The new administration is causing major changes in the benefits industry, with a laser focus on what will become of the Affordable Care Act. Confronted with a litany of new legislation, it’s easy to miss something. Get the download of the new laws you need to know to keep your benefits compliant and get attorney Larry Grudzien’s legal take on what this means for benefits and HR.

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2. Regulation GPS:
Re-Routing Health & Welfare
Plans
Larry Grudzien
Attorney at Law

3. • Current state of ACA
• Repeal of ACA and Trumpcare
• What could happen in the future?
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Agenda

4. Current State of ACA

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The Healthcare Coverage Landscape as of 2009

6. Goals:
• Increase the number of Americans with health insurance
 Health care costs are #1 reason for bankruptcy
• 1 ER visit averages $1,265
• 1 broken foot averages $16,000
• Cancer treatment averages $30,000 per year
 Some can’t afford health insurance & some jobs don’t provide health insurance
 Some choose not to buy insurance
 Some want to buy insurance but companies won’t sell it to them
• Lower the cost of healthcare on a per person basis with cost controls
• ACA Links:
http://www2.iona.edu/faculty/rjantzen/eco380/obamacarelinks.html
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Patient Protection & Affordable Care Act

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The Three-Legged Stool

8. • Guaranteed Issue: Carriers must sell to everyone regardless of
medical condition, age, pre-existing conditions, etc (and in fact
can no longer even ask about medical history at all)
• Community Rating: Carriers cannot charge people different
rates for the same policy based on any factors other than age
(within a 3:1 ratio), location (rating area) and whether they
smoke (50% surcharge)
• Qualified Health Plans (QHP): All plans sold have to meet ACA
standards, including at least 60% AV, all 10 Essential Health
Benefits, etc. (i.e., they have to be real healthcare policies)
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The Three-Legged Stool: Leg 1

9. QHP Actuarial Value: All QHPs have to cover at least 60% of healthcare
costs. Available in 4 “Metal Levels”:
• BRONZE: 60% AV (low premiums, high deductible)
• SILVER: 70% AV (mid-range premiums, mid-range deductible)*
• GOLD: 80% AV (higher premiums, low deductible)
• PLATINUM: 90% AV (highest premiums, no deductible)
• Catastrophic: 50% AV, very low premiums, insanely high deductibles, only
available if you’re under 30 or other rare exceptions
*(Silver plans are the only ones eligible for Cost Sharing Reduction assistance)
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The Three-Legged Stool: Leg 1

10. • Individual Mandate: Everyone (with exceptions) has to have an ACA-
compliant healthcare policy for at least 9 months of the year or they
have to pay a tax penalty of:
 $695.00/adult ($347.50/child) or
 2.5% of household income (whichever is greater)
 maximum of $2,085/family or the avg. annual premium for a Bronze plan
• Penalty is by month (6 mo. uncovered = ½ penalty, etc.)
• Exceptions made for various reasons (expatriate, hardship, domestic
violence victim, natural disaster, etc.)
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The Three-Legged Stool: Leg 2

11. • Tax Credits (aka Subsidies): Two types, both based on income relative
to the Federal Poverty Level (FPL):
• Advance Premium Tax Credits (APTC): Income between 100-400%
FPL ($12K - $48K individual; $24.6K - $98.4K for a family of 4)
 Subsidies increase as benchmark premiums/deductible increase (premium
goes up 20%? Subsidy goes up ~20%)
 Subsidies vary by rating area:
• Avg. premium in Louisville KY $229/month
• Avg. premium in Anchorage Alaska: $994/month
• Cost Sharing Reduction (CSR): Income between 100-250% FPL
($12K - $30K individual, $24.6K - $61.5K family of 4)
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The Three-Legged Stool: Leg 3

12. • Expands Medicaid eligibility to everyone up to 138% FPL ($16.6K/ yr for
individual) regardless of pre-ACA eligibility
• 31 states + DC expanded; 19 states (all GOP held) still refusing
• 2.6 million people caught in Medicaid Gap: Don’t qualify for Medicaid, but earn
too little to qualify for ACA tax credits
• October 2013: 57.4 million enrolled in Medicaid
• October 2016: 74.4 million enrolled in Medicaid
• Net increase of 17.0 million
• 13.0 million of that due to ACA expansion (+special from NY)
• 3-4 million via “Woodworkers”…people who were already eligible for Medicaid
pre-ACA but either didn’t know it or were reluctant to until the ACA went into
effect.
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Medicaid Expansion

