NAVIGATING THE NEXT PHASE OF HEALTH CARE REFORM. PRESENTED BY SHIRAZI BENEFITS. LOOKING BACK. HEALTH CARE REFORM TIMELINE: A YEAR-BY-YEAR LOOK. Looking Back. 2010 Dependent coverage to age 26 Changes to dollar limits Patient protections
LOOKING BACK HEALTH CARE REFORM TIMELINE: A YEAR-BY-YEAR LOOK
Looking Back 2010 Dependent coverage to age 26 Changes to dollar limits Patient protections No pre-existing condition exclusions for children Emergency room services 100% coverage for in-network preventative services For non-Grandfathered plans Non discrimination in favor of highly compensated employees (suspended until further guidance)
Looking Back Dependent coverage through age 26 Allows for dependents to remain on their parent’s or guardian’s health plan until age 26 (dependent age may be higher in some states) and expands the definition of a dependent Also applies to specialty products such as vision, dental and pharmacy 100+ groups with a grandfathered plan can choose to include an eligibility exclusion for dependents who are eligible for their own employer sponsored plan 100+ groups can choose to customize their vision or dental dependent age
Looking Back Changes to dollar limits Eliminates annual dollar limits on covered services that may be considered “essential health benefits” by the Department of Health and Human Services (HHS) Eliminates lifetime dollar limits on covered services that may be considered “essential health benefits” by HHS
Looking Back Patient protections For plans that require a primary care provider (PCP), members must be able to designate any in-network provider as their PCP (including an OB-GYN for a woman or a pediatrician for a child) Eliminates referral and preauthorization requirements for in-network OB-GYNs and pediatrician Only required for non-grandfathered plans; custom groups with a grandfathered plan may exclude some of the patient protections
Looking Back No pre-existing condition limitations for children Prohibits pre-existing condition exclusions (including coverage denials and waiting periods) for children younger than 19
Looking Back No member cost share for preventive care Requires health plans to provide coverage without cost-sharing for preventive services Expands preventive services list
Looking Back Emergency room services Requires plans to cover in-network and out-of-network emergency room services Forbids preauthorization requirements for emergency room services, including out-of-network (post treatment notification requirements are permitted) Out-of-network copayments and coinsurance cannot exceed in-network copayments and coinsurance Only required for non-grandfathered plans.
Looking Back Non discrimination in favor of highly compensated employees (suspended until further guidance) Prohibits employers from having different health benefits tied to employee salary levels Disallows eligibility rules (that is, total hourly or annual salary rules) that have the effect of discriminating in favor of highly compensated employees Self-funded plans are not subject to this requirement, but are subject to a separate similar law. IRS Section 105(h)
Looking Back 2011 Changes to Tax-Free Savings Accounts Medical loss ratio standards go into effect
Looking Back Changes to Tax-Free Savings Accounts Excludes the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a Health Reimbursement Account or health Flexible Spending Account and from being reimbursed on a tax-free basis through a Health Savings Account or Archer Medical Savings Account. Increases the tax on distributions from a health savings account or an Archer MSA that are not used for qualified medical expenses to 20% of the amount used. Implementation update: On September 3, 2010, the IRS issued guidance regarding changes on health flexible spending accounts including Health Reimbursement Accounts and health Flexible Spending Accounts noting that over-the-counter medicines prescribed by a doctor could be reimbursed by these tax-savings accounts.
Looking Back Medical loss ratio (MLR) MLR is the percentage of premiums spent on medical care relative to the amount spent on administrative costs Requires issuers to spend a minimum of 85% for large group and 80% for small group and individuals (generally) on medical care If the MLR minimum is not met a rebate check is issued to enrollees in the individual market and employers in the group market MLR applies to large group, small group and fully insured plans, regardless of grandfathered status. It is also being implemented for individual plans, but not self-funded groups
WHERE WE ARE TODAY MAKING SHIFTS FROM 2012 TO 2013
WHERE WE ARE TODAY 2012-2013 Uniform Summary of Benefits and Coverage W-2 tax reporting Notice for Material Modification Flexible Spending Account Limits ($2,500 per year) Comparative effectiveness research (CER) fee Women’s Preventive Services Medicare Tax Increase Health insurance exchanges: Employee notification deadline extended Reinsurance Assessment
WHERE WE ARE TODAY Summary of benefits and coverage (SBC) Requires plans and issuers to provide an easy-to-understand document that includes a summary of coverage, common glossary of terms and coverage fact labels This provision is being implemented for all group sizes and individual plans. It also applies to both fully insured and self-funded plans
WHERE WE ARE TODAY W-2 tax reporting Requires employers to report the cost of employer-sponsored health benefits on a separate entry of the W-2 form Various types of coverage may be included such as medical plans, dental and vision coverage, prescription drug plans and employee physicals This provision applies to fully insured and self-funded plans. However, employers that file less than 250 W-2s are not required to report the value of benefits
WHERE WE ARE TODAY Notice of Material Modification Requires plan sponsors or issuers to provide 60 days advance notice to enrollees when making material modifications to the plan Modifications include any change to the coverage such as enhanced or reduced benefits, increased premiums or cost sharing, and new referral requirements Can be satisfied by sending an updated summary of benefits and coverage or separate written notice
WHERE WE ARE TODAY Comparative effectiveness research (CER) fee Revenues will fund research to determine the effectiveness of various forms of medical treatment. The initial annual fee of $1 per covered life is for plan years that began on or after Oct. 2, 2011. The fee increases to $2 in 2012, then increases to an amount indexed annually to national health expenditures until 2019, when it no longer applies. Reporting and payment using IRS Form 720 is required by July 31of the calendar year immediately following the last day of the policy or plan year (e.g., liability for a plan year ending Jan. 31, 2013 must be filed by July 31, 2014).
