Health Care Reform Patient Protection and Affordable Care Act (PPACA) Chris Harrison, President EBENCONCEPTS David Smith, Vice President EBENCONCEPTSVersion 32July 22, 2012
Deadlines & Regulations Deadlines vary based on the way law was written All plans after 9/1/11 will have complied with the initial deadline (for plans renewing after 9/23/10) and its provisions. A number of changes effective January 1, or at renewal, for the next few years are to come Regulatory “Clarifications” continue to be issued HHS, DOL issuing regulations, FAQs answer many questions Ongoing efforts to revise have moved forward For instance, 1099 requirement repealed W-2 requirements postponed“But isn’t this law going away?”
Deadlines & Regulations “2012 Elections have potential to affect implementation” Political Reality: Efforts to repeal vs. realities of trying to repeal House’s multiple attempts to stop health care reform through defunding or policy statements have failed; although changes to the regulations have occurred Senate would require 60 votes to completely repeal the bill Outcome of 2012 elections are uncertain Carrier investments in PPACA compliance are significant Lots of quiet support for health care reform by carriers Their perspective is important in terms of how the courts are considering this question and may answer it…
Deadlines & Regulations “The courts will strike this down” Supreme Court ruled on June 28, 2012 that the individual mandate was constitutional as a tax and therefore this law is going forward toward full implementation Only complication is about states being required to expand Medicaid eligibility and to be responsible for a portion of the funding, which has no impact on employers and individuals buying health insurance Post-decision polls are showing a majority of Americans say it’s time to move on and that fewer numbers of businesses will drop coverage So… we’re moving forward!
Grandfathered Plans 2010Grandfathered Plans: Individuals and employer group plans can keep their current “grandfathered” policy if the only plan changes made are to add or delete new employee/dependents or part of a collective bargaining agreement. Starting point: What were the benefits as of March 23, 2010 New regulations define what changes are permissible to retain grandfathered status
Grandfathered Plans 2010 Grandfathered plans are permanently exempt from the following reforms: Preventive services mandates Annual cost sharing, deductible requirements & essential benefits 105(h) Nondiscrimination rules apply to fully-insured plans Certain reporting & rating requirements Appeals process Designation Rules for Primary Care Providers Coverage of clinical trials No discrimination against providers Main reasons to maintain status Savings of 3-5% in additional health care costs Non-discrimination rules
Grandfathered Plans 2010Grandfathered plans are subject to the following requirements: Changes in tax rules relating to health plans Uniform explanation of coverage Cost reporting and rebates Automatic enrollment Notification of availability of the exchange and subsidies Notices regarding the exchange
Grandfathered Plans 2010Grandfathered plans are subject to the following requirements (continued): Six months after enactment Limitation on lifetime and annual limits Limitation on pre-existing condition exclusions Limitation on waiting periods Coverage of adult children (only if adult child is NOT eligible to enroll in another eligible employer plan) 2014 for employees Prohibition on rescissions
Grandfathered Plans 2010Cannot retain grandfathered status if: Increase of 5%* or more of employee contribution amount for any tier of coverage (EE only, ES, EC, Family) Change of 15%* or more of deductible or out-of-pocket max Any increase in employee’s coinsurance % (e.g. 20% to 30%) Increase copayments by more than $5 or 15% Eliminate coverage to diagnose or treat a particular condition Obtain new policy, certificate or contract of insuranceThese are lifetime exceptions one and done: cannot use annually Exception: medical inflation increases
Grandfathered Plans 2010 What can you do? Add family members or new employees Disenroll employees Make changes as a result of state or federal regulations Make changes to voluntarily adopt some or all of the law’s requirements Change third party administrator if you are self-funded Increase premiums
Grandfathered Plans 2010October 2010 guidance Multiple plans? Each plan would have be evaluated separately Implementing wellness discounts? Creates lower contribution levels may affect grandfathered status Do these rules apply to dental or vision plans? No… If they are separate policies, certificates or contracts of insurance or If not separate, employees must have right to choose not to have dental or vision benefits, and if they choose to have them, must pay premium to cover it
Grandfathered Plans 2010 Most carriers have announced that all of their post-10/1 plans will be compliant with mandates Higher costs, but not necessarily affecting group’s grandfathered status Notice mandate Employers are required to provide annual notice to employees of grandfathered plan status Three forms: grandfathered, non-grandfathered, “gray” grandfathered Can layer plans to maintain grandfathered status Using HRA with group health plan to maintain current benefits is one innovative way to build GF plan