13. • No Annual or Lifetime limits on coverage for anyone
(individual market and group market)
• All plans (group & individual) must meet minimum
coverage requirements
• Young adults can stay on parents’ plans until 26 (group &
individual)
• Closes Medicare Part D donut hole
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Other ACA Provisions

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The Healthcare Coverage Landscape as of 2017

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Eligibility for ACA Coverage Among Non-
elderly Uninsured as of 2016

16. • Lowers overall healthcare costs by providing insurance for millions and
making preventive care which will reduce expensive ER visits.
• It increases access to health care by expanding Medicaid.
• Increases access to health care by disallowing exclusions for pre-existing
conditions, keeping <26 year old kids insured, eliminating limits on coverage,
mandating minimum benefit set, providing exchanges with tax credits and
subsidies for small.
• It doesn’t change the budget deficit even though the number of government
subsidized enrollees is increasing because cost controls, shifting the burden to
employers, insurers and other and higher taxes defray the extra costs.
• It ties Medicare MD fees to quality measures in the future.
• Mandates implementation of computerized patient records for health care
providers (w/ some subsidies).
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Pros of Affordable Care Act

17. • Won’t decrease health care costs
• If employers opt to pay fine, govt. subsidies to cover employees will soar
• Increased taxes on high incomes leads to fewer jobs, production, savings
• Huge expansion of government into private sector yielding less choice &
freedom
• Individual mandate is loss of freedom
• Mandatory community rating will increase uninsured by choice
• Cuts to Medicare MCOs will decrease choice for seniors & decrease
efficiency
• Even today more than half of Americans want it repealed.
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Conservative Objections

18. • Medicaid:
 Medicaid Gap (2.6M): 19 states haven’t expanded (blame GOP)
 Dr./Hospital reimbursement too low (~40% of private rates)
 Feds cover 90-95% of expansion Medicaid funding but only 50-75% of traditional
Medicaid; states constantly raiding their share or messing w/ program
requirements/coverage
• Group coverage:
 Employer mandate ironically encourages “Job Lock” while also adding a bunch of
paperwork for tracking employees (but also provides partial funding for exchange
subsidies/Medicaid expansion)
 Ineligible due to ESI offer (4.5M): Employer plans glitch allows Catastrophic (Lead)
plans “left on the table” to disqualify employees for individual exchange tax credits
• Risk Corridor Funding
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Legitimate Problems w/the ACA

19. • Undocumented immigrants (5.4M):
 ACA doesn’t allow undocumented immigrants onto Medicaid or ACA exchanges even
at full price (unsubsidized). CA nearly passed state law to allow it but rescinded after
Trump took office.
• Medicaid/CHIP eligible (6.4M):
 Outreach, outreach, outreach…and obstruction by GOP officials at state level
(remember, most of these are eligible for trad. Medicaid)
• Tax credit eligible/income ineligible (8.3M):
 APTC too skimpy (400% FPL cut-off, not generous enough 300-400%)
 CSR too skimpy (250% FPL cut-off, not generous enough 200-250%)
 ESI ineligibility allows skinny plans to be considered “compliant”
 Family Glitch: If 1 member on employee-only ESI, others don’t qualify for exchange
subsidies (~3M people)
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Legitimate Problems w/the ACA

20. Repeal of ACA and Trumpcare

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CBO estimated that repealing the ACA would increase the
federal deficit by ~$145 billion between 2017 and 2025
-60
-40
-20
0
20
40
60
80
100
120
2017 2018 2019 2020 2021 2022 2023 2024 2025
Impact of ACA Repeal on Federal Deficit, in Billions

22. Reasons for unfavorable
opinion include:
• Concerns about cost of
coverage
• Perception that law gives
government too big a role
Source: Kaiser Health Tracking Poll,
October 27, 2016
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Despite the insurance gains and deficit impact,
public is divided on view of the law
45% 45%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Favorable Unfavorable Don't Know
Given what you know about the
health law, do you have a generally
favorable or generally unfavorable
view of it?

