue ShieldBlue Shield PPOPPOPPOPPO $86$86$86$86 $149$149$149$149 $221$221$221$221 $287$287$287$287 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 AnthemAnthemAnthemAnthem EPOEPOEPOEPO $97$97$97$97 $160$160$160$160 $232$232$232$232 $299$299$299$299 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 Kaiser PermanenteKaiser PermanenteKaiser PermanenteKaiser Permanente HMOHMOHMOHMO $123$123$123$123 $186$186$186$186 $258$258$258$258 $325$325$325$325 $202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0 40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan Subsidies shown in green premium after subsidy and monthly premium after subsidy is shown in black
  13. 13. 6/27/2013 13 CoveredCoveredCoveredCovered California :California :California :California : Cost Estimate Calculator25252525 Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees26262626 MediMediMediMedi CalCalCalCal EligibleEligibleEligibleEligible IndividualIndividualIndividualIndividual with income lower than $15,856 Or Family of 2Family of 2Family of 2Family of 2 with income lower than $21,404 Or Family of 3Family of 3Family of 3Family of 3 with income lower than $26,951 Or Family of 4Family of 4Family of 4Family of 4 with income lower than $32,499 Group 1Group 1Group 1Group 1 Less than 138% FPLLess than 138% FPLLess than 138% FPLLess than 138% FPL Group 2Group 2Group 2Group 2 138 to 250% FPL138 to 250% FPL138 to 250% FPL138 to 250% FPL CostCostCostCost Sharing & PremiumSharing & PremiumSharing & PremiumSharing & Premium Subsidy EligibleSubsidy EligibleSubsidy EligibleSubsidy Eligible IndividualIndividualIndividualIndividual with income between $15,856 $28,725 Or Family of 2Family of 2Family of 2Family of 2 with income between $21,404 $38,774 Or Family of 3Family of 3Family of 3Family of 3 with income between $26,951 $48,825 Or Family of 4Family of 4Family of 4Family of 4 with income between $32,499 $58,876 Must purchase on the Exchange to receive subsidies
  14. 14. 6/27/2013 14 Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees27272727 Premium SubsidyPremium SubsidyPremium SubsidyPremium Subsidy EligibleEligibleEligibleEligible Individual with income of $22,980 $45,960 Or Family of 2 with income of $31,020 $62,400 Or Family of 3 with income of $39,060 $78,120 Or Family of 4 with income of $47,100 $94,200 Group 3Group 3Group 3Group 3 138% to 400% FPL Group 4Group 4Group 4Group 4 Higher than 400% FPL NoNoNoNo SubsidiesSubsidiesSubsidiesSubsidies Individual with income higher than $45,960 Or Family of 2 with income higher than $62,400 Or Family of 3 with income higher than $78,120 Or Family of 4 with income higher than $94,200 Must purchase on the Exchange to receive subsidies Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees28282828 GroupGroupGroupGroup 5555 Waives Coverage and Opts to Pay Penalty YearYearYearYear % of Income% of Income% of Income% of Income AdultAdultAdultAdult ChildChildChildChild 2014 1% $95 $47.50 2015 2% $325 $162.50 2016 2.5% $695 $347.50
  15. 15. 6/27/2013 15 Group Health Benefit ChangesGroup Health Benefit ChangesGroup Health Benefit ChangesGroup Health Benefit Changes Effective Already:Effective Already:Effective Already:Effective Already: 1. Dependents covered until age 26 2. No cost for preventative care 3. No cost for contraceptives 4. No lifetime or annual benefit limits Effective Jan. 1, 2014:Effective Jan. 1, 2014:Effective Jan. 1, 2014:Effective Jan. 1, 2014: 1. No pre existing exclusions 2. Maximum OOP $6,350 / $12,700 29292929 Small EmployersSmall EmployersSmall EmployersSmall Employers • No mandate to provide group health insurance • Defined as 1 – 50 full time employees • Small employer expands to 100 employees in 2017 but penalty still applies over 50 FTEs • Community rating • Max. plan deductible of $2,000/$4,000 • In the Exchange: min. participation and contribution requirements may no longer apply (must enroll during special open enrollment period Nov. 15 – December 15) 30303030
  16. 16. 6/27/2013 16 Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP) • Public Exchange run by Covered California • Side by side comparison of plans • Choice of health plans, dental and carriers • Can provide defined contribution amount towards Bronze, Silver, Gold or Platinum plans • One consolidated bill for all plans • Tax credits are available for 2 years from 2014 to 2020 • On a sliding scale up to a maximum of 50%: o 25 or fewer FTEs with average payroll less than $50,000 per year and contribute 50% are eligible for minimal tax credit o 10 or fewer FTEs with average payroll less than $25,000 are eligible for maximum tax credit 31313131 Large EmployersLarge EmployersLarge EmployersLarge Employers • Pay or Play! • 50 or more full time equivalent (FTE) employees in the prior year. • Employees working 30 hours per week are deemed full time. • Part time employees: add up hours worked for the month and divide by 120 • 10 employees @ 15 hours per week = 600 hours divided by 120 = 5 FTEs 32323232
