Healthcare Reform SALGBA Presentation


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Employers Healthcare Reform Overview and TimelineThe comprehensive nature of this recently passed reform includes benefit re-design, increased administrative compliance costs, eligibility rule restructuring, increased taxes and health insurance exchange management. Employers need to streamline their operations to meet ...compliance requirements set by the legislation and their employer\’s workforce size.

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Healthcare Reform SALGBA Presentation

  1. 1. Healthcare Reform<br />Patient Protection & Affordable Care Act<br />Healthcare & Education Affordability Reconciliation Act<br />April 21, 2010<br />
  2. 2. About <br />Secova<br />Workshop<br />Agenda<br />Presenter<br /><ul><li>Secova Introduction
  3. 3. Our History and Approach
  4. 4. Healthcare Reform
  5. 5. Overview, Major Provisions and Administration
  6. 6. Details by Effective Year
  7. 7. 2010 - 2014
  8. 8. The Next Steps
  9. 9. 2015-2018, Questions and Contact Information</li></li></ul><li>About <br />Secova<br />Workshop<br />Agenda<br />Presenter<br />Secova is an HR and Benefits Management Services company supporting our clients with customized, “value–sourced” solutions that enhance services and reduce operating costs. <br /><ul><li>Founded in 1989
  10. 10. Global Service Provider, headquartered in Newport Beach, CA
  11. 11. Dedicated Benefits Administration team with 20+ years experience</li></ul>Our Mission: To help employers control and drive down the cost of delivering Human Resources & Employee Benefit Services.<br />
  12. 12. About <br />Secova<br />Workshop<br />Agenda<br />Presenter<br />Bruce Borgos<br />Mr. Borgos is the Director of Healthcare audit services at Secova. With over 20 years of experience in risk management and benefits management for public sector employers, Mr. Borgos has developed and managed innovative solutions designed to reduce health care costs and improve employee health and productivity. Before joining Secova, Mr. Borgos served as Director of Sales and Marketing for a division of Sierra Health Services, Product Manager for GatesMcDonald, and Vice President of Operations for W.R. Gibbens. <br /> <br />Karen Kerns<br />Karen Kerns is the Internal Compliance Director  at Secova.  Miss Kerns has advised the public and private sector on all aspects of benefit administration including optimal operational and administrative design, as well as advising companies of the due diligence necessary for employee benefit issues. Karen has presented at the National Retail Federation’s Human Resources Executives Summit helping employers understand how to implement new administrative procedures to meet the new requirements from recently passed legislative measures for COBRA. With a focus on process improvements, her experience provides insight to enhancing current processes to accommodate future business needs while ensuring client needs and requirements are represented.<br />
  13. 13. Healthcare <br />Reform<br />
  14. 14. 2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Senate Passed Patient Protection & Affordable Care Act (PPACA)<br />December 24, 2009<br />House Passed the Health Care and Education Reconciliation Act <br />(HCERA)<br />March 21, 2010<br />Senate Enacted Changes & Passed the HCERA<br />March 25, 2010<br />Passage of Healthcare Reform <br />PPACA Signed Into Law By President Obama<br />March 23, 2010<br />HCERA Signed Into Lay by President Obama <br />March 30, 2010<br />
  15. 15. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Healthcare Reform Overview<br /><ul><li>Expands coverage to 31 million currently uninsured Americans through a combination of cost controls, subsidies and mandates.
  16. 16. Congressional Budget Office estimates that the legislation will cost $950 billion over a ten-year period.
  17. 17. Healthcare reform measures will go into effect six months from the enactment date through 2018.
  18. 18. Significant changes occur in 2010-11 with the majority of the provisions taking place in 2014.
  19. 19. Comprehensive nature of this recently passed reform includes benefit re-design, increased administrative and compliance costs, eligibility rules restructuring, increased taxes and health insurance exchanges.
  20. 20. All provisions should be carefully reviewed with legal council, actuaries </li></ul> and plan design consultants. <br />
  21. 21. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Healthcare Reform Overview<br /><ul><li>Enforcement regulations will delay “immediate” provisions until:
  22. 22. Next plan year after enactment, waiting period or effective date
  23. 23. First renewal date after enactment or effective date
  24. 24. The regulations are written to ensure:
  25. 25. More individuals are covered with fewer restrictions on coverage or eligibility.