23. As Congress looks to reform or replace the ACA
policymakers may wish to avoid adverse consequences,
such as:
• Coverage loss among the 20 million people who have gained
insurance
• Return to an era of pre-existing conditions exclusions and denial of
coverage
• Deficit increases stemming from repeal of ACA’s revenue-generating
provisions
• Continued premium increases in the individual market
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Consequences

24. • Defunds Planned Parenthood ($530 million/year…40% of
their total budget)
• Defunds Medicaid Expansion (starting in 2020, via
attrition…no new enrollees, current ones can’t come back
once they leave.
• Defunds Cost Sharing Reductions (CSR) completely
starting in 2020.
• Changes non-ACA Medicaid to Block Grants (kicks more off
later)
• Changes Tax Credits (APTC) from income-based to age-
based ($2,000 for younger --> $4,000 for older enrollees)
• Tax credits no longer increase to match premium hikes, nor
do they vary by geography/rating area
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What’s in Trumpcare?

25. • Changes age band from 3:1 to 5:1 (older enrollees can be charge 5x
as much as younger)
• Eliminates the minimum 60% AV (Bronze) requirement – junk plans
• $100 billion over 9 years to states for High Risk Pools, Reinsurance
programs, etc (part of this is effectively replacing money they stole
from the Risk Corridor program)
• Changes Mandate penalty to a 30%, 1-yr premium surcharge for not
maintaining continuous coverage…w/penalty going to carrier, not IRS
• Wipes out over half the revenue to fund ACA…including 3.8%
investment tax on rich people & 0.9% Medicare payroll tax. Replaces
with…not much.
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What’s in Trumpcare?

26. • This would give top 1% avg. $33,000 tax cut; top 0.1%
avg. $197,000 tax cut; and top 400 richest Americans an
average tax cut of $7 million.
• Repeal ACA Mandates standards for health plans and
premiums and subsidies until 2020
• Retains private market rules
• Retain health insurance marketplaces
• Encourages use of Health Savings Accounts
• Individual Mandate eliminated effective January 1,2016
• Employer mandate penalty reduced to zero effective
January 1, 2016
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What’s in Trumpcare?

27. • 14 million lose coverage in 2018
• Another 10 million lose coverage by 2026 (24 million total)
• Just about all losing coverage would be low-income (Medicaid/elderly/etc.)
• By 2026, total uninsured would be ~52 million (up from current 28 million)
• Age-based tax credits would actually be somewhat better for some in the
middle class (300-600% FPL), but devastating to low-income/elderly.
• Premiums would increase by an additional 15-20% per year thru 2020; would
then gradually decrease to ~10% lower than current projections by
2026…mainly due to forcing 50-64 year-olds off coverage completely.
• Deductibles would increase even more in 2 ways: a) Lower AV requirements;
b) CSR assistance cut off for lower-income enrollees
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CBO Score?

28. What could happen in the future?
Repeal, Replace, or Repair?

29. • Fix the “Family Glitch”: Other family members should qualify for APTC/ CSR even
if someone in the family is covered by ESI.
• Fix the “Skinny Plan Glitch”: Require ESI policies to be at least Bronze strength
(preferably Silver) before employees are ineligible for APTC/CSR
• Restore Risk Corridor funding (& extend it indefinitely). The money is legally owed
to the carriers anyway, and the program works just fin for Medicare Part D).
• Guarantee CSR Payments. House GOP brought a lawsuit charging CSR
payments are unconstitutional even though they’re legally mandated. Case
pending; sword of Damocles causing monthly uncertainty.
• Require all Individual Market plans be offered on the exchanges (better yet,
exclusively on-exchange, as DC has done for 4 years). Less confusion, no
income-based cherry-picking, easier tracking of enrollment trends.
• Beef up Individual Mandate Penalty (Unlikely)
• Beef up the tax credits (both APTC & CSR)
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Fix the ACA’s Problems?

