The ACA & What It Means ForYour Business, Your Employees & You! CFO Roundtable Series December 2012 We Share Your World. 0
On This Date In History… August 14, 1935 We Share Your World.
On This Date In History… August 14, 1935The Social Security Act is enacted "Isnt this socialism? Isnt this a teeny-weeny bit of socialism?" We Share Your World.
On This Date In History… November 6, 1978 We Share Your World.
On This Date In History…Source: Employee Benefits Research Institute November 6, 1978 The Revenue Act of 1978 is enacted 1/1/1980 - Provision that became IRC Section 401(k) went into effect 12/1978 - Hughes Aircraft Co advised to amend savings plan to adopt 12/1981 - Regulations issued 1/1982 - Plans start to become operational We Share Your World.
On This Date In History… March 23, 2010 We Share Your World.
On This Date In History… March 23, 2010The Patient Protection & Affordable Care Act is enacted We Share Your World.
On This Date In History… We Share Your World.
The ACA - Where Are We? You Are Here! Exchange OE CONGRESSIONAL OVERSIGHT 2010 2011 2012 2013 2014 2015 2016 2017 2018+ THE DECISION PPACA The Cadillac is born (tax, that is)(March 23) THE ELECTION The (Next) Election Exchange Benefits EffectiveHealth Care Reform CFO Roundtable
The Very Latest • November 15 – HHS extends deadline for states to notify of intent to run Exchanges to December 14, 2012 – February 15, 2013 if intending to work in partnership with federal government • November 20 – three proposed rules issued: – Health insurance market rules – Issuer standards for ―essential health benefits‖ – Rules on wellness programs • November 27 – HHS issues RFI seeking public comments regarding health plan quality management in Affordable Insurance ExchangesHealth Care Reform CFO Roundtable
Confused? • You’re not alone! • Of 439 small business owners surveyed: – 34% believed they had to provide coverage – 35% didn’t know – Yet, only 2 of the surveyed businesses were large enough to require coverage! • 6 of 10 waited for election outcomes • 65% familiar in 2010 vs. 61% in 2012 Sources: eHealthInsurance Fall 2012 Small Employer Benefits Survey Health Care Reform 360Health Care Reform CFO Roundtable
The Fundamentals • Pay or Play • The Exchanges • Short-term & Long-Term Compliance – Mostly short! • Strategic ConsiderationsHealth Care Reform CFO Roundtable
To Pay or To Play? DYNAMICS Minimal Essential Coverage Federal Size Subsidies Plan Value (Employer) (Employee, (Employer) Affordable Exchange) Offered to all FT EmployeesHealth Care Reform CFO Roundtable
Pay or Play In MotionHealth Care Reform CFO Roundtable
Strategic Considerations • Evaluate your plans against the ACA’s provisions – Affordability (cost sharing) – Value (plan design & related cost) – Coverage (eligibility for full-time, part-time, etc.) – Are you positioned to avoid the penalties? – What is your tolerance for absorbing the penalties? • Determine impact of ACA’s Employer Shared Responsibility/FT employee determination for applicability, potential impact to your organization – Evaluate determination methods – Will it impact your staffing strategy?Health Care Reform CFO Roundtable
Case Study • Darden Restaurants – Parent company of Red Lobster and other chain restaurants – 185,000 employees – 75% part time (working less than 30 hours per week) – All employees are eligible for health care – Experimenting with filling vacant full-time spots with part-time workersHealth Care Reform CFO Roundtable
The Exchanges • Don’t let the name fool you - it’s a marketplace • In order to open, it needs: PRICED A PLACE PRODUCTS CUSTOMERSHealth Care Reform CFO Roundtable
Source: Citizen’s Council for Health Freedom A PlaceHealth Care ReformCFO Roundtable
Around the NationSource: Kaiser Family Foundation Health Care Reform CFO Roundtable
Priced Products • Insurers must grapple with how to: – Deliver a quality product – Within compliance of the rules • Minimal essential coverage • No pre-ex – At a specified price – To the greatest number of consumers • In a manner which allows them to: – Tolerate the risks (adverse selection, initial penalty disincentive) – Stay competitive – Be profitableHealth Care Reform CFO Roundtable
Priced Products • While the options will be similar by name: – Bronze – Silver – Gold – Platinum • The number of options will vary • The features will vary (e.g. dental, anyone?) • The price tags will vary • Differentiators will be cost and quality – Benefits, provider networks, serviceHealth Care Reform CFO Roundtable
Customers • The uninsured (30-50 million) – Likely assumption – are in this category because they can’t afford coverage – Which ones are healthy and which ones are not? – Medicaid expansion to cover 5.7 to 21.2 million • Your employees & their dependents – Covered under your plans – Covered under another group health plan (spouse) – Can afford coverage and may be inclined to shop yet are not historically good or active “shoppers” for health insuranceHealth Care Reform CFO Roundtable