  26. 26. Future regulations will provide guidance by:
  27. 27. Internal Revenue Service (IRS)
  28. 28. Department of Labor (DOL)
  29. 29. Health and Human Services (HHS)
  30. 30. Health Resources and Services Administration (HRSA)
  31. 31. State Departments/Division of Insurance
  32. 32. State Departments/Division of Revenue</li></li></ul><li>2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Major Provisions to Healthcare Reform<br /><ul><li>2010 - Expansion of Eligibility: (Grandfathered Plans)
  33. 33. Dependents are eligible to receive health insurance until their 26th birthday
  34. 34. 2010 - Elimination of lifetime and most annual dollar limits on coverage. (Grandfathered Plans)
  35. 35. 2010 - Internal and External Appeals Process: Must be established
  36. 36. 2010 - Prohibition of Pre-existing Conditions and Recissions. (Grandfathered Plans)
  37. 37. Eliminating exclusions of pre-existing conditions excluded for all others in 2014
  38. 38. 2010 - Health Plan Disclosure and Transparency Requirements: Administrative simplification and </li></ul> uniform explanation of coverage standards are implemented. <br /><ul><li>2011 - Reporting Health Coverage Costs on W-2 Forms – This is issued for W-2’s issued in 2012 covering </li></ul> the 2011 tax year. <br /><ul><li>2011 - Insurer Regulations: Regulated medical loss ratios for large and small groups
  39. 39. 2011 - Automatic Enrollment: 1st national long-term care insurance program for </li></ul> U.S. workers. Few employers will enroll their employees when it officially launches.<br />
  40. 40. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Major Provisions to Healthcare Reform<br /><ul><li>2013 - Loss of tax advantage benefits: Medical FSA cap of $2,500 and limitation on reimbursement of prescribed medicines
  41. 41. 2013 - Additional Tax for High Wage Workers
  42. 42. 2014 - Automatic Enrollment: Employers with more than 200 employees are required to automatically enroll new-full time employees in their healthcare plans
  43. 43. 2014 - Expansion of eligibility for Medicaid and subsidized care
  44. 44. 2014 - Insurance Exchanges: Created to assist individuals and small businesses with fewer than 100 employees to purchase medical insurance
  45. 45. 2014 - Individual Coverage Mandate: Requires all individuals to qualify to receive affordable health insurance or pay a penalty
  46. 46. 2014 - Employer Pay or Play Mandate: Employers must offer affordable coverage to full time employees (30 hours a week), or pay a penalty
  47. 47. Employers with 50 or fewer employees are exempt from penalties
  48. 48. 2018 – High Cost Insurance Excise Tax: Is established
  49. 49. 2014 to 2018 - Insurer Regulations: Health insurance provider fee imposed</li></li></ul><li>Michelle’s Law<br />Compliance <br />Strategy<br />Model Notices<br />Timeline<br />What Happens now?<br />This calls for a lot of paper work.<br />
  50. 50. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br /><ul><li>Increased administrative workload:
  51. 51. Notices will be required after enactment to educate your employees and their dependents. Increased costs are attributed to: </li></ul> 1. Spike of enrolled dependents and participants in your medical plans<br /> 2. Penalties to the employer for not offering coverage to your expanded “dependent” population<br /> 3. Automatic medical enrollment provision taking effect in 2014<br /><ul><li>Employees may opt out
  52. 52. Claims activity levels will increase.
  53. 53. Potential increased premium costs through:
  54. 54. Removal of lifetime and annual limits
  55. 55. Insurer tax increases
  56. 56. Mandatory preventative service provisions with no cost sharing</li></ul>Increase In Administrative Workload and Costs<br />
  57. 57. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br /><ul><li>Annual distribution and collection of waivers and other forms
  58. 58. Employers that provide FSAs will need to amend their plan documentation and enrollment materials. Restrictions must be placed on automatic reimbursement procedures, such as the use of debit cards. Increased costs will be attributed to: </li></ul>Fewer employees enrolled/lower contributions (increased taxes)<br />Limited $2,500 cap in 2013<br />Restriction on reimbursement for prescribed medicines and insulin in 2011<br /><ul><li>Monitoring (FCV, Medicaid): </li></ul>1. Inflation adjustments<br />2. Federal poverty levels<br />3. Employee incomes vs. cost sharing<br />4. State exchanges (What is offered in each state, costs and coverage.) <br />Increase In Administrative Workload and Costs<br />
  59. 59. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Grandfathered Plans<br /><ul><li>As for existing plans, the law includes a grandfathering rule that allows employers to avoid many (but not all) of the reform law's benefit requirements as long as the plan was in use when the bill was passed.
  60. 60. Plans in existence on March 23, 2010 are grandfathered plans.
