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Federal Health Care Reform (PPACA) Presentation to the Maine Legislature February 26, 2014

Federal Health Care Reform (PPACA) Presentation to the Maine Legislature February 26, 2014. 2014 Health Care Reform. 1. Individual Mandate Required to have insurance coverage or pay penalty

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Federal Health Care Reform (PPACA) Presentation to the Maine Legislature February 26, 2014

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  1. Federal Health Care Reform (PPACA) Presentation to the Maine Legislature February 26, 2014

  2. 2014 Health Care Reform 1 Individual Mandate • Required to have insurance coverage or pay penalty • Individuals - starts at $95 a year or up to 1% of income, whichever is greater, and by 2016 rises to $695 per individual or 2.5% of income. • Families $285 per family for 2014, $975 per family for 2015, $2,085 per family for 2016 and beyond • Certain exemptions are allowed: • You have insurance through your employer or purchase individual insurance on your own • You have insurance through Medicare, Medicaid, CHIP, Veteran’s Administration an/or Tricare, Indian Health Services or a health-care sharing ministry • You would have to spend more than 8 percent of your household income on the least expensive qualifying health insurance plan, even after tax credits and subsidies. Will more employees opt for coverage at work as a result of the Individual Mandate?

  3. Large vs. Small Employer - ACA Small Employers • Fewer than 50 full time employees • No penalty for not offering health insurance coverage • Employees will not be eligible for tax credit/premium subsidy when employer makes contribution to premiums Large Employers • 50 or more Full-Time employees (FT employees plus Full-Time Equivalents) • Full-time = 30 or more hours per week (or 130 hours per month) • Possible penalty if FT employees are not offered Minimum Essential Coverage

  4. Small Employer Market in 2014 3 What are small employers thinking? • Will employees without health insurance request access through the Employer’s group plan in response to the Individual Mandate? • Will small employers, who have no penalty for discontinuing benefits, direct employees to the Exchange? • Will employer based health insurance become more or less competitive in comparison to coverage offered through an Exchange? • As small employers look to the Exchange, will health insurance become devalued in the eyes of employees? • What does this all mean for a small employer’s ability to attract and retain employees?

  5. Small Employer Market in 2014 4 Possible Actions by Small Employers • Continue offering health insurance coverage as an employer does today • Purchase health insurance through the SHOP Exchange (Small Business Health Options Program) – this will allow employees access to the coverage options contemplated under healthcare reform. This option will also allow coverage to be deducted on a pre-tax basis, but the SHOP approach will block employees ability to access the federal subsidy through the public exchange. • Drop coverage completely and establish a defined contribution and encourage employees to go to the public exchange. This will be a taxable allocation to the employee, but allow the employee and their dependents to possibly access the federal subsidy if below 400% of the FPL. • Introduce a private exchange offering - products being developed by carriers • Offer no coverage and offer no defined contribution

  6. What to expect in 2014? Large Employers

  7. 2014 Health Care ReformKey Provisions Impacting Large Employers 6 Are you a Large Employer (per the ACA)? • Large Employers (Employers with 50 or more employees) must offer minimum essential coverage to full time employees or may pay a penalty. • Full time is defined as working an average of 30 hours of service per week. • Full-time employees are calculated by adding the number of full time employees to the number of part-time employees that aggregate to full time equivalents (e.g., 2 half-time employees are equivalent to one full-time employee. • Seasonal employees do not need to be counted if the employer only exceeds 50 full-time employees for 120 or fewer days during the calendar year, and the only reason the employer exceeds 50 employees is because of the seasonal employees. Only Large Employers are subject to the “Pay or Play” Requirement Small Employer are not subject to the “Pay or Play” Requirement

  8. 2014 Health Care ReformKey Provisions Impacting Large Employers If you are a Large Employer, health coverage needs to be offered to the following employees or you may face a penalty: Full-time employees (average at least 30 hours of service* per week or 130 hours of service in calendar month) Seasonal Employees who meet the Waiting Period (in this context Seasonal is not defined. Employers are to make a good faith effort interpretation) Not required to offer coverage to Part-Time employees or Leased employees Required to offer coverage to dependents (up to age 26). Spouses are not included. * Note: Hours of service include any time for which an employee is paid, or entitled to be paid, including vacation time, holiday time, sick time, layoff, jury duty, military duty or leave of absence.

  9. 2014 Health Care ReformKey Provisions Impacting Large Employers Beginning January 1, 2014, Large Employers will need to offer minimum essential (health) coverage to their employees or may pay a penalty • A recent regulation delays a potential penalty until the first day of the fiscal plan year (benefit plan year). For example, if an employer’s benefit plan renews July 1, 2014, the employer may be exempt from a penalty until July 1, 2014. • The regulation also permits employers to modify their cafeteria plan when their benefit plan does not operate on a calendar year to allow: • Employees to drop their health plan for 1/1/2014 to enroll in an Exchange plan • Employees to enroll in the group plan through the employer to meet the individual mandate for 1/1/2014

  10. 2014 Health Care ReformKey Provisions Impacting Large Employers If a Large Employer drops health coverage or does not offer health coverage in 2014: You may face a penalty equal to $2000 per employee per year less the first 30 employees. The penalty only applies if 1 or more employee enrolls in health coverage through a Public Exchange and qualifies for a tax credit/premium subsidy. The penalty is not tax deductible. This is not a Defined Contribution plan.