Grandfathered Plans 2010Other recent guidance Changes mid-year change grandfathered status at time of change, not time of contract Example: 1/1 plan year, but make benefit change eff 7/1 Lose grandfathered status as of 7/1 Change in formulary does not change grandfathered status Drug move from tier to tier because of availability of generic Change in carriers that results in a drug change of tier Defined Contribution Plan and Grandfathered Must maintain percentage of actual cost levels to maintain grandfathered status Example: $300 per employee per month
Grandfathered Plans 2010What are we doing? Providing our clients the “correct” employee notice of their grandfathered status at renewal Grandfathered Non-grandfathered Benefits are compliant but plan still grandfathered Our notices are continually updated; for instance in 2011 to included required information regarding Medicaid and CHIP programs. Carriers are not providing any guidance on this issue
(Very) Small Business Tax Credit 2010Eligible small businesses are eligible for phase one of the small business premium tax credit. Requirements: Less than 25 employees Must pay up to 50% of premiums Average salary must be $50,000 or less. Sliding scale based on # of employees and average payroll Businesses and non-profits are eligible for the credit. Credit for amounts paid for dental and vision eligible
(Very) Small Business Tax Credit 2010Must have taxable income for the tax credit: Carry back 1 year / Carry forward 20 yearsControlled Groups / Common Ownership are treated as a single employerHow subsidy claimed varies based on how taxes paid by employer “C” Corporations - reflected on tax return “S” Corps or other disregarded entities – distributed to owners via K-1 Nonprofits – used to pay employment taxes (but not more than annual amounts)
(Very) Small Business Tax Credit 2010 How will it work? Take all employee hours from the prior year Example: 10 FT employees, 20 PT employees Determine # of employees 20 PT employees work, on average, 1,000 hours annually Add full-time employees hours (10 x 2080) and part-time EE hours (20 x 1000) = 40,800 then divide by 2,080 = 19.6 Determine average salary Total salaries for all employees (except for owners) Average salary for FT workers: $26,000 PT employees paid an average of $12/hr Add FT employees salaries ($260,000) + PT ee’s income ($240,000) = $500,000 then divide by # employees above (19.6) = $25,510.20
(Very) Small Business Tax Credit 2010How will it work? What is the max tax credit? For Profit Business: No more than 35% of employer portion • Tax CREDIT (not deduction) of $8,400 • Reduces tax deduction under Section 152 by the amount of tax credit Non-profit Organization: No more than 25% of employer costs • Tax CREDIT (not deduction) of $6,000 However… the tax credit will be reduced if your average group size is greater than 10 and/or average salary is greater than $25,000
(Very) Small Business Tax Credit 2010Phase-out for amounts above certain limits These formulas will calculate the REDUCTION in subsidy to a small employer More than 10 FTE’s • (number FTE’s – 10) / 15 * Max Tax Credit Amount • (19.6-10) / 15 = 0.64 * 8,400 = $5,376 More than $25,000 average wage • (average wage - $25,000) / $25,000 • (25,510-$25,000) / $25,000 = 0.0204 * 8,400 = $171.36 REVISED TAX CREDIT AMOUNT • $8,400 - $5,376 - $171.36 = $2,852.64 • Still able to deduct $21,147.36 under §152
(Very) Small Business Tax Credit 2010New guidance as of December 5, 2010 IRS Notice 2010-82 now available Who gets counted as an employee? Includes those who have terminated, or who waived coverage Determining hours of service Can use any of the common methods (count actual hours, days- worked or weeks-work equivalencies) Could use different methods for different employees within same employerForm for filing for tax credit issued IRS Form 8941 (available on IRS website)
★ (Very) Small Business Tax Credit 2010How has it gone? Original estimate: $2B annually in tax credits Latest data from IRS: $278M claimed in 2010 Less than 10 FTEs 10-25 FTEs $25-50,000 Partial Credit Partial Credit 115,800 20,800 Less than $25,000 Full Credit Partial Credit 28,100 6,000
(Very) Small Business Tax Credit 2010What are we doing? Developed an excel spreadsheet to assist employer-clients with determining their eligibility and estimated amount of tax credit for 2010 and 2011 Available for our clients through our sales team
“Older” Dependent Children Coverage 2010 Mandate for all groups Employee’s children who are up to 26 years of age are eligible to be on parents’ insurance Includes up to the date before the child turns 26 Regardless of whether full-time student or a tax dependent of employee (amount deductible through child turning 27 per IRS) Still have COBRA eligibility for 36 months following loss of eligibility (so covered until day before they turn 29 years old) Amount paid by employee is not taxable income (new change) Prohibited from vary premium contributions based on child’s age Does not apply to spouse of child, nor to the child’s child(ren) Other benefit restrictions still apply Per regs, creates new eligibility period employee and dependent Grandfathered plans do not have to extend eligibility if the child is eligible for other employer coverage
“Older” Dependent Children Coverage 2010New guidance – 9-23-2010 “Child” means: Biological child Step-child Adopted child Foster child Does not require the coverage of employee’s grandchildren, custody arrangements or children of domestic partner Could still extend to these “other” children, and could also place restrictions on their inclusion (such as student status, etc.)
