Supreme Courts Ppaca Ruling What Does It Mean For Plan Sponsors


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Supreme Courts Ppaca Ruling What Does It Mean For Plan Sponsors

  1. 1. Click to edit Master title style The Supreme Court Health Care Reform Decision and Its Impact on EmployersWebcast Presenter:Dennis Fiszer, JDEastern Region Chief Compliance Officer
  2. 2. Today’s agenda• Supreme Court ruling• Individual Mandate• Looming PPACA Requirements• Employer Mandate• HUB International’s Health Care Reform Impact Tool• Compliance Strategies2
  3. 3. Click to editCourt’s title style Supreme Master PPACA Ruling What does it meanfor Plan Sponsors?
  4. 4. Overview of RulingJune 28, 2012: U.S. Supreme Court upholdsPatient Protection and Affordable Care Act (PPACA) • Court found Congress did not have the power to pass the law under Commerce Clause – Led to some initial confusion as several news organizations mis- reported outcome • Court noted that Congress lacked the authority to regulate “inactivity” (for example, the failure to buy a product or service) – Not the determinative finding • Court upholds citing Congressional taxing authority4
  5. 5. Click to edit Master title style Individual MandateSupreme Court Validation
  6. 6. Individual MandateIndividual mandate starts in 2014 • Requires individuals hold health coverage or pay a penalty (limited exceptions) – Fines (assessed as “taxes”) for failure to purchase • $95 or 1.0% of adjusted income in 2014 • $325 or 2.0% of adjusted income in 2015 • $695 or 2.5% of adjusted income in 2016 • Individual subject to penalty unless shows evidence of coverage for at least nine (9) months of the year • Supreme Court was never asked to evaluate PPACA employer mandate – If law been invalidated and then found not severable employer mandate would have disappeared 6
  7. 7. Lingering battlesPPACA may face further legal challenges • Catholic organizations recently filed lawsuits in a number of states challenging the PPACA’s contraception coverage requirement • State and local governments may challenge the federal government’s power to impose penalties on non-federal entities as employers • Plan sponsors are expected to challenge whether penalties issued in states that failed to establish Exchanges are valid under PPACA’s statutory language7
  8. 8. Immediate AffectsFull speed ahead with compliance and strategicplanning • Employer coverage mandate will take effect in 2014 – Absent new Congressional legislative action to significantly change or repeal the law • November elections will factor strongly – President Obama would certainly veto any action against the law – Governor Romney has actively campaigned to “repeal and replace” PPACA 8
  9. 9. Click to edit Master title style Looming PPACA RequirementsWhat to expect
  10. 10. Looming PPACA RequirementsKey compliance duties include the following: • Form W-2 reporting requirement – Starting with W-2 reports issued in January 2013 – One year delay for employers that did not issue 250 W-2s in 2011 • Implement $2,500 limit on employee contributions to health flexible spending accounts (FSAs) – For plan years beginning in 2013 – Opportunity to explain FSA operation to workers in plan materials – IRS recently issued guidance to resolve implementation problems • Summary of Benefits and Coverage requirements – For open enrollment periods starting on or after September 23, 2012 – Template published10
  11. 11. Looming PPACA Requirements • Administer (to the extent applicable), any Medical Loss Ratio (MLR) rebates stemming from insured group health plan coverage • Requirement for employers to notify employees of the availability of health insurance Exchanges – March 2013 • Comparative Effectiveness Research fees will be assessed ($1 per covered life for first year) – Generally paid starting in 2013 • Comply with women’s health coverage expansions under preventive care rule – Not applicable to grandfathered plans – Plan years starting on or after August 1, 2012 – Safe harbor delay for religious employers11
  12. 12. PPACA Requirements for 2014Employers must provide health coverage under the new“pay-or-play” mandate • Penalties apply for employers who either: – Fail to offer health coverage; or – Offer health coverage that is either “unaffordable” (as defined by PPACA) or does not provide “minimum value” (as to be defined by agencies)Employers must report on health coverage of each eligibleemployee and family members: • Name • Address • SSN • Detail of coverage and other data • Provided on a month-by-month basis • Starting in January 2015 (for coverage provided in 2014)12
  13. 13. PPACA Requirements for 2014Increase in permitted wellness incentives from 20% to 30% • Possibly as high as 50%Maximum 90-day limit on waiting periodsCoverage for certain approved clinical trials • Grandfathered plans exemptedComprehensive prohibition on preexisting conditionexclusions; andComplete prohibition on annual dollar limits. • Current transition rule in effect • Mini-med programs eliminated13
  14. 14. Status of Nondiscrimination RulesCompliance delayed and remains pending • Non-discrimination rules for insured health plans – Plan testing requirement added to measure whether benefits and /or eligibility skewed to favor highly compensated employees • Testing to be modeled after self-funded plan requirements – Applies to non-grandfathered insured plans, but currently “on hold” under an IRS non-enforcement policy – Effective date unknown • IRS delayed application of testing to insured plans in Notice 2011-114
  15. 15. Status of Nondiscrimination Rules• IRS attorney indicates they may delay release of rules until 2014, and then may limit application of rules to employers with under 50 employees – HUB is lobbying for delay or non-enforcement position even after 2014• Grandfathered plans will remain excused from compliance as long as grandfathered – Remaining grandfathered will be difficult15
