Healthcare Reform PPACA Overview


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Healthcare Reform PPACA Overview

  1. 1. Healthcare Reform Webinar Discussion for BenefitMall Brokers Thursday, September 13, 2012 10:00 a.m. ESTListen to the audio portion of the webinar here.
  2. 2. Meet The Panel Rob Schlossberg Meet the Panel Ari Friedman Executive Director of Sales Executive Director of Sales Moderators Randy Madry BenefitMall Consultant Garry Carneal, JD, MA SpeakerSpeaker BenefitMall Consultant
  3. 3. Webinar Overview Attendees will learn about Part III: How will brokers and their Part II: Key points clients be impactedPart I: PPACA Part IV: PPACA of Supreme Court’s and what can Background Reflection Points ruling on PPACA employers do to prepare for the future?
  4. 4. Part I:PPACA Background
  5. 5. PPACA Background• The Patient Protection and Affordable Care Act (PPACA) was signed into law by President Obama on March 23, 2010• Technical amendments were made through the Health Care and Education Reconciliation Act of 2010, signed March 30, 2010• Various portions of the law began being implemented in 2010 and will continue until 2018. Many key changes will occur in 2014.• Federal and state governments are largely implementing these provisions• Several federal agencies are assuming pivotal roles • U.S. Department of Health and Human Services • U.S. Department of Labor • U.S Department of Treasury
  6. 6. National Health ExpenditureProjections by Payer, 2010-2019
  7. 7. PPACA GoalsCovering uninsured and underinsured populationsImproving the transparency and ease of purchasing health insuranceIncreasing health plan/insurer accountabilityCreating national standardsStandardizing benefit packagesReducing medical and insurance costs But how successful will PPACA be in achieving these goals?
  8. 8. Individual Mandate The Individual Most employers In theory, this With a few Mandate is an also must will help spread exceptions, integral part of participate, the risk andeveryone must PPACA to Effective either through make sure participate in ensure full January 1, offering everyone isthe new health participation by 2014 coverage or by participating in care reform all U.S. citizens, paying a the insurance system unless they are penalty system. exempted. Picture Credit: Texas Enterprise ; Univ of Texas at Austin
  9. 9. Exceptions to the Individual MandateApplies to everyone except the following: • Who already have minimum essential coverage through an employer-sponsored plan • Who have individual qualified coverage • Who are enrolled in a Medicaid or Medicare program • Who are covered by a military plan • Who are dependents of active military enrolled in a TriCare plan • Who are permanently incarcerated
  10. 10. Additional Exceptions to the Individual MandateOther exceptions include persons: • Who are members of Indian tribes • Who express religious objection • Who are without coverage for less than three months • Who would be contributing more than eight percent of their household income as a “required contribution,” • Whom the Secretary of HHS determines that obtaining coverage would constitute an extreme hardship
  11. 11. Repeal Efforts Not Successful To DateMost recent effort There have beenoccurred in the US 32 efforts to repeal House of or defund variousRepresentatives on portions of PPACA July 11th to date The vote followed Some programs party lines with 244 associated with members voting to PPACA are not repeal PPACA in its funded and will entirety need an affirmative action by Congress
  12. 12. Part II: Key points of SupremeCourt’s ruling on PPACA
  13. 13. U.S. Supreme Court - PPACA Legal Issues • The Question of Legal Standing and the Applicability of the Anti-Injunction Act Four Key • The Constitutionality of the Individual Legal Mandate Issues • The Missing Severability Clause • The Medicaid Expansion Provisions
  14. 14. Supreme Court RulingThe Court found that jurisdiction and timing was proper, and rejected theargument that the Anti-Injunction Act prohibited the case from being heardThe Court found that the Commerce Clause does not grant Congress theauthority to regulate inactivity, but that the Individual Mandate is constitutionalunder Congress’s ability to levy and collect taxes.Court noted that the missing Severability Clause was not relevant to this case.The Court upheld most of the Medicaid Expansion Provisions but narrowed thefinancial obligations of the state
  15. 15. Part III:How will brokers and their clients be impacted andwhat can employers do to prepare for the future?
