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Health Care Reform Presentation


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Health Care Reform Presentation

  1. 1. Presented by Kristine Bingman Health Care Reform Update
  2. 2. Vigilant a We counsel companies on employment issues across the Northwest and California. Learn more about Vigilant and the benefits of membership at:
  3. 3. What We’ll Cover Today <ul><li>The status of federal health care reform </li></ul><ul><li>What’s new </li></ul><ul><li>Upcoming mandates </li></ul><ul><li>Planning for the future </li></ul>
  4. 4. Federal Health Care Reform <ul><li>Patient Protection and Affordable Care Act (PPACA) – enacted March 23, 2010 </li></ul><ul><li>PPACA amended by the Health Care and Education Reconciliation Act of 2010 – March 30, 2010 </li></ul>
  5. 5. Status of Federal Health Care Reform <ul><li>Various federal legislative efforts to repeal entire law or certain sections </li></ul><ul><ul><li>Republican-controlled House passed a repeal bill (January 2011) </li></ul></ul><ul><ul><li>Senate blocked the bill from going further </li></ul></ul><ul><ul><li>Many of the provisions that affect employers are still relatively popular—not likely to be repealed </li></ul></ul><ul><li>Budget pressure to stall implementation </li></ul><ul><li>Much will depend on the outcome of U.S. Supreme Court decision and 2012 elections </li></ul>
  6. 6. Status of Federal Health Care Reform <ul><li>Two main types of court challenges: </li></ul><ul><ul><li>Individual mandate to maintain health insurance (effective 2014) </li></ul></ul><ul><ul><li>State vs. federal control of health care; unfunded mandates </li></ul></ul><ul><li>Appeals courts are split </li></ul><ul><li>U.S. Supreme Court has agreed to hear three of the five cases submitted for appeal </li></ul><ul><ul><li>Federal power vs. state power </li></ul></ul>
  7. 7. Supreme Court – Issues Under Review <ul><li>Is the suit barred by the Anti-Injunction Act? </li></ul><ul><li>Did Congress had the constitutional authority to impose the individual mandate? (Federal power vs. state power) </li></ul><ul><li>If no, then should the entire law be struck down? </li></ul><ul><li>Arguments to be heard in March, decision expected in late June </li></ul>
  8. 8. Status of Federal Health Care Reform <ul><li>Federal government is moving forward with implementation </li></ul><ul><li>17 states have passed legislation opposing various parts of federal reform </li></ul><ul><li>Climate in Oregon is generally supportive of reform </li></ul><ul><ul><li>Oregon Health Policy Board: established in 2009 to set policy for reform in Oregon </li></ul></ul><ul><ul><li>SB 99 established the legal framework for the Exchange </li></ul></ul>
  9. 9. Recent Updates
  10. 10. Form W-2 Reporting Delayed <ul><li>Employers must report “aggregate cost” of employer-sponsored health coverage on Form W-2 </li></ul><ul><li>Employers who file <250 Forms W-2 for the preceding calendar year are exempt from reporting until further guidance is issued </li></ul><ul><li>First applies to coverage provided in 2012, as reported on 2012 Form W-2, issued by February 1, 2013 </li></ul>
  11. 11. CLASS Program Defunct <ul><li>Federally-run long term care program </li></ul><ul><li>October 14: Health and Human Services (HHS) Secretary Sebelius recommends ending the program due to concerns over its financial sustainability </li></ul><ul><li>Would have gone into effect in October 2012 </li></ul>
  12. 12. Summary of Benefits and Coverage Delayed Delayed <ul><li>Distribution deadline for Summary of Benefits and Coverage has been delayed indefinitely, pending issuance of final regulations </li></ul><ul><ul><li>Final regulations will give lead time to ensure compliance </li></ul></ul><ul><li>Previously scheduled to go into effect March 23, 2012 </li></ul><ul><li>60-day advance notice of material plan changes also delayed </li></ul>
