Created by WEA Trust Vice President & General Counsel Vaughn Vance, this presentation helps explain to employers the changing health insurance marketplace. You'll learn about new fees and taxes, plan restrictions and employer obligations under health care reform.

1. Health Care
Reform: An
Update
October 2013
Vaughn Vance
Vice President & General Counsel

2. Agenda
•
•
•
•
Changing insurance marketplace
New fees and taxes
New plan restrictions
New employer obligations
2

3. Changing insurance marketplace
Health Insurance Exchanges
• Individual exchanges are open for enrollment; many
technical glitches.
• Voluntary marketplace for small employers and
individuals. May be expanded in 2017 for large groups.
• No Wisconsin effort to establish a state-based exchange.
• Federal government will establish and operate in 2014.
• Federal law defines small employers as those with 100
or fewer employees. However, federal government is
deferring to Wisconsin’s definition of 50 or fewer
employees, for now.
• Many unanswered questions remain.
3

4. Changing insurance marketplace
Individual and Employer Mandates
As of January 1, 2014:
• Every individual must have health insurance for
themselves and their dependents
Given recent federal delay, as of January 1, 2015:
• Failure to offer affordable coverage to their
employees and eligible dependents can result
in penalties (taxes) to employers
4

5. Changing insurance marketplace
Individual Penalties
• 2014—$95.00/adult and $47.50/child, up to $285.00 or
1% of family income, whichever is greater
• 2015—$325.00/adult and $162.50/child, up to $975.00
or 2% of family income, whichever is greater
• 2016 and beyond—$695.00/adult and $347.50/child,
up to $2,085.00 or 2.5% of family income, whichever is
greater
5

6. Employer penalties
Applicable
Large Employer
Applicable
Large Employer
Fails/refuses to
offer plan to at
least 95% of
employees and
dependents
Offers plan to
employees
and
dependents
One or more
employees
receives tax
credit or
subsidy
Affordability
Penalty=$2,000 x
# of full-time
employees minus
30
Employee
receives a
tax credit or
subsidy
Penalty=
$3,000 x
# of full-time
employees
receiving a
tax credit or
subsidy
6

7. Full-time employee defined
• 30 hours of service per week or 130 hours per month
(Federal requirement similar, but not identical to Wis. Stat.,
632.745(5)(a))
• Look-Back Standard Measurement Period (SMP)
At least three months and not more than 12 months
If unpaid time (of at least four weeks) due to the
academic calendar occurs during SMP, it must
either be excluded or credited as service hours
(maximum 501 hours)
• ―And their dependents‖—children, not spouse
7

8. Minimum value
• A group health plan fails to offer minimum
value (MV) if ―the plan’s share of the total
allowed costs of benefits provided under
the plan is less than 60 percent of such
costs‖
• Can demonstrate compliance using any of
the following:
– HHS MV Calculator Tool
– HHS/IRS Safe Harbor
– Actuarial Certification
8

9. Deductible and out-of-pocket limits
• Plans and issuers in the small group
market will be required to comply with the
$2,000/$4,000 deductible limit (indexed)
• All non-grandfathered group health plans
must comply with the annual limitation on
out-of-pocket maximums of $6,250 selfonly/$12,500 family (the same amounts
that apply under Code 223 for high
deductible health plans/HSAs)
9

10. Non-discrimination testing
• PPACA extends IRS non-discrimination
requirements to health insurance plans
• Effect of regulations will likely be to limit
plan offerings made to ―Highly
Compensated Employees‖ that differ from
other staff
• IRS Notice 2011–1 suspends enforcement
of regulation until additional guidance has
been issued
10

11. New fees and taxes
• Patient Centered Outcome Research
Institute (PCORI) Fee
• Insurer Assessment Fee
• Mandatory Reinsurance Program Fee
• Risk Adjustment Program (applies only to
insurers that participate in the individual or
small group markets)
11

12. New PPACA fees
Program
Patient Centered
Outcome Research
Institute (PCORI) Fee
Mandatory Reinsurance Program
Fee
Insurer Assessment Fee
Purpose
Funds evidence-based
research.
Temporary Program—Plan
Years 2012–2018.
Offset adverse selection risk in
individual market.
Temporary Program—January 1, 2014
to December 31, 2016.
Funds are not linked to specific
purpose.
Permanent program.
Applies To
All health insurance
carriers and TPAs on
behalf of self-funded group
plans.
All health insurance carriers and TPAs
on behalf of self-funded group plans.
Health insurance issuers
(licensed insurers). Not
applicable to any of the
following: self-funded plans,
plans with 80% MA/other
government program business,
non-employer VEBA plans, or
other ―governmental‖ plans.
Fee structure
$1 annual fee per
member—2012.
$2 annual fee in
subsequent plan years.
$5.25 per member per month
(PMPM).
$63 per year per member—first year.
Federal estimates vary
between 1.9% to 3.5% of
premium in 2014.
Effective
Dates
*Reference to risk assessment program omitted
as only applicable to small groups
12

13. New plan restrictions
• Rating restrictions
• Plan design requirements
• Actuarial value requirements
13

14. Rating restrictions:
How rates are determined
• Applicable to all individual and small group
insurance policies
• Prohibited rating factors include: Gender,
health status, claims experience, occupation,
duration of coverage, prior source of
coverage, credit worthiness, and
re-underwriting
14

