Health Care Reform: An Update


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Created by WEA Trust Vice President & General Counsel Vaughn Vance, this presentation helps explain to employers the changing health insurance marketplace. You'll learn about new fees and taxes, plan restrictions and employer obligations under health care reform.

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Health Care Reform: An Update

  1. 1. Health Care Reform: An Update October 2013 Vaughn Vance Vice President & General Counsel
  2. 2. Agenda • • • • Changing insurance marketplace New fees and taxes New plan restrictions New employer obligations 2
  3. 3. Changing insurance marketplace Health Insurance Exchanges • Individual exchanges are open for enrollment; many technical glitches. • Voluntary marketplace for small employers and individuals. May be expanded in 2017 for large groups. • No Wisconsin effort to establish a state-based exchange. • Federal government will establish and operate in 2014. • Federal law defines small employers as those with 100 or fewer employees. However, federal government is deferring to Wisconsin’s definition of 50 or fewer employees, for now. • Many unanswered questions remain. 3
  4. 4. Changing insurance marketplace Individual and Employer Mandates As of January 1, 2014: • Every individual must have health insurance for themselves and their dependents Given recent federal delay, as of January 1, 2015: • Failure to offer affordable coverage to their employees and eligible dependents can result in penalties (taxes) to employers 4
  5. 5. Changing insurance marketplace Individual Penalties • 2014—$95.00/adult and $47.50/child, up to $285.00 or 1% of family income, whichever is greater • 2015—$325.00/adult and $162.50/child, up to $975.00 or 2% of family income, whichever is greater • 2016 and beyond—$695.00/adult and $347.50/child, up to $2,085.00 or 2.5% of family income, whichever is greater 5
  6. 6. Employer penalties Applicable Large Employer Applicable Large Employer Fails/refuses to offer plan to at least 95% of employees and dependents Offers plan to employees and dependents One or more employees receives tax credit or subsidy Affordability Penalty=$2,000 x # of full-time employees minus 30 Employee receives a tax credit or subsidy Penalty= $3,000 x # of full-time employees receiving a tax credit or subsidy 6
  7. 7. Full-time employee defined • 30 hours of service per week or 130 hours per month (Federal requirement similar, but not identical to Wis. Stat., 632.745(5)(a)) • Look-Back Standard Measurement Period (SMP) At least three months and not more than 12 months If unpaid time (of at least four weeks) due to the academic calendar occurs during SMP, it must either be excluded or credited as service hours (maximum 501 hours) • ―And their dependents‖—children, not spouse 7
  8. 8. Minimum value • A group health plan fails to offer minimum value (MV) if ―the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs‖ • Can demonstrate compliance using any of the following: – HHS MV Calculator Tool – HHS/IRS Safe Harbor – Actuarial Certification 8
  9. 9. Deductible and out-of-pocket limits • Plans and issuers in the small group market will be required to comply with the $2,000/$4,000 deductible limit (indexed) • All non-grandfathered group health plans must comply with the annual limitation on out-of-pocket maximums of $6,250 selfonly/$12,500 family (the same amounts that apply under Code 223 for high deductible health plans/HSAs) 9
  10. 10. Non-discrimination testing • PPACA extends IRS non-discrimination requirements to health insurance plans • Effect of regulations will likely be to limit plan offerings made to ―Highly Compensated Employees‖ that differ from other staff • IRS Notice 2011–1 suspends enforcement of regulation until additional guidance has been issued 10
  11. 11. New fees and taxes • Patient Centered Outcome Research Institute (PCORI) Fee • Insurer Assessment Fee • Mandatory Reinsurance Program Fee • Risk Adjustment Program (applies only to insurers that participate in the individual or small group markets) 11
  12. 12. New PPACA fees Program Patient Centered Outcome Research Institute (PCORI) Fee Mandatory Reinsurance Program Fee Insurer Assessment Fee Purpose Funds evidence-based research. Temporary Program—Plan Years 2012–2018. Offset adverse selection risk in individual market. Temporary Program—January 1, 2014 to December 31, 2016. Funds are not linked to specific purpose. Permanent program. Applies To All health insurance carriers and TPAs on behalf of self-funded group plans. All health insurance carriers and TPAs on behalf of self-funded group plans. Health insurance issuers (licensed insurers). Not applicable to any of the following: self-funded plans, plans with 80% MA/other government program business, non-employer VEBA plans, or other ―governmental‖ plans. Fee structure $1 annual fee per member—2012. $2 annual fee in subsequent plan years. $5.25 per member per month (PMPM). $63 per year per member—first year. Federal estimates vary between 1.9% to 3.5% of premium in 2014. Effective Dates *Reference to risk assessment program omitted as only applicable to small groups 12
  13. 13. New plan restrictions • Rating restrictions • Plan design requirements • Actuarial value requirements 13
  14. 14. Rating restrictions: How rates are determined • Applicable to all individual and small group insurance policies • Prohibited rating factors include: Gender, health status, claims experience, occupation, duration of coverage, prior source of coverage, credit worthiness, and re-underwriting 14