  13. 13. Summary of Benefits and Coverage <ul><li>Plan and insurer must distribute a summary no more than 4 pages, 12-point type, containing: </li></ul><ul><ul><li>Uniform definitions of insurance and medical terms </li></ul></ul><ul><ul><li>Description of coverage, exceptions, limitations on coverage, cost-sharing provisions, renewability and continuation provisions </li></ul></ul><ul><ul><li>Illustrations of common benefit scenarios </li></ul></ul><ul><ul><li>Contact numbers </li></ul></ul>
  14. 14. Summary of Benefits and Coverage <ul><li>When to distribute? </li></ul><ul><ul><li>As part of enrollment materials </li></ul></ul><ul><ul><li>Within 7 days of request for special enrollment </li></ul></ul><ul><ul><li>As soon as practicable upon request, but not later than 7 days following the request </li></ul></ul><ul><ul><li>Upon renewal: </li></ul></ul><ul><ul><ul><li>As part of enrollment materials if written application is required </li></ul></ul></ul><ul><ul><ul><li>30 days prior to the first day of coverage under the new plan year where renewal is automatic </li></ul></ul></ul>
  15. 15. Employer Mandates: On the Horizon
  16. 16. Nondiscrimination Rules for Insured Plans <ul><li>Effective date: plan years beginning on or after Sept. 23, 2010 </li></ul><ul><ul><li>Delayed indefinitely pending guidance </li></ul></ul><ul><ul><li>Will become effective the first day of the first plan year beginning some time after guidance is issued </li></ul></ul><ul><li>No discrimination in benefits or eligibility in favor of highly compensated individuals (HCIs): </li></ul><ul><ul><li>5 highest paid officers; </li></ul></ul><ul><ul><li>10%+ shareholders; and </li></ul></ul><ul><ul><li>Highest paid 25% of employees </li></ul></ul><ul><li>Applies to plans that are: </li></ul><ul><ul><li>Insured; and </li></ul></ul><ul><ul><li>Not grandfathered </li></ul></ul>
  17. 17. Nondiscrimination Rules for Insured Plans <ul><li>Rules will be “similar to” existing rules for self-insured plans </li></ul><ul><li>Penalty for noncompliance is serious: $100 excise tax per day, per individual discriminated against </li></ul><ul><li>Mandatory reporting of rule violations and excise taxes on IRS Form 8928 </li></ul><ul><li>Red flags—differences in: </li></ul><ul><ul><li>Eligibility terms </li></ul></ul><ul><ul><li>Premium contribution </li></ul></ul><ul><ul><li>Plan options </li></ul></ul>
  18. 18. Automatic Enrollment <ul><li>Effective date: Delayed until regulatory guidance issued (sometime before 2014) </li></ul><ul><li>Employers with more than 200 full-time employees (30+ hours/week) must automatically enroll employees in employer-sponsored coverage </li></ul><ul><li>Employee may be required to pay any premium contribution and serve any waiting period </li></ul><ul><li>Employees must receive notice and opportunity to opt out </li></ul>
  19. 19. State Insurance Exchanges <ul><li>Online marketplace for individuals and businesses to shop, compare options and purchase private health insurance </li></ul><ul><li>Individuals and small employers (up to 100 employees) can purchase coverage from a state-run exchange in 2014 </li></ul><ul><li>Large employers (100+ employees) can participate in 2017 </li></ul><ul><li>Individuals can use federal tax credits to help pay for coverage </li></ul>
  20. 20. Oregon Insurance Exchange - Governance <ul><li>State corporation—not a state agency (similar to SAIF or OHSU) </li></ul><ul><li>Governed by nine-member citizen board </li></ul><ul><ul><li>Appointed by Governor, confirmed by Senate </li></ul></ul><ul><ul><li>At least two consumer members, no more than two members with ties to insurance or health care industry </li></ul></ul>