  17. 17. 6/27/2013 17 Large Employer PenaltiesLarge Employer PenaltiesLarge Employer PenaltiesLarge Employer Penalties • No health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employee o The first 30 employees are not counted: o Example: 60 employees – 30 = 30 x $2,000 = $60,000 annual penalty • Unaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases health insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy. 33333333 Minimum Value andMinimum Value andMinimum Value andMinimum Value and AffordabilityAffordabilityAffordabilityAffordability TestTestTestTest 1)1)1)1) Minimum ValueMinimum ValueMinimum ValueMinimum Value TestTestTestTest: health plan must pay a minimum of 60% of expenses 2)2)2)2) Affordability TestAffordability TestAffordability TestAffordability Test: employees’ contribution cannot exceed 9.5% of their W 2 wages • Penalty does not apply: • If employee has coverage through spouse • Employee buys health insurance through the Exchange but does not qualify for a subsidy • Employee is enrolled in Medicaid/Medicare 34343434
  18. 18. 6/27/2013 18 Penalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014 35353535 Penalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014 36363636
  19. 19. 6/27/2013 19 Employer Survey on Health ReformEmployer Survey on Health ReformEmployer Survey on Health ReformEmployer Survey on Health Reform McKinsey & Company, a leading global management consulting firm, conducted a survey of 1,329 employers to measure their attitudes about healthcare reform: • 30% of employers will “definitely or probably” stop providing employer sponsored insurance in the years following 2014 • Among employers with a “high awareness of reform, this proportion increases to more than 50%” • 45 to 50% of employers will “pursue some alternative to traditional” group health coverage 37373737 Research and Consumer SurveysResearch and Consumer SurveysResearch and Consumer SurveysResearch and Consumer Surveys • At least 30% of employers would gain economically from dropping coverage even if they make employees 100% whole • Contrary to what other employers assume, more than 85% of employees would remain at their jobs even if their employer stopped offering employer sponsored insurance “Most employers, however will find value“Most employers, however will find value“Most employers, however will find value“Most employers, however will find value creating options between thecreating options between thecreating options between thecreating options between the extremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes to the current offering”the current offering”the current offering”the current offering” Source: McKinsey & Company 38383838
  20. 20. 6/27/2013 20 Key Concepts and Plan Design StrategiesKey Concepts and Plan Design StrategiesKey Concepts and Plan Design StrategiesKey Concepts and Plan Design Strategies 39393939 Defined ContributionDefined ContributionDefined ContributionDefined Contribution Employer provides fixed dollarEmployer provides fixed dollarEmployer provides fixed dollarEmployer provides fixed dollar amountamountamountamount and theand theand theand the employee canemployee canemployee canemployee can choosechoosechoosechoose how to allocate it amonghow to allocate it amonghow to allocate it amonghow to allocate it among aaaa variety of benefit options.variety of benefit options.variety of benefit options.variety of benefit options. 40404040
  21. 21. 6/27/2013 21 Defined Contribution &Defined Contribution &Defined Contribution &Defined Contribution & PrivatePrivatePrivatePrivate ExchangesExchangesExchangesExchanges A benefits exchange is an online store where employees purchase benefit to suit their individual and family needs. 41414141 What is a private exchange?What is a private exchange?What is a private exchange?What is a private exchange? A benefits model that: • Allows employees to select health plans and other benefits from a menu of products and services • Employees shop for the products that best fit them personally using defined contribution dollars from their employer, and their own money if they choose Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)42424242 What is an HRA?What is an HRA?What is an HRA?What is an HRA? • Created under Section 105 of the IRS Code and further clarified by the IRS in 2002 • HRAs are an employer funded plan to reimburse employees for medical expenses including individual and family premiums • HRAs are notional arrangements; no funds are expensed until reimbursements are paid • HRAs are tax deductible for the employer and tax free to the employee • HRAs can be restricted for the purchase of individual and family health and other specified benefit plans and medical expenses
  22. 22. 6/27/2013 22 Healthcare Reform &Healthcare Reform &Healthcare Reform &Healthcare Reform & Defined Contribution HRADefined Contribution HRADefined Contribution HRADefined Contribution HRA43434343 • Medical Underwriting • No Federal Subsidies for Individual Policies • No Standardized System for Comparing Plans • Employer Driven • No Medical Underwriting • Federal Subsidies for Individual Policies • Easy comparison of plans • Individual/Family DrivenVs.Vs.Vs.Vs. AfterAfterAfterAfter 2014201420142014BeforeBeforeBeforeBefore 2014201420142014 Advantages to HRAsAdvantages to HRAsAdvantages to HRAsAdvantages to HRAs & Defined& Defined& Defined& Defined ContributionContributionContributionContribution44444444 • Control & predict costs • No min. contribution or participation • Establish own rules • No admin. hassle • Allows you to focus on your business • Portable & permanent • Total choice & flexibility • Up to 29% less cost • Allows for premium & cost sharing subsidies • Better educated consumers EmployeeEmployeeEmployeeEmployeeEmployerEmployerEmployerEmployer