15. Rating restrictions, cont.
Permitted Rating Factor
Permissible Rating Impact
Notes
Family Size
Family Tiers Prohibited
Defaults to state definition of
spouse/partner.
Rates can include no more than the
three oldest family members under age
21.
Geographic Rating Areas
Actuarially justified
Established/approved by federal
government.
Age
3:1 for adults
Children have single rate band from
0–20 years.
Age bands by year 21–63.
One age band for 64 and older.
Tobacco Use
1 ½:1 for adults
Definition of use pending.
Must have opportunity to avoid
surcharge through wellness program.
15

16. Plan changes required
To comply with initial PPACA requirements, the following
plan changes will likely be necessary:
• Modify plans so that copayments apply to maximum
out-of-pocket
• Eliminate plan options that exceed maximum out-ofpockets
• Must have separate network and non-network
accumulators
• Eliminate existing annual dollar limits for ESRD,
autism, TMD, and home health services
• Add coverage for habilitative services and pediatric
vision in all small group offerings
16

17. Actuarial value: Plan design
• All non-grandfathered health insurance coverage in
the individual and small group market meet specific
actuarial values
• A plan must be within 2% of the metal standard to
be acceptable
Metal Level
Platinum
Gold
Silver
Bronze
% costs paid by
insurer
90%
80%
70%
60%
% of costs paid by
insured
10%
20%
30%
40%
17

18. New employer obligations
•
•
•
•
•
W-2 reporting
Employer notices
Summary of benefits and coverage
Automatic enrollment
IRS reporting on covered employees
18

19. W-2 reporting requirements
• PPACA requires employers to report to
employees the aggregate cost of their
employer-sponsored group health plan
coverage on the annual Form W-2, in box
12, using code DD
• These benefits are not taxed
• Optional for employers with less than 250
employees until IRS publishes additional
guidance
19

20. Employer exchange notice
• Employer requirement was initially set for
March 1, 2013, to provide written notice to
employees related to health insurance exchanges
• October 1, 2013, was deadline; no fine or penalty
under the law for failing to provide the notice
• Notice to include a description of services provided
by the Exchange and how to contact the Exchange
• Notice also to highlight potential premium tax credits
or cost-sharing reductions if the employee
purchases coverage through the Exchange
20

21. Other Employer Notices
• PPACA requires a variety of notices
• Most notices are included in WEA Trust plan
documents
– Prohibition of pre-existing condition exclusion
– Claims appeal procedures
– Notice of material modifications
• Some notices are not PPACA related, but still
performed by WEA Trust:
– Notice of privacy practices
– Medicare Part D creditable coverage
– Women’s Health and Cancer Rights
21

22. Other Notices
• Summary of Benefit Coverage
• Notice of Healthcare Marketplace
(Mandated by October 1, 2013, but no penalties for failure to do so)
– http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html
• Automatic Enrollment
– Notice and the opportunity for an employee to
opt-out of coverage
• IRS Reporting on Covered Employees
22

23. Summary of Benefits and Coverage (SBC)
• The purpose of SBC is to provide individuals with standard
information so they can compare medical plans as they make
decisions about which plan to choose
Trigger
“Upon application”
Upon request from either the
plan (employer/sponsor) or
participant
Automatic Renewal
To Whom
To the plan/sponsor
Either plan or participant
Renewal—where policy has not
been issued or renewed before
the 30 day period
Plan/participants
Material modifications of plan
affecting SBC provisions
Participants
Participants
Distribution Timeline
No later than 7 calendar days
As soon as practicable, but no
later than 7 business days
following receipt of request
No later than 30 days prior to the
first day of the new plan year
As soon as practicable, but no
later than 7 business days after
issuance of the new policy or
written confirmation of intent to
renew
At least 60 days prior to the
effective date of the change
23

24. Automatic enrollment of employees
• Applies to employers with 200 or more employees
• Employer must automatically enroll new full-time
employees in one of the employer’s health benefits
plans (subject to any waiting period authorized by
law), and to continue the enrollment of current
employees in a health benefits plan offered through
the employer
• In abeyance until IRS issues additional regulations
—guidance expected in 2014
24

25. IRS reporting on covered employees
•
•
•
•
Requirement delayed until 2015 (to be reported in 2016)
Applies to large employers (≥ 50 FTE)
Employer requirements:
– Certification that employees had the opportunity to enroll in
minimum essential coverage
– Reporting of the months for which each employee’s coverage
was available
– Reporting the employee’s share of the lowest cost monthly
premium for Minimum Essential Coverage, by calendar month
– Reporting the name, address, and Taxpayer Identification
Number (TIN) for each employee and the months, if any,
during which the employee was covered
Participants must also be provided with notice
25

26. IRS reporting on Minimum
Essential Coverage
• Requirement delayed until 2015 (to be reported in 2016)
• Applies to insurers of fully-insured plans and employers with selffunded plans
• Information to be reported:
– Name, address, and EIN of employer plan sponsor
– Name, address, and TIN of the ―responsible individual‖ and of
each other individual obtaining coverage under the plan
– Month in which the individual is covered at least one day
• Participants must also be provided with notice given to federal
government
26

27. Open enrollment period
• To avoid penalty, employers must offer coverage
to full-time employees
• Little guidance given
• No guidance on when first offer must occur
(assume one must occur prior to January 2015)
• Must be no less than once during the plan year
• Whether coverage was offered is determined by:
– Adequacy of notice
– Period of time during which acceptance may be made
– Other condition on the offer
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28. Thank you!