10568079

1. Impact of the Affordable Care Act Nashville Association for Financial ProfessionalsFebruary 14, 2013James B. Bristol615.850.8922james.bristol@wallerlaw.com 10568079

2. Employee Health Benefits –New Business Decisions For Employers

3. Health Law Status Before PPACA • Employer-driven based on tax incentives • ERISA – “settlor” discretion on plan design • ERISA – fiduciary claims administration • Medicare and FAS 106 • EMTALA – patient anti-dumping, charity care • Universal Coverage? Cost?

4. Employer Obligations • Federal/state mandates – ERISA preemption • HIPAA –pre-existing condition exclusions • Maximum exclusion is 12 months • No exclusion if coverage break is 63 days • Non-discrimination testing for self-funded plans • Summary description of plan, notice of changes within six months – judicial exceptions

5. Popular Changes - Talking Points • Employer Plans Grandfathered • Dependent care through age 26 • No pre-existing exclusions – up to age 19; universal in 2014 • Community Rating – “affordable”

6. Supreme Court Decision • “It’s a Tax Stupid” • No expansion of interstate commerce • Medicaid unconstitutional – Medicaid funding cannot be withheld for states that opt out • How much tax is ok under equal protection?

7. Mandated Health Coverage – Pay or Play • Effective January 1, 2014 • Employer Mandate • Focused on “Large” employers • Most larger employers are “self-funded” • Employer as “Settlor” and “Fiduciary” • Individual Mandate • Federal and State Exchanges

8. Employer Mandate - Play or Pay • Large employers - 50+ FTEs • Headcount/30 hours • Must provide “minimum essential coverage” • Workers at 30+ hours • Employer must provide financial support • employee premium share cannot exceed 9.5% of income • plan’s share of benefit cost at least 60%

9. Employer Mandate – Tax Enforcement • Per employee tax if plan is not “affordable” • $2,000 per employee tax if no “minimum essential coverage” • $3,000 tax for each employee enrolling in exchange or receiving premium credit • Exclude first 30 employees in calculating tax

10. Individual Mandate • Must obtain “minimum essential coverage” • Through employer or exchange • Tax subsidies assist purchase, based on income • Employer “pay or play” tax covers subsidies • Provider reports– W-2 for employer plan • Expands Medicaid – although states can opt out

11. Individual Mandate • Tax penalty to enforce individual mandate • Minimum of $95, phased increases to $695 in 2016 – based on income, up to 3x • Percentage of income test, 1% phased increases up to 2.5% • Assistance and exceptions for lower income families • No Time Limit • EMTALA, Pre-existing ok, Community rating

12. Cost Containment • Comparative Effectiveness Research • Patient-Centered Outcome Research Institute (PCORI) • Non-profit created by government, funded by taxes • Compares clinical effectiveness of medical treatment options, communications, healthcare disparity • Designed to “pry savings” from healthcare • Preventive Care – Wellness • Managed Care?

13. Grandfathered Plan Status • Plans in existence on March 23, 2010 grandfathered from most requirements • Status is lost if materially modified • Changes to cost sharing • Changes to employer share of premiums • Employers will have continual decisions on maintaining grandfather

14. New Employer Obligations to Employees

15. Employer Obligations • Standardized summary of plan benefits and coverage • Template available on DOL website – 4 pages • Can be part of summary plan description (SPD) • Applies now

16. Employer Obligations • Form W-2 report aggregate cost of coverage for self-funded plans • Used to determine tax credits and tax penalties • Dept. of Labor valuation methods • HHS MV Calculator • Safe-harbor Checklist • Actuarial Checklist

17. Employer Obligations • Submit to HHS and state insurance commissioner policies, practices, medical loss ratio, etc. • Additional IRS reporting requirements for covered employers in 2014 • 60-day prior notice of material modifications to plan

18. Employer Obligations • Accommodations for nursing mothers • Employers must provide reasonable, unpaid break time for one year after birth • Location shielded from view • Similar to many existing state laws

19. Employee Status • Many requirements do not apply to smaller employers • See over 50, over 30 mandates and penalties • Full-time equivalent calculations – divide hours worked by 2,080, etc. • Worker classification? • Compare independent contractor vs. employee to retain small employer status

20. Employer Obligations • “Whistleblower” Employee Protections • Cannot retaliate against employee for reporting, testifying about, or objecting to a reasonably believed violation of PPACA • Complaints investigated by OSHA • Similar to Sarbanes-Oxley procedures • New source of employment litigation?

21. Mandates for Employer Plans

22. Plan Design and Requirements • Healthcare reform imposes many rules for employer plans including: • Coverage of dependents to age 26 • New hire waiting period 90 days or less • Universal preexisting condition coverage • Medical Loss Ratio • Spend 85% of premium (80% small plan) or refund

23. Plan Design and Requirements • No lifetime limits on “essential health benefits” • Cannot rescind health benefits other than for fraud/intentional misrepresentation • Limits on annual cost sharing • Total $5,950 for individual, $11,500 for family • Annual deductible $2,000 for single, $4,000 for spouse and family coverage

24. Plan Design and Requirements • Automatic health plan enrollment required for employers with 200 or more employees • Auto for new employees, renewal for current employees • Employees may opt out • Logistical issues – effective after DOL regulations • Payroll programming, notices, etc.

25. Wellness Incentives – Cost Savings • Many wellness incentives – similar to current practices • Premium discounts for wellness ok if • Made available to all similarly situated employees • Up to 30%discount on employee-paid cost (50% if regulation) • Must be reasonably designed to promote health • Individuals may qualify at least annually

26. Wellness Incentives • Health plans must cover without cost sharing • Immunizations • Preventive care, screenings for children until adolescent • Screenings, preventive care for women (mammogram, cervical cancer, genetic counseling) • Evidence-based items or services (blood pressure, diabetes, cholesterol test, wellness counseling, etc.) • More under development

27. Key PPACA Tax Changes

28. Tax Credits • Small Employer Tax Credit (temporary) • 25 or fewer full-time equivalents • Plan covers at least 50% of premium cost • Average annual wages less than $50,000 • Based on average employer or small group premium • 35% premium credit, 50% in 2014 • 25%/35% for tax-exempts • Not available after 2016 • Phased out based on employees/wages

29. Cadillac Tax • Beginning in 2018 for High Cost Plan • 40% excise tax on “excess benefit” • Premiums above $27,500 family, $10,200 single • Includes contributions to FSA, HRA, employer HSA • Does not apply to dental, vision, long-term care, after-tax indemnity • Employer calculates and reports tax, must notify HHS and providers

30. Revenue Enhancements • Flexible spending accounts limited to $2,500 • Over-the-counter ineligible for HRA, FSA and HSA – 2011 • Penalty for ineligible HSA payments increased from 10% to 20% – 2011

31. Medicare Tax Increase - 2013 • Additional 0.9% - $200,000/250,000 • 2.35% or 3.8% if self-employed • 3.8% on investment income $200,000/250,000 • Capital gains/dividends 20% @$400/450,000

32. Other Tax Highlights • Medical Device Tax • 2.3% excise tax on gross sales (not profits) • Items under $100 exempt • Tanning Salon Tax – 10% • Medical Expense Deduction • Must exceed 10% of AGI – currently 7.5% • Insurance Executive Deduction Limit • $500,000, no commission or performance exception