  61. 61. Grandfathered plans will be subject to the following insurance reforms. </li></ul>Expansion of child coverage for children until age 26.<br />Prohibition of waiting periods for over 90 days. <br />Prohibition of lifetime limits.<br />Restrictions on annual limits from 2010 through 2013 and prohibit annual limits 2014 onward. <br />Standard uniform explanation of coverage. <br />Prohibition of pre-existing conditions on dependents under age 19 (2011 through 2013) and prohibition of pre-existing condition limitations entirely by 2014.<br />
  62. 62. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />New Law Redefines Eligible Dependents<br /><ul><li>Allows adult children to remain on their parents’ health insurance plan up until their 26th birthday.
  63. 63. Applies to married children. Excluded from this provision are married children’s spouse and their children.
  64. 64. Applies to young adults away at college or </li></ul> young adults living away from home not <br /> attending college. <br /><ul><li>Employer may exclude children up to the age 26, who </li></ul> are eligible for coverage under another employer <br /> sponsored plan, for the next three years. <br />Note: Plan year 2014 this requirement is no longer <br /> imposed. <br /><ul><li>Young adults under the age of 26 will be able to </li></ul> take advantage of this provision as of September 2010, six months after the <br /> enactment of the legislation (March 23, 2010).<br />
  65. 65. 2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Medicare and Medicaid Provisions<br /><ul><li>Rebates for Medicare Part D “Donut Hole” - Seniors will get a $250 rebate to help fill the “donut hole” gap in Medicare prescription drug coverage.
  66. 66. The coverage gap falls between the $2,830 and $6,440 in total drug spending.
  67. 67. Makes Participation in Medicare Part D more attractive to retirees.
  68. 68. Program to Reduce the Cost of Covering Early Retirees - A program will be implemented to temporarily support employer retiree plans until the exchange is fully running.
  69. 69. Plan sponsors will be reimbursed for 80% of claims between $15,000 and $90,000 for pre-Medicare retirees age 55-64.
  70. 70. Program does not apply to retirees on Medicare and retirees that are not actively working for an employer.
  71. 71. Program will end when the health insurance exchanges roll out in 2014.</li></li></ul><li>2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Benefit Restrictions and Prohibitions<br /><ul><li>Prohibiting Rescission of Coverage – Coverage can not be cancelled unless the individual has committed fraud or made an intentional misrepresentation of material fact.
  72. 72. No lifetime dollar amount maximums on benefits are allowed.
  73. 73. Annual limits are allowed until the year 2014 on services determined by the Department of Health and Human Services. </li></li></ul><li>2010 <br />Impact<br />2011 <br />Impact<br />Overview<br />Essential Health Benefits<br /><ul><li>The new law requires that the Secretary of Health and Human Services issue regulations specifically defining essential health benefits. The statute states that these categories should be considered “essential”:
  74. 74. Ambulatory patient services
  75. 75. Emergency services
  76. 76. Hospitalization
  77. 77. Maternity and newborn care
  78. 78. Mental health and substance use disorder services
  79. 79. Prescription drugs
  80. 80. Rehabilitative services and devices
  81. 81. Prevention and wellness services and chronic disease management, and Pediatric services, including oral and vision care.</li></li></ul><li>2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Health Plan Administration<br /><ul><li>Nondiscrimination Requirements for Fully Insured Plans - Nondiscrimination rules formerly applicable to self-funded group health plans are now applicable to all group health plans.
  82. 82. Access to Insurance for Uninsured Individuals with Pre-Existing Conditions - Through a new program of high-risk insurance pools, people who have been denied coverage on the basis of pre-existing conditions and have been uninsured for at least six months will be extended subsidized coverage.
  83. 83. The program will end when the health insurance exchanges roll out in 2014.
  84. 84. Administrative Simplification - Health plans must adopt and implement uniform standards and business rules for the electronic exchange of health information to reduce paperwork, administrative burdens and costs.</li></li></ul><li>2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Tax Provisions<br /><ul><li>Adoption Tax Credit and Assistance Exclusion - The adoption tax credit has increased from $12,170 to $13,170 for adoption beginning January 1, 2010.
  85. 85. Adoption credit is refundable and is extended through 2011.
  86. 86. Tax on Indoor Tanning Services -The act imposes a 10% tax on amounts paid for indoor tanning services (new IRC § 5000B).
  87. 87. Like a sales tax, the tax will be collected from the person tanning when payment for the tanning services is made. The provision applies to services performed on or after July 1, 2010.