  16. 16. What should brokers and their clients do to prepare for the future?With the PPACA moving forward including the individual mandate, brokers should helptheir clients prepare for future changes to the health care system. To make an informedchoices, six key elements will be discussed:• Exchange concept (both state-based and federally-facilitated)• Qualified Health Plans and other insurance arrangements• Essential Health Benefits (EHB)• Summary of Benefit and Coverage• Medical Loss Ratio (MLR) impact• Tax implications and penalties
  17. 17. Exchange Functions • Purchasing cooperative that promotes transparency • Qualified health plan certification • Standardizing benefit offerings (including essential Primary health benefit requirements and gold/silver/bronzeFunctions levels) • Consumer website/On-line enrollment portal • Operate or supervise electronic enrollment process • Vehicle for premium subsidies - Who is eligible and how much is it worth?
  18. 18. Exchange OverviewExchangeConfigurations• State standalone Exchange(s) (Individual and/or SHOP)• State & Federal Partnership Exchange• Default to Federally-run Exchange
  19. 19. State-Based Exchanges• Individual/Non-Group• Small Business Health Options Program (SHOP) • As of October 1, 2013, Small group employers with fewer than 101 employees will be able to access health insurance through the SHOP exchange. • The SHOP exchange is designed to attempt to arrange employee health insurance for small employers on terms similar to those that large employers enjoy. • The SHOP exchange will only sell benefit plans that conform to a consistent format • On January 1, 2014, state health insurance SHOP exchanges may be able to expand eligibility to large employers with more than 100 FTEs.• Blended model• State Exchanges must be certified and operational by October 1, 2013
  20. 20. State Exchange Updates• Implementing a State-Based Exchange: 16 States that are moving forward with Exchanges are California, Colorado, Connecticut, Hawaii, Indiana, Kentucky, Maryland, Massachusetts, New York, Nevada, Oregon, Rhode Island, Vermont, Utah, West Virginia, Washington (and the District of Columbia)• State-Based Exchange Legislation Pending: 2 States with pending Exchange legislation include Illinois, and Pennsylvania.• Not Implementing a State-Based Exchange: 10 States not moving forward with Exchanges are Alaska, Florida, Louisiana, Maine, Michigan, New Hampshire, Ohio, South Carolina Texas, Wisconsin• Leaning Towards/Not Moving Forward: 22 other states are leaning toward opting out of broad health care reform or waiting for a federal exchange.
  21. 21. Federally-Facilitated Exchanges• PPACA establishes a federal exchange system along with the state exchanges• Should a state fail to implement a state-based Exchange, even if by choice, the federal government will implement a federally-facilitated Exchange• The State can maintain some control over this type of Exchange• Funding for this type of Exchange is still lacking• How many states are likely default to the federal exchanges?
  22. 22. Exchange Challenges Promoting efficiency and Setting up the flexibility while keepingPPACA timeframe - only governance and costs for participants about one year to operational infrastructure, down (e.g., for small become operational including the IT platforms businesses and individuals) Complying with PPACA Avoiding adverse standards for publicselection by pooling a mix Becoming financially self- accountability, of the healthy and the sustaining transparency, and unhealthy reporting
  23. 23. Qualified Health Plans• Both Brokers and Employers must understand PPACA authorized health plan offerings• A “qualified health plan” is a health plan that: • Is certified by each Exchange through which it is offered • Provides the essential benefits package • Is offered by an issuer that is: • Licensed and in good standing in each state in which it is offered • Agrees to offer at least one silver plan and one gold plan • Agrees to charge the same premium whether the plan is sold through the Exchange or outside the Exchange • Complies with other requirements of the Secretary of HHS and the Exchange Source: NAIC
  24. 24. Other Health Plans• Grandfathered Health Plans • Allows existing benefit designs and participation rules to be maintained for a period of time• Self-funded Health Plans and Union Plans have some exemptions under PPACA. They are not required to: • provide coverage with minimum essential benefits • participate in a risk-adjustment system • comply with the MLR requirements and review of premium increases• Accountable Care Organization (ACO) • Providing coordinated high quality care to Medicare patients • Agree to take responsibility for the care of patients in exchange for the opportunity to share in the total savings - $940 million over 4 years
  25. 25. Essential Health BenefitsBeginning in 2014, PPACA requires health insurance plans offered to individuals andsmall businesses to include health benefit services in each of ten categories, calledessential health benefits (EHBs). • HHS has established a rule that allows state regulators several options to define their state’s EHBs. State regulators may choose any of the following: • One of the three largest small group plans in the state by enrollment • One of the three largest state employee health plans by enrollment • One of the three largest federal employee health plan options by enrollment, or • The largest health maintenance organization (HMO) plan offered.Policy Goal: "It is important to find a successful balance between providingaffordable coverage while establishing a reasonable level of benefit protection. If wecontinue to increase the cost by mandating a comprehensive set of essentialbenefits, we place further unwanted burdens on the business owner and theiremployees."