30. • Individual tax relief for everyone, regardless of where they work, to
purchase their own insurance
• Replace tax deduction for employer contribution with tax credit for
individual purchase
• No barriers to interstate insurance sales
• Allow employers to convert from defined benefit to defined contribution
plans
• Move Medicare to defined contribution plan & allow Medicare plans to opt
out
• Promote new group purchasing based on organization memberships &
associations
• More consumer-directed options like health savings accounts & flex plans
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Conservative Reforms

31. • Extend rational pre-existing condition provisions in individual plans
rewarding responsible behavior
• Equal payment for traditional Medicare & MCO Medicare
• Encourage states to set up high-risk pools and consumer based
reforms
• Provide Medicaid insurees with opt out to private insurance
• Increase fraud & abuse efforts in Medicaid
• Encourage private savings and private long term care insurance to
solve long term care needs
• Stop new tax increases and promote tax cuts to expand private
insurance coverage
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Conservative Reforms

32. • States could apply for federal waivers from several
coverage requirements that President Barack Obama's
2010 health care law imposes on insurers.
• Waivers from an Affordable Care Act provision that obliges
insurers to cover "essential health benefits," including
mental health, maternity and substance abuse services
• The current version of the GOP legislation would erase
that coverage requirement but would let states re-impose it
on their own.
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New Republican Proposals

33. Let states seek an exemption to the law's requirement that
insurers must offer coverage to people with serious
diseases
Patients with high-cost conditions like metastatic cancer and
AIDS would not be segregated in a separate insurance pool,
but their insurers could receive extra payments, as the
government would cover a share of claims exceeding a level
specified by federal health officials.
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New Republican Proposals

34. Stop cost-sharing subsidies
• In addition to subsidized insurance premiums, the ACA provides financial
assistance for deductibles and copayments to consumers with modest
incomes.
• House Republicans have challenged the constitutionality of aid payments,
estimated at $7 billion this year.
Tweak insurance benefits
• The ACA requires insurers to cover ten categories of "essential health
benefits," from prevention to prescriptions, maternity to mental health.
• While broad categories are written into law, key specifics are spelled out in
regulations and guidance.
• The administration could propose changes.
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Other Administrative Actions

35. Remake Medicaid
• Alongside subsidized private insurance for people who
don't have job-based coverage, the ACA expanded
Medicaid to serve millions more low-income adults.
• With the repeal effort stalled, some of the 19 states that
have refused the expansion may come forward.
• That gives the Trump administration an opportunity to
steer an important program in a different direction.
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Other Administrative Actions

36. Wink on insurance penalty
• Tax penalties on people who remain uninsured are the
most unpopular part of the Obama-era law.
• The Trump administration has already eased enforcement.
• The IRS scrapped a plan to hold up tax returns of people
who fail to indicate if they have coverage.
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Other Administrative Actions

37. • Employer Mandate – 2017, 2018, or 2019
• Individual Mandate – 2016, or 2017
• Reporting (1094 1095) – 2018?
• Nondiscrimination rules – gone
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Possible Changes: Health Care Reform

38. • Cadillac Tax – gone
• Essential Health Benefits –small plan market?
• Preexisting Conditions – return?
• Expansion of Medicaid – gone
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Possible Changes: Health Care Reform

39. • Dependent Age 26 – stay
• Marketplace – stay
• Full-time Employee definition – gone
• Health FSA Limitation – gone
• Free standing HRAs – come back
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Possible Changes: Health Care Reform

40. Other Welfare Benefits
• Eliminate the expansion of Form 5500 reporting
• Wellness rules – changed
• Contraceptive Coverage – gone
• Gender transition services – gone
Individual Income Tax
• Allow the deduction of individual premium
• Limit or eliminate deductions
• Eliminate credits to broaden tax base
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Possible Changes

41. • Repeal or replace DOL final overtime rules
• Slow Increases minimum wage
• Delay any pay equity and equal employment opportunity
issues
• Leave Paid Leave to state and local
• Lessen enforcement of Independent contractors and the
gig economy
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Possible Changes: Worker Protections

42. Employer-sponsored healthcare
• Mandates may stay in place for 2017 or 2018
• Reporting in place for 2016, but for 2017 or 2018?
• HSAs and HRAs may be favored
Retirement income
• Reporting and fiduciary rule may change
• Limits may change
• Roth may not be favored
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Employer Next Steps

43. Questions?

44. Larry Grudzien
Attorney at Law
(708) 717-9638
larry@larrygrudzien.com
www.larrygrudzien.com
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Contact Information
44