  11. 2014 Health Care ReformKey Provisions Impacting Large Employers Large Employers who offer health coverage • Must offer Minimum Essential Coverage to at least 95% of employees - coverage needs to be Affordable (not exceed 9.5% of household income) and provide Minimum Value (benefit at least 60% value) • Safe-harbor will permit affordability to be based on the employee’s wages for Employee coverage only. • Employees and their dependents who have “affordable” coverage are “locked out” of tax credit at Exchange • Shared Responsibility Tax • Penalty for any employee who qualifies for a Tax Credit/Subsidy through an Exchange if employers plan is not “Affordable” and/or provide “Minimum Value”. • Penalty is lesser of $3,000 annually for each employee receiving subsidy or $2000 for each employee excluding 1st 30 employees • Persons with household income between 100% and 400% of the FPL will qualify for a subsidy if coverage is not Affordable and provide Minimum Value. (133% if Maine expanded Medicaid) Referred to as “Pay or Play”

  12. Impact What actions can an employer take in response to the 2014 requirements? • Increase Employer’s contribution to ensure that no employee pays more than 9.5% of wages for employee only coverage. (Prevents the Shared Responsibility Tax). This may require reducing employer subsidy for dependents. • Introduce a Low Cost Option by decreasing the value of a benefit plan (which then lowers the premium) in order to decrease the employee contributions to less than 9.5% of wages. (Note: the health plan must have a minimum value of at least 60%.....Bronze Level) • Modify schedules and policies to limit part-time employees to 30 hours or less. (FTE is defined as 30 hours or more per week) Employers with employees working over 30 hours will need to make benefit eligibility decisions. • Consider a “Pay and Play” strategy that encourages lower paid individuals to go to the exchange preserving their access to federal subsidy (avoid lockout). Employer will knowingly incur a $3000 penalty for individuals who qualify for subsidy. One or more strategies can be utilized.

  13. Exchanges

  14. 2014 Health Care ReformExchanges 13 Public Exchanges • State or Federally operated Web-Based Exchange where Individuals and Small Businesses (referred to as the SHOP – Small Business Health Options Program) will be able to purchase health insurance. (Small businesses defined as 50 or fewer employees.) In 2016 large employers may be able to purchase health coverage through an Exchange. • Starting in 2014, small business tax credits will only be available through an Exchange to groups under 25 with average earnings under $50K • Maine will have a Federally Facilitated Exchange • Role of Producers and Navigators in the Exchange Market • Producers are required to be licensed to sell health insurance in Maine. Will this qualify Producers to become Navigators? • Navigators will be required to be certified and complete a training program (new Maine law) – it is unclear how will this work if Maine has a federally operated Exchange?

  15. 2014 Health Care ReformExchanges 14 Public Exchanges (cont’d) • Exchanges will determine eligibility for tax credit/subsidy and Medicaid. • Tax Credit/Subsidy offered to individuals with household incomes between 133% and 400% of the Federal Poverty Level (FPL). In states which choose to not expand Medicaid (as allowed by the Supreme Court’s June decision), the subsidy will be based on 100% to 400% of FPL. Maine has chosen not to expand to 133% of FPL. • Tax Credit/Subsidy only available to individuals who do not receive Medicaid, employer-sponsored coverage (that is Affordable and/or provides Minimum Value) or other acceptable insurance • Offer at least 4 levels of coverage • Bronze – 60% plan value • Silver – 70% plan value • Gold – 80% plan value • Platinum – 90% plan value

  16. 2014 Health Care ReformExchanges Private Exchanges • Small business tax credit and premium subsidies not available through private exchanges. • Varying Models • Carrier Specific – Small, Middle and Large Group • Multi-Carrier Exchange – National Accounts • Insured and Self-Funded Mechanisms All leading to a Defined Contribution approach where the plan is Affordable (9.5% of wages) and provides Minimum Value (60% - a Bronze plan). Concern: Employers may need to devalue benefits to meet budget demands. But, how will this impact attracting and retaining employees?