  26. 26. Sec. 1302. Essential Health Benefits Requirements • (A) Ambulatory patient services. • (B) Emergency services. • (C) Hospitalization. • (D) Maternity and newborn care.PPACA Sec. • (E) Mental health and substance use disorder services,1302(b)(1) including behavioral health treatment. services • (F) Prescription drugs. covered • (G) Rehabilitative and Rehabilitative services and devices. include: • (H) Laboratory services. • (I) Preventive and Wellness services and Chronic Disease Management. • (J) Pediatric services, including oral and vision care
  27. 27. EHB Issues that Employers and Brokers Should Thinking About Embracing state flexibility especially for multi-state employers Customizing EHB standard packages for each state Keeping EHB levels affordable Addressing variability in mandated benefits at state level Understanding additional variations in benefit designs Defining Medical Necessity when interpreting applicability of EHBs How will EHBs be addressed in Federally-Facilitated Exchanges
  28. 28. Summary of Benefits and Coverage Effective September 23, 2012, insurers and group benefit plans must issue a standardized Summary of Benefits and Coverage (SBC) SBC should detail “in plain language, simple and consistentinformation about health plan benefits and coverage that…will help consumers better understand the coverage they have, and, for thefirst time, allow them to easily compare different coverage options.”NAIC provided recommendations that were adopted by the federal government
  29. 29. Summary of Benefits and Coverage Should include coverage examples thatillustrate benefits provided under Upon renewal, the plan or must be provided Experts differ as coverage, detail Person requesting to both to when updated out-of-pocket an SBC must be participants and SBCs need to be costs, provide provided with the beneficiaries as issued – after examples of document within part of any written September 23 or coverage for a seven (7) enrollment after new policy simple delivery business days application year (?) and a Type II materialsdiabetic care, and explain any coverage exclusions forcommon benefits
  30. 30. MLR in a Nutshell• Beginning in 2011, insurers had to spend and track MLR ratios• Large Group (defined as 100 or more Employees) • 85% clinical services and qualified quality programs • 15% administrative• Small Group (defined as 2 to 100 Employees) and nongroup • 80% clinical services and qualified quality programs (NY 82%) • 20% administrative (NY 18%)• Calculations are based by legal entity, state and line of business• MLR reports filed to HHS June 1st each year• Rebate checks for 2011 have been issued in 2012• If a health plan or insurer meets or exceeds the MLR, notices will be issued with the first plan document after July 1, 2012• If 80/85% percentage not achieved, notices and rebate checks must be distributed by August 1st the following year• Three month requirement from August 1 to take action on the MLR rebate options
  31. 31. Employer MLR Distribution Rebate Options DOL Technical 2011-04 Release Based upon • Distribute rebates to current (and, if already desired, former) participants established • Enhance benefits provided to plan ERISA participants by additional benefits or principles, the wellness programs DOL guidance • Pay reasonable plan expenses provides • Reduce future premiums for current plan employers with participants four options. • Note: For the purposes of MLR rebate An employer checks, COBRA plan participants are may: considered plan participants.