Consumer Purchasing 90% Prefer low cost healthcare with little willingness to 81% accept trade offs Source: BusinessWire.com 40% 30% Affordable enough to Guidance 1 in 4 trust insurers to provide change doctor? wanted, just not from guidance on improving health doctor?Health Care Reform CFO Roundtable
Around the Nation Source: advisory.comHealth Care Reform CFO Roundtable
Around the Nation Source: advisory.comHealth Care Reform CFO Roundtable
Strategic Considerations • With an Exchange as a potential option, will you help your employees get there? – Will you educate them on the difference? – What does it mean for how you expose your employees to ALL of their benefits? • How would a shift in employees to Exchange-based coverage impact your tax advantages? • Who in your organization has an eye on Harrisburg and Washington? – Congressional oversight as a driver of refinementHealth Care Reform CFO Roundtable
Cadillac Tax (2018) • An excise tax on high cost health plans – 40% tax on excess value • Single - $10,200 • Family - $27,500 • Indexed in subsequent years – Higher thresholds for early retirees and specific high-risk occupations – Other potential adjustments for age and gender – An estimated 60% of employers have at least one plan that would be subject to this taxHealth Care Reform CFO Roundtable
Cadillac Tax (2018) A plan with single coverage costs of $11,200 in 2018 would exceed the limit by $1,000 and be assessed a tax of $400. If 10,000 employees were enrolled in that plan, the total tax bill would be $4 million!Health Care Reform CFO Roundtable
Strategic Considerations Pay or Play and 2018 Cadillac Tax will be major influencers at the employer level Eligibility Competitiveness Compensation Tax Consequences Penalties Plan & Cost Sharing Administration COST & VALUE PROPOSITIONS CORPORATE PHILOSOPHY/BENEFITS STRATEGY HEALTH CARE OFFERINGS & OPTIONS None “Exchange “Traditional” Consumer Friendly” (perhaps with Driven new funding arrangement?)Health Care Reform CFO Roundtable
Strategic Considerations “Employers have been looking for ways to control the cost of health coverage since World War II when health benefits were first introduced. They aren’t happy about the costs, yet they haven’t abandoned the coverage. They’re going to continue to do that with the Affordable Care Act.” Paul Fronstin Director of Health Research Employee Benefit Research InstituteHealth Care Reform CFO Roundtable
Strategic Considerations • How openly has your organization considered consumer-driven or high deductible plans in the past? • How creatively are you sharing costs? • If you’re not already there, is self-insuring ripe for reconsideration? • Where are you on wellness? • How will you go about “ripping off the Band-Aid”?Health Care Reform CFO Roundtable
Short-Term Checklist • $2,500 Health FSA Limit – Effective January 1, 2013 • Summaries of Benefits & Coverage – For annual OE beginning 9/23/2012 and beyond • W-2 reporting of health care costs – W-2s issued by 1/31/2013 • Notice of exchanges – By 3/1/2013 • PCOR Fees – Due by 7/31/2013 for 2012 calendar year plans • +90 day coverage waiting period prohibition – January 1, 2014 forwardHealth Care Reform CFO Roundtable
$2,500 Health FSA Limit • Effective – January 1, 2013 • Applies To – Cafeteria plan years beginning after December 31, 2012 • What It Does – Imposes a $2,500 limit on annual salary reduction contributions to health FSAs offered under cafeteria plans • Non-compliance risks & penalties – Jeopardize 125 plan status (taxes, disqualification, etc.)Health Care Reform CFO Roundtable
$2,500 Health FSA Limit • Requirements – Adjust FSA enrollment system to cap elections at $2,500 – Communicate new maximum to employees • Inform employees that maximum can be realized by both the employee and spouse, even through same employerHealth Care Reform CFO Roundtable
SBC/Uniform GlossaryHealth Care Reform CFO Roundtable
SBC/Uniform Glossary • Effective – For open enrollees, the first open enrollment beginning on or after September 23, 2012 – For all other enrollees and upon request, the first plan year beginning on or after September 23, 2012 • Applies To – Group Health Plans and health insurance issuers (private-sector, governmental, church) regardless of grandfathered status with some limited exceptions • What It Does – Introduces a new set of documentation and distribution requirements designed to help individuals better understand coverage and compare available options • Non-compliance risks & penalties – Up to $1,000 per failure (aka per participant or beneficiary), ERISA – Fine cannot be paid from plan or trust assetsHealth Care Reform CFO Roundtable
SBC/Uniform Glossary • Requirements – Determine short-term applicability of statute • For open enrollees, the first open enrollment beginning on or after September 23, 2012. • For all other enrollees and upon request, the first plan year beginning on or after September 23, 2012. – Identify SBC sources • The ―builder‖ • The ―distributor‖ • and production date(s)Health Care Reform CFO Roundtable