“Older” Dependent Children Coverage 2010State Income Tax Issues Even though federal law says that contributions for non- dependent children, a number of states do not follow federal law when it comes to that state’s tax laws
“Older” Dependent Children Coverage 2010How is it working? According to May 2012 survey of largest health insurers, at least 3.1 million new young adults are now covered because of this provision
“Older” Dependent Children Coverage 2010What are we doing? Providing our clients the correct notice for the open enrollment which is mandated under this provision Two different notices – grandfathered and non-grandfathered Recommending this notice be given out 30 days prior to renewal to avoid retro adding dependent children Assisting our clients in communicating this information to their employees and answering the “complex” questions that will undoubtedly come
Preventative Service Mandates 2010 Applies to Non-grandfathered Plans (mostly) New regulations issued July 12, 2010 A part of the 2010 implementation mandates Outline list of tests/procedures to be covered with no cost sharing to the plan participant Three page list of procedures to be covered includes STD testing, pregnancy tests, mammograms, vision exams for children, and colonoscopies http://www.healthcare.gov/law/about/provisions/services/lists.html Also includes covering costs of immunizations and other well-child and well- baby care Likely to be the most expensive aspect of first phase of HCR implementation Much higher levels of preventative care received per HHS reports 54M Americans received at least one free preventative service in past year
★ Preventative Service Mandates 2010 The creeping expansion of preventative service mandates August 2011: HHS adopted additional Guidelines for Women’s Preventive Services Requires the following services to be provided at no additional cost (no copay, deductible or other cost-sharing): Annual well-woman preventive care visit Gestational diabetes screening for women 24 to 28 weeks pregnant, and those at high risk of developing gestational diabetes High-risk human papillomavirus (HPV) DNA testing for women who are 30 or older every three years, regardless of pap smear results STI counseling, and HIV screening and counseling Contraception (including all FDA-approved contraceptive methods) and contraceptive counseling Breastfeeding support, supplies, and counseling Domestic violence screening Applies to new health plans starting in August 2012
★ Preventative Service Mandates 2010The creeping expansion of preventative service mandates Guidelines for Women’s Preventive Services Lots of reactions against contraceptive requirements Two “compromises” for religious nonprofits only • Delayed requirements to be in compliance until August 1, 2013 • Allow religious nonprofit to not pay for contraception for their employees, but require that the insurance company pay for it instead No exceptions for other employers who may object on moral grounds Stay Tuned: This battle is not over yet
Guidance on Notices 2010USDOL/HHS announced early November 2010 Employers must provide the grandfathered notice whenever they provide a participant or potential participant a copy of their benefits May be given or delivered in paper or electronically
Mini-Med Policies 2010 Affects plans that do not provide “comprehensive” medical benefits Lower annual caps (e.g. $25,000) Limited benefits for office visits, etc. Carriers could obtain waiver for mini-med to continue to offer benefits, but must establish that failure to obtain waiver will result in a: Significant decrease in access to benefits OR Significant increase in premiums Waiver only applies to EXISTING plans and does not permit the sale of new policies Limited exception – existing mini-med customers buying a replacement policy from a different carrier
Mini-Med Policies 2010If Plan is approved (HHS determination), employer must provide a notice to mini-med participants Notice must: Clearly indicate the dollar amount of the annual limit and the benefits affected by the lower annual limit Be prominently displayed in 14 point bold type State waiver is good for only one year Model language is available Obligation to provide notice is an EMPLOYER responsibility and not one for the CARRIER
★ High Risk Pools 2010 Creates high-risk pool coverage for people who cannot obtain current individual coverage due to preexisting conditions and have been uninsured for 6+ months. Many states have implemented new pool, and federal pool have opened to mixed enrollment Must be uninsured by more than six months Employers and Insurers cannot put people in the pool—would pay penalty. Ends January 1, 2014, when Exchanges are operational Financed by a $5 billion appropriation. Enrollment to date: over 73,333 through June 2012 4,124 in North Carolina
Reinsurance for Early Retirees 2010Federal gov’t will assume partial risk for early retiree health costs Only for early retirees who are 55 or older Plans would pay first $15,000 in claims Share risk on the next $75,000 on an 80/20 basis Plan assumes liability for costs in excess of $90,000 Plan paid stop- Federal Reinsurance loss coverage $15,000 $90,000
Reinsurance for Early Retirees 2010 Federal gov’t assumes some risk for early retirees’ health care costs Effective June 23, 2010 Impact: dramatically reduce costs for early retirees on group health plans Health care costs for 55-64 populations are significantly higher (estimated to be more than 30%) than younger workers Health care costs for early retirees are higher than those working Caveat: Must invest the difference in wellness and chronic care management programs Ends January 1, 2014, when Exchanges are operational
Reinsurance for Early Retirees 2010 The following are not eligible for reimbursement Custodial care Routine foot care (e.g., orthopedic shoes) Personal comfort items (e.g., TV in a hospital room) Routine services and appliances for vision (e.g., glasses, contact lenses) Hearing aids and auditory implants Cosmetic surgery Routine dental services Assisted suicide In-vitro fertilization, artificial insemination, sperm and embryo procurement Abortion services, except if the pregnancy resulted from rape or incest or endangers the life of the woman Drugs that are not covered by a standard Part D plan (unless covered under Parts A or B) Items or services not furnished in the United States
Reinsurance for Early Retirees 2010Latest update: Spent approximately $3.6B (of $5B) of the available pool money through the end of FY2011 (ending 9/30/2011) Approximately $1.4B left for the remaining two years; funds expected to run-out prior to 2014. No new employers may participate after May 5, 2011