  32. 32. MLR Impact: Kaiser Foundation Study Refund: MLR rebate checks this year estimated $1.3 billion Non-Group Market: Rebates are expected to go to almost one-third (31%) of consumers in the individual market.  The share of consumers in the individual insurance market expected to receive rebates ranges from near zero in several states to as high as 86% in Oklahoma and 92% in Texas Group Market: About one-quarter (28%) of the small group market and 19% of the large group market is projected to receive rebates. Amount: Checks could range from an average of $72 for those with insurance through a large employer to an average of $127 for those who bought individual policies
  33. 33. Individual Mandate:What are the tax penalties for non-compliance?The annual tax (formerly known as a penalty) for not obtaining minimum essentialcoverage will be the greater of a flat dollar tax amount per individual or a percentageof the individual’s taxable income. The applicable flat dollar amount for 2014 for a tax filer with no dependents will be $95 and the amount for 2015 will increase to $325. This amount will increase over the years, rising to $695 in 2016, and will be further revised in 2017 according to the changes in cost-of-living. Each adult will pay the rate of an individual, and then you need to add the dependent at the 50% rate. For example, in 2016 a couple with one child under 18 would be assessed a flat dollar penalty of $1,737.50 (two adults x $695 plus one child at $347.50 -- one half of adult penalty). A family of four (one couple with two children over 18) would only be required to pay the 300% cap in 2016. Three hundred percent of the $695 flat amount for 2016 is equal to $2,085. This amount is less than the flat amount that could be charged if the cap were not in place (two adults + two children over 18 = $695 x 4 = $2,780).
  34. 34. Small Employer Tax Credits Eligible small employers are defined as those employing 25 or fewer full- Under PPACA, small time equivalentemployers offering health employees with average insurance coverage to annual wages of less thanemployees enjoy several $50,000 and contributingbenefits, including a new to employees’ qualified income tax credit health care coverage a uniform percentage, no less than 50%, of the premium cost
  35. 35. Large Employer Tax Penalties Large employers Under PPACA, a MUST offer medical premium subsidy coverage to its full- program is NOT time employeesestablished for a large beginning in 2014. If a employer. In fact, a large employer fails to tax penalty may be offer appropriate assessed against a coverage, that large employer employer may be liable for a tax penalty.
  36. 36. How is the Tax Penalty Triggered? The tax • If the employer does not offer coverage, and at least one of its full- penalty time employees claims the premium tax assistance tax credit, or can be • The employer does offer coverage, but the coverage fails to meet the triggered minimum essential coverage in one of threshold and one full-time employee is certified to claim the premium taxtwo ways: credit
  37. 37. Which Employers Will Face these Penalties?• Employers with at least 50 Employees will face penalties if one or more of their full-time employees obtains a premium credit through an Exchange.• How does the law define 50 Employees? • PPACA refers to “full-time equivalents” • A subsequent rule expanded on this definition to include both full and part time workers • Guidance issued by DOL expanded the definition to include employees of a “controlled group” of corporations, employees, partnerships, proprietorships, etc., that are under common control
  38. 38. How can an Employer determine if it is a “Large Employer”?• Both full and part time employees are included in the calculation • Full time employees: work 30 or more hours per week • Seasonal employees who work for fewer than 120 days per year are not considered to be full time employees • Part time employees: include hours worked by taking the total number of hours worked by individuals who work less than 30 hours per week and dividing the total by 120 • If an employer has more than 50 employees for 120 days or less in the preceding year, the employer will NOT be considered a large employer
  39. 39. Employee Calculations: an Example• A firm has 35 full time employees who work at least 30 hours a week.• In addition, the firm has 10 part time employees who all work 24 hours per week (for a total of 96 hours per month) 10 employees x 96 hours = 960 total hours 960 hours / 120 = 8 The part time employees would be counted as 8 full time employees • 35 full time employees + 8 = • 43 “Employees”
  40. 40. Who can potentially obtain a premium credit?• Individuals can obtain a premium assistance credit if: • They are not eligible for Medicare, Medicaid, or other similar programs • They are not offered employer-sponsored health benefit coverage • Their income is between 138% and 400% of the federal poverty level If an individual is offered employer sponsored health benefits, but these health benefits are unaffordable, that individual can obtain a premium assistance credit. • Benefits are unaffordable if: • The individual’s required contribution toward the plan premium for self-only coverage exceeds 9.5% of their household income, OR • The plan pays for less than 60%, on average, of covered health care expenses.
  41. 41. What are the tax penalties for large employers who do not offer coverage? The monthly penalty a large employer is obligated to pay for not offering any coverage is equal to $2,000 divided by 12, multiplied by the difference of the number of full-time employees employed during the applicable month minus the first 30 full-time employees. Only full-time employees (not full-time equivalents) are counted for purposes of determining the penalty. (Number of Full-Time Employees) – 30 x (2,000/12) For example, a firm with 51 employees would be subject to: 51-30 x (2,000/12) = total monthly penalty $3,500 per month
  42. 42. What are the tax penalties for large employers who offer coverage that is not affordable? A large employer who offers coverage that does not satisfy the minimum value threshold or minimum affordability threshold is assessed a monthly penalty of $3,000 divided by 12 times the number of employees that qualify for the tax credit. For example, a firm with 51 employees of whom 5 qualify for the tax credit would be subject to a penalty of: 5 x (3,000/12) = $1,250
  43. 43. Employer W2 Reporting Requirements Employers need to report the cost of employer- sponsored health care • Applicable to all employers that provide group coverage on employees’ health plans, including federal, state, and localW-2 forms for all tax years governments, and religious organizations.starting on or after January 1, 2011. • The employer was required to file fewer than 250 W-2 Forms for the preceding calendarAn employer need year, or not report if: • The employer is a federally recognized Indian tribal government
  44. 44. Excise Tax on “Cadillac” Health PlansIn an effort to penalize employers who offerexcessively rich health benefit plans, PPACAincludes a new excise tax on high-cost health plans,called “Cadillac” health arrangements.This is a new non-deductible 40% excise tax thatsome experts have estimated will affect more thanhalf of large employers’ active health plans by 2018.
  45. 45. Medicare Tax Increase• PPACA includes a provision that will create a new tax for certain Americans.• Specifically, section 1411 of PPACA imposes an additional tax of 3.8% if certain conditions are met as described below.• Currently, individuals pay a Medicare tax of 2.9% of their wages. The new tax is in addition to the current Medicare taxes, and expands the definition of income subject to Medicare taxes. The tax also applies to trusts and estates.• The tax applies to taxable years beginning after December 31, 2012• The tax will apply to single taxpayers with a modified adjusted gross income of $200,000 or higher and married taxpayers with a modified adjusted gross income of $250,000 or over. The tax also will apply to a married person filing separately whose modified gross adjusted income exceeds $125,000
  46. 46. Part IV:PPACA Reflection Points
  47. 47. PPACA’s Impact: Positive Opened a national dialogue on insurance coverage Federal funding for Move to electronic uninsured and medical records underinsuredMore patients are Fundamentalinsured with first insurance reform dollar coverage Expansion of care management, Leveraging NAIC wellness programs, expertise medical home, etc.
  48. 48. PPACA Impact: ChallengesAdopted by a slim majority in CongressNot supported by the majority of AmericansRegulatory Concerns• PPACA law is 2,700 pages and regulations are over 9,000 pages.• More regulations and guidance to come.• Federalism: State losing ground• Over-reliance on “interim final rules”Radical changes to current health plan offerings will likelycreate some disruptions to the market
  49. 49. PPACA Impact: Challenges Health care spending is over 17% of the U.S. GDP • Additional cost burdens (e.g., expansion of mandated benefits, appeal rights, etc.)MLR premiumrebates are an • CBO now estimates that PPACA willadministrative cost over $1.76 trillion burden • States cannot afford to build, support and maintain many of PPACA’s Young subsidize requirements the old, and • Significant compliance costs for health males plans and others subsidizes the females • Budget concerns including Congress’s sequestration rule Premium increases
  50. 50. How will PPACA Impact Employers?As highlighted earlier in the presentation, PPACA will affect employers differently, depending upon their size and whether they currently offer health insurance.• Small employers (less than 50 workers) will face no new requirements but will have new insurance options made available to them through the new health insurance exchanges.• Medium-size employers (50 to 100 workers) will have access to these new coverage options as well, but may face some financial penalties•The vast majority of large employers (more than 100 workers) will be impacted significantly including penalties, automatic enrollment requirements, etc.
  51. 51. Lots of Government Oversight
  52. 52. The Elections & Financial Impact
  53. 53. DisclaimerDisclaimer: This webinar is for informational purposes only.
  54. 54. Questions & AnswersFor additional health care Reform updates, please monitor: • •