9 23 Hc Reform Presentation Mini

Health Care Reform:
Understanding your most expensive new hire…
(H

(HR 3590: The Patient Protection and Affordable Care Act of 2010)

Bill Hammett
President

Hammett Health Insurance Services
San Diego Assoc. of Health Underwriters

How did we get here?

 „Health Care‟ cost increases
 „Health Insurance‟ rate increases
 Un-Insured/Under Insured
 Scott Brown #41
 Anthem Blue Cross +40%
 Reconciliation
 Severance Clause

email a question now to: bill@hammetthealth.com

The New Law
The Patient Protection and
Affordable Care Act of
2010
•Mandates •FSA/HSA Changes
•W-2 Changes •Grandfathered Plans
•Exchanges •Compliance Issues
•Taxes & Tax Credits •Pre-Existing Coverage
•Premium Increases •Dependants up to 26
•Medicare Taxes •Subsidies


Reform Timeline Highlights
 March 23rd-Bill Signed into Law
-Grandfathered Plans -Tax Credits
 September 23rd-Bill Enacted
-Kids up to 26 -Preventative Care Free
 January 1st 2011
-W-2 Changes -CLASS Act
-FSA/HSA Changes
 January 1st , 2013
-Medicare Tax -Passive Income Tax
 January 1st, 2014
-Exchanges -Subsidies -No Pre-Ex Exclusions
- Auto-Enroll -Mandates -Guarantee Issue
-Minimum Benefit Levels -Modified Community Rating


Grandfathered Plans
 Plans in place on March 23, 2010

 Some new rules do not apply to GF plans

 Adding employees or dependants do not affect GF
Status

 Simple changes to health plans lose GF status
-Increase employee contribution -Change plans -Decrease benefits

 Discrimination & Executive Carve-Outs


Small Business Tax Credits

 Begins with the 2010 Tax Year

 Credit on Business‟ Annual Tax Return

 Retro tax credit to January 2010
 Less than 25 Full Time Employees (FTE‟s)
 Income „average‟ less than $50K per FTE
 More from Sheldon…


Expansion of Child Coverage

 All Group & Individual Plans, including Self Insured

 Through age 25 up to age 26

 Dependents may be Married and even live elsewhere

 Covers only the Dependent, not Spouse or Children

 No Pre-ex exclusion for children under 19
-But does that mean guarantee issue?


Maximum Benefit Limits
 For both GF and non-GF

 Lifetime Benefit Limits will be prohibited
Maximum Annual Limits
 For both GF and non-GF

 Annual Benefit Limits will be limited almost to the
point of prohibited

Emergency Services covered as ‘In-Network’


Preventative Care

 All non-GF plans must cover preventative at no
cost to the employee
Adults Children
Type 2 Diabetes Autism
Osteoperosis Behavioral Assessments
Blood Pressure Hearing Screening
Cholesterol Immunizations
Colorectal Cancer Oral Health
Breast Cancer Vision Screening


2011 Provisions

 Employer sponsored premiums on W-2

 Prohibits „OTC‟ drug reimbursements from FSA‟s,
HSA, HRA

 Penalties for HSA non-qualified withdrawals
increase from 10% to 20%

 New Public LTC Program- “CLASS Act”

2013 Provisions

 New cap on „Medical‟ FSA contributions of
$2,500 annually

 MediCare Hospital Tax:
◦ 1.45% to 2.35% for high income earners
◦ New 3.8% Tax on net investment income

 Both: $200k Indiv. / $250K Joint


Exchanges

 All states will be required to establish insurance
exchanges

 What are they?
-Regulatory bodies
-Subsidy administrators
-Enrollment Portals
-Information Portals

 Small employers (under 100) will be allowed to
purchase through the exchange


Market Reforms

 Guarantee Issue in all markets
 No Pre-Ex
 No Annual Benefit Limits
 Waiting Periods may not exceed 90 days
 Low income subsidies begin – Affordability
Credits up to 400% of FPL
 Redefines Small Group as 1-100
 Modified Community Rating


Sheldon Blumling
Employee Benefits/ERISA Specialist

(949) 798-2127
sblumling@laborlawyers.com

Introduction
• Healthcare Reform is complex…

• 2 bills totaling just under 1,000 pages of statutes
• Patient Protection and Affordable Care Act (signed into
law on March 23, 2010)
• Health Care and Education Reconciliation Act of 2010
(signed into law on March 30, 2010)

