Healthcare Update with Jim Casadaban for Greater Baton Rouge Society for Human Resource

1. PPACA
(The Patient Protection and Affordable Care Act)
Presented by
Jim Casadaban, MBA
HUB International Gulf South
July 18, 2013
Greater Baton Rouge SHRM

2. Overview & Historical Look Back
PPACA
(The Patient Protection and Affordable Care Act)
2

3. Status of Federal
Health Care Reform
 Supreme Court Upheld the Law
- Except as to Medicaid expansion
- More court challenges but won’t delay
 Political Landscape
- No changes to political makeup in
Washington
- Possibility of major change to the law is slim
- Congress could work to de-fund some
provisions
 Timing and Rollout Now Proceed
- Federal agencies now working to release
updated regulations (10,000+ pages)
3

4. PPACA Provisions
Effective in 2011
 Coverage of children to age 26
(regardless of marital or full-time student status)
 No pre-existing condition exclusions for
children under age 19
 Removal of lifetime benefit limits
 Annual limits phase out begins –
complete in 2014
 No rescission of coverage (retroactive
termination of benefits)
 No FSA reimbursement for over-the-
counter medications
4

5. PPACA Provisions
Effective in 2011 – Cont.
 Minimum Loss Ratio (MLR)
requirements for insurance carriers’
on fully-insured medical plans
- 80% for small market (<100 employees)
- 85% for large market segment
 Small employer tax credit
 Health carrier administrative changes
(many plans already allowed)
- Primary care provider designation, if
required, allowed for any contracted
provider
- Access to any OB/GYN provider
- Access to pediatric specialists as child’s
primary care provider
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6. PPACA Provisions
Effective in 2013
 60 day prior notification of plan modifications
 Summary of Benefits and Coverage distribution (SBCs)
- Must be distributed to all eligible employees
- Carrier responsibility to prepare form for insured plans
 Implement $2,500 limit on employee contributions to health
flexible spending accounts (FSAs) for plan years beginning in
2013
 Form W-2 reporting requirement
- Starting with W-2 reports issued in January 2013
- Delay for employers that have not issued 250 W-2s (look back)
 Requirement for employers to notify employees of the
availability of health insurance Exchanges
- Deadline was March 1st – delayed to October 1st deadline
(Wait – we expect modifications!)
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7. “Expected” 2014
PPACA Compliance
 Taxes and fees – see handout
 No waiting period over 90 days
for group health plan coverage
 No pre-existing condition
exclusions
 Preventive/wellness benefits
 Variable hour/seasonal employee
designations
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8. “Expected” 2014
PPACA Compliance – Cont.
 HIPAA non-discrimination rules
relaxed to promote more
generous wellness plan safe
harbor design
 Plan design requirements
(maximum OOP amounts, max
deductible, clinical trial coverage,
essential health benefits for small
employers, minimum value)
 Additional exchange notification
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9. PPACA Taxes and Fees
 Comparative Effectiveness Research fees
- $1 per covered life/year for first year, then
increases to $2/year
 Reinsurance fees 2014 - 2016
- $63 per covered life/year regardless of plan funding
 Carrier Tax on fully insured plans
- 3% beginning September 30, 2014
 Cadillac Tax
- 40% excise tax on amount over $10,200 for
individual and $27,500 for family
- Begins 2018
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10. The Employer & Individual
Mandates
PPACA
(The Patient Protection and Affordable Care Act)
10

11. Mandates
 Individual Mandate - effective
January 1, 2014
- All individuals must be covered by a
group plan or individual policy
- Failure to comply results in penalty when
filing Federal taxes
 Employer Mandate - effective 1st
renewal on/following January 1, 2015
(Just delayed)
- Applies to all firms or control groups that
regularly employ more than 50 FTE’s of
labor
- Must offer coverage to all full-time
employees (30 hours per week)
11

