CEO Terry McCorvie's presentation from the 2010 FL HR Conference. If you are interested in having Terry speak at your function, contact Workable Solutions.

1. Health Care Reform
How to Get from Here to There

2. Real Cost of Dropping Coverage
Number of Employees 10,000
Less 30 exempted 9,970
Premium $ 8,863
EE Contribution (25%) $ 2,216
Employer Contribution (75%) $ 6,647
Penalty (non-deductible)
($2000 per EE less 30 Ees) $ 1,994
Loss of Deduction $ 798
Net Cost $ 2,792
Employee Compensation Increase
(90% of employer contribution) $ 3,324
Tax Gross Up (30%) $ 997
Total Comp Expense $ 4,321
Total Employer Cost $ 7,112

3. Major Plan Design Changes
For plans years beginning after
September 23, 2010
(2011 Calendar Year Plans)

4. Advance Notice of Benefit Changes
2011
• 60‐day notice requirement
• Earliest notice date is August, 2011 for October
2011 plan years.
• Includes changes in covered benefits, co‐pays,
deductibles, coinsurance
• Applies to both insured and self‐insured plans
• Penalty for non‐compliance up to $1000 a day per
incidence
• Employers with 200 EEs must auto enroll, with
notice and opt‐out provisions*

5. Pre‐Existing Limitations
October 2010
• No pre‐ex limitations on dependents < age 19
2011
• Cannot rescind group coverage except for
case of fraud or misrepresentation
– Advance notice required
2014
• No pre‐ex limits for adults either

6. Annual/Lifetime Maximums
2011
• No group health plan may impose a maximum
lifetime value dollar limit on “essential benefits”
• Only “restricted” annual limits
– Plan years beginning:
9/23/10 ‐ 9/22/11 $750,000
9/23/11 – 9/22/12 $1.25 million
9/23/13 – 1/1/14 $2 million
2014
• No annual limits either

7. Coverage for Adult Dependents
2011
• Must allow dependent coverage till age 26
– Even if married
– Grandfathered plans: Unless eligible for other
employer plan
– New Plans: Even if eligible for other group plan
• Penalty for non‐compliance $100 a day per
incident

8. New Plan Design Changes
2011
• Emergency Services
– Must be covered without pre‐authorization
– Must be covered in or out‐of‐network
• OB/GYN may be designated as PCP
• No cost sharing for preventive services
• External appeals process for denied claims
• Insured group health plans now subject to
non‐discrimination

9. Consumer Driven Plan Changes
• January 2011
– OTC meds no longer qualified expenses
• FSA, HRA, HSA
– Can get doctor’s order
– OTC supplies still eligible
– Switchover will vary by merchant (IIAS)
– Penalty for non-qualified use of HSA funds
increased from 10% to 20%
• January 2013
– FSA plan year contributions capped at $2500

10. Wellness Incentives
2011
• $200 million in grants available over 5 years for
employers who
• Have fewer than 100 employers who work more than
25 hours a week and did not have a workplace
wellness program as of 3/23/2010
• Employers may create up to 20% incentive for
completion of wellness program
– Programs must meet minimum criteria
established by HHS.
2014
• Incentives of 30% (or up to 50% with HHS approval)

11. W–2 Reporting
2011
• Beginning in 2011 tax year, employers must
report value of health benefits on
employees W‐2.
– Report aggregate cost of employer sponsored
coverage including both employer and
employee contributions (COBRA rate)
– Informational only. Not counted as income

12. Small Employer Tax Credits
2010 – 2013
• Up to 35% tax credit for employer contribution
– Small businesses with 25 or fewer EEs and avg
wages of $50,00 or less (full credit for 10 EE s and
less)
– Who pay at least 50% of health insurance costs
2014
• Increase to 50% for businesses who buy
through Exchange (for up to two years.)
• CBO estimates 12% of small business will
qualify

13. 2014
When Things Really Get Serious

14. Small Group Redefined
Beginning 2014
• Defined as 1 – 100
– States can delay 51‐100 until January 2016
• Below 50 exempt from mandates and
penalties