• Expect significant future regulatory guidance
• ~1,000 pages of statutes are just the beginning…
• Many details need to be worked out and/or clarified


Introduction (cont.)
• In addition to complexity…

• Broad impact
• Individuals
• Insurance companies
• Healthcare industry
• Government
• Employers (regardless of type or size)

• Significantly expands Federal regulation of healthcare
plans and insurance
• Compare ERISA
• Historic State regulation of insurance


Four Pillars
• Four “pillars” of Healthcare Reform

• Individual coverage mandate
• Employer “play or pay” mandate
• Insurance reforms
• Coverage mandates
• Cost controls
• Creation of “insurance exchanges”

• Financing
• Subsidies for lower-income individuals and small
employers
• New taxes

‚Plan Year‛

• Basis for some of Healthcare Reform‟s effective dates
• For example, several provisions become effective for plan
years beginning on or after September 23, 2010 (6
months after the March 23, 2010 enactment date)

• Fiscal / tax year for a group health plan
• Check summary plan description and Forms 5500
• Effect of insurance renewal dates and open enrollment
dates


Small Employer Tax Credits

 Tax Credits for Small Businesses

◦ Effective in 2010 for both grandfathered and non-grandfathered
plans
◦ Available to employers with fewer than 25 FTEs and average
annual wages of less than $50,000 per FTE
◦ Employer must subsidize at least 50% of employee-only coverage
◦ Initial credit is up to 35% of employer premium costs, subject to
certain caps
◦ Potential credit increases to up to 50% of employer premium
costs in 2014 (subject to certain caps)


W-2 Changes
• Reporting Cost of Employer-Sponsored Group Health
Plan Coverage on Forms W-2

• Effective January 1, 2011 for both grandfathered and
non-grandfathered plans
• Reporting the “aggregate cost” of coverage using rules
similar to the rules for calculating the principal
amount of COBRA premiums
• Applies to 2011 Forms W-2 distributed in 2012
• Does not make amounts taxable


Employer Play or Pay
 Effective January 1, 2014
 Applies to “large employers”
◦ 50 or more “full-time” employees (including full-time
equivalents)
◦ “Full-time” means 30 or more hours per week

 In order to “play” and avoid the possibility of “paying,” an employer
must offer adequate group health plan coverage to all full-time
employees and their dependents
◦ Plan provides minimum essential benefits
◦ Plan covers at least 60% of the cost of benefits
◦ Employee premium cost does not exceed 9.5% of “household
income”


Employer Play or Pay (cont.)

• If an employer fails to “play” by not offering coverage to ALL
full-time employees and their dependents AND at least one
full-time employee receives Federal premium assistance for
purchasing coverage through an insurance exchange, then the
employer will “pay” $2,000 per full-time employee,
excluding the first 30 full-time employees.

• An employee may qualify for Federal premium assistance if
his or her income is less than 400% of the Federal poverty
level (currently $88,200 for a family of 4)


Auto-Enrollment of Large Groups

• Automatic Enrollment for Employees of Large
Employers

• Technically, statutory effective date is immediate.
However, statutory language indicates that actual
effective date will be dictated by future regulations.
• Applies to employers with more than 200 full-time
employees
• Similar to existing concept for 401(k) plans


Uniform Explanation of Coverage
 Plans Must Provide Uniform Explanation of Coverage

◦ Deadline is no later than March 23, 2012 (24 months after March
23, 2010 enactment date)
◦ Applies to both grandfathered and non-grandfathered plans
◦ Standards will be developed in regulations to be issued no later
than March 23, 2011 (12 months after March 23, 2010 enactment
date)
◦ Any “material” change in a plan not reflected in the most recent
uniform explanation of coverage must be communicated at least
60 days IN ADVANCE of the effective date of the change
 Compare existing SMM and SPD requirements


Miscellaneous New Mandates

• Miscellaneous New Coverage Mandates Effective on January
1, 2014

• Coverage of minimum essential benefits
• Cost sharing limits
• Employer reporting requirements relating to the provision
of minimum essential benefits
• “Free choice” vouchers
• Wellness discounts of up to 30% may be offered


Cadillac Tax

◦ Effective date is January 1, 2018
◦ 40% excise tax imposed for employer-provided coverage valued
in excess of $10,200 for single coverage or $27,500 for family
coverage
◦ Values will be indexed for inflation
◦ Certain exceptions apply
◦ Will this generate tax revenue?
◦ Will high-cost groups (due to experience and/or geography) be
disadvantaged?
◦ Perhaps more to come on this provision…


Other Miscellaneous Tax Provisions
• Effective January 1, 2013, an additional 0.9% Medicare tax on
wages exceeding $200,000 for individuals and $250,000 for
joint filers.