12. Individual Mandate
 Requires individuals hold health coverage or
pay a penalty (limited exceptions)
- Fines (assessed as “taxes”) for failure to purchase at
greater of:
 $95 or 1.0% of adjusted income in 2014
 $325 or 2.0% of adjusted income in 2015
 $695 or 2.5% of adjusted income in 2016
 Annual election for exchange
 Individual subject to penalty unless he shows
evidence of coverage for at least nine (9)
months of the year
- Generous grace periods for Exchange premium payment
 Employee can still waive employer coverage
- No tax credits for employee or family:
 If affordable coverage offered by employer or,
 If the person actually elects coverage
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13. Employer Mandate –
Delayed to 2015
 To comply, an employer must
offer (key word is “offer” –
employees can still waive
coverage):
- A minimum level of health plan
coverage to full-time
employees and their
dependents (children to age
26, not spouses) that is also
- Affordable for the employee –
9.5% (but not the family
members)
 No coverage offered results in
$2,000 annual penalty per
employee, minus 30
 Failure to comply and
employee purchases coverage
through the Exchange with a
Federal premium subsidy
results in $3,000 penalty (per
applicable employee)
 Plans tested on “base” option
only
13

14. Play or Pay?
Penalties may seem lower
than cost of coverage…
 Lost tax advantage
 Reporting burden’s remain
 Recruitment and retention
challenges
 Counting employees can be
complex
 Cost of coverage can be
adjusted
 Other financial implications
 Carriers will address plan
designs
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15. The Exchange – aka
“Marketplace”
PPACA
(The Patient Protection and Affordable Care Act)
15

16. Positioning for Reform:
Exchanges (Marketplace)
 Employers may face penalties because of what the
government learns from Exchange-collected data
 Individuals report on their annual income tax returns
 Annual Employer Reporting Requirement (Jan. 2016
for 2015 data)
- Report on health coverage of each eligible employee and family
members, broken out on a monthly basis – Reporting to IRS:
 Name/address/SSN
 All covered individuals (employees and dependents)
 Detail of coverage (month-by-month)
 Describe individual coverage and premiums
- Reporting rules still unclear
16

17. Positioning for Reform:
Exchanges (Marketplace)
 Exchanges used for
enforcement against
individuals & employers:
- Exchange will know individual’s
household income (IRS data
check), whether employed (using
IRS information), and whether
employer coverage is affordable
- Law directs state exchanges to
report to federal government
 Enforcement will be after
the fact
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18. States’ Positions on Exchanges
As of June 14, 2013…
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Source: Center on Budget and Policy Priorities

19. States’ Positions on Medicaid
Expansion
As of June 24, 2013…
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Source: Center on Budget and Policy Priorities

20. The Healthcare Income
Continuum
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Coverage Gap
PPACA when fully enforced provides coverage and assistance for most
Americans from 0 to 400% of Federal Poverty level Income
If Medicaid expansion is refused, Louisiana will have no insurance help for
citizens between 11% and 138% of FPL
0-11% Existing
Medicaid
11% to 138% New
Medicaid
Expansion
139% to 400% Exchange
Subsidy Eligible
401% of FPL
and above, you
are on your own!
Federal Poverty Level Income
0% 11% 138% 400%

21. Sample Exchange
Purchases
(Benchmark)
“Metal” Level Bronze Silver Gold Platinum
Typical Sample Annual Premium $10,908 $12,120 $13,332 $15,350
Family Income $35,000/year (149% of FPL)
Premium Tax Subsidy $10,734 $10,734 $10,734 $10,734
Family pays: $174 $1,386 $2,598 $4,616
Payment % of Income 0.4% 4.0% 7.4% 13.2%
Family Income $88,000/year (375% of FPL)
Premium Tax Subsidy $3,760 $3,760 $3,760 $3,760
Family pays: $7,148 $8,360 $9,572 $11,590
Payment % of Income 8.1% 9.5% 10.9% 13.2%
21
Expect Exchange coverage to be priced like group coverage (no plans/rates
released yet). Family members offered coverage CANNOT use tax credits to
access Exchange coverage – Even if affordable to employee only
21
1
2
Example for a Family of 4 (ages 40, 36, 6, 4):