Rescission of Coverage 2010Regulation defines “rescission” as a cancellation or discontinuance of coverage that has a retroactive effect.Plan may not rescind coverage unless: individual or person seeking coverage on behalf of individual performs act, practice, or omission that constitutes fraud or intentional misrepresentation of material fact. “Inadvertent” failures to provide health information not considered intentional misrepresentation. Example: premium deducted but not eligible for coverage Regs say that the individual “relied” on coverage and employer may not retro-term the individual’s coverage on the health plan
Rescission of Coverage 2010Not considered “rescission” if cancellation is prospective or only is effective retroactively to extent attributable to a failure to timely pay required premiums or contributions. Plan must provide 30-days advance written notice to each participant affected (regardless whether individual or group coverage). No guidance yet on cancellations (Preamble says will be issued in future). Statute requires advance notice.Guidance: be very careful if you want to revoke someone’s participation on plan
Benefit Changes 2010 No Lifetime limits on benefits Some annual limits allowed for now prohibited completely by January 1, 2014 Cover preexisting conditions for children 0-19 Emergency services covered in-network Includes new limitations on copayments for going to ER Enrollees may designate any in-network doctor as their primary care physician. New coverage appeal process. Federal grant program for small employers providing wellness programs to their employees
Other Provisions 2010 All group plans will be required to comply with the Internal Revenue Section 105(h) rules that prohibit discrimination in favor of highly compensated individuals Delayed until regulations are implemented Medicare Part D changes Deductibility for Part D subsidies is eliminated in 2013, but this results in an immediate accounting impact. Provides a $250 rebate to seniors who hit the “donut hole in 2010 (and closes the donut hole over time) Nursing mothers must be given breaks/location Employers with less than 50 employees may not have to comply if there is “undue hardship”
Other Provisions 2010 Expanded claims appeals process Six major changes include: Reducing urgent care claims from 72 to 24 hours Expanded notice requirements for denials Mandated use of state-based external review of claims Delayed enforcement until 7/1/2011
★ Changes Effective in 2011 2011 Penalty for use of HSA for nonqualified medical expenses increases to 20%. OTC drugs no longer be reimbursable unless prescribed by a doctor. Small employers (less than 100 lives) will be allowed to adopt new “simple cafeteria plans.” Easier eligibility requirements Employees who work more than 1,000 hours a year Could exclude employees under 21 or those who have been employed less than one year Minimum contribution requirements based on non-elective or matching methods A uniform percentage (2%+) or less of 6% of salary or 2x employee’s salary reductions Cannot favor HCE or key employees
★ Changes Effective in 2011 2011 MINIMUM MEDICAL LOSS RATIOS: Rebates must be provided to consumers if health plans spend below minimum loss ratios based on percentage of premium spent for HC expenses 85% for large group plans 80% for small group and individual Remember: it’s not how your group does… it’s how that carrier’s entire market segment performs Also, self-funded plans are not subject to these rules What counts toward HC Expenses? Reimbursement of clinical services Activities that improve health care quality All other non-claims expenses excluding state and federal taxes, licensing or regulatory fees Standard for what is administrative expenses has been approved for 2011 Ongoing efforts among numerous groups to have their expenses excluded from “admin cost”
★ Changes Effective in 2011 2011 MINIMUM MEDICAL LOSS RATIOS: Beginning January 2011, This will result in some carriers sending rebates to payers Estimated rebates for 2011: $1.3-2.0B Carriers are required to report MLR results annually Notices have been mailed to both groups affected and those who are not going to receive a rebate
★ Changes Effective in 2011 2011 MINIMUM MEDICAL LOSS RATIOS: What happens if you receive a rebate? What is the source of funds used to pay the premiums? All employer money: money stays with employer Part employer and part employee money: percentage paid by participants/ employees is considered a plan asset Distribute to former plan participants? If the cost of calculating and distributing to former participants is approximately to amount of proceeds • Yes: may limit allocation to current plan participants • No: must distribute to former plan participants Distribute to current plan participants? No if not cost effective (amount is de minimis) or taxable consequences • If participant’s portion was paid with pre-tax dollars, then the return of those premiums – whether received in cash or as a credit against future premiums – will be subject to both income and employment taxes Deadline: 90 days from receipt of rebate to return or apply
★ Changes Effective in 2011 2011 MINIMUM MEDICAL LOSS RATIOS: What are we doing? We have prepared an Excel spreadsheet to assist employers with determining what portion of the rebate could be owed to participants and to assess the economic cost of doing so Further, we developed a corporate resolution form so that the employer can, on behalf of the Plan, show how the funds are being handled: Returned to current and/or former participants Rebates kept in the Plan and applied toward future participant premium payments and/or benefit enhancements
★ Changes Effective in 2011 2011Regulating “unreasonable” premium hikes Any premium rate increase of 10% or more on carrier’s entire block (trend increases) are subject to review by the states and HHS for renewals on or after 9/1/11 individual or small employer group insurance markets does not apply to grandfathered plans or the large group market 10 percent threshold based on nationwide cost trends exceeds both the average rate of growth in the medical component of the consumer price index (3.7%–4.4%) and the average annual rate of growth in national health care expenditures over the last five years (4.4%–6.9%) Developing state-level thresholds for 2012
★ Changes Effective in 2011 2011 Regulating “unreasonable” premium hikes Carriers must submit public disclosure to justify the increase that “allow consumers to understand the factors driving rate increases” Review to be done by States (if rate review process in place) or by HHS if the state does not complete rate review or no process The following ten states are likely to be regulated by HHS: Alabama, Arizona, Idaho, Iowa, Louisiana, Missouri, Montana, Pennsylvania, Virginia and Wyoming Review will carry with it one of three labels: "excessive" unreasonably high in relation to the benefits provided "unjustified" lacking adequate data to determine whether it is reasonable "unfairly discriminatory" resulting in premium differences for enrollees that are not permissible under state law or unjustified based on expected cost differences.