WHERE WE ARE TODAY Women’s Preventive Services Requires health plans to cover evidence-informed preventive care and screenings without cost sharing Some services include: – Well-woman visits – Testing for human papillomavirus (HPV) – Breastfeeding support, supplies and counseling – FDA-approved contraception methods and contraceptive counseling This provision applies to all non-grandfathered health plans (whether insured or ASO) starting with the first plan year on or after August 1, 2012. It also applies to grandfathered health plans that have chosen to implement the ACA’s preventive care coverage
WHERE WE ARE TODAY Medicare Tax Increase Increases the Medicare Part A (hospital insurance) tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly and imposes a 3.8% assessment on unearned income for higher-income taxpayers.
WHERE WE ARE TODAY Health insurance exchanges: Employee notification deadline extended The Affordable Care Act (ACA or health care reform law) added a section to the Fair Labor Standards Act (FLSA),that says an applicable employer must provide each employee at the time of hiring (or with respect to current employees, no later than March 1, 2013), a written notice: Informing the employee of the existence of exchanges including a description of the services provided by the Exchanges, and the manner in which the employee may contact exchanges to request assistance; If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an exchange; and If the employee purchases a qualified health plan through an exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes. The FAQ issued by the Department of Labor (DOL) on January 24, 2013 recognized that the initial March 1, 2013 notification deadline is unrealistic and will not take effect on March 1, 2013. The new FAQ indicates that the agency will issue additional guidance in the future, moving the implementation date to late summer or fall of 2013.
WHERE WE ARE TODAY Reinsurance Assessment Collected over the three-year period from 2014 through 2016, this assessment will fund a reinsurance program to help lessen the impact of high-risk individuals entering the Individual market. Fully insured plans: The Carrier is required to pay this assessment. The carrierwill build additional loads into our premium rates to offset the cost of these fees for any applicable insurance plan effective 2/1/2013 and later. Self-funded plans: Third party administrators may make the payment on behalf of self-insured plans.
WHERE WE ARE GOING SUMMARY OF NEW HEALTH REFORM LAW EFFECTIVE 2014
WHERE WE ARE GOING 2014 Health Insurance Industry Fee Employer requirements to provide coverage Health Insurance Exchanges Health insurance premium and cost sharing subsidies Guaranteed availability of insurance Essential health benefits Wellness programs in insurance Individual requirement to have insurance
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Health Insurance Industry Fee The Health Insurance Industry Fee affects health insurers (including HMOs) and is estimated to start at $8 billion in 2014. It increases year over year before reaching an estimated $14.3 billion in 2018. After 2018, it will continue to increase with premium growth. The fee applies only to insured business, and will be based on each insurer’s share of the taxable health insurance premium base (among all health insurers of U.S. health risks). Plans include all insured individual and group medical plans (HMO, Network, PPO and OAP) regardless of funding type (i.e., Guaranteed Cost or Shared Returns including Minimum Premium), behavioral health, pharmacy, vision and dental benefit plans (including stand-alone), among others. Impacted plans will be assessed 2-2.5% of premium in 2014. This will increase to 3-4% of premium in future years. The Carrier is required to pay this assessment. The Carrier will build additional loads into our premium rates to offset the cost of these fees for any applicable insurance plan..