22. Ineligible for Subsidies
 Incarcerated
 Income above 400% of FPL
 Offered coverage at work that meets employer
mandate criteria
 Medicaid or CHIP eligible (income <138% FPL)
 Claimed as a dependant on someone’s taxes
 In the country unlawfully (but you do get 90 days
of Medicaid coverage while your citizenship is
being verified)
 Unable to attest to residency in a single state
 Once a subsidy is accepted, individual MUST file
tax return for that year
22
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23. IRS Measurement Guidance
PPACA
(The Patient Protection and Affordable Care Act)
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24. Who is an Employee?
 Down the rabbit hole…
- Title I of the PPACA leads to
- Section 1551 of the PPACA which leads to
- Section 2791 of the Public Health Service
Act which leads to
- Section 3(6) and 3(5) of the Employee
Retirement Income Security Act (ERISA)
which says an employee is
- “any individual employed by an employer”
 The Supreme Court’s definition of a
common law employee applies
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25. IRS Measurement Guidance
 Full time employee: Expected to work on average at least 30 hours
per week
 Variable hour employee: If, based on the facts and circumstances
at the start date, the employee is not reasonably expected to work
on average at least 30 hours per week
 Seasonal: Make a reasonable, good faith interpretation of facts
- Can the job only be performed at certain times of the year?
- Educational employees are not “seasonal,” but sports coaches might be
- Summer camp counselors instructors are seasonal
- Golf course workers may or may not be (location?)
- Short term workers (duties tied to projects of short term duration) are
not seasonal
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26. IRS Measurement Guidance
 Tracking hours allows an employer to deny coverage to any
employee who was not full-time when hours were being tracked
 When hours are being tracked, employee may access federal tax
credits
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Transitional Initial Annual
Track hours to know
who should be
offered coverage in
2015
Track hours worked
for new hires who will
be variable hour or
seasonal
Track hours each
year for current
employees who will
be variable hour or
seasonal

27. IRS Measurement Guidance
 High turnover employees
An employer cannot simply assume the worker will not be there very
long (for example, a substitute teacher, or a project worker, perhaps)
 Rehires:
After 26 weeks post-termination, a worker can be treated as a new
hire
- An employer can treat an employee with a short absence of at least 4
weeks as new hire if rehired, provided the employee’s period of non-
employment is longer than the period of just-prior employment
- If a variable hour employee returns, credit with prior service if required
under above rule
- If a full-time employee returns, then offer coverage as soon as possible,
ideally on date of return to work
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28. Rules for Counting Hours
 For variable hour & seasonal
employees, count:
- Actual hours of service
- Hours of paid time off such as
vacation, sick leave, holiday pay,
jury duty pay, military leave
- Credit for hours of federally-
mandated leave (FMLA, etc.)
using average hours method
- On-call or travel time that is paid
under Federal law
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29. What to Prepare for Now?
PPACA
(The Patient Protection and Affordable Care Act)
29
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30. Have a Strategic Plan
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2013 2014 2015 2016
 Understand your plan and demographics
 Know effective date (non-calendar year renewals)
 Know who your FT employees are
 Budgeting: Who will you offer coverage to?
 Begin measuring variable hour workers
 Wellness: Outcomes based penalties cap up to 30%
(50% for smokers)
 Exchange notices (October 2013)
 Preventive care rule and benefit mandates
 Health FSA limit: $2,500
 Pre-existing conditions exclusions removed in 2014
 Address possible stop loss issues vis-à-vis clinical trial
coverage
We
are
here
 Employer Mandate: Affordable
minimum coverage to all FT
EEs (more than 130 hours/mo)
- Minimum coverage to EE +
Child(ren) with affordability
- Mandate does not require
coverage to spouses or PT
workers
 Exchanges – Public and
private coming online
- Consider spousal
coverage, tax credits
and exchange options

31. Top Employer Strategies to Avoid
Financial Impact of Reform
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Increase
dependent
coverage costs
paid by EE
Review retiree
coverage
options
Increase deductibles
or copayments to keep
costs below “Cadillac
tax” threshold
Increase
employee
contributions
Offer basic plan
along with “buy up”
option for executives
and management
Cut other benefit
offerings and steer
dollars to medical plan
Manage staff:
a) Reduce # of FT EEs
b) Reduce # of EEs below 50
(beware controlled groups)
c) Use more variable hour EEs and
delay offering benefits
Manage plan design:
a) Consider self-funding
b) Set EE premiums for plan
based on estimated W-2 for
affordability
c) Offer Flex Credit approach
Leverage wellness

32. Thank you!
Jim Casadaban, MBA
HUB International Gulf South
504.620.4473 | jim.casadaban@hubinternational.com
For more information, visit our website:
www.hubhealthreform.com