★ Changes effective in 2012 2012Employers report on W2s the aggregate cost of employer-sponsored health benefits. Amounts continue to be not taxable, and is informational only Applies to benefits provided during taxable years after December 31, 2011 Mandatory for businesses that issue 250 or more W- 2s in a calendar year Optional for smaller businesses… for now. 2011 W-2 already allows reporting in Box 12 via Code DD
Changes effective in 2012 2012 All employers must include on their W2s the aggregate cost of employer-sponsored health benefits. If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage Health Insurance Premium Amount (portion paid by EE and ER) Employer Contributions to FSA (but not HRA, HSA or Archer MSAs) Wellness Programs and/or Onsite Medical Clinics that are COBRA-eligible Governmental Plans (except for military) Not required to include HRA spending, separate dental and vision plans Will not report costs when two employees are married and covered on health plan How determined? Premium charged or core COBRA rates, and reflect cost changes during the year — amounts could be composite for all employees
★ Changes effective in 2012 2012 New Fee to pay for comparative clinical effectiveness research will be charged to all insured and self-funded groups beginning 10/1/2012 To provide information regarding the effectiveness, risks and benefits of various medical treatments Costs First year: $1 x average number of covered lives Second and subsequent years: $2 x average number of covered lives Who pays? Insured: carrier Self-funded: employer If separate HRA – must collect double-fee
Changes effective in 2012 2012Group plans (including self-insured) must report whether benefits provided to employees: meet criteria (to be established) on improving health outcomes, reducing medical errors, and wellness and health promotion activities. This report must also be provided to plan participants. No guidance YET on what this report will look like…The Department of Labor will begin annual studies on self-insured plans using data collected from Form 5500.
★ Changes effective in 2012 2012 Notice of changes in benefit plans Under current guidance, notice of any material modification of benefits must be given 60 days prior to the change Would include any enhancement or reduction in coverage services or benefits (including copay, deductible and other changes) or changes in premium or employee contribution amounts This presents a number of complications… Resolution of this issue is somewhat related to the Summary of Benefits and Coverages (next slides) and related regulations Federal agencies are soliciting comments on this notice requirement, including whether there are any circumstances where 60-day advance notice might be difficult Also soliciting comments on the format of the notice No requirement… YET.
★ Changes effective in 2012 2012 Summary of Benefits and Coverage (SBC) When: Renewals or start of open enrollment after September 23, 2012 Limited on size No more than four doubled-sided pages (but flexible) Must be delivered more quickly Renewals: Must be delivered 30 days prior to renewal date (NLT seven business days after issuance of new policy or written confirmation of intent to renew) Mid-Year: If there are changes to plan mid-year, must be communicated at least 60 days prior to the effective date of the change Must delivered: when shopping for coverage, when coverage is renewed before each policy year, at least 60 days before any change to coverage and within seven business days of request Who is responsible for producing the SBC? Insured: insurance company and the employer Self-funded: employer Who is it delivered to: Anyone eligible to enroll on the plan: EE and beneficiaries have same address: one Separate addresses: to each address
★ Changes effective in 2012 2012 Summary of Benefits and Coverage (SBC) Notice must include certain information Uniform definitions of standard insurance and medical terms List of 44 terms (e.g. “allowed amount,” “urgent care”) Description of coverage including cost-sharing for each benefit Eliminated mandate to include cost of coverage within SBC Exceptions, reductions, and limitations of the coverage, along with cost-sharing provisions including deductibles, co-payments and coinsurance Statement that SBC is only a summary and that the plan document, policy or certificate of insurance should be consulted to determine the governing provisions. Internet addresses for obtaining the uniform glossary and for obtaining any formulary or provider network that a plan uses.
★ Changes effective in 2012_______________________: _________________Coverage Examples Coverage Period: [See instructions] Coverage for: _____________ | Plan Type: _____ 2012About these Coverage Having a baby Managing type 2 diabetes (normal delivery) (routine maintenance ofExamples: a well-controlled condition)These examples show how this plan might cover Amount owed to providers: $7,540 Amount owed to providers: $4,100medical care in given situations. Use these Plan pays $ Plan pays $examples to see, in general, how much financial Patient pays $ Patient pays $protection a sample patient might get if they arecovered under different plans. Sample care costs: Sample care costs: Hospital charges (mother) $2,700 Prescriptions $1,500 Routine obstetric care $2,100 Medical Equipment and Supplies $1,300 Hospital charges (baby) $900 Office Visits and Procedures $730 This is Anesthesia $900 Education $290 not a cost Laboratory tests $500 Laboratory tests $140 estimator. Prescriptions $200 Vaccines, other preventive $140 Don’t use these examples to Radiology $200 Total $4,100 estimate your actual costs Vaccines, other preventive $40 under this plan. The actual Total $7,540 Patient pays: care you receive will be Deductibles $ different from these Patient pays: Co-pays $ examples, and the cost of Deductibles $ Co-insurance $ that care will also be Co-pays $ Limits or exclusions $ different. Co-insurance $ Total $ See the next page for Limits or exclusions $ important information about Total $ these examples.!Questions: Call 1-800-[insert] or visit us at www.[insert].com.If you aren’t clear about any of the bolded terms used in this form, see the Glossary. You can view the Glossary 5 of 6!at www.[insert] or call 1-800-[insert] to request a copy.