  16. 16. Additional concernsAutomatic enrollment of new employees in a grouphealth plan • Applies to organizations with more than 200 employees • Effective date unknown, except that it will apply after 2014“Cadillac Tax” on high-cost health plans • Effective for 2018 • Forty percent excise tax on employers offering coverage that is too rich – Generally, plans with a value over $10,200 single and $27,500 family • Some group health plans are already at these valuation thresholds due to unavoidable issues like union contracts and geography • Government estimates 60% of plans will pay tax soon after effective date16
  17. 17. Additional concerns • States will be required to have their health insurance Exchanges up and running by 2014 – Rules governing Exchanges have not even been drafted in many states – Unlikely such states will be ready with operational Exchange programs by the specified deadline – Such states will default into a federal Exchange model17
  18. 18. Click to edit Master title style Employer MandateWhat it means to your organization
  19. 19. Employer Mandate: A closer lookPPACA mandates that employers provide healthcoverage to workers starting on January 1, 2014 • Mandate applies starting the first day of 2014 – Caution: Not the employer’s plan year date in 2014 • Organizational planning must begin well ahead of the compliance dateEmployers with over 50 employees must offer coverageto full-time workers and their family members • Coverage must be “affordable” for the employee • Penalties generally lower than the cost of coverage but intangible factors apply • Budgetary pressures expected to force government to revisit and ratchet up its original penalty thresholds19
  20. 20. Employer Mandate: A closer look • Employers must determine if they have over 50 full-time employees or full-time equivalents – Measured across control group – Part-time equivalents – New federal definition that sets that standard at 30 or more hours of actual work on average per week in a month – Actual year of measurement is 2013 – Employers need to know as early as possible • Employers with fewer than 50 full-time workers excused from federal mandate – Smaller employers may be “incented” to voluntarily provide health coverage by federal tax credits – Employers may still be subject to state and local mandates20
  21. 21. How is Compliance Achieved?To comply, an employer must offer a minimum level ofhealth plan coverage to full-time employees and theirdependents and spouses • The key word is “offer” – employees can still waive coverage • What will that cost be? – Determining that figure should be done as soon as possible • Employers must carefully compare penalty exposure to the cost of compliance and weigh the decision versus intangibles – Tax advantages – Workforce expectations • Several studies suggest that less than ten percent of employers plan to discontinue benefits and pay the penalty • HUB International Health Care Reform Impact Tool (HCR-IT)21
  22. 22. How is Compliance Achieved? • Coverage has to be affordable for the employee, but not for family members – Most employers will shift all of family coverage cost to employees – Failure to offer “affordable coverage” can trigger a $3,000 annual penalty for each person who instead gets federal assistance with coverage through tax credits22
  23. 23. Click to edit Master title style Health Care Reform Impact Tool Available to HUBInternational Clients
  24. 24. Health Care Reform Impact ToolOffered by HUB International • Projects an employer’s future costs – Health Plan Cost through 2018 • Current plan versus one that would avoid Excise Tax – Estimates 2014 costs related to in-and-out migration • Individual Mandate • Auto enrollment • Movement to the state health Exchange • Other employer costs under health care reform • Please contact your HUB International Advisor for further details24
  25. 25. Indirect impact of the DecisionAnticipated ripple effects • Self-funded ERISA plans will be more advantageous for employers as they will be exempt from some of the key federal PPACA obligations – Also protected from many otherwise applicable state mandates under ERISA’s preemption power – Smaller groups may consider self-funded model • Federal subsidies to individuals who qualify will increase budgetary pressures on the federal government – May manifest itself in greater cost shifting to the private sector, causing premiums to increase – Variation of what Federal government did in implementing Medicare secondary payer program25
  26. 26. Indirect impact of the Decision • Some analysts anticipate “system gaming” as the penalties for not purchasing health insurance are artificially low – Unlikely to deter healthier individuals from staying uninsured until they require coverage – Individual mandate annually satisfied with only nine (9) months demonstrable coverage – Exchanges will feature lengthy grace periods before premium payment required • Significant remainder of current uninsured population still coverage ineligible – Unreimbursed medical costs represents on-going system drain – Additional pressure on health care costs26
  27. 27. Click to edit Master title style Compliance StrategiesHow you can prepare for PPACA changes
  28. 28. Compliance Strategies / TacticsBegin “pay or play” determinations and strategy • Cost projections / budget measures • Plan documentation changes / required notices • Identify and delegate compliance functionsCarefully examine eligibility • Who is full-time? • Determine cost estimates as soon as possible • Count employees in 2013 for compliance at 50 employees • Review use of independent contractors/outside service providers – Caution now because IRS audit area – Complaints will trigger audit and possible penalties28
  29. 29. Click to edit Master title style Thank You!
  30. 30. Upcoming Health Care Reform webinarsElection 2012: What does the outcome mean for Health Care Reform and Employers?November 13, 2012 How will the makeup of the next Congress affect continuing implementation of the Patient Protection and Affordable Care Act? What direction should we expect to come from the White House? How will this translate to guidance from regulatory bodies? And how will state election results factor into compliance duties as we move into 2013? Register at reform/webinar-series/Additional webinars maybe scheduled as needed prior to our November13 program. Please continue to visit forupdates.30