Affordable Care Act (ACA) Basics

1. Affordable Care Act (ACA) Basics

2. Workshop Overview • Affordable Care Act basics • Provide a foundation for ACA • Regulations, Act interpretations, and implementation dates occurring regularly • Engage the employer • Be proactive

3. Spending vs. Health http://kff.org/health-costs/issue-brief/snapshots-health-care-spending-in-the-united-states-selected-oecd-countries/

4. Health Care Reform http://xanatemedia.com/2012/12/request-for-submissions-to-the-next-edition-the-triple-aim-edition-of-the-hcsm-review/

5. Union Issues: Health Care Reform • Provisions of ACA may impact employer-based insurance and union health plans • Provisions have been going into in effect every year since 2010 • Other major provisions 2014 and 2018 • Depending on CBA expiration, could impact next few rounds of negotiations

6. Plan Requirements • Plan Types • Grandfathered Plans • Collectively Bargained Plans • Self-insured Plans

7. Union Issues: Plan Requirements • ACA introduces new standards for employer