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Larger employers face penalties starting in 2014 if they don't make affordable coverage available.This simple flowchart illustrates how those employer responsibilities work.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Prepare for 2014, when the employer mandate kicks in. Employers with 50+ full-time employees (or full-time equivalents) must offer medical coverage that is “affordable” and provides “minimum value” to their full-time employees (and their dependent children to age 26) or be subject to penalties. This mandate is effective January 1, 2014, regardless of grandfathered status. There is transitional relief for employer-sponsored plans that begin on a date other than January 1, if they comply upon the first day of their 2014 plan year. – Employees who work 30 hours per week are deemed full-time. – Coverage is affordable if employee contributions are less than 9.5% of: - an employee’s W-2 wages, - an employee’s monthly wages (hourly rate x 130 hours per month), OR - the Federal Poverty Level for a single individual. – A plan must pay 60% of the costs of covered health services to be considered as providing “minimum value.” – Employers cannot have more than a 90-day waiting period after an employee becomes eligible for coverage. – Dependents are considered children up to age 26. Spouses are not included in the definition.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Determining your full-time employees – Safe harbor methods may be used to determine the full-time status of current and new employees who work variable hours. These methods are complex and differ for ongoing and new employees. Employers should consider the methods carefully with their own legal counsel.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Who is a Full-Time Employee? Hours of service include paid leave. Employers must count all of the hours of service for which an employee is paid or is entitled to payment, including paid leaves of absence such as: Vacations Holidays Leave for illness, disability or other incapacity Layoffs Jury or military duty leave
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Safe Harbors Defined time periods. The safe harbors allow employers to use these time periods to predict whether an employee will qualify as full-time for shared responsibility purposes: Measurement period. Employers select a fixed three- to 12-month measurement period for determining whether an employee has averaged at least 30 hours of service per week. Stability period. After meeting the minimum-hours threshold during the measurement , employees must be treated as full-time – regardless of actual hours worked during a subsequent “stability period,” provided they remain employed. Employees who fail to meet the minimum-hours threshold during the measurement period do not have full-time status during the stability period and will not trigger shared-responsibility penalties.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Safe Harbors Stability period. The stability period can’t be shorter in duration (number of months) than its associated prior measurement period. If an employee meets the minimum-hours threshold during the measurement period, then the ensuing stability period for coverage availability must last at least six full, consecutive calendar months. If the employee did not meet the minimum-hours threshold, the stability period cannot be longer than the measurement period.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Safe Harbors Optional administrative period. Employers may need time after the measurement period ends to decide which employees must be offered coverage during the ensuing stability period. The safe harbor allows an optional “administrative period” between the measurement and stability periods so employers can notify employees qualifying for coverage and handle enrollment tasks. The administrative period can’t exceed 90 days or be applied in a way that imposes a gap in employees’ coverage.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Safe Harbors Uniform periods, except between certain employee groups. An employer generally must apply its selected measurement and stability periods on a consistent basis to employees. But an employer’s measurement and stability periods can vary in length and/or in starting and ending dates for different specified categories of employees: Collectively bargained versus non-collectively bargained employees, Salaried versus hourly employees, and Employees located in different US states.
EMPLOYER RESPONSIBILITY TO PROVIDE COVERAGE Employer mandate penalties – The penalty for employers not offering any coverage to at least 95% of their employees is $2,000 per FTE (minus the first 30). The penalty for employers offering a plan that is not “affordable” or does not provide “minimum value” is the lesser of: (a) $3,000 per FTE receiving the tax credit for exchange coverage, or (b) $2,000 per FTE (minus the first 30). There are no tax penalties for employers with fewer than 50 full-time employees, or full-time equivalents. Employers with non-1/1 plan effective dates will not incur any penalties if they comply upon the first day of their 2014 plan year. Employers cannot change their effective date now to take advantage of this relief.
REQUIREMENTS FOR MINIMUM COVERAGE To be considered minimum coverage, a plan must: Provide 60% actuarial value minimum (covers at least 60% of covered health care costs) Be “affordable” based on regulations – Employee share of the premium must be less than 9.5% of household income
Essential Health Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care
Determination of employer penalty for categories of employees
IMPACT ON SMALL BUSINESS Individual and small group plans must provide Essential Health Benefits Package Four components of package: Essential Health Benefits 10 required coverage categories Out-of-Pocket Maximum New accumulation rules and ceiling Small group deductible ceiling 2,000 single/$4,000 family Limited to "Metallic" coverage levels Bronze, Silver, Gold, Platinum
IMPACT ON SMALL BUSINESS Essential Health Benefits Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care
IMPACT ON SMALL BUSINESS Out-of-Pocket Maximum – New accumulation rules and ceiling OOPM ceiling at HSA level: likely $6,400/$12,800 in 2014 (indexed to inflation) Allcost-sharing (for essential health benefits) must accumulate to OOPM Applies to small and large fully insured plans and self-funded plans Transition rules give flexibility for "separate service providers" for one year Does not apply to out-of-network benefits
IMPACT ON SMALL BUSINESS Small group deductible ceiling - $2,000 single/$4,000 family Indexed to inflation Exception for Bronze plans if you cannot "reasonably" design one with a $2,000 deductible Applies to small group fully insured only; NOT to individual, large group, or self-funded Does not apply to out-of-network benefits
IMPACT ON SMALL BUSINESS Limited to "Metallic" coverage levels (Bronze, Silver, Gold, Platinum) Apply on and off Exchange Defined by actuarial value (plus/minus 2%): Bronze/60%, Silver/70%, Gold/80%, Platinum/90% Federal requirement to offer one Silver, one Gold plan on Exchanges All as calculated by the new "actuarial value calculator" (released on 2/20)
INDIVIDUAL MANDATE All U.S. citizens and legal residents will be required to have qualifying health coverage in 2014 or pay a penalty. This simple flowchart illustrates how that requirement works.