  17. Preparing for 2014 16 What should businesses do to be ready for 2014? • Start planning for HCR today if you haven’t done so already! • Develop a committee to work on implementing HCR. It may be just you! • Engage decision makers from finance, legal, accounting and human resources • Identify strategies to address short and long-term issues regarding cost, compliance, tax and compensation • Evaluate the effect of required coverage changes on current group health plan options • Begin developing required employee notices

  18. PPACA - What’s Next? • The federal government has recently released proposed regulations covering the following topics: • Defining Full-Time Employee and Waiting Period • Essential Health Benefits, Actuarial Value and Health Plan Accreditation for Exchanges • Insurance market reforms for the fully-insured market – Guarantee Issue, Risk Pool, etc. • Wellness Regulations and corresponding incentives • Other regulations expected soon. • Federal government will likely have to step in and establish insurance exchanges in many states • Could lead to challenges to block or limit enforcement • Will an exchange established and administered by the federal government be considered “established by a state”? • Some continued litigation is possible over enforcement of regulations (e.g., church-affiliated employers) 17

  19. Appendix

  20. HCR Changes for 2012 19 Federal Requirements for 2012 • Summary of Benefits and Coverage – All Employers • Effective for plan years on or after 9/23/12 • 4 page, double sided document , prescribed format • Descriptions of coverage including coverage examples • Created by carriers for fully insured plans then distributed by employer • Comparative Effectiveness Research Fee – All Employers • $1 PMPY for plan years ending 10/1/12 to 9/30/13 ; $2 PMPY for plan years ending 10/1/13 to 9/30/19 • Funds Patient Centered Outcomes Research Institute • Paid by carrier for fully-insured plans • Women’s Preventive Health Care Services – All Employers • Plan years on or after 8/1/12 • Extensive list of services to be covered at 100%

  21. HCR Changes for 2012 20 Federal Requirements for 2012 (Continued) • Reporting cost of employee health coverage on W-2 form (report in January 2013) • Employers filing fewer than 250 W-2 Forms will not have to report until further guidance • Small Business Tax Credit • Employers with 10 or fewer employees and average wages below $25,000. Unfortunately not many business have applied and/or qualified because of the complexity of the process. (NY Times, 9/25/12) . See the following link for more information. http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

  22. HCR Changes for 2013 21 Federal Requirements for 2013 • Limit Health Care FSA contributions to $2,500 – All Employers • For plan years beginning after December 31, 2012 • Medicare Tax on High Income (1/1/13) – All Employers • Increases Medicare Part A tax rate on wages from 1.45% to 2.35% on earning over $200,000 for individual tax payers and $250,000 for married couples filing jointly. • And 3.8% assessment on unearned income for higher income tax payers • Employers are required to withhold the additional taxes for an employee who earns more than $200,000 • Notice to inform employees of Exchange – All Employers • Effective 3/1/13. Employees may have access to subsidies if their employer does not offer affordable health care. Delayed until late summer/fall 2013.

  23. 2014 Health Care ReformKey Provisions Impacting Large Employers How to Determine if an employee is Full-Time? A recent regulation provided guidance: Measurement Period - Calculate the average number of hours worked over of 3 to 12 months. Determines whether employee is FT or PT. Stability Period – Employee remains FT or PT based on Measurement Period. At least 6 months but not longer than Measurement Period. Administrative Period – time to complete enrollment materials, etc. For new employees, the combination of the Measurement Period and Waiting Period cannot exceed 13 months. Note: Employers will need to look back into 2013 to count hours to determine FT or PT status.

  24. Before and After 2014 HCR RequirementsCost Impact

  25. 2014 Health Care ReformOther Provisions 24 Other 2014 Provisions • Waiting Period – cannot exceed 90 days – All Employers • Essential Health Benefits • All small group and individual health plans sold inside and outside Exchange are required to include “affordable” Essential Health Benefits. Each state is determining the Essential Health Benefits or will default to the largest Small Group plan sold in the state. • No Pre-Existing Condition restrictions for any covered person (expands to adults) - All Employers • Coverage to age 26 for adult children even if eligible for employment based plans (grandfathered plans, already in effect for non-grandfathered plans) – All Employers • Insurer Assessment • Fee to be paid by insurance companies to pay for premium subsidies and tax credits to qualifying individuals purchasing coverage through Exchanges. The assessment will be 2.46% of premiums. Fee likely to be shifted to insurance premiums.

  26. Maine Legislature - 2012 25 • No Exchange legislation passed in 2012 • Federal government will operate Exchange if not implemented in Maine • Dirigo Health Program • Assessment phasing out and program will be eliminated as of December 2013. • Assessment is 1.64% of claims for 7/1/12 to 6/30/13 then 1.14% of claims for 7/1/13 to 12/31/13. • Maine Guarantee Access Reinsurance Association (MGARA) • $4 PMPM Assessment (beginning July 2012) • All health plans, including TPA • Designed to offset high cost claims for individual coverage and improve individual pool (e.g., lower premiums) • Bill submitted by Supt of Insurance to allow Maine’s Program to supersede the federal program Note: Employers will have both the Dirigo Assessment and MGARA assessment in 2012 and 2013.

  27. Health Care Reform Resources: www.holdenagency.com – Employee Benefits – see Health Care Reform and our blog http://healthreform.kff.org/ - Kaiser Family Foundation http://www.dol.gov/ebsa/healthreform/ - Department of Labor, Health Care Reform http://www.healthcare.gov/law/resources/regulations/prevention/index.html - Information on Preventive Care Services

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