  21. 21. Oregon Insurance Exchange - Duties <ul><li>Screens, certifies plans as “qualified health plans” (QHPs) </li></ul><ul><li>Makes QHPs available to individuals and small businesses, beginning in 2014 </li></ul><ul><ul><li>2014: 2-50 employees </li></ul></ul><ul><ul><li>2016: up to 100 employees </li></ul></ul><ul><li>Determines eligibility for QHP enrollment and administering tax credits </li></ul><ul><li>Provide customer service for internet-based program </li></ul><ul><li>Provide information to consumers to help them make informed decisions </li></ul><ul><li>Manage a Navigator program to provide education, awareness, assistance </li></ul>
  22. 22. Oregon Insurance Exchange – Prohibited Functions <ul><li>Cannot prohibit non-exchange market </li></ul><ul><li>Cannot compel enrollment in the exchange </li></ul><ul><li>Cannot limit individual enrollment choice </li></ul><ul><li>Cannot impose premium price controls </li></ul><ul><ul><li>Rate regulation is still the responsibility of the Oregon Insurance Division </li></ul></ul>
  23. 23. Oregon Insurance Exchange - Funding <ul><li>Planning and implementation grants funded by federal government through 2013 </li></ul><ul><li>Federal grant for first year of operation: 2014 </li></ul><ul><li>Self-sustaining January 2015 </li></ul><ul><li>No access to general fund </li></ul>
  24. 24. Oregon Insurance Exchange <ul><li>Much left to be determined: </li></ul><ul><ul><li>Business plan due to Oregon legislature Feb 2012, due to HHS by Aug 2012, for federal approval by 2013 </li></ul></ul><ul><ul><li>Risk sharing/market stability </li></ul></ul><ul><ul><li>QHP standards </li></ul></ul><ul><ul><li>Role of agents and brokers </li></ul></ul><ul><ul><li>Sustainable funding </li></ul></ul><ul><ul><li>Transformation of delivery system: how to handle Medicaid shortfalls, etc. </li></ul></ul>
  25. 25. Health Insurance Premium Tax Credits <ul><li>Premium Tax Credits </li></ul><ul><ul><li>Individuals/families between 100% and 400% of federal poverty level ($22,350 to $89,400 for a family of four in 2011) </li></ul></ul><ul><ul><li>Enrolled in a qualified health plan through the exchange </li></ul></ul><ul><ul><li>Legally present in the United States, not incarcerated </li></ul></ul><ul><ul><li>Not claimed as a dependent by another taxpayer </li></ul></ul><ul><ul><li>Not eligible for Medicare, Medicaid, CHIP, TRICARE, veterans’ health care or affordable employer-sponsored coverage </li></ul></ul><ul><ul><ul><li>Affordable employer coverage: plan's share of total cost of benefits is at least 60% or the premium is no more than 9.5% of employee's household income </li></ul></ul></ul>
  26. 26. Health Insurance Premium Tax Credits <ul><li>Amount of credit depends on income level and amount of premium for the plan selected </li></ul><ul><li>Refundable </li></ul><ul><li>Credit is paid in advance directly to the insurance company by the IRS </li></ul>
  27. 27. Employer “Play or Pay” Penalties <ul><li>Effective date: 2014 </li></ul><ul><li>Applies to employers with 50+ full-time employees (30+ hours/week) </li></ul><ul><ul><li>Seasonal employees (<120 days/yr) do not count toward 50-employee threshold </li></ul></ul><ul><li>Coverage not required to be offered, but… </li></ul><ul><li>If employer does not offer coverage to full time employees (30+ hours/week) and their dependents, or if coverage is offered, but is not affordable, penalties are assessed </li></ul>