  15. 15. Rating restrictions, cont. Permitted Rating Factor Permissible Rating Impact Notes Family Size Family Tiers Prohibited Defaults to state definition of spouse/partner. Rates can include no more than the three oldest family members under age 21. Geographic Rating Areas Actuarially justified Established/approved by federal government. Age 3:1 for adults Children have single rate band from 0–20 years. Age bands by year 21–63. One age band for 64 and older. Tobacco Use 1 ½:1 for adults Definition of use pending. Must have opportunity to avoid surcharge through wellness program. 15
  16. 16. Plan changes required To comply with initial PPACA requirements, the following plan changes will likely be necessary: • Modify plans so that copayments apply to maximum out-of-pocket • Eliminate plan options that exceed maximum out-ofpockets • Must have separate network and non-network accumulators • Eliminate existing annual dollar limits for ESRD, autism, TMD, and home health services • Add coverage for habilitative services and pediatric vision in all small group offerings 16
  17. 17. Actuarial value: Plan design • All non-grandfathered health insurance coverage in the individual and small group market meet specific actuarial values • A plan must be within 2% of the metal standard to be acceptable Metal Level Platinum Gold Silver Bronze % costs paid by insurer 90% 80% 70% 60% % of costs paid by insured 10% 20% 30% 40% 17
  18. 18. New employer obligations • • • • • W-2 reporting Employer notices Summary of benefits and coverage Automatic enrollment IRS reporting on covered employees 18
  19. 19. W-2 reporting requirements • PPACA requires employers to report to employees the aggregate cost of their employer-sponsored group health plan coverage on the annual Form W-2, in box 12, using code DD • These benefits are not taxed • Optional for employers with less than 250 employees until IRS publishes additional guidance 19
  20. 20. Employer exchange notice • Employer requirement was initially set for March 1, 2013, to provide written notice to employees related to health insurance exchanges • October 1, 2013, was deadline; no fine or penalty under the law for failing to provide the notice • Notice to include a description of services provided by the Exchange and how to contact the Exchange • Notice also to highlight potential premium tax credits or cost-sharing reductions if the employee purchases coverage through the Exchange 20
  21. 21. Other Employer Notices • PPACA requires a variety of notices • Most notices are included in WEA Trust plan documents – Prohibition of pre-existing condition exclusion – Claims appeal procedures – Notice of material modifications • Some notices are not PPACA related, but still performed by WEA Trust: – Notice of privacy practices – Medicare Part D creditable coverage – Women’s Health and Cancer Rights 21
  22. 22. Other Notices • Summary of Benefit Coverage • Notice of Healthcare Marketplace (Mandated by October 1, 2013, but no penalties for failure to do so) – • Automatic Enrollment – Notice and the opportunity for an employee to opt-out of coverage • IRS Reporting on Covered Employees 22
  23. 23. Summary of Benefits and Coverage (SBC) • The purpose of SBC is to provide individuals with standard information so they can compare medical plans as they make decisions about which plan to choose Trigger “Upon application” Upon request from either the plan (employer/sponsor) or participant Automatic Renewal To Whom To the plan/sponsor Either plan or participant Renewal—where policy has not been issued or renewed before the 30 day period Plan/participants Material modifications of plan affecting SBC provisions Participants Participants Distribution Timeline No later than 7 calendar days As soon as practicable, but no later than 7 business days following receipt of request No later than 30 days prior to the first day of the new plan year As soon as practicable, but no later than 7 business days after issuance of the new policy or written confirmation of intent to renew At least 60 days prior to the effective date of the change 23
  24. 24. Automatic enrollment of employees • Applies to employers with 200 or more employees • Employer must automatically enroll new full-time employees in one of the employer’s health benefits plans (subject to any waiting period authorized by law), and to continue the enrollment of current employees in a health benefits plan offered through the employer • In abeyance until IRS issues additional regulations —guidance expected in 2014 24
  25. 25. IRS reporting on covered employees • • • • Requirement delayed until 2015 (to be reported in 2016) Applies to large employers (≥ 50 FTE) Employer requirements: – Certification that employees had the opportunity to enroll in minimum essential coverage – Reporting of the months for which each employee’s coverage was available – Reporting the employee’s share of the lowest cost monthly premium for Minimum Essential Coverage, by calendar month – Reporting the name, address, and Taxpayer Identification Number (TIN) for each employee and the months, if any, during which the employee was covered Participants must also be provided with notice 25
  26. 26. IRS reporting on Minimum Essential Coverage • Requirement delayed until 2015 (to be reported in 2016) • Applies to insurers of fully-insured plans and employers with selffunded plans • Information to be reported: – Name, address, and EIN of employer plan sponsor – Name, address, and TIN of the ―responsible individual‖ and of each other individual obtaining coverage under the plan – Month in which the individual is covered at least one day • Participants must also be provided with notice given to federal government 26
  27. 27. Open enrollment period • To avoid penalty, employers must offer coverage to full-time employees • Little guidance given • No guidance on when first offer must occur (assume one must occur prior to January 2015) • Must be no less than once during the plan year • Whether coverage was offered is determined by: – Adequacy of notice – Period of time during which acceptance may be made – Other condition on the offer 27
  28. 28. Thank you!