SBC/Uniform Glossary – Assess impact of unavailability based on target OE dates • If enrollment is active, SBC must be available at the time enrollment materials are distributed. • If enrollment is automatic/passive, SBC must be available at least 30 days before the first day of the next plan/policy year. • Consider alternate strategies: post during/after OE and communicate via confirm, issue with confirm, issue as separate task/deliverable – Determine feasibility of electronic issuanceHealth Care Reform CFO Roundtable
SBC/Uniform Glossary If your benefits enrollment is not online: Paper is always OK; electronic distribution rules depend on coverage status: If participant or beneficiary If participant or beneficiary is covered under the plan, then: is eligible but not covered under the plan, then: For ERISA and church plans, electronic For all plans, electronic distribution is permitted if: distribution must comply with ERISA electronic distribution rules at 29 CFR 2520.104b-1(c) (see • The format is readily accessible next slide) • A paper copy can be obtained upon request • The plan/issuer notifies the individual by postcard For non-federal government plans electronic or email if the SBC is posted to an intranet site. distribution must comply with ERISA rules OR electronic distribution rules for individual coverageHealth Care Reform CFO Roundtable
SBC/Uniform Glossary – Determine non-English language requirements • The counties in which this must be done are those in which at least 10% of the population residing in the county is literate only in the same non-English language. • HHS website (applicable for 2012): http://www.cciio.cms.gov/resources/factsheets/clas-data.html – Ensure consistency of message/language between various materials (e.g. SBC & Benefits ―Guidebook‖) – Post files in conjunction with OE ramp up – Implement methodology to handle employee hard copy requests – Communicate availability (enrollment, OE & new hire) – Print and issue quantities to COBRA populationHealth Care Reform CFO Roundtable
W-2 Reporting Disclosure • Effective – 2012 taxable year (W-2s sent no later than January 31, 2013) • Applies To – All employers filing more than 250 W-2’s for preceding year that provide ―applicable employer-sponsored coverage‖ during a calendar year are subject to the reporting requirement— including federal, state, and local government entities • What It Does – Requires employers to report the ―aggregate cost‖ of ―applicable employer-sponsored coverage‖ on an employee’s Form W-2 • Non-compliance risks & penalties – $200 per Form W-2 up to $3 million maxHealth Care Reform CFO Roundtable
W-2 Reporting • What is ―applicable employer-sponsored coverage‖? – Any employer-provided group health plan coverage under an insured or self-insured health plan that is excludable from the employees gross income under Code §106, or that would be excludable if it were paid for by the employer, subject to numerous exceptions: • any coverage for long-term care; • any coverage (whether through insurance or otherwise) described in Code § 9832(c)(1), which includes accident and disability coverage, but no exception applies for coverage for on-site medical clinics; • certain stand-alone vision or dental coverage; and • any coverage described in Code § 9832(c)(3) (i.e., coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance) where such coverage is funded by the employee on an after-tax basis for which a deduction under Code § 162(l) is not allowable.Health Care Reform CFO Roundtable
W-2 Reporting …in other words, • any coverage subject to the COBRA regulations definition of group health plan would, in the absence of an exception or transition rule, be subject to the W-2 reporting requirement. • N/A if employer is not otherwise required to issue a W-2 (e.g. retirees, former employee receiving no compensation)Health Care Reform CFO Roundtable
W-2 Reporting • Requirements – Determine methods for calculating the cost of coverage • Most common – COBRA applicable premium method – Collect data • Must reflect changes: – Mid-year changes to plan costs (employer) – Mid-year life event changes (employee) – Aggregate data and upload (or procure from third party) – Consider feasibility of integrating process with payroll – Communicate! • OE as option, but definitely in concert with W-2 release at a minimumHealth Care Reform CFO Roundtable
Notice of Exchanges • Effective – March 1, 2013 • Applies To – Those subject to FLSAs broad—and somewhat circular— general definition of ―employer‖: • ―any person acting directly or indirectly in the interest of an employer in relation to an employee.‖ • What It Does – Provides all new hires and current employees with a written notice about the health benefit Exchange and some of the consequences if an employee decides to purchase a qualified health plan through the Exchange in lieu of employer-sponsored coverageHealth Care Reform CFO Roundtable
Notice of Exchanges • Requirements – Employees hired on or after the effective date must be provided the Notice of Exchange at the time of hiring. – Employees employed on the effective date must be provided the Notice of Exchange no later than the effective date (i.e., no later than March 1, 2013). – Model TBD – anticipate release of model notice/language and additional guidanceHealth Care Reform CFO Roundtable