★ Changes effective in 2012 2012Summary of Benefits and Coverage (SBC) How Distributed? Electronically or paper – if electronic, must deliver paper if requested by an enrollee “Culturally and linguistically appropriate” If more than 10% of employer’s population speaks one of the following languages must have translation available: Chinese (1), Spanish (100+), Tagalog (2) or Navaho (3) Limited number of counties require SBC available in language always Penalty for non-compliance: $1,000 for each failure to provide Mandate applies to health insurers for fully-insured plans and employers for self-funded plans Penalties delayed for first year with “an emphasis on assisting with compliance rather than enforcement”
★ Changes effective in 2012 2012Summary of Benefits and Coverage (SBC) Final(?) Answers How SBC coordinates with existing ERISA-required SPDs, and other communications, such as open enrollment materials Can be incorporated into SPD – but must be first What are the specific coverage examples (birth of a child, cancer treatment and managing diabetes) that might be included Limited to just childbirth and diabetes, for now… Expected to include other coverage examples in the future May combine multiple coordinated plans into single SBC Example: When there is an outside administered HRA
Changes effective in 2012 2012 CLASS Act What? A government program to pay for long-term care expenses, but with a smaller benefit and mandatory “taxes” to pay for this benefit Very similar to Social Security Disability Designed to reduce the government’s obligations under Medicaid to pay for long-term care expenses Requirements? Monthly payment of $180-240 for a period of at least five years to receive a small daily benefit for long-term care expenses (rest home, etc.) Benefit estimated to be $50-75 per day depending on ADL loss Must opt out – either employer or employee or will automatically be required to take out amount from paycheck
Changes effective in 2012 2012 CLASS Act FAQs from HHS released 4-2011 Outlined general information about the program Mentioned that HHS has until 10/2012 to announce “details of the CLASS program” and that implementation would start thereafter COULD BE REPEALED BY CONGRESS Two bills introduced in current session to repeal CLASS provisions Main concerns are about cost and viability HHS has said that, consistent with the law’s requirement, it will not move forward with the program until it is clear that it will be sustainable. An excellent opportunity to discuss Long-Term Care Insurance options with employers A number of states have adopted LTC Partnership plans which are designed to assist with these costs
Changes effective in 2013 2013Higher taxes: Additional 0.9% Medicare Hospital Insurance tax on self- employed individuals and employees with respect to earnings and wages above $200,000 individuals/$250,000 joint filers (not indexed). Self-employed individuals are not permitted to deduct any portion of the additional tax. New 3.8% Medicare contribution on certain unearned income (e.g. rental income) from individuals with AGI over $200,000/$250,000 joint filers Why important: payroll impact – talk to your payroll providers ASAP to make sure you’re ready
Changes effective in 2013 2013The threshold for the itemized deduction for unreimbursed medical expenses would be increased from 7.5% of AGI to 10% of AGI for regular tax purposes. The increase would be waived for individuals age 65 and older for tax years 2013 through 2016.
★ Changes effective in 2013 2013$2,500 Cap on Medical FSA contributions annually indexed for inflation begins. Only applies to employee contributions to FSA No cap on employer contributions No impact on use-it-or-lose-it rules There is active discussion of repealing cap Effective when plan renews on or after 1/1/13All employers must provide notice to employees of the existence of state-based exchanges.
Taxes and Fees 2014Imposes annual taxes on private health insurers based on net premiums. Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable.Also a fee will be charged to cover reinsurance for the individual market for 2014-16 A federally-established amount (per-capita instead of % of premium) will be collected during first three years Amount will gradually be reduced over the three years
Rating Changes 2014Redefine small group coverage as 1-100 employees.Strict modified community rating standards for pricing all small group products Premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geography Geographic regions to be defined by the states and experience rating would be prohibited. Wellness discounts are allowed for group plans under specific circumstances.
★ Exchanges 2014Two types of Exchanges AHB Exchanges for SHOP Exchanges for Individual Purchasers Small Employers •Open to individuals whose: •Open to individuals who are - employers do not offer employed by employers with less coverage than 50 FTEs - employer-sponsored coverage is deemed •No premium subsidies – employer inadequate or unaffordable receives 50% tax credit for the - are ineligible for Medicaid non-elective costs of coverage •The only place where premium subsidies can be received
★ Exchanges 2014Main job: a marketplace where individuals and small employers will be able to shop for insurance coverage. Must be “fully operational” by October 1, 2013 Will also direct people to Medicaid if theyre eligible Facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit “CO-OP” plans
★ Exchanges 2014Certain individuals will get premium credit based on a sliding scale (non-Medicaid eligible individuals) Incomes up to 400% of FPL to buy coverage through the exchange. Slight increases to the subsidy amounts for all subsidy-eligible individuals and increases the cost-sharing subsidies for those making 250% FPL or less.Each Exchange must approve the carriers who will participate (called Qualified Health Plans “QHP”) This process will be better defined in coming regs
★ Exchanges 2014 Other important information: Only applies to individuals and those working for employers with less than 100 employees Every state is different – some have adopted laws, others are doing it by Executive Order, make-up of boards may vary “Interested parties” may not make up a majority of the Board Majority of Board must have relevant experience Every Exchange must have a website for comparative data about health plan options and create a common enrollment form States that do not create an Exchange will fall under the applicable federal exchanges (just like has occurred with the high-risk pools)
★ How Premium/Tax Credit Will Work? 2014 AHB Exchanges will make advance determinations of eligibility for individuals who: Enroll in coverage through an exchange Seek financial assistance Exchanges will determine: Whether the individual satisfies the income and other requirements for advance credit payments. The amount of the advance payments, which are made: on a monthly basis; to the insurer of the QHP in which the individual enrolls.