• Effective January 1, 2013, a new 3.8% Medicare tax on
investment income exceeding $200,000 for individuals and
$250,000 for joint filers.

• Effective January 1, 2013, elimination of certain deductions for
employers who receive Medicare Part D subsidies for providing
qualifying prescription drug coverage to retirees.

• Effective January 1, 2011, the excise tax for unqualified
distributions from an HSA is increased to 20%.


What Employers Should Do Now…Near Term
• Determine plan year and related effective date for near-term new
coverage mandates

• Evaluate importance of grandfathered plan status and take steps
to preserve status, if applicable
• Minimize changes
• Preserve plan documentation
• Keep an eye out for further guidance

• Amend cafeteria and/or healthcare FSA documents for coverage
of new adult tax dependents and 2011 limits on over-the-counter
drug reimbursements


What Employers Should Do Now…Near Term (cont.)
• Determine whether any existing taxable coverage of employee
dependents should be nontaxable on and after March 30, 2010 as
a result of the new exclusion for adult tax dependents

• Amend plan documents, communication materials and open
enrollment materials to account for near-term changes.
• Incorporate applicable DOL model notices into open
enrollment materials
• Ensure that 2011 open enrollment satisfies 30-day enrollment
period for adult dependents and those previously affected by
lifetime maximum

• Prepare payroll system to capture 2011 data necessary to report
the cost of group health plan coverage on Forms W-2.


What Employers Should Do Now…Near Term (cont.)
• Self-Insured Plans:
• Review plan documents for amendments required by near-
term changes
• Evaluate continued utility of maintaining a self-insured plan

• Collectively-Bargained Plans:
• Determine effective date for near-term new coverage mandates
by reviewing applicable CBAs
• Evaluate whether mid-CBA plan amendments are necessary
and/or permitted by applicable CBAs and plan documents
• Evaluate whether new Healthcare Reform requirements
(including longer-term requirements) may affect healthcare
costs to an extent that would impact future bargaining
strategies


What Employers Should Do…Long Term
• Keep an eye out for periodic future regulatory guidance

• Evaluate whether the employer “play or pay” mandate will apply

• If the employer “play or pay” mandates will apply, evaluate the
projected impact on employee healthcare costs

• Be prepared for ongoing changes and uncertainty

• Be prepared for higher employee healthcare costs

• Be prepared for more employer administrative burdens relating
to group health plans


Now What?
Key Issues & Considerations on
Health Care ‚Reform‛
from a Regional Perspective
Nick Macchione, FACHE
Director, Health & Human Services Agency
County of San Diego, CA


Last year we were asking…


This year I ask…


Key Points

• Environmental Realities

• Emerging Ideas and Best Practices
Influencing the Industry

• Future Implications of a Changing Healthcare
Landscape


National Realities


2010 Commonwealth Fund Ranking of US Healthcare
Country Rankings
1.00–2.33
2.34–4.66
4.67–7.00


Realities of State and Local Governments
 Surviving an economic recession
 Historic levels of unemployment, home
foreclosures, and personal bankruptcies
 Highest level of people on public welfare
 Inverse proportion between funding & human need
 Chronic diseases leading to chronic costs


Dilemma of Healthcare Reform
The Past: The Current:

•Accidents •Cardiovascular
•Births •Diabetes
•Contagions •Malignancy
•Genetics •Metabolic
•Pulmonary

(Diseases that are behavior
(Diseases that were random, based, lifestyle induced
infrequent, catastrophic) and environmentally
impacted)


Ironic Realities of the US Healthcare System
Pros
 One of the BEST systems in the world with
technology and state-of-the-art facilities

Cons
 Fragmented and inefficient
 Spends more than any other country
 Massive uninsured, uneven quality and
 Administrative waste


Realities of Regional System Capacity

 Complex, co-optition service delivery system
 Siloed, Fragile & Overburdened
 Parity issues
 Inefficiencies with wide variations of care
 Uneven supply/demand
 Chronic Disease  Chronic Costs


Prevention Pays Off…Healthy
Choices Wins All the Time!