  23. 23. 6/27/2013 23 Pay or Play Spectrum of StrategiesPay or Play Spectrum of StrategiesPay or Play Spectrum of StrategiesPay or Play Spectrum of Strategies45454545 Continue as plan sponsor for all employees (plan provides minimum value is affordable) Restructure contributions to qualify lower paid employees and their dependents for federal subsidies in the Exchange Limit eligibility to plan and direct ineligibles to the Exchange Exclude classes of full time employees Reduce weekly hours to 29 or less Discontinue plan and provide tax free defined contribution for employees to purchase individual plans in the Exchange Discontinue plan with no employee contributions Play and RedirectPlay and RedirectPlay and RedirectPlay and Redirect • Calculate potential penalties • Establish defined contribution plan and HRA • Restructure contributions so that employee contributions are greater than 9.5% of income for employees earning less than 400% FPL • Redirect eligible employees to receive cost sharing and premium subsidies through the Exchange • Allow non eligible employees to continue group health insurance or receive tax free defined contribution allowance to purchase policies through the Exchange • Provide eligible employees with a tax free defined contribution HRA allowance to purchase policies through the Exchange 46464646
  24. 24. 6/27/2013 24 PayPayPayPay and Redeploy Strategiesand Redeploy Strategiesand Redeploy Strategiesand Redeploy Strategies • Employer discontinues group coverage and completely subsidizes employee participation in the Exchange (make employees whole) • Employer discontinues group coverage and keep employee contributions in the exchange at the same level of what continued group coverage would have cost (employer cost neutral Defined Contribution HRA) • Employer discontinues group coverage and provides contributions for individual exchange at a level to achieve a savings target i.e. 20% (employer cost savings defined contribution HRA) • Employer discontinues coverage and eliminates entire cost of coverage by not subsidizing any employee exchange participation and pays penalties (pay and exit ) By implementing an HRA, employers avoid using pay increases and paying increased payroll taxes to compensate employees. Employees still maintain tax free benefits and avoid paying increased income taxes. 47474747 ACAACAACAACA ComplianceComplianceComplianceCompliance ChecklistChecklistChecklistChecklist 2013:2013:2013:2013: Summary of Benefits Coverage (SBC) Include in Open Enrollment Packets Include in New Hire Packets W 2 Reporting Requirements (over 250 ees) Employee Notice of Exchange Distributed by 10/1 Include in New Hire Packets 2014:2014:2014:2014: Maximum Waiting Period of 60 days in CA Automatic Enrollment (200 or more ees) Pending:Pending:Pending:Pending: Eligibility and Benefits Non Discrimination Testing 48484848
  25. 25. 6/27/2013 25 What Are You Doing with Your Plan?What Are You Doing with Your Plan?What Are You Doing with Your Plan?What Are You Doing with Your Plan? • 90% of employers have moved beyond a “wait and see” approach • Only 10% of companies are still in the “wait and see” mode • More than 50% of companies are developing tactics to deal with the implications of health reform • About one third of companies have modeled the financial impact of reform on their organization 49494949 Which category do you fall into today?Which category do you fall into today?Which category do you fall into today?Which category do you fall into today? Source: International Foundation of Employee Benefit Plans Survey Results: “2013 Employer Sponsored Health Care: ACA’s Impact” Action StepsAction StepsAction StepsAction Steps Talk to other companies in your industry. What are they doing? Take advantage of our free whitepapers, reports, tools and resources Register for our next monthly webinar: “Beyond the Basics: Advanced Healthcare Reform Strategies” on Thursday, July 18 Evaluate your broker: How well informed are you on the ACA? What strategies have been discussed and developed specifically for your company? Take advantage of your complimentary one hour, no obligation consultation and we’ll develop specific strategies for your company (or to discuss any topic you desire) Expect my call tomorrow to answer any questions you might have 50505050
  26. 26. 6/27/2013 26 Employer Tools and ResourcesEmployer Tools and ResourcesEmployer Tools and ResourcesEmployer Tools and Resources Free White Papers and EBooksFree White Papers and EBooksFree White Papers and EBooksFree White Papers and EBooks 51515151 End.End.End.End. Thank you !

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