Health Care Reform - What You Need to Know Now
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Leah Wurth, Gallagher Grace Mayer, 2014 Pork Management Conference, June 17-20 in Tampa, Florida.
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Health Care Reform - What You Need to Know Now
- 1. Health Care Reform What you need to know now LEAH M. WURTH
- 2. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ New Requirements for 2014 • No waiting periods longer than 90 days • Elimination of pre-existing condition exclusions for all enrollees • All dependent children to age 26 • No annual dollar limits on essential benefits
- 3. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ New Requirements for 2014 • Clinical trials • Out-of-pocket limits capped at limits for qualified high deductible health plans ($6,350 individual/ $12,700 family for 2014) • Wellness plan limits raised, new rules
- 4. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Fees • Comparative Effectiveness Research Fee (2013-2019) – $1 per member in 2013 – $2 per member in 2014 – Due July 31 • Annual Health Insurer Fee (2014+) – Insured plans only – Impact on renewal • Transitional Reinsurance Fee (2014-2016) – $63 per member – Due late 2014/early 2015
- 5. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Individual Mandate -2014 OR OR Exception Penalty Minimum Essential Coverage Premium Assistance
- 6. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Premium Assistance • To qualify for premium assistance credit, an individual must: – Not be eligible for an employer-sponsored plan that is affordable and provides 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
- 7. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Exchanges - 2014 PROVIDERS CHOICEPOOL Bronze Plan Silver Plan Gold Plan Platinum Plan Catastrophic Plan CONSISTENTMARKETRULEBASE Large Group Government Subsidy Individuals Small Group
- 8. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Exchanges – Open Enrollment • Initial open enrollment period begins October 1, 2013 and ends March 31, 2014 • Employer Notice of Exchange Due October 1, 2013 for existing employees plus new hires thereafter Notice revised January 2014 • Beginning with 2014, annual open enrollment will be from November 15- January 15, 2015 • HIPAA special enrollment rights apply
- 9. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Employer Shared Responsibility • Penalties delayed until January 1, 2015 – Depending on size and certain conditions, penalties delayed until January 1, 2016 • Final Regulations issued February 10, 2014 – Additional delay for certain plans – Clarification on counting hours – Clarification on determining full time status – Plus more! • Employer reporting required – IRS Section 6055 and 6056 – Due January 2016 for 2015 information – Information includes plan enrollment, plan design information, eligibility, etc. – Additional guidance expected
- 10. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Employer Shared Responsibility Penalty Triggers • Failure to offer coverage ($2,000 penalty) – Employers with over 100 FTE must offer to 70% of all full-time employees beginning in 2015 • 95% beginning in 2016 – Must offer coverage to children (but not spouses) • Final regulations exclude stepchildren and foster children – Must have annual opportunity to accept or decline coverage • Unless coverage is provided that has MV and is affordable based upon the federal poverty line safe harbor – $2,000 x all full-time employees (minus first 80 employees) if any employee purchases coverage through Exchange Marketplace and qualifies for premium assistance • Minus 30 beginning in 2016
- 11. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Employer Shared Responsibility Penalty Triggers • Failure to offer affordable coverage ($3,000 penalty) – Employee-only coverage cost to employee must not exceed 9.5% of employee’s compensation – $3,000 per employee who purchases coverage through Exchange Marketplace and qualifies for premium assistance • Failure to offer coverage providing minimum value ($3,000 penalty) – Plan must pay for at least 60% of claims costs – $3,000 per employee who purchases coverage through Exchange Marketplace and qualifies for premium assistance Only full-time employees trigger penalty and count toward calculation
- 12. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Determining Full-Time Status • FINAL regulations issued on 2/10/2014 clarified rules on determining full-time status! • All employees hours must be tracked using either the new “Monthly Measurement Method” or “Look back Method” • Full-time employee – Hired to work at least 30-hours per week – Coverage must be offered within three months of start date • Part-time employee – Hired to work less than average of 30 hours per week • Variable hour employee – As of the date of hire, employer cannot reasonably determined average hours – may be full-time employee – Safe harbors for tracking hours