  88. 88. This excise tax will not impact employer plans. </li></li></ul><li>2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Medicare and Medicaid Provisions<br /><ul><li>Preventative Care Services - Provides a free, annual wellness visit and personalized prevention plan service for Medicare beneficiaries and requires new plans to cover preventive services with little to no cost sharing.
  89. 89. Medicare Part D Discounts - Seniors who have fallen into the "donut hole" of Medicare Part D prescription coverage in 2010 will receive a 50% discount on name brand drugs. Pharmaceutical manufacturers that don’t comply with the discount program will be subject to fines.
  90. 90. The legislation aims to close the donut hole by 2020 by offering a 75% discount on generic drugs.
  91. 91. The bill includes $500 billion in Medicare cuts over the next decade.</li></li></ul><li>2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Tax Provisions<br /><ul><li>Increased Tax on Withdrawals from </li></ul> HSAs, FSAs and Health Reimbursement <br /> Arrangements (HRAs)- Additional tax for <br /> health savings account withdrawals before <br /> age 65 for nonqualified medical expenses <br /> will increase from 10 percent to 20 percent. <br /><ul><li>Plan sponsors should communicate this </li></ul> to their employees. <br /> <br />
  92. 92. 2010 <br />Impact<br />2011<br />Impact<br />Overview<br />Health Plan Administration<br /><ul><li>Reporting Health Coverage Costs on </li></ul>W-2 Forms - Employers are required to disclose the value of the health coverage provided by the employer on the employee’s annual W-2 form. <br /><ul><li>This is for W-2’s issued in 2012 covering the 2011 tax year. </li></ul> <br />
  93. 93. 2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Medicare and Medicaid Provisions<br /><ul><li>Eliminating Deduction for Medicare Part D Subsidy - Employers that maintain prescription drug coverage for their Medicare Part D eligible retirees previous to the year 2013 are entitled to a tax deduction. This deduction will be eliminated.
  94. 94. Under 2003 law, employers are eligible for tax-free government reimbursement of 28% of prescription drug expenses. With the elimination of this deduction some companies are reporting a $150 million dollar loss in earnings. </li></ul> <br />
  95. 95. 2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Health Plan Administration<br /><ul><li>Limiting Flexible Spending Account Contributions: A $2,500 cap on contributions to flexible spending accounts will go into effect. In succeeding years, the cap would be increased to match the rise in the Consumer Price Index.
  96. 96. There is no annual limit under current law. Currently employers impose limits between $4,000 and $5,000 a year.
  97. 97. Administrative Note: Employers that provide FSAs will need to amend their plan documentation and enrollment materials. Restrictions must be placed on automatic reimbursement procedures, such as the use of debit cards.
  98. 98. Required Employee Redesign of FSA’s - Employers will have to narrow allowed spending from flexible spending accounts to bar reimbursement for non-prescription and over-the-counter drugs. This is an FSA feature that the Internal Revenue Service sanctioned in 2003. </li></ul> <br />
  99. 99. 2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Tax Provisions<br /><ul><li>Increased Threshold for Claiming Itemized Deduction for Medical Expenses - Increases the income threshold for claiming the itemized deduction for medical expenses from 7.5 to 10 percent.
  100. 100. Beginning 2013, individuals over 65 will be able to claim the itemized deduction for medical expenses at 7.5 percent of adjusted gross income through 2016.
  101. 101. Excise Tax on Medical Device - Medical device manufacturers will face a 2.9 percent national sales tax. Excepted are eyeglasses, contact lenses, hearing aids or other items for individuals. </li></ul> <br />
  102. 102. 2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />State Exchanges are Created<br /><ul><li>Health Insurance Exchanges - Insurance exchanges will open in each state for small employers that fall under 100 employees. Insurance exchanges build a competitive marketplace for the self-employed, unemployed, small businesses and others not covered through their employer.
  103. 103. Individuals and small businesses can utilize
  104. 104. Analysts and insurers are uncertain how state insurance exchanges will operate until after final regulations are issued.
  105. 105. In 2017 states may opt to allow businesses with more than 100 employees to participate in these exchanges.</li></ul> <br />
  106. 106. 2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Employer Penalties, Fees and Fines<br /><ul><li>Employer Pay or Play Mandate for Lack of Coverage - Employers with over 50 full time employees will be assessed a pay or play penalty of $2,000 per employee.
  107. 107. The first 30 employees are not counted in calculation of the penalty. Example: an employer with 75 employees would pay the penalty for 45 workers, or $90,000 (45* $2,000).
  108. 108. Applies to full-time employees (defined as at least 30 hours per week).