  28. 28. Employer “Play or Pay” Penalties <ul><li>“ Free rider penalty” </li></ul><ul><ul><li>Employer does not offer coverage and </li></ul></ul><ul><ul><li>At least one full time employee enrolls in an exchange plan under which they receive a tax credit or premium reduction assistance </li></ul></ul><ul><ul><li>Penalty = $2,000 per full time employee per year ($166.67 per month in 2014) </li></ul></ul><ul><ul><li>First 30 full time employees exempt </li></ul></ul><ul><ul><li>Penalties indexed for inflation after 2014 </li></ul></ul>
  29. 29. Employer “Play or Pay” Penalties <ul><li>“ Unaffordable coverage penalty” </li></ul><ul><ul><li>If coverage is offered to full time employees and their dependents, but </li></ul></ul><ul><ul><li>At least one full time employee has enrolled in an exchange plan under which they receive a premium tax credit </li></ul></ul><ul><ul><li>Penalty (annual) = $3,000 per full time employee that purchases coverage through the exchange with a tax credit ($250 per month in 2014) </li></ul></ul><ul><ul><li>Annual penalty capped at $2,000 x (Total FTEs – 30) </li></ul></ul>
  30. 30. Employer “Play or Pay” Penalties <ul><li>National Retail Federation’s Health Mandate Cost Calculator: </li></ul><ul><li> </li></ul>
  31. 31. Tax on High Cost Health Coverage (“Cadillac Tax”) <ul><li>Effective date: taxable years beginning after 1/1/17 </li></ul><ul><li>40% nondeductible excise tax on high-cost health coverage </li></ul><ul><li>Initial cost limits: (subject to later adjustments) </li></ul><ul><ul><li>$10,200/year self-only </li></ul></ul><ul><ul><li>$27,500/year other than self-only </li></ul></ul><ul><li>Policy objectives: </li></ul><ul><ul><li>Revenue raiser (projected to raise $20 billion in 2019) </li></ul></ul><ul><ul><li>To encourage control of health care costs </li></ul></ul>
  32. 32. Employee Benefits: Planning for the Future <ul><li>“ How will health care reform affect my company?” </li></ul>
  33. 34. Employee Benefits: Planning for the Future <ul><li>Should I stop offering health benefits altogether? </li></ul><ul><ul><li>Outcome of Supreme Court decision and elections </li></ul></ul><ul><ul><li>Outcome of regulatory guidance </li></ul></ul><ul><ul><li>Labor market and industry competition </li></ul></ul><ul><ul><li>Workforce demographics </li></ul></ul><ul><ul><li>Corporate culture </li></ul></ul><ul><ul><li>Workforce size </li></ul></ul><ul><ul><li>Employee health and productivity </li></ul></ul><ul><ul><li>Workers’ compensation costs </li></ul></ul><ul><ul><li>Effectiveness of state exchanges </li></ul></ul><ul><ul><li>Increased tax burden of not offering health benefits </li></ul></ul><ul><ul><li>“ Play or pay” penalties are not tax deductible </li></ul></ul>
  34. 35. Employee Benefits: Planning for the Future <ul><li>What are other employers doing? </li></ul><ul><ul><li>McKinsey Quarterly survey of 1,329 employers (June 2011): </li></ul></ul><ul><ul><ul><li>30% of employers will “definitely” or “probably” stop offering coverage in 2014 </li></ul></ul></ul><ul><ul><ul><li> </li></ul></ul></ul><ul><ul><li>Mercer survey of 894 employers (June 2011): </li></ul></ul><ul><ul><ul><li>8% of employers “likely” or “very likely” to terminate employer-sponsored coverage in 2014 </li></ul></ul></ul><ul><ul><ul><li> </li></ul></ul></ul>
  35. 36. Employee Benefits: Planning for the Future <ul><li>Can I divide my business into separate small companies to avoid reform mandates? </li></ul><ul><ul><li>IRS controlled group rules </li></ul></ul><ul><li>Can I make all or most of my employees part-time to avoid reform mandates? </li></ul><ul><ul><li>Yes, but … </li></ul></ul>
  36. 37. Questions and More Information? Questions about Health Care Reform? Kristine Bingman Benefits & Employment Attorney [email_address] 503.620.1710 Questions about Vigilant membership? Bryon Bailey  800.733.8620