- 13. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Sections 6055 and 6056 Reporting Requirements Although initially delayed so that the government could streamline the process, both Sections 6055 and 6056 reporting requirements will be in effect in 2015 and will require action on the part of reporting employers in order to prepare for compliance and avoid penalties. • March 5, 2014 - IRS released two sets of final regulations addressing information reporting required by PPACA. requires entities to report healthcare coverage information to the IRS, as well as, provide a statement to all covered individuals. • Who Must Report? – health insurance issuers, for all insured coverage, – plan sponsors of self-insured group health plans, – government-sponsored programs (such as Medicaid, CHIP, TRICARE), and – Any other entities that provide MEC to an individual © 2014 GALLAGHER BENEFIT SERVICES, INC. 13
- 14. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Sections 6055 and 6056 Reporting Requirements PPACA requires applicable large employers (those with 50 or more full-time and full-time equivalent employees) to file returns with the IRS containing information about health care coverage offered to full-time employees and furnish a statement to every full-time employee with the same information. Section 6056 reporting is needed for the administration of the employer shared responsibility requirement and the premium tax credits offered through the Marketplaces. The final regulations provide a general method for preparing and filing the 6056 return, along with alternatives that are available to applicable large employer members in lieu of the general method. . © 2014 GALLAGHER BENEFIT SERVICES, INC. 14 Fast Fact: Applicable large employers that are not required to offer MEC to their full-time employees until the 2016 plan year as a result of transitional relief issued by the IRS in the final employer mandate rules must still file their Section 6056 returns in accordance with the deadlines. However, you will be allowed to indicate on the form that you were not subject to the mandate.
- 15. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ “Cadillac” Tax – 2018 COBRA Rate ≥ $10,200 for individual or $27,500 for family Special Provisions • High risk professions • Early retirees • Age & Gender = 40% of plan value that exceeds threshold Excise Tax
- 16. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 2012 Employee only premium: $5,808 ($484 per month) 2014 $7,028 2018 $10,289 Financial Impact 2018: “Cadillac” Excise Tax
- 17. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ Future Considerations • Determining which PPACA requirements will impact you and your organization • Make sure to properly calculate applicable PPACA fees • Staying on top of required notices and reporting • Consumer driven plans • Adjustments to waiting periods © 2014 GALLAGHER BENEFIT SERVICES, INC. 17
- 18. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 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. 4. Set measurement and stability periods. 5. Revise plan document eligibility language to cover applicable employees through the stability period.
- 19. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 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. 10.Stay informed. Closely monitor for new guidance and approaches to compliance.
- 20. ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ 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 your organization's general counsel, tax advisor, or an attorney who specializes in this practice area.
Editor's Notes
- 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.
- 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).
- According to PPACA, in 2018 high-value medical plans may be subject to excise tax. The value threshold is $10,200 per year for individual or $27,500 for family for 2018 (dental premiums are not included in the calculation) A tax of 40% will be assessed on any amount in excess of the threshold In subsequent years, the threshold is indexed at CPI-U plus 1% -- although this is below projected medical trend Somewhat higher threshold value are set for retired individuals age 55 and older and for plans that cover employees engaged in high risk professions (such as law enforcement, fire protection, mining and others). For fully insured plans, the tax will be assessed against the insurer. For self funded plans, it will be assessed against the plan sponsor. This provision applies to employers of all sizes It applies to public entities, including the federal government plan. The goal of the legislators in imposing this tax was not really to use it as a revenue stream, but as a way to force cost cuts and bend the curve of the medical cost trend.
- While the prospect of the excise tax is still distant, it is prudent to begin planning your strategy now. A plan that had a moderate value of $4,800 per employee per year (or $400 per month) in 2010 when the law was passed may exceed the “Cadillac” threshold by 2018 if it experiences 10% year-over-year cost increases. However, when considering the impact of the excise tax, it is important to realize that the main reason the legislators introduced this provision was not to collect additional tax revenue but to encourage employers and insurers to impose stronger cost controls. Thus, if your plan appears to be on the path from a “Prius” to a “Cadillac”, it may be a sign that a reevaluation of some elements of your benefits strategy may be in order.
- 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.