  109. 109. Employer Pay or Play Mandate for Employees Receiving Coverage through the Exchange - Employers who offer coverage, and has at least one employee that receives a tax credit, will be assessed a pay or play fine of $3,000 for each worker receiving the tax credit, up to an aggregate cap of $2,000 per full-time employee.
  110. 110. Employers are required to report to the federal government on health coverage they provide.
  111. 111. Employers can provide a voucher to eliminate penalty.
  112. 112. Available for employees under 400% FPL and employee plan cost between 8%-9.8% of income.</li></li></ul><li>2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Provisions Under Health Insurance Exchanges<br /><ul><li>Free Choice Vouchers - Employers that offer healthcare coverage and make a contribution toward the cost of the health care coverage will be required to provide “Free Choice Vouchers” to qualified employees for the purchase of qualified health plans through the exchanges under the following conditions:
  113. 113. Employee household income is 400% of the Federal Poverty Level, and
  114. 114. The required contribution for employer-sponsored single coverage in the least expensive plan is between 8% and 9.8% of AGI and
  115. 115. The employee is a full time employee and
  116. 116. The employee opts out of your employer sponsored coverage and
  117. 117. The employee purchases coverage through the exchange. </li></li></ul><li>2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Individual Penalties, Fees and Fines<br /><ul><li>Individual Coverage Mandates - Citizens will be required to have acceptable coverage or pay a penalty of $95 in 2014, $325 in 2015, $695 (or up to 2.5 percent of income) in 2016. Families pay half of the amount for children, up to a cap of $2,250 per family. After 2016 prices are indexed to the consumer price index.
  118. 118. Applies to retirees.
  119. 119. Employer plan participation will increase.
  120. 120. Healthcare Tax Credits
  121. 121. Premium tax credits will be available to individuals up to 400% of the Federal Poverty Level (FPL) through the “exchanges” for those not eligible/offered “affordable” employer coverage.
  122. 122. Employers are required to educate employees about their insurance options outside of employment
  123. 123. The notifications must mention existence of the exchanges, premium subsidies and credits. </li></li></ul><li>2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Medicare and Medicaid Provisions<br /><ul><li>Expands Medicaid Eligibility - The uninsured and self-employed will be able to purchase insurance through state-based exchanges with subsidies available to individuals and families with income above Medicaid eligibility (133%) and below 400%of poverty level.
  124. 124. Generous subsidies are offered to the low income. For this reason employers may not want to duplicate these offerings with salary-based cost sharing.
  125. 125. Medicaid businesses will not be able to charge patients premiums to pay for the enrollees. They will have to absorb the extra costs or pass it to others with higher premiums. </li></li></ul><li>2014<br />Impact<br />2013 <br />Impact<br />2012<br />Impact<br />Health Plan Administration<br /><ul><li>Automatic Enrollment - Employers with more than 200 employees are required to automatically enroll new full-time employees in their healthcare plan (subject to any waiting period authorized by law).
  126. 126. Employers must provide notice of employee’s right to opt out of automatic enrollment.
  127. 127. Notice Of Coverage Options: Employers must give employees notice about the availability of an insurance exchange. </li></li></ul><li>The Next Steps<br />
  128. 128. Contact Information<br />2015 - 2018<br />Questions<br />Comprehensive nature of this <br />recently passed reform includes <br />benefit re-design, increased <br />administrative and compliance <br />costs, eligibility rules <br />restructuring, increased taxes <br />and health insurance exchanges.<br />Note: All provisions should be<br />carefully reviewed with legal<br />council, actuaries and plan<br />design consultants. <br />
  129. 129. Contact Information<br />2015 - 2018<br />Questions<br /><ul><li>Implementprocesses to account for the “tricky” situations in addition to the standard guidelines.
  130. 130. Communicateto all HR ongoing processes which will be implemented to manage the healthcare reform provisions.
  131. 131. EducateHR about the healthcare reform legislation to reduce any mistakes that can lead to unwanted costs.
  132. 132. Provideongoing review and training to all HR for benefits improvements and the healthcare reform legislative updates.</li></ul>Whether you administer your benefits in house or <br />utilize an outsourced vendor, here are suggestions <br />regarding achieving success within your benefits<br />department and administration:<br />
  133. 133. Questions<br />Questions<br />
  134. 134. Thank You<br />Secova, Inc.<br />5000 Birch Street<br />Suite 300, East Tower<br />Newport Beach, CA 92660 1.800.257.0011 <br /><br />Sarah Soss<br />714-384-0590<br /><br />2009 Secova, Inc. All Rights Reserved. <br />