Notice of Exchanges • Absent a model, we know the content requirements to be as follows: – Employees must be informed of the existence of an Exchange, given a description of the services provided by the Exchange, and told how to contact the Exchange to request assistance. – Employees must be informed that they may be eligible for a premium tax credit (under Code § 36B) or a cost-sharing reduction (under PPACA § 1402) through the Exchange if the employer plan’s share of the total cost of benefits under the plan is less than 60%. – Employees must be informed that (a) if they purchase a qualified health plan through the Exchange, then they may lose any employer contribution toward the cost of employer-provided coverage; and (b) all or a portion of employer contributions to employer-provided coverage may be excludable for federal income tax purposes.Health Care Reform CFO Roundtable
PCOR Fees • Effective – For policy/plan years ending after September 20, 2012 (stops applying to policy/plan years ending after September 30, 2019) • Applies To – Insurers of specified health insurance policies and sponsors of applicable self-insured health plans • What It Does – Funds, in part, the Patient Centered Outcomes Research Institute, a nonprofit corporation created by the ACA charged with supporting clinical effectiveness researchHealth Care Reform CFO Roundtable
PCOR Fees • Requirements – Determine ―payer‖ (insurer or you). If you, – Determine method for calculating fee (self-insured) • Actual count method • Snapshot method • Form 5500 method • Year One (plan years before July 11, 2012) – any reasonable method – Set up applicable reports, process – Pay fee • $2 X average number of covered lives; subject to increase • Reported and paid once a year on IRS Form 720 (Quarterly Federal Excise Tax Return) • Due by July 31 of following year for calendar year plansHealth Care Reform CFO Roundtable
90 Day Waiting Period Max • Effective – For policy/plan years beginning on or after January 1, 2014 • Applies To – Group health plans and insurers, including grandfathered plans • What It Does – Prohibits a group health plan or insurer from applying a coverage waiting period that exceeds 90 daysHealth Care Reform CFO Roundtable
90 Day Waiting Period Max • Noteworthy – Limit applies eligibility conditions based on the lapse of time – Substantive eligibility conditions (FT status, job category, licensing) permitted • …so long as not designed to avoid compliance • Requirements – Modify current eligibility rules, including ―+1‖, when applicable – Evaluate ACA’s Employer Shared Responsibility/FT employee determination • While serving a different purpose, the method dovetails into this provisionHealth Care Reform CFO Roundtable
Other Notable Provisions • Payroll – 0.9% Medicare tax increase for $200K+ employees (1/1/2013) • Financial/Reporting – Medical loss ratio rebates (first rebates paid by 8/1/2012) – Deduction ends for portion of health care expenses reimbursed to employer through Medicare Part D subsidy program (1/1/2013) – Elimination of Retiree Drug Subsidy deductibility for employers (1/1/2013) – subsidy remains in existence • Tax – Threshold for the itemized deduction for unreimbursed medical expenses under Code § 213 is increased to 10% of adjusted gross income (from 7.5% of adjusted gross income) for taxable years beginning after December 31, 2012.Health Care Reform CFO Roundtable
Other Notable Provisions • Administrative/wellness (2014) – Rewards for wellness programs increased from 20% to 30% – Automatic enrollment? • Plan design (2014) – Pre-existing condition limitation exclusions eliminated – Annual dollar amounts for essential health benefits prohibited – Cost sharing limits on plans cannot exceed limits in effect for high deductible health plansHealth Care Reform CFO Roundtable
Resources • healthcare.gov – HHS’ main consumer resource on HCR (the Fed exchange ―gateway‖?) • dol.gov/ebsa/healthreform – DOL’s dedicated ACA website • cciio.cms.gov – Center for Consumer Information & Insurance Oversight • ncsl.org – database tracks state reform-related bills • www.HealthCareandYou.org – formed by a coalition of doctors, nurses, pharmacists and consumers; geared toward answering consumer questions about HCRHealth Care Reform CFO Roundtable
Final Considerations • Make ACA a strategic requirement of all future benefits planning and budgeting – Pay or play, employer shared responsibility FT employee method – ―Exchange readiness‖ – ―Cadillac Tax‖ – Isolate related costs – new? additional? different? savings? – Embrace ―safe harbors‖ and ―good faith‖ allowances • Ask questions & hold people/partners accountable • Educate & communicate with your employees • Keep an eye on Washington, D.C., the Departments & the StatesHealth Care Reform CFO Roundtable
Thank You! Eric Pochas (firstname.lastname@example.org)Health Care Reform CFO Roundtable