Affordable Care Act - Are you Prepared?
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This document provides an overview and summary of requirements under the Affordable Care Act for 2013 and upcoming requirements for 2014. It outlines 10 potential "traps for the unwary" in complying with ACA provisions and requirements employers must meet in 2013 including providing Summaries of Benefits and Coverage and limiting Flexible Spending Accounts to $2,500. It also summarizes upcoming 2014 requirements such as eliminating waiting periods longer than 90 days and employer shared responsibility provisions.
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Affordable Care Act - Are you Prepared?
- 1. Affordable Care Act ARE YOU PREPARED? June 2013 Leah M. Wurth, Gallagher Grace/Mayer Employee Benefits Consultant
- 2. 2©2012 Gallagher Benefit Services, Inc. 2 ©2013 Gallagher Benefit Services, Inc. Healthcare Reform Update • Ten PPACA Traps for the Unwary • 2013 PPACA Requirements • Preparing for 2014 » Upcoming 2014 Requirements » Spotlight on Fees • Understanding the Individual Mandate • 2014 Exchanges » The Marketplace, Open Enrollment, Rates, Federal VS State Exchange • Employer Shared Responsibility » Applicable Large Employer » Transition Rules » Definition of Minimal Value & Affordable Coverage » Penalties & How to calculate • Medicaid Expansion » Potential employer Impact • Preparing for the Financial Impact – Action Plan
- 3. Ten PPACA Traps For The Unwary
- 4. 4©2012 Gallagher Benefit Services, Inc. 4 ©2013 Gallagher Benefit Services, Inc. Trap #1 Not Planning For The Potential Financial Impact In 2013 Can Cost You In 2014 - Large Employers (50 + FTE) who do NOT offer “affordable” health insurance that provides “minimum value” to all employees working on average over 30+ hours/ week will face potential penalties - It is key to determine your potential impact and develop a plan and strategic approach to offer or modify how you currently offer health insurance
- 5. 5©2012 Gallagher Benefit Services, Inc. 5 ©2013 Gallagher Benefit Services, Inc. Trap #2 Failing To Plan For The 2014 Mandate Plan Design Changes Required Under PPACA - Beginning in 2014 PPACA requires certain plans changes including limiting employee waiting periods to no more than 90 days, eliminating annual dollar limits on Essential Health Benefits, mandatory coverage of clinical trials for cancer & life threatening diseases and eliminating pre- existing condition exclusions for all enrollees
- 6. 6©2012 Gallagher Benefit Services, Inc. 6 ©2013 Gallagher Benefit Services, Inc. Trap #3 Not Amending You Healthcare Flexible Spending Account Plan Documents - Effective for plans starting on or before Jan 1, 2013, employee salary reduction contributions to health flexible spending accounts will be limited to a maximum $2,500 limit. Any plan amendment to conform a cafeteria plan to the $2,500 limit must be adopted on or before Dec 31, 2014 and may be effective retroactively, provided it acts in accordance with this guidance for plans after Dec 31, 2012
- 7. 7©2012 Gallagher Benefit Services, Inc. 7 ©2013 Gallagher Benefit Services, Inc. Trap #4 Failing To Amend Your Cafeteria Plan Documents For A One-time Special Change In Status - Within the cafeteria plan change in status regulations, an employer may amend one or more of its written cafeteria plans to permit either or both of the following changes in salary reduction elections: (1) Permit an employee who elected to pay for coverage under a health plan with a fiscal plan year beginning in 2013 to prospectively revoke or change his or her election once, without a change in status (2) Permit an employee who failed to make a salary reduction election through the employer’s cafeteria plan to make a prospective salary reduction election for accident and health coverage on or after the first day of the 2013 plan year, without regard to a change in status Such a change would permit employees to drop employer-sponsored coverage mid-year to obtain coverage through an Exchange or add coverage under the employer’s plan to comply with requirements under the “individual mandate.”
- 8. 8©2012 Gallagher Benefit Services, Inc. 8 ©2013 Gallagher Benefit Services, Inc. Trap #5 Overlooking The Need To Plan For Distribution Of The New Exchange Notice - Originally employers were slated to issue a notice to ALL employees about the new state and federal Health Insurance Exchanges by March 1, 2013, guidance has provided a delay until a date closer to the October 2013 open enrollment
- 9. 9©2012 Gallagher Benefit Services, Inc. 9 ©2013 Gallagher Benefit Services, Inc. Trap #6 Forgetting About Grandfather Status - If your organization offers a group health plan that has been able to retain Grandfathered status there are certain PPACA requirements that may begin in 2014 for you as well; such as non-discrimination rules for fully-insured plans, quality of care reporting, preventative care mandates and patient protections, including applicable notice rules
- 10. 10©2012 Gallagher Benefit Services, Inc. 10 ©2013 Gallagher Benefit Services, Inc. Trap #7 Ignoring The Potential Impact Of New Wellness Regulations Under PPACA - As more and more employers look for ways to control health plan cost, increasing numbers are turning to wellness and health management programs to improve employees’ health and responsibility for the health to thus lower plan cost and improve over wellbeing. Under the proposed PPACA regulations employers can change existing contribution limits to incent employees to maintain good health
- 11. 11©2012 Gallagher Benefit Services, Inc. 11 ©2013 Gallagher Benefit Services, Inc. Trap #8 Waiting To Develop Measurement And Stability Periods Under PPACA - Employer may face penalties under PPACA beginning Jan 1, 2014 for failure to offering affordable coverage and provide minimum value health insurance to all full-time (avg 30+ hrs/ week). Regulations issued in late 2012 provide safe harbor methods for determining whether employees are seasonal or variable hour employees and which employees constitute that of a “full-time” employee for purposes of the employer shared responsibility
- 12. 12©2012 Gallagher Benefit Services, Inc. 12 ©2013 Gallagher Benefit Services, Inc. Trap #9 Disregarding New Fees And Taxes Under PPACA - PPACA introduced a number of new fees and taxes with varying due dates and calculation methods, most notably - Patient Centered Outcomes Research Fees (or Comparative Effectiveness Research Fee) PCORI or CER; established to advance comparative effectiveness research related to patient-centered outcomes - Transitional Reinsurance Fee meant to provide excess coverage for high risk individual in the exchanges - Payroll Tax on High Income Earners there is an additional payroll tax for compensations in excess of $200,000 single/ $250,000 married filing jointly
- 13. 13©2012 Gallagher Benefit Services, Inc. 13 ©2013 Gallagher Benefit Services, Inc. Trap #10 Failing To Provide Required Notices Under PPACA - PPACA has created over a dozen new notice requirements covering areas from new appeals procedures to grandfather status to information about Exchanges, not all new notices apply to all employers, but some do. And Properly providing the correct notices is crucial to avoid audit penalties
- 14. 14©2012 Gallagher Benefit Services, Inc. 2013 PPACA Requirements
- 15. 15©2012 Gallagher Benefit Services, Inc. 15 ©2013 Gallagher Benefit Services, Inc. 2013 PPACA Requirements • Summaries of Benefits & Coverage – Patient Protection and Affordable Care Act (PPACA) require accurate description of benefits and coverage • Annual contributions to FSA limited to $2,500 » UPDATE: Effective with plan years beginning on or after January 1, 2013 » UPDATE: Cafeteria plan documents must be amended by December 31, 2014 • Employers must amend cafeteria plan documents to reflect this change • Additional Medicare Payroll Tax = 0.9% on high-income workers*
- 16. 16©2012 Gallagher Benefit Services, Inc. 16 ©2013 Gallagher Benefit Services, Inc. 2013 PPACA Requirements • Employer notice explaining Exchange » Beginning 10/1/13, state and government run exchanges begin, PPACA requires employers to provide notice to employees late summer/fall 2013 • W-2 Reporting Requirements » Employers filing over 250 W-2s from the preceding year must be reporting the cost of employer-sponsored healthcare coverage • Grandfathered Plan Determinations • Begin measurement periods for determining full-time employee status “Counting Hours”
- 17. 17©2012 Gallagher Benefit Services, Inc. Upcoming 2014 PPACA Requirements
- 18. 18©2012 Gallagher Benefit Services, Inc. 18 ©2012 Gallagher Benefit Services, Inc. 6/23/10 9/23/10 1/1/11 1/1/12 1/1/13 1/1/14+ • OTC drug reimbursements • HSA penalties • Employee notification requirements • Coverage expansion mandates • Patient protections • Early retiree reinsurance • High-risk pools • Employer and individual mandates • Insurance exchanges • Patient protections • Automatic enrollment? • “Cadillac” excise tax (2018) • Annual Health Insurer Fee • Transitional Reinsurance Fee • W-2 Reporting (begin implementation for 2012 W-2s) • Internal and External Claims and Appeals Procedures • “CLASS” LTC Program (suspended) • SCOTUS Decision • Women’s Preventive Services (plan years beginning on or after August 1, 2012; certain exemptions apply) • Medical Loss Ratio Rebate Distributions (August 2012) • Summary of Benefits and Coverage (open enrollments beginning on or after 9/23/2012) • Quality of Care Reporting (guidance was due March 2012) • Comparative Effectiveness Research Fee • FSA limit to $2,500 • Itemized medical expense deduction changes • Medicare tax increase • Part D drug subsidy deduction eliminated • Employee Exchange notification Timeline for Plan Sponsors
- 19. 19©2012 Gallagher Benefit Services, Inc. 19 ©2013 Gallagher Benefit Services, Inc. Upcoming Requirements for 2014 • No waiting periods longer than 90 days • Elimination of Pre-existing Condition Exclusions • No Annual Limits for Essential Benefits • Non-grandfathered plans: » Cannot deny participation in a clinical trial » Cannot discriminate based on health status • Small group insured plans » Must provide essential benefits » Deductibles must not exceed limits for qualified high deductible health plans ($2,000 individual/$4,000 family in 2014);
- 20. 20©2012 Gallagher Benefit Services, Inc. 20 ©2013 Gallagher Benefit Services, Inc. Upcoming Requirements for 2014 • Out-of-pocket limits cannot exceed applicable limits for qualified high deductible health plans ($6,250 individual/$12,500 family for 2013) • Automatic Enrollment » Employers with over 200 full-time employees must automatically enroll employees in employer-sponsored group health plan coverage beginning in 1/1/14 (effective date TBD) • Employer Shared Responsibility » Beginning in January 2014, applicable large employers who average 50+ Full-Time Equivalents (FTE) during the preceding year will be required to offer affordable group health coverage or pay a penalty
- 22. 22©2012 Gallagher Benefit Services, Inc. 22 ©2013 Gallagher Benefit Services, Inc. Spotlight on Fees • Comparative Effectiveness Research Fee (“CER” Fee) » Due by July 31 of following year » Effective for plans with plan or policy years ending after 9/30/12 » First payment due 7/31/2013 » Report on Form 720 » Amount of fee • $2 per participant/enrollee annual fee • $1 for fiscal year 2013 » Finances Patient-Centered Outcomes Research Institute • Fee also referred to as “PCORI” Fee » Fee ends in 2019 • Plan years ending after 9/30/19 are not included » Guidance issued April 2012 » UPDATE: final regulations issued December 2012
- 23. 23©2012 Gallagher Benefit Services, Inc. 23 ©2013 Gallagher Benefit Services, Inc. Spotlight on Fees • Transitional Reinsurance Fee » Intended to stabilize premiums by partially offsetting claims for high-cost individuals in non-grandfathered individual market plans » Insured and self-funded plans • Fee paid by TPA in case of self-funded plans, but plan responsible for funding payment » Payments due annually (submit enrollment count by 11/15, HHS responds by later of 15 days later or 12/15, payment due 30 days later; e.g., 1/15/2015, but could be as early as 12/31/2014) » Payment amount proposed regulations set fee amount at annualized rate of $63/member annually
- 24. 24©2012 Gallagher Benefit Services, Inc. Individual Mandate
- 25. 25©2012 Gallagher Benefit Services, Inc. 25 ©2012 Gallagher Benefit Services, Inc. Individual Mandate -2014 OR OR Exception Penalty Minimum Essential Coverage Premium Assistance
- 26. 26©2012 Gallagher Benefit Services, Inc. 26 ©2012 Gallagher Benefit Services, Inc. Year • 2014 • 2015 • 2016 • After 2016 Flat Dollar Amount** (max of 300 % for family) • $95 • $325 • $695 • $695, indexed for inflation in $50 increments % of Household Income • 1.0 • 2.0 • 2.5 • 2.5 *Capped at the national average of the annual cost of a bronze level health insurance plan, for the family size, offered through the state exchange. **Halved for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for those NOT insured by taxpayer) Penalty amount is the greater of*: Individual Penalty Penalty
- 27. 27©2012 Gallagher Benefit Services, Inc. 27 ©2012 Gallagher Benefit Services, Inc. Individuals’ Choices in 2014 Bronze Plan Silver Plan Gold Plan Platinum Plan HEALTHINSURANCEEXCHANGE Catastrophic Plan Value of Benefits & Household Income Medicaid Spouse Employer With/Without Premium Assistance
- 28. 28©2012 Gallagher Benefit Services, Inc. 2014 Exchnages
- 29. 29©2012 Gallagher Benefit Services, Inc. 29 ©2012 Gallagher Benefit Services, Inc. 2014 Exchanges The 'Marketplace' Employer Notice Call Center Website Navigator
- 30. 30©2012 Gallagher Benefit Services, Inc. 30 ©2012 Gallagher Benefit Services, Inc. Exchanges - 2014 PROVIDERS CHOICEPOOL Bronze Plan Silver Plan Gold Plan Platinum Plan Catastrophic Plan CONSISTENTMARKETRULEBASE Large Group > 100 employees Government Subsidy Individuals Small Group < 100 employees
- 31. 31©2012 Gallagher Benefit Services, Inc. 31 ©2013 Gallagher Benefit Services, Inc. Exchanges – Premium Assistance To qualify for premium assistance credit, an individual must: • NOT be eligible for an employer-sponsored plan that is affordable and has a minimum value • Have a household income between 100% and 400% of the Federal Poverty Level • NOT receive benefits through Medicare, Medicaid, CHIP, TRICARE, VA or other coverage as determined by HHS • Be a citizen or legal immigrant • Be a resident of the state where the Exchange is located • NOT be claimed as a dependent on anyone’s tax return • Purchase a qualified health plan through the Exchange (not including a catastrophic plan) Premium Assistance
- 32. 32©2012 Gallagher Benefit Services, Inc. 32 ©2013 Gallagher Benefit Services, Inc. Exchanges – Open Enrollment Initial open enrollment period from October 1, 2013 - February 28, 2014 In following years, annual open enrollment from October 15- December 7 Coverage effective January 1 HIPAA special enrollment rights apply
- 33. 33©2012 Gallagher Benefit Services, Inc. 33 ©2012 Gallagher Benefit Services, Inc. Exchanges – Rates Charge the same premium as plans purchased outside of the Exchange Rates will vary only by: • Individual vs. Family Coverage • Geographic area • Age (no more than 3 to 1) • Tobacco use (no more than 1.5 to 1) Actual rates won’t be determined until closer to 2014 Exchange will determine eligibility for premium assistance credit to help pay premiums
- 34. 34©2012 Gallagher Benefit Services, Inc. 34 ©2012 Gallagher Benefit Services, Inc. State Decisions on Exchanges
- 35. 35©2012 Gallagher Benefit Services, Inc. Employer Shared Responsibility
- 36. 36©2012 Gallagher Benefit Services, Inc. 36 ©2012 Gallagher Benefit Services, Inc. No penalty applies! Lesser of: • $3,000 per full-time EE receiving tax credit* Or • $2,000 per full-time EE (minus first 30) $2,000 penalty per full-time EE (minus first 30) if at least one full-time EE receives the tax credit No penalty applies! Is coverage affordable? Plan provides minimum required value? Offering Minimum Essential Coverage? * Only applies to full-time employees s with household incomes of between 100% and 400% of FPL Employer Shared Responsibility Have at least 50 FTEs?
- 37. 37©2012 Gallagher Benefit Services, Inc. 37 ©2013 Gallagher Benefit Services, Inc. • Transition Rules – Employers can utilize any 6-12 month period in 2013 to determine applicability for 2014 Employer Shared Responsibility • Controlled Group Rules – Rules are similar to retirement plan testing utilized to aggregate ownership and avoid abuse • How to determine if you are an Applicable Large Employer » Aggregate the number of full-time employees and full-time equivalents (to determine FTE; total number of hours worked by variable hour employees, divided by 12, divided by 130) if sum is greater than 50 = Applicable Large Employer Employer Shared Responsibility
- 38. 38©2012 Gallagher Benefit Services, Inc. 38 ©2013 Gallagher Benefit Services, Inc. • Full-Time Employee – Any employee working 30 hours or more per week or 130 hours per month • Full-Time Equivalent (FTE) – Combination of employees who separately do not constitute full- time employees, but who constitute a full-time employee when aggregated • Hourly Employees – Use actual hours of service and for which payment is owed • Non-Hourly Employees – use (1) actual hours of service (2) days worked or (3) weeks- worked Employer Shared Responsibility
- 39. 39©2012 Gallagher Benefit Services, Inc. 39 ©2013 Gallagher Benefit Services, Inc. • Non Citizen Employees » Non citizen employees are considered common law employees and who are lawfully present must be counted for purposes of the employer shared responsibility rules in determining whether the “lawfully present” noncitizen employee is entitled to be offered coverage as a “full-time” employee » Must be counted if they are (or are reasonably expected to be) present noncitizen employees for the entire enrollment period of an exchange » Some may qualify as seasonal workers Employer Shared Responsibility
- 40. 40©2012 Gallagher Benefit Services, Inc. 40 ©2013 Gallagher Benefit Services, Inc. • Penalty for failure to offer coverage » If an employer is determined to be and Applicable Large Employer, such employer must offer and the opportunity to enroll all of it’s full-time employees and dependents (up to age 26) » Spouses NOT listed as a requirement • When is a penalty triggered » Failure to offer minimum essential coverage to “substantially” all full-time employees (5% buffer) and ONE or more full-time employees subsequently acquires and receives premium assistance from an exchange Employer Shared Responsibility
- 41. 41©2012 Gallagher Benefit Services, Inc. 41 ©2013 Gallagher Benefit Services, Inc. • Calculation for penalty for failure to offer coverage » Penalty is assessed on a monthly basis » Rate of 1/12th of $2,000 per full-time employee employed by the employer » Less 30 “free” full-time employees » Penalty to be indexed for cost of living adjustments » Penalty is based on ALL full-time employees, not just those not offered coverage Employer Shared Responsibility
- 42. 42©2012 Gallagher Benefit Services, Inc. 42 ©2013 Gallagher Benefit Services, Inc. • Penalty for failure to offer affordable coverage » Applicable large employer may be subject to a separate penalty if coverage does not provide both “minimum value” and is not “affordable” » Penalty triggered if coverage is either unaffordable or does not provide minimum value, and if one or more full-time employees are certified by an exchange to receive a premium tax credit or cost sharing reduction » Affordable coverage is determined by the employee contribution for employee only coverage, which cannot exceed 9.5% of employees annual box W-2 wage for the calendar year » Rate of Pay Safe Harbor Method – use employee’s computed monthly wages (multiply hourly rate of pay for each hourly employee by 130 hours per month) Employer Shared Responsibility
- 43. 43©2012 Gallagher Benefit Services, Inc. 43 ©2013 Gallagher Benefit Services, Inc. • “minimal value” – Health coverage that fails to meet a 60% actuarial plan value (sharing 60% of the total allowed cost of benefit) will incur a penalty assessed to the employer only for each employee for whom is granted a subsidy on the governmental exchange. • The penalty is calculated as 1/12 of $3,000 per month per employee for whom offered coverage was either unaffordable or did not meet minimal value standards, limited to a maximum penalty equal for failure to offer coverage (full-time employees less 30 * 1/12 of $2,000 per months) Employer Shared Responsibility
- 45. 45©2012 Gallagher Benefit Services, Inc. 45 ©2013 Gallagher Benefit Services, Inc. Unites States Supreme Court Ruling • Upheld constitutionality of individual mandate • Government has limited ability to penalize states for not expanding Medicaid » 100% of Federal Poverty Level = Medicaid Eligible » PPACA would have required states to expand Medicaid eligibility up to 133%* of FPL » It is now effectively optional for states *138%, with an adjustment allowed by federal law
- 46. 46©2012 Gallagher Benefit Services, Inc. 46 ©2013 Gallagher Benefit Services, Inc. State Decisions on Medicaid Expansion Source: The Advisory Council, www.advisory.com, as visited January 15, 2013
- 47. 47©2012 Gallagher Benefit Services, Inc. 47 ©2013 Gallagher Benefit Services, Inc. Impact • Impact on employers where states say no » PPACA provides premium credits to eligible individuals and families with incomes 100% - 400% of FPL to purchase insurance through the Exchanges » Individuals with incomes 100% - 133%/138% of FPL (who might otherwise have been Medicaid beneficiaries pre-SCOTUS ruling) can buy federally subsidized coverage on the exchanges potentially triggering a penalty for employers (if affordability and/or actuarial value requirements are not met) » Total federal subsidy spending could be greater than originally forecast » Could result in increased number of employees who could potentially trigger an employer shared responsibility penalty under PPACA
- 48. Preparing for the Financial Impact
- 49. 49©2012 Gallagher Benefit Services, Inc. 49 ©2012 Gallagher Benefit Services, Inc. What to Expect Opportunities • Insurance carriers restructure plans and networks • State exchanges open in 2014 • Small business get tax credits beginning in 2014 • Employees become more knowledgeable about healthcare
- 50. 50©2012 Gallagher Benefit Services, Inc. 50 ©2013 Gallagher Benefit Services, Inc. Forecast impact of “Cadillac” tax2018 Forecast Financial Impact Model “play” scenario Model “pay” scenario Model “play limited” scenario Estimate impact on EEs2014 Estimate cost effect of near-term mandates on current plan Project trend on current plan to 2014 and 2018Now
- 51. Action Steps
- 52. 52©2012 Gallagher Benefit Services, Inc. 52 ©2012 Gallagher Benefit Services, Inc. Action Steps Areas of Impact What Employers Must Do FINANCIAL Forecast impact1 Build a plan2STRATEGIC Execute & communicate3OPERATIONAL
- 53. 53©2012 Gallagher Benefit Services, Inc. 53 ©2012 Gallagher Benefit Services, Inc. Action Steps 1. Forecast financial impact 2. Re-examine how benefits and compensation relate to organizational objectives, market position and reputation; what effect benefits have on productivity 3. Set up administrative process to identify and track employees for status as full-time, part- time, and variable. Also identify seasonal employees; Start counting hours NOW! 4. Set measurement and stability periods 5. Revise plan document eligibility language to cover applicable employees through the stability period
- 54. 54©2012 Gallagher Benefit Services, Inc. 54 ©2012 Gallagher Benefit Services, Inc. Action Steps 6. Focus on total rewards; communicate 7. Follow “Cadillac” tax developments to assess if change in strategy is needed in future 8. Reevaluate strategy and options once the reformed marketplace is in place and rules have been finalized 9. Continue current strategy of aggressively managing healthcare cost while increasing employee engagement and productivity; implement wellness and risk management programs to sustain total rewards costs.
- 55. 55©2012 Gallagher Benefit Services, Inc. 55 ©2012 Gallagher Benefit Services, Inc. Stay Informed – GBShealthcarereform.com
- 56. Questions?
- 57. 57©2012 Gallagher Benefit Services, Inc. 57 ©2013 Gallagher Benefit Services, Inc. Thank you! The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue. It does not necessarily fully address all your specific issues. It should not be construed as, nor is it intended to provide, legal or tax advice. Questions regarding specific issues should be addressed by the client's general counsel, tax advisor, or an attorney who specializes in this practice area.
Editor's Notes
- The Patient Protection and Affordable Care Act (which we will refer to as PPACA) was signed into law on March 23, 2010 and the Health Care and Education Reconciliation Act of 2010 was signed into law on March 30, 2010. These two Acts constitute healthcare reform. A number of rounds of regulatory guidance clarifying the law have been issued since inception and will continue to further define the rights and responsibilities under PPACA. This timeline highlights some key changes effected by healthcare reform laws that have a direct impact on plan sponsors. As you can see, these laws take effect over a period of time. While the initial legislation left a number of open questions, a steady stream of regulations has been coming out to help plan sponsors and their advisors better grasp the necessary steps and implications. The initial effective dates focus on near term plan design mandates Most of these coverage expansion mandates went into effect with the first plan year starting on or after September 23, 2010. From 1/1/11 until 2013, the focus of changes will be on how you provide information on your benefit plans and how you tell employees about any benefit changes. These requirements will include a new 4-page summary of benefits and the need to give a 60-day written notice of any changes. UPDATE: As of plan years beginning on or after 8/1/12, nongrandfathered or new plans will need to offer add’l women’s preventive health services, including contraceptive care, as part of preventive services with no cost sharing. In 2013, we will start to see some of the revenue generating aspects become effective. FSA contributions will be limited to $2,500 per year; new Medicare taxes of 3.8% on net investment income will start for those with high income; and the Part D drug subsidy deduction will be eliminated. 2014 will bring some of the most comprehensive changes with the advent of the individual mandate to have health coverage and the opening of the new insurance Exchanges. Additional consumer protections will also kick in when we see the elimination of preexisting waiting periods and the elimination of discrimination to access coverage based on health status. Finally, farther down the road, in 2018 we will see the impact of an excise tax on high valued plans, known as the “Cadillac” tax.
- November 1, 2011 renewals and after https://ajg.adobeconnect.com/_a815130238/hcr_1213a/ For policy or plan years that end on or after October 1, 2014, but before October 1, 2019, the $2 fee will be increased based on increases in the projected per capita amount of National Health Expenditures.
- https://ajg.adobeconnect.com/_a815130238/hcr_1206b/
- Another set of provisions employers should pay close attention are the individual and employer mandates. The individual mandate will require that all U.S. Citizens and legal residents must have “Minimum Essential Benefits Coverage” starting in 2014. Failing to maintain the coverage will result in the assessment of a tax. The penalty will start out being nominal: in 2014 it will be $95 per uninsured adult in a household or 1% of household income. It will increase in subsequent years: $696 per uninsured adult or 2.5% of household income. However, this will still be substantially below today’s level of health insurance premiums. Some individuals will get an exception from the mandate. Among others, the exceptions will include those with incomes below the income tax filing threshold and Native Americans. To assist individuals and families in obtaining health coverage, PPACA includes a refundable premium tax credit for individuals in households with income below 400% of the federal poverty level. Under our current health insurance system, a Coverage Mandate like this would be difficult to fulfill. Under our current individual health insurance model, an individual in poor health, or with a history of a serious medical condition, is frequently unable to obtain health coverage. In addition, while insurance companies are required to offer health insurance policies to small groups, the cost is often prohibitive.
- For Individual Penalty Flat Dollar Amount: Capped at the national average of the annual cost of a bronze level health insurance plan, for the family size, offered through the state exchange. Dependent Penalty: 50% for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for those NOT insured by taxpayer)
- Looking further down the road, employer and individual mandates are set to go into effect in 2014. Let’s examine what will drive the financial impact on employers. First, an employee’s perspective. Starting in 2014, each individual in the U.S. will be faced with a potential choice of where to obtain health insurance. Based on an individual’s household income and the cost and value of benefits, here will be the available options: The employer’s plan will remain the most frequent choice (currently some 70% of the non-elderly U.S. population is covered through employer plans) Employer-sponsored plan through a family member, such as a spouse or parent (for up to 26-year-olds) will be another frequent choice More individuals may now be able to take Medicaid, with its newly expanded eligibility Some will turn to the newly set up state health insurance exchanges to get their coverage. Based on their income and their employer’s benefits offering, these individuals may qualify for federal premium assistance via tax credit to help purchase insurance in an exchange.
- No Wrong Door!
- Since one of the objectives of the legislation was to expand access to health coverage to allow each individual to be responsible for his or her health care expenses, a change in the health insurance delivery model was deemed necessary. The legislation therefore contains reforms, from specific mandates about coverage to major financial reforms of the insurance business. By 2014, the health care reforms will largely be in place and the mandate to maintain health coverage will be effective. That is when the new marketplace for health coverage will be established – the Health Insurance Exchanges. These Exchanges become the marketplace for individuals and small employers (up to 100 employees) to purchase health insurance coverage that satisfies the minimum essential coverage required under the mandate. While the Exchange will not be the only place to purchase health insurance, the Exchanges will be the place where the premium tax credit system will be established and administered. Describe the types of plans available from Bronze Plan (60% w/ HSA OOP) to Platinum Plan (90% w/ HSA OOP) to Catastrophic (HDHP for young & temporarily uncovered).
- PPACA does not actually mandate that employers offer employees acceptable healthcare coverage. However, if they don’t they may be subject to the so-called “free-rider” or “shared responsibility” penalty if any of their employees take advantage of government assistance to buy insurance in the exchange. This applies to groups with 50 or more full time employees – with an FTE defined as a person working an average of 30 hours per week.
- This expansion will particularly benefit childless adults, who in more than 40 states cannot currently qualify for Medicaid regardless of their income level. It will also benefit low income parents, who in more than 30 states don't currently qualify even if their children do. Is Medicaid eligibility expanding to 133 or 138 percent FPL, and what is MAGI? Some sources state that the new minimum Medicaid eligibility threshold is 133 percent FPL; other sources state it will be 138 percent. Both are correct. The text of the ACA says 133 percent, but the law also calls for a new methodology of calculating income, which will make the effective minimum threshold 138 percent. (Either way, remember that these are minimum thresholds; states can set eligibility thresholds higher, and many already have for certain populations, which means that more people qualify.) Currently, the system for determining whether someone meets the eligibility threshold is complicated, and varies from state to state. It involves calculations of income and assets, as well as "disregards" of income and assets that vary for different populations. (Disregarding income or assets means not counting it for the purposes of determining eligibility.) Under the ACA, the system for determining eligibility will be streamlined and unified across the states, and it will be tied to the Modified Adjusted Gross Income (MAGI) tax rules. Now, instead of a variety of different income disregards, there will be one standard disregard for most populations: 5 percent. That means that a person's income can be up 138 percent FPL, but since 5 percent of her income will be ignored, she will effectively meet the 133 percent threshold. The new MAGI system is also important in terms of what sources of income it counts and doesn't count, because it doesn't count assets, and in how family size is determined. The new system will also be used to determine eligibility for exchange subsidies. This Kaiser Family Foundation brief (2011) has more information. (FAQ top) 6. How will the Medicaid expansion be financed? The federal government will finance the great majority of the costs associated with the Medicaid expansion. For the "newly eligible population" (anyone not previously eligible in their state), the federal government will cover 100 percent of costs in 2014-16, and it will always cover at least 90 percent of the costs of this population. States will continue to receive their standard federal contributions for "traditionally eligible" populations. This amount is different from state to state, and averages less than 60 percent. Is Medicaid eligibility expanding to 133 or 138 percent FPL, and what is MAGI? Some sources state that the new minimum Medicaid eligibility threshold is 133 percent FPL; other sources state it will be 138 percent. Both are correct. The text of the ACA says 133 percent, but the law also calls for a new methodology of calculating income, which will make the effective minimum threshold 138 percent. (Either way, remember that these are minimum thresholds; states can set eligibility thresholds higher, and many already have for certain populations, which means that more people qualify.) Currently, the system for determining whether someone meets the eligibility threshold is complicated, and varies from state to state. It involves calculations of income and assets, as well as "disregards" of income and assets that vary for different populations. (Disregarding income or assets means not counting it for the purposes of determining eligibility.) Under the ACA, the system for determining eligibility will be streamlined and unified across the states, and it will be tied to the Modified Adjusted Gross Income (MAGI) tax rules. Now, instead of a variety of different income disregards, there will be one standard disregard for most populations: 5 percent. That means that a person's income can be up 138 percent FPL, but since 5 percent of her income will be ignored, she will effectively meet the 133 percent threshold. The new MAGI system is also important in terms of what sources of income it counts and doesn't count, because it doesn't count assets, and in how family size is determined. The new system will also be used to determine eligibility for exchange subsidies. This Kaiser Family Foundation brief (2011) has more information. (FAQ top) 6. How will the Medicaid expansion be financed? The federal government will finance the great majority of the costs associated with the Medicaid expansion. For the "newly eligible population" (anyone not previously eligible in their state), the federal government will cover 100 percent of costs in 2014-16, and it will always cover at least 90 percent of the costs of this population. States will continue to receive their standard federal contributions for "traditionally eligible" populations. This amount is different from state to state, and averages less than 60 percent. http://www.apha.org/APHA/CMS_Templates/GeneralArticle.aspx?NRMODE=Published&NRNODEGUID=%7bD5E1C04A-0438-4FD4-A423-CEFDA0D9878D%7d&NRORIGINALURL=%2fadvocacy%2fHealth%2bReform%2fACAbasics%2fmedicaid%2ehtm&NRCACHEHINT=NoModifyGuest#Medi5
- Letter from Gov. Perry to Sec. Sebelius dated July 9, 2012 Expand Medicaid to all non-Medicare eligible individuals under age 65 (children, pregnant women, parents, and adults without dependent children) with incomes up to 133% FPL based on modified adjusted gross income (as under current law undocumented immigrants are not eligible for Medicaid). All newly eligible adults will be guaranteed a benchmark benefit package that meets the essential health benefits available through the Exchanges. To finance the coverage for the newly eligible (those who were not previously eligible for at least benchmark equivalent coverage, those who were eligible for a capped program but were not enrolled, or those who were enrolled in state-funded programs), states will receive 100% federal funding for 2014 through 2016, 95% federal financing in 2017, 94% federal financing in 2018, 93% federal financing in 2019, and 90% federal financing for 2020 and subsequent years. States that have already expanded eligibility to adults with incomes up to 100% FPL will receive a phased-in increase in the federal medical assistance percentage (FMAP) for non-pregnant childless adults so that by 2019 they receive the same federal financing as other states (93% in 2019 and 90% in 2020 and later). States have the option to expand Medicaid eligibility to childless adults beginning on April 1, 2010, but will receive their regular FMAP until 2014. In addition, increase Medicaid payments in fee-for-service and managed care for primary care services provided by primary care doctors (family medicine, general internal medicine or pediatric medicine) to 100% of the Medicare payment rates for 2013 and 2014. States will receive 100% federal financing for the increased payment rates. (Effective January 1, 2014) That states can’t afford it is wrong. The federal government covers 100 percent of the expansion in 2014 through 2016. In 2017, states begin sharing the cost, paying 5 percent; that share grows to 10 percent in 2020. States are never on the hook for more than 10 percent of the annual cost. To put that in perspective, states currently pay between 25 to 50 percent of current Medicaid's costs. TEXAS Extended Eligibility If you are pregnant, Texas extends Medicaid eligibility up to 185 percent of the federal poverty level, although the federal guidelines stop at 133 percent of the federal poverty level. Medically needy pregnant women and children also get a break in Texas, as this program is optional under Medicaid regulations. These are individuals with high medical expenses and insufficient income to pay, although their income exceeds Medicaid guidelines. Medicare premiums may be paid by Medicaid if your income is below 120 percent of the federal poverty level under dual eligibility regulations. Resources or Assets Medicaid requires low assets or resources to qualify. An individual may have $2,000 in assets after exclusions. The resource limit for a couple is $3,000. Exclusions are a home up to $500,000 value and car of any value, burial plot and burial insurance and life insurance under $1,500. Income The income limit depends on the status of the claimant. An elderly individual may receive $2,022 a month in 2010, or three times the federal Supplemental Security Income limit for an individual. An elderly married couple can make double that amount or $4,044. Pregnant women and infants qualify at 185 percent of the federal poverty level. Under the 2010 federal poverty guidelines, 100 percent of the federal poverty level is $14,570 for a family of two. Income of $26,955 is 185 percent. A child from age 6 to 9 qualifies at 100 percent the federal poverty level and a child from 1 to 6 qualifies at 133 percent of the federal poverty level. The federal poverty level changes yearly and the income maximum requires calculation based on new figures. Read more: Income Guidelines for Medicaid Eligibility in Texas | eHow.com http://www.ehow.com/info_7879942_income-guidelines-medicaid-eligibility-texas.html#ixzz22zQFYiqb HHS General Guidance on Federally-facilitated Exchanges. Federally Facilitated Exchange For a state unable or unwilling to establish a state-based or a state-federal partnership exchange, HHS will assume primary responsibility for operating an exchange in that state. Federal guidance released in May 2012 indicates that federally facilitated exchanges will adopt a clearinghouse model — certifying any health plan that meets all certification standards as a QHP — and will establish Navigator programs with a role for agents and brokers to assist consumers in accessing health insurance.11 While the federal government will retain primary responsibility for operating these exchanges, it will seek to coordinate with states on multiple fronts including, plan certification and oversight functions, consumer assistance and outreach, and on streamlining eligibility determinations. States’ involvement with the federal exchange, while not mandatory, will be important for ensuring effective and seamless operation. Over time, this involvement may allow states in a federal exchange to transition into a partnership model.
- Here are the definitions of some key provisions that will have the most impact. FOR CONSULTANTS: Customize this portion of the presentation to the needs of the client by removing the slides that talk about the issues that do not pertain. For example, slides 11 and 12 on full-time employee definition or slide 15 on Cadillac tax may be of less interest to some groups.
- Challenges Federally mandated health plan changes with impact on cost – many are already in effect Increased benefits enrollment as a result of the new mandate to offer benefits to those working at least 30 hrs per week Insurance exchanges and pay-or-play employer penalties starting in 2014 (shared responsibility) Other fees, including Comparative Effectiveness Research, Market Reinsurance Fund and pass-through carrier fees Changes in how insurance carriers structure employer plans and provider networks in response to the new rules “Cadillac” tax on high-value health plans starting in 2018 Opportunities Insurance carriers are reforming product offerings to provide more diverse and affordable options, as well as stronger focus on integrated care and health risk management State exchanges open in 2014. While this is also a negative (employers may be subject to penalties), there may be new opportunities for some, especially small businesses who may also get tax credits With the standardization of benefits summaries and the rise of exchanges, all healthcare consumers will become more knowledgeable about plans, costs and services – and that will be a benefit to all in the system
- This is our suggested methodology for analyzing the financial impact PPACA can have on your business. It’s a very involved process, but it is necessary to now you are fully prepared and are not surprised later. Current plan analysis Cost effect of new mandates Trend to 2014 and 2018 “Play” scenario for 2014 (benefits remain as-is) Estimate employees’ choices based on plan affordability “Pay” scenario for 2014 (eliminate healthcare benefits) Estimate impact of taxes and penalties Model various options of “making employees whole” “Minimum requirement” scenario for 2014 (offer minimum required level of benefits to avoid penalties) Model a scaled-down benefits offering Estimate maximum required employer contribution Financial impact of each 2014 scenario to employees Forecast impact of “Cadillac” tax in 2018 Gallagher has developed unique proprietary tools to help employers make valid financial projections.
- With the financial analysis and models in hand, we will help you develop a strategy looking forward to 2014 (when the main provision of reform, like exchanges, become effective) and beyond.
- The impact of healthcare reform on businesses can be substantial. We’ve developed a methodology to assess the impact on the financial, strategic and operational level and help you develop a strategy. FOR CONSULTANTS: This slide is intended to be a “homepage” from which you can quickly browse to any place in your presentation, rather than going through the slides sequentially. This way, you can have a more interactive and flexible discussion with the client, while still leveraging visual aids to drive your points home.
- Finally, healthcare reform laws will have an operational impact on employers. One area will be the implementation of the mandated plan design changes we’ve already discussed. Also, there will be some new mandates for communicating benefits information to employees that may add to what you have already done to comply. Additional required reporting will be another area of increased administrative load. It will be extremely important to be prepared and have a plan, so that you can address the new requirements nimbly and efficiently. Plan Operations Plan design changes SPDs/SMMs Legally required employee notifications Reporting and Disclosure Reports to the IRS Summary of Benefits & Coverage (SBC) W-2 reporting Notifications regarding Exchanges Reporting on quality of care Transparency of coverage report New opportunities will present themselves, too. With so much emphasis in the media on healthcare, engaging employees in decision making and wellness should become easier. Also, since all the plans will need to be communicated out in a standard consistent form (like nutritional facts boxes on packaged foods), it will become easier for employees to understand and manage benefits.
- Finally, healthcare reform laws will have an operational impact on employers. One area will be the implementation of the mandated plan design changes we’ve already discussed. Also, there will be some new mandates for communicating benefits information to employees that may add to what you have already done to comply. Additional required reporting will be another area of increased administrative load. It will be extremely important to be prepared and have a plan, so that you can address the new requirements nimbly and efficiently. Plan Operations Plan design changes SPDs/SMMs Legally required employee notifications Reporting and Disclosure Reports to the IRS Summary of Benefits & Coverage (SBC) W-2 reporting Notifications regarding Exchanges Reporting on quality of care Transparency of coverage report New opportunities will present themselves, too. With so much emphasis in the media on healthcare, engaging employees in decision making and wellness should become easier. Also, since all the plans will need to be communicated out in a standard consistent form (like nutritional facts boxes on packaged foods), it will become easier for employees to understand and manage benefits.
- First, employers need to stay informed. There’s a barrage of information on healthcare reform available from a multitude of sources. Pick your trusted sources to follow. One great place for general information is the website provided by the government: healthcare.gov. From Gallagher, you can expect timely information that highlights and analyzes specifically the areas of impact to employers. We keep clients informed through our Healthcare Reform Update newsletter, frequent webinars, our specialized compliance toolkits such as those for Form W-2 reporting and preparing the required summary of benefits and coverage, as well as user-friendly reference materials, such as healthcare Reform Questions and Answers for Employers, which we update on a regular basis. All of this information can be easily accessed at GBShealthcarereform.com, our comprehensive reform portal.