★ How Premium/Tax Credit Will Work? 2014 Guidelines for determining who is an "applicable taxpayer" eligible for the premium tax credit who must be: Enrolled in one or more QHPs through an exchange. Not eligible for "minimum essential coverage," other than coverage in the individual market, defined to include: government-sponsored programs; eligible employer-sponsored programs; grandfathered health plans; and certain other health benefits coverage. The regulations include detailed guidelines, including numerous examples, for calculating the premium assistance credit amount, defined as the sum of the premium assistance amounts for all coverage months in the tax year for individuals in the taxpayers family.
★ How Premium/Tax Credit Will Work? 2014 Actual credit for the tax year computed on a taxpayers tax return with the amount of advance payments must be reconciled with their annual taxes. if a taxpayers credit amount is greater than the amount of the taxpayers advance payments for a tax year, the taxpayer may receive the excess as an income tax refund; if a taxpayers advance payments are greater than the taxpayers credit amount, the taxpayer owes the excess as an additional income tax liability.
Recent Premium Tax Credit Guidance 2014Larger tax credit for older Americans Since they have higher premiumsCredit is refundable Families with moderate incomes will be able to receive the full benefit of the creditCovers Premiums Upfront Will be paid directly to the insurance company by TreasuryAmount to be paid toward the cost of coverage by individual varies based on Federal Poverty Level 100% FPL: 2% of income 400% FPL: 9.5% of income
Who falls where?Family size Medicaid Health-care exchange1 $0 to $14,856 $14,857 to $44,6802 $0 to $20,123 $20,123 to $60,5203 $0 to $25,390 $25,390 to $76,3604 $0 to $30,657 $30,657 to $92,2005 $0 to $35,923 $35,923 to $108,0406 $0 to $41,190 $41,190 to $123,8807 $0 to $46,457 $46,457 to $139,7208 $0 to $51,724 $51,724 to $155,560To see what the subsidy amounts look like:http://healthreform.kff.org/SubsidyCalculator.aspx
Individual Mandate 2014All American citizens and legal residents to purchase qualified health insurance coverage. Exceptions: religious objectors, individuals not lawfully present incarcerated individuals, taxpayers with income under 100 percent of poverty, and those who have a hardship waiver members of Indian tribes, those who were not covered for a period of less than three months during the year People with no income tax liability
Individual Mandate 2014 Penalty for non compliance flat dollar amount per person or The alternative is a fixed dollar amount that phases in beginning with $325 per person in 2015 to $695 in 2016. a percentage of the individual’s income In 2014 the percentage of income determining the fine amount will be 1%, then 2% in 2015, with the maximum fine of 2.5% of taxable (gross) household income capped at the average bronze-level insurance premium (60% actuarial) rate for the person’s family beginning in 2016. whichever is higher
★ Employer Mandate 2014There is no true requirement to buy: “Pay or Play” If an employer does not offer health benefits to their employees, then they will pay a penalty Quality or Pay If the plan doesn’t meet the coverage levels required, then the employer pays a penalty Limit contributions or pay If the amount that an employee pays is more than a certain threshold, the employer pays a penalty
★ Employer Mandate 2014Does not mandate coverage for those who are working less than 30 hours a week No requirement to cover part-time employees They should be covered through ExchangesWhen is this effective? Tax years beginning January 1, 2014
★ What does “employer” mean? 2014“Applicable large employer” An employer that had an average of 50 or more full-time employees during the preceding year based on the sum of full-time employees and full-time equivalent employees (FTEs) But there are complications…
★ Common Ownership 2014What if there are multiple employers which are commonly owned? Common Law Test Control Group rules apply (IRC §414(c)) Look at percentage of ownership
★ Common Ownership 2014Multiple owners at different shares of different businesses Look at the common percentage of ownership among the various businesses Examples
★ Common Ownership 2014Why does this matter? Business 1: 20 employees Business 2: 40 employees Business 3: 5 employees On their own, none have the mandate Under common ownership, all three must offer coverage to their respective employees
★ What are “full-time equivalents” 2014Full-time employees Each employee who works an average of 30 hours of service per week or 130 hours per month with the employer Each employee who works more than 30 hours/week or 130 hours/calendar month would count as ONE FTE Note: even if they are considered “part-time” (meaning that they work less than 40 hours a week but 30 or more hours), they could be considered full-time based on these rules
★ What are “full-time equivalents” 2014How do you count those who work less? Look at their hours worked during the “look-back stability period” – which would be between 3 months and 12 months Compare that as a percentage to 30 hours/week or 130 hours per month The fractional shares are added together to reach a “non-FT” FTE count
★ What are “full-time equivalents” 2014Example: Company A Group 1 30 employees who work 130 hours or more a month Group 2 40 employees who work 20 hours a week or 86 hrs a month (on average) Now add it up Group 1: 30 Group 2: 26.667 TOTAL: 56+ FTEs – Employer Pay or Play Mandates apply
★ Seasonal Employees 2014Some will not be counted Who? Who knows for now….Who will be counted: Much more complicated formula IRS contemplates using a six-step process to determine whether a seasonable employee is eligible for coverageHowever if the “over 50” is not for more than four months in the prior calendar year No employer pay-or-play mandate
★ Who is eligible? 2014 Employer would calculate each employee’s full-time status by looking back “at a defined period of not less than three but not more than 12 consecutive calendar months” determine if the employee worked an average of 30 hours per week during this “measurement” period. Stability period: considered a full-time employee during a subsequent “stability” period, regardless of the number of hours worked during that subsequent period. Exception: Hired to work part-time or not sure if full or part-time (seasonal) and 30+ hour average during measurement period: If representative of hours to be worked: eligible If not, not eligible
★ Who is eligible? 2014Example: Sally works an average of 25 hrs a week However for a three month period, she works full-time to fill in for someone… Since the number of hours worked was not represent what Sally would normally work, then she would not be eligible to go on health plan.