15. Rate Compression
• 3:1 ratio
• Rating only on age, geographic location,
coverage tier and tobacco use
– 1.5 to 1
• Minimum Essential Benefits required
• One rating pool inside and outside Exchange
• Risk adjustment inside and outside Exchange

16. Other changes
• 90 day max waiting period
• No annual limits
• Pre‐existing condition exclusions prohibited
for all enrollees
• OOP limited to HSA levels $5,950 and
$11,900

17. Health Insurance Exchange
Choice Portal

18. Subsidy Payment & Reconciliation
Carrier A Carrier B Carrier C Carrier D
S P E
Individual Exchange The
Exchange Reporting
Preferred Model
(Carriers could bill and collect.)
Medicaid‐CHIP
S
E (S) Determine Subsidy
I Eligibility/Amount
P
(E) Plan Selection, Enrollment
( I) Premium Invoice
(P) Non-Subsidy Premium Payment

19. Carrier A Carrier B Carrier C Carrier D Carrier E
E E E
E
P E P P
P P
on
iliati
conc
The
Exchange rR e
SHOP Exchange C arrie
(P) Group Premium Payment
(E) Plan Selection, Enrollment
E I P
( I) Premium Invoice
Tax Credit Mechanism
Employer

20. Precious Metal Plans
• All plans must meet HSA OOP limits
• Bronze – covers 60% of benefit costs
• Silver – 70%
• Gold – 80%
• Platinum – 90%
• Catastrophic Plan for Young Invincibles
– Up to age 30
– Or exempted from mandates
• Carriers only have to offer silver and gold

21. Two Levels of Subsidy
Reduce Out‐of‐Pocket Maximums
• Out of pocket cost reductions
– 100‐200% – one‐third of the HSA limits
– 200‐300% ‐ one‐half of the HSA limits
– 300‐400% ‐ two‐thirds of the HSA limits
• 2010 HSA OOP Limits
– $5,950 individuals, $11,900 families

22. Two Levels of Subsidy
Subsidize Premium through Tax Credits
• Contributions for silver plan limited to:
– 133 – 150% of FPL = 3 – 4% of income
– 150 – 200% of FPL: 4 – 6.3% of income
– 200‐250% of FPL: 6.3 to 8.05% of income
– 250‐400% of FPL: 8.05 to 9.5% of income
– 300 – 400% of FPL: 9.5% of income
• Adjusted annually

23. Employer Penalty – No Plan
• Effective January 2014
• 50 or more EEs
• If you do not offer “minimum essential
coverage” AND
• At least one full‐time employee receives
subsidy through the Exchange
– $2000 penalty per employee
– Excluding first 30 EEs

24. Free Rider Penalty
Effective 2014
• 50 or more EEs
• Even if you offer coverage, subject to penalty if:
• Coverage is unaffordable because EE must
contribute more than 9.5% of household income
• Or if plan covers less than 60% of covered health
expenses
• And one or more full‐time EEs receives a subsidy.
• Lesser of:
• Penalty of $250 per month ($3,000) annually per
subsidized EE
– $2.000 multiplied by all full‐time employees, less 30 EEs.

25. Free Choice Voucher
• Applies to employees within 400% of the FPL
– If their contribution cost is between 8% and 9.5 of
their income
– And they want to buy coverage through the
Exchange
• Employer must provide EE with a voucher
equal to employer contribution to buy
insurance through Exchange
• No penalty to employer who offers voucher

26. Bridge to Reform Checklist
• Develop wellness program. Apply for grant.
• Employee education
– Online tools
• Couple high‐deductible with tax‐advantaged
plans
• Consider automation tools, outsourcing
• Pay attention. Things will change.

27. Creative Design Mix
Wellness Quality
Education
Incentives Initiatives
$3050 deductible Fixed
POP Plan
HSA-qualified insurance plan Cost
$1850 HRA for Employees Variable
$3050 (Buy down deductible to $1200)
Cost
1040
Deduction HSA
FSA for Employees
for Owners (Covers 1st $1200)
Voluntary
Dependent Care - $5000

28. Timeline & Checklist

29. Questions?