Health Insurance Exchanges Exchanges, administered by a governmental agency or non-profit organization, are where individuals and small businesses with up to 50 employees can purchase qualified coverage. Exchanges are effective January 1, 2014. Businesses with more than 100 employees will be able to purchase coverage in the SHOP Exchange beginning in 2017.
Plans within the Exchange
Federal Subsidy through the Exchange The federal subsidy (or tax credit) is not available to an employee if the following conditions are met: An employer offers employees the opportunity to enroll in a group health plan providing minimum actuarialcoverage, and Health plan premium costs for single coverage are less than 9.5% of an employee’s household income
Federal Subsidy through the Exchange 2013 Poverty Guidelines for the 48 Contiguous States and the District of Columbia Persons in family/household Poverty guideline Persons in Family / Household Poverty Guideline For families/households with more than 8 persons, add $4,020 or each additional person.
Federal Subsidy through the Exchange Provide refundable and advanceable premium credits to eligible individuals and families with incomes between 100-400% FPL to purchase insurance through the Exchanges. The premium credits will be tied to the second lowest cost silver plan in the area and will be set on a sliding scale such that the premium contributions are limited to the following percentages of income for specified income levels: 100-133% FPL: 2% of income 133-150% FPL: 3 – 4% of income 150-200% FPL: 4 – 6.3% of income 200-250% FPL: 6.3 – 8.05% of income 250-300% FPL: 8.05 – 9.5% of income 300-400% FPL: 9.5% of income Increase the premium contributions for those receiving subsidies annually to reflect the excess of the premium growth over the rate of income growth for 2014-2018. Beginning in 2019, further adjust the premium contributions to reflect the excess of premium growth over CPI if aggregate premiums and cost sharing subsidies exceed .54% of GDP. Provisions related to the premium and cost-sharing subsidies are effective January 1, 2014.
Wellness programs in insurance Permits employers to offer employees rewards of up to 30%, potentially increasing to 50%, of the cost of coverage for participating in a wellness program and meeting certain health-related standards. Effective January 1, 2014
“Pay or Play?” CHOICES EMPLOYERS FACE
6 Reasons why ‘Pay’ is not an easy answer There are lost tax advantages Reporting burdens remain Employee recruitment and retention challenges Counting employees can be complex The cost of coverage can be adjusted Other financial implications
6 Reasons why ‘Pay’ is not an easy answer There are lost tax advantages Currently, employee benefits are tax deductible to the employer and a tax free benefit to the employee. The employee’s portion of the premium can be paid via a Section 125 plan, which reduces both the employer’s and employee’s FICA tax.
6 Reasons why ‘Pay’ is not an easy answer Reporting burden remains Employers will still face federal reporting requirements to help determine the penalty amount. The individual exchanges will require employee reporting to determine if the employee is eligible for a premium tax credit.
6 Reasons why ‘Pay’ is not an easy answer Employee recruitment and retention challenges The primary reason for offering employee benefits is to attract and retain employees. PPACA does not change this. Employers that offer a good comprehensive employee benefit package will still be looked up on more favorably than those employers that decide not to offer employee benefits.
6 Reasons why ‘Pay’ is not an easy answer Counting employees can be complex Counting employees is a complex calculation! How many full time? How many part time? How do I count seasonal? How do I count temporary?
6 Reasons why ‘Pay’ is not an easy answer The cost of coverage can be adjusted Current plans may be too expensive for the employer or the employee. Employers can begin offering the 60% minimum value plan or reduce employees hours to part time to mitigate the overall cost effect of PPACA.
6 Reasons why ‘Pay’ is not an easy answer Other financial implications Employers may have to increase employee compensation to off set the loss of employer provided coverage. An employer paying $500 per month for medical insurance would have to give their employee a raise between $633 and $926 per month to give the employee the same after tax money, so the employee can purchase medical insurance through the exchange.