Top 10 Local Health Issues
Source: Community Health Improvement Partners, 2007 Needs Assessment


True ‚Healthcare‛ or ‚Sick Care‛ Janitorial Services?


Top 5 Things Driving The Industry

• Cost: Price Competitiveness and National Deficit
w/HCF
• Demographics: Aging, Diversity, Growth
• Epidemiology: Acute to Chronic
• Technology: IT + Biotech = Care Management Tech
• Consumer Value = Price + Outcome + Experience

• And possibly Globalization: Emerging markets


Emerging Best Practices and Key Considerations
1. Elevated Roles for Nurses: Nurses as Care Integrators
2. Migration to Interdisciplinary Care: Team Approach
3. Bridging the Continuum of Care
4. Pushing the Boundaries: Home as Setting of Care
5. Targeting High Users of Health Care: Elderly Plus
6. Sharpened Focus on the Patient
7. Leveraging Technology in Care Delivery
8. Driven by Results: Accounted Care
9. Prevention will become national key strategy…and
10. Personal responsibility will need to follow.


US Health Delivery System: In Major Transition
1. Acute treatment 1. Chronic prevention/mgmt
2. Cost unaware 2. Price competitive
3. Professional prerogative 3. Consumer responsive
4. In-patient 4. Ambulatory: Home/Community
5. Individual profession 5. Team approach
6. Traditional practice 6. Evidence based practice
7. Information as record 7. Information as tool
8. Patient passivity 8. Consumer engagement
9. Provider passivity 9. Accountable care
10. Secondary Prevention 10. Primary Prevention


Regional Implications:
What Can Be Expected?
 No pain, No gain  No margin, no mission
 Commitment at all levels essential
 Delivery will come from the edge of delivery
 Best practices, but modified to be owned
 Spreading to the house is a big chasm
 Leadership skills at all levels
 Innovative solutions will come from bold new non-
traditional approaches!
 Standardization and elimination of variation
 Accountable Care…Are we really ready?


Accountable Care Organizations:
Balancing Quality-Cost-Access…Reality or Myth?


The Changing Healthcare Landscape


FRAMEWORK for
Building Better Health
Service Delivery System

Healthy Choices

Policy & Environmental Change
Culture Change

So, Now What The Health Do We Do?
•Proactive accountable “well” care

•“Right incentives”  “right outcomes”
Value versus volume.

•Improve patient safety, including
health literacy for all.

•Leverage mHealth and genomic
medicine.

•Prevention & early intervention focus


Vision of The Future…

Continuum of Care System Driven by Wellness,
Self-Reliance and Health System Collaboration


Percentage of employers who agree their
organizations will continue to offer healthcare
benefits because they are critical to employee
recruitment, retention and remaining competitive

Source: “Health Care Reform: What Employers Are Considering” conducted by the International Foundation of Employee Benefit Plans

Percentage of employers in America expect to
revisit their healthcare benefit strategy this year,
following the passage of healthcare reform
legislation

Source: “Health Care Reform: What Employers Are Considering” conducted by the International Foundation of Employee Benefit Plans

How are
E-Mail
Employers
Planning to
Special Written
Communicate Communication

and educate
Company
Their Web Site
Employees
on the new Planning
Communication
Legislation?
Already
Communicated
w/ Employees

Will Employers take advantage of a new provision that will
offer financial incentives to employees participating in
wellness programs?

Health Plans most attractive to large
employers (500+) moving forward

Takeaways
• With Legislative change comes strategy change
• Who‟s your resource?
• Are they earning their money? Ask for references.
• Reform will add cost to premium
• Efficiency with service providers will be key
• Think outside the box (HRA‟s, Kaiser/Sharp Wraps)
• Workers Comp, Liability, 401k, Payroll, HR Management
• Communication
• Control the reform message with your employees
• Show them the worth of their benefits
• Engage them in the insurance process
• Reward healthy behaviors
• Take advantage of new age wellness programs
• Reduce the risk

Questions?

Contact information:
Bill@HammettHealth.com
(858) 309-8801 office
(619) 252-3735 cell

9 23 Hc Reform Presentation Mini

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