★ Penalties 2014If no coverage Employer does not have a group health plan for their employees $2,000 per FTE annual penalty Credit for 30 (or $60,000) under current rules Example: 75 FTEs within group, but no coverage offered Penalty: $90,000 annually
★ Penalties 2014If “unaffordable” coverage Employee pays more than 9.5% of their household income on benefits $3,000 per FTE annual penalty (no reduction) Example: 75 FTEs within group, but employees required are required to pay $250/month for employee only coverage Employer pays penalty for each employee who makes less than $31,250 annually
★ Penalties 2014If benefits are not “minimum level” Each plan must have benefits at or above the actuarial value of the “bronze” level benefit If benefits do not meet that level, $3,000 per employee penalty (no reduction) Who is responsible for actuarial determination? Employer or insurance company? How do you determine if a plan is creditable or noncreditable for Medicare Part D notices? Employer ultimately responsible
★ Penalties 2014Details on the penalties Treated as an Excise tax not deductible from income Those taxed as partnerships (“S” Corps, LLCs, etc) would have the penalty go to the owners’ personal taxes
★ How caught? 2014Just one employee who gets coverage from Exchange would cause employer to be reviewed for penaltiesHow will they know? The Exchanges are responsible to review each individual’s income to determine the level of premium subsidy that they are eligible for in the Exchange The Exchange will obviously review tax information for each applicant they find employer
What are larger businesses considering?Drop employer coverage completely Pay the $2,000 penalty and absorb productivity issuesKeep existing coverage and not add other populations Pay $3,000 per non-covered employee penaltyDrop employer coverage and subsidize employee coverage through exchanges Pay $2,000 penalty + pay all or some portion of coverage costContinue employer-based coverage Economic realities may make this difficult…
★ What about participation? 2014Could an employee choose not to be covered? If employer has less than 200 FTEs: Yes If employer has more than 200 Employee must be covered on employer plan Only way for employee to waive coverage is to prove that they have other coverage • Other group coverage • Medicaid or Medicare Effective date is officially 2014, according to guidance issued in January 2012Waiting periods in excess of 90 days are prohibited This mandate does not go into effect until 2014
Small Business IncentivesSmall employers will receive a 50% tax credit/subsidy for the first two years of purchasing coverage through the exchange Details? None yet
Employer Mandate 2014Free Choice Vouchers Requires employers to provide a voucher to use in the exchange instead of participating in the employer-provided plan in limited circumstances Employees must be ineligible for subsidies Employees share of premium must be more than 8% to 9.8% of family income that is less than 400% of FPL Employee can keep amounts of the voucher in excess of the cost of coverage
Benefits 2014 Three benefit packages to be defined – Gold, Silver, & Bronze Known changes to the benefit mandates Preexisting conditions limitations prohibited Prohibition on any annual limits or lifetime limits in all group (even self-funded plans) or individual plans. Multiple levels available based on actuarial equivalents Self-funded plans may not be subject to all requirements, but may not meet employer mandate requirements if they don’t comply Allows catastrophic-only policies for those 30 and younger.
Benefits 2014 All plans must meet standard packages or be based on actuarial equivalents The plans will define maximum cost-sharing amounts, benefit mandates, and other minimum covered benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and Substance use disorder services Prescription drugs Rehabilitative services and devices Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care
★ Benefits 2014 Institutes of Medicine recommendations: Build the plan to look like the “typical” small employer health plan Be sure that it costs about what the average small employer would pay If there are changes to be made, process should be transparent Summary: Keep it affordable was the recurring theme Late 2011 - HHS: no “national” essential benefits design will be established and will allows states/Exchanges to establish the standards reflective of their local needs Differing opinions on this “solution” More to come Standards will not apply to large group (100+) or self-funded plans
Wellness 2014Codifies and improves upon the HIPAA bona fide wellness program rules and increases the value of workplace wellness incentives to 30% of premiums with DHHS able to raise to 50% Establishes a 10-state pilot program to apply the rules to HIPAA bona fide wellness program rules the individual market in 2014-2017 with potential expansion to all states after 2017. New federal study on wellness program effectiveness and cost savings.
Beyond 2014Cadillac Tax: 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for singles and from $27,500 for families takes effect in 2018. Transition relief would be provided for 17 identified high-cost states. Values of health plans include reimbursements from FSAs, HRAs and employer contributions to HSAs. Stand-alone vision and dental are excluded from the calculation. Premium values are indexed to CPI Allows plans to take into account age, gender and certain other factors that impact premium costs
What happens from here?Regulatory Process Numerous federal agencies in charge of drafting rules for implementing law HHS in charge (working with DOL, Treasury/IRS, EEOC, FTC)State Implementation Legislatures, Governors, Insurance CommissionersLitigation Supreme Court: DONE
What happens from here?From Mercer, Emerging challenges and opportunities inthe new health care world, May 2011
EbenConcepts We are actively involved in the “next steps” We will be updating our clients regularly COBRA Subsidy HIRE Act compliance work today Modified HCR Notices We will work cooperatively with our clients to find the best product, to protect their status as grandfathered plans, and to continue to advocate for your needs with carriers or administrators
Questions? Chris Harrison firstname.lastname@example.org David C. Smith email@example.com
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