Healthcare Reform Its The Law


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Healthcare Reform - It\'s the Law

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Healthcare Reform Its The Law

  1. 1. HEALTHCARE REFORM – THE LAW The Patient Protection and Affordable Care Act and The Health Care and Education Affordability Reconciliation Act of 2010 April, 2010 CHERNOFF DIAMOND Benefits and Risk Management Consultants
  2. 2. Today’s Presentation Session Moderator Ralph Sepe - Partner Session Presenters • Jill Bergman, CEBS - Compliance Manager, Health & Welfare Services • Frank Aiosa – Partner Webinar Guidelines • Muted phone lines during the presentation • Polling questions and asking questions • Presentation materials will be made available • Copy of the slides and Questions and Answers from the audience
  3. 3. Today’s Agenda • Health Care Reform is in its infancy • Key elements and issues for employer-sponsored programs • Identify critical issues of concern for your organization • Help predict questions your employees will ask • Implementation timeline • Tax Year 2010 • Plan years beginning after September 23, 2010 • January 1, 2011 - 2018 • Questions
  4. 4. Healthcare Reform Legislation It’s The Law • President Obama signs two healthcare reform laws • The Patient Protection and Affordable Care Act (PPACA) was signed on March 23, 2010 • Original Senate bill with no changes • The Healthcare and Education Affordability Reconciliation Act of 2010 (HEARA) was signed on March 30, 2010 • Contained tax and budget related changes to the PPACA • Passed through the reconciliation process • These two laws create the newly enacted healthcare reform legislation • All information reflects our understanding (to date) of both of these laws
  5. 5. Important Definitions Grandfathered Plans • Plans in effect on the date of enactment (March 23, 2010) • Preserve the right to maintain existing coverage • Clearly allows new enrollment of members and dependents • Certain provisions do not apply or apply differently to grandfathered plans • Collectively bargained plans with coverage changes are grandfathered • Additional guidance is needed to clearly define a grandfathered plan Full-Time Employee • Generally refers to 30-hours per week (unless otherwise noted) • Determination of employer size for various provisions including “pay or play”
  6. 6. Early Implementation The First Six Months 2010 2011 2012 2013 2014 • Small business tax credits (2010 tax year) • Temporary retiree medical reinsurance pool to help employers lower costs for early retirees (90 days through 2014) • Insurance market reforms (various) • 10% excise tax on indoor tanning services (July 1) • Health & Human Services (HHS) to develop informational website portal (July 1) • Relief begins for retirees in the Medicare Part D coverage gap “donut hole” (2010)
  7. 7. Small Business Tax Credits Beginning Tax Year 2010 • No more than 25 full-time equivalent employees (FTE) • Average wages less than $50,000 • The employer contributes at least 50% of the total cost of coverage • Maximum credit is 35% of the employer’s share of the contribution which is reduced as the number of lives and average wages increase • Beginning in 2014 • Tax credit for coverage purchased through the Exchange increases to 50% • Available for two years • Credits are also allowed for non-profit businesses • Q&A on the IRS website:,,id=220839,00.html
  8. 8. Six Months After Enactment September 23, 2010 2010 2011 2012 2013 2014 • Eliminate lifetime limits and annual limit restrictions • Eliminate pre-existing condition limitations for children • Expand dependent coverage • Cover preventive care • Require nondiscrimination testing • New coverage appeals processes • Emergency services must be covered as in-network services • Designate any in-network doctor as a primary care physician
  9. 9. Plan Limits and Pre-Existing Conditions Plan Years Beginning On And After September 23, 2010 • Eliminate lifetime limits • Applies to fully insured, self-funded plans, and grandfathered plans • Secretary of Health & Human Services to regulate annual limits for non-essential benefits • Annual limits no longer allowed beginning in 2014 • Applies to fully insured, self-funded and grandfathered plans • Eliminate pre-existing condition limitations for children under age 19 • Pre-existing condition limitations no longer allowed beginning 2014 • Applies to fully insured, self-funded and grandfathered plans
  10. 10. Expanding Dependent Coverage Plan Years Beginning On and After September 23, 2010 • Expands coverage for dependent children (regulations to define) to age 26 • Applies to fully insured and self funded plans • Medical expense reimbursements (benefits) are not taxable to the employee • IRC was changed to allow nontaxable reimbursement to a child who has not attained age 27 by tax year end - eliminates imputed income requirement • It is believed that Congress also intends the coverage (premium costs) to be nontaxable as well, although this apparently has not been addressed, as yet • Employee could add as family member and pay with pre-tax dollars • Grandfathered Plans to 2014 – only applies if these dependents are not eligible to enroll in an employer-sponsored plan • Carefully coordinate with more generous state provisions (insured plans)
  11. 11. Covering Preventive Care Plan Years Beginning On and After September 23, 2010 • Requires fully insured and self-funded plans to cover specific preventive services with no cost sharing imposed on the member. Exempts Grandfathered Plans • Evidence-based items with A or B rating - U.S. Preventive Services Task Force • Screening adults for depression, oral fluoride supplementation to children (6 months+, high blood pressure screening for adults (age 18), intensive behavioral dietary counseling for adult patients with known risk factors for cardiovascular and diet-related chronic diseases • Immunizations recommended by the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention • Evidenced-informed preventive care for infants, children and adolescents in accordance with Health Resources and Services Administration • Additional services for women such as mammography and cancer screenings
  12. 12. Nondiscrimination Testing Plan Years Beginning On And After September 23, 2010 • Requires fully insured and self-funded plans satisfy nondiscrimination rules under IRC 105(h) • Cannot discriminate in favor of highly compensated employees • Eligibility and benefits • Does not apply to Grandfathered Plans • New safe harbor cafeteria plan rules for small employers • 100 or fewer employees • Require minimum participation and contribution requirements • Will automatically satisfy testing requirements • Effective January 1, 2011
  13. 13. Key Provisions In 2011 A Brief Summary 2010 2011 2012 2013 2014 • Spending account restrictions • New W-2 reporting requirements • CLASS Act • Uniform standards developed by HHS for communicating benefit provisions • Freeze threshold for income-related Medicare Part B premiums and reduce subsidy for individuals with incomes greater than $85,000
  14. 14. Spending Account Restrictions Beginning January 1, 2011 and 2013 • Only allow reimbursement of prescription drugs and items under Flexible Spending Accounts (FSAs), Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) • Over-the-counter items no longer considered “qualified medical expenses” • Diabetic necessities still qualify • Tax year beginning January 1, 2011 • Restricts reimbursements after December 31, 2010 for non-calendar year FSAs when annual elections may have already been made • Increase the tax on HSAs from 10% to 20% for non qualified medical expenses - tax year beginning January 1, 2011 • Limit FSA salary reduction to $2,500 beginning tax year January 1, 2013
  15. 15. New W-2 Reporting Requirements Beginning Tax Year January 1, 2011 • Requires employers to include the “Aggregate Cost” of employer-sponsored health coverage on annual W-2 regardless of who pays the cost • Pertains to health benefits that are excluded from gross income • Includes medical, dental, vision • Appears employer contributions to an HRA are included • Excludes HSA contributions (employer and employee) and FSA salary reduction amounts • Aggregate Cost is determined using “Cobra-like” rules • Premium for insured plans or premium equivalent for self-funded plans • First reported on 2011 W-2 issued in January 2012
  16. 16. CLASS ACT Beginning January 1, 2011 National Community Living Assistance Services and Support • Voluntary national long-term care program • Financed through voluntary payroll deduction • Automatic enrollment, unless an employee opts out • Appears that employers can decline to participate • Provide a cash benefit not less than $50 per day for non-medical services • 5-year vesting requirement
  17. 17. Key Provisions In 2012 and 2013 A Brief Summary 2010 2011 2012 2013 2014 • Implement uniform standards for communicating benefit information with $1,000 fine for each failure (2012) • Salary reduction to FSAs are limited to $2,500, with annual index (2013) • Employers must notify employees plan benefits and Exchanges (March 2013) • Annual comparative effectiveness research fee of $2 per member assessed on fully insured and self-funded plans • Individuals with earnings greater than $200,000 and households with earnings greater than $250,000 subject to additional taxes (2013) • Medicare payroll tax is increased by .9% (from 1.45% to 2.35%) • 3.8% tax on unearned income
  18. 18. Key Provisions In 2012 and 2013 A Brief Summary 2010 2011 2012 2013 2014 • Eliminate the tax deduction for employers who receive Medicare D retiree drug subsidy payments (2013) • Accounting implications recognized immediately • Reports from large employers such as Caterpillar, Verizon and AT&T • New taxes on the industry providers and manufacturers • Pharmaceutical manufacturing (2012) • 2.3% on medical device sales (2013) • Does not include eyeglasses, contact lenses, and hearing aids
  19. 19. Major Changes In 2014 A Brief Summary 2010 2011 2012 2013 2014 • Requires U.S. citizens and legal residents to have insurance or pay penalty • State based exchanges established for individuals and small groups (100 lives) to purchase coverage with required benefit plans being offered • Employers with 50+ employees are required to offer coverage or pay a penalty • Minimum essential benefits must be offered to individuals and small groups outside the exchange – Grandfathered and large employer plans are exempt • Premium and cost sharing credits for low-income individuals (up to 400% of FPL) • Employers with 200+ employees must automatically enroll employees (opt-out) • Maximum waiting period limited to 90 days
  20. 20. Other Changes In 2014 and Beyond A Brief Summary 2010 2011 2012 2013 2014 • Insurance industry taxes begin which impact fully insured plans • Eliminate pre-existing condition limitations and annual limits • “Cadillac Tax” becomes effective in 2018 • 40% tax on excess value assessed on insurer or plan sponsor (self-funded) • $10,200 for individual coverage; $27,500 for family coverage • Aggregate value includes medical, dental, vision if under single plan • Stand-alone vision and dental would be excluded • Adjustments for age, gender and other factors may be considered
  21. 21. Individual Mandate January 1, 2014 • Requires individuals to have qualifying coverage or pay a penalty - greater of flat dollar amount or percentage of income, scheduled to increase beginning 2017 • Flat Dollar Fine (3x per family) Percentage of Taxable Income (capped at average Bronze premium) • 2014 $95 1% • 2015 $325 2% • 2016 $695 2.5% • Exemptions for financial hardship, religious objections, American Indians, those without coverage less than 3 months, incarcerated individuals, undocumented immigrants • Exempt if lowest cost option is greater than 8% of income • Exempt if income is less than filing threshold ($9,350 and $18,700) in 2009
  22. 22. State Health Benefit Exchanges January 1, 2014 • Open to individuals and small employers (100 lives) to purchase coverage • States may open to larger employers beginning in 2017 • Pre-tax purchase of coverage only available to group plans • Must provide standard benefit packages that include minimum essential benefits • Bronze (60%), Silver (70%), Gold (80%) and Platinum (90%) of plan costs • Out-of-pocket limits tied to HSA limits ($5,950 individual and $11,900 family) • Catastrophic plan for young adults under age 30 • Restricted “community rating” underwriting criteria • 3:1 age ratio , family composition, 1.5:1 tobacco usage, geographic location • Premium and cost sharing subsidies if income is 133% - 400% of FPL
  23. 23. Employer Mandates January 1, 2014 • Employers with 50+ employees must offer coverage or pay penalty if one full-time employee is receiving a premium tax credit via the Exchange • $2,000 per full-time employee based on 30-hours per week • Exclude the first 30 employees from the assessment • Employers with 50+ employees that offer coverage but have one full-time employee receiving a premium tax credit pay the lesser of: • $3,000 for each employee receiving a credit, or $2,000 for each full-time employee • Eligible for premium tax credit if family income is less than 400% FPL and: • Actuarial value of employer coverage is less than 60%, or • Employee is required to pay more than 9.5% of income for coverage
  24. 24. Employer Mandates January 1, 2014 • Employers with 50+ employees who offer coverage • Offer free-choice vouchers to employees with income less than 400% of FPL • Share of the premium is between 8.0% and 9.8% of household income • The employee wishes to enroll in the Exchange • Voucher is equal to the employer’s share of the premium • The employer will be exempt from the penalty for employees who receive a free choice voucher • Employee can keep any excess contribution without being taxed • All penalties are assessed on a monthly basis
  25. 25. Implementing The Law So Many Unanswered Questions • “How To” requires substantial input from authorities – guidance and regulations • What are grandfathered plans? • How to monitor income under 400% of FPL? • What if someone has income from multiple sources? • What if someone’s earnings change substantially during the year? • What if someone is covered under another plan – how do we monitor? • Who determines the “value” of the plan for W-2 and voucher purposes? • As more information and regulations become available we will guide you through the process
  26. 26. Healthcare Reform Legislation Expectations • Additional information and guidance from the Department of Health & Human Services, Congress, IRS, Insurance Industry • Repeal and Replace • Will it reduce costs? • Will employers eliminate coverage when the Exchanges are implemented? • What happens in 2018 when the Cadillac Tax becomes effective?
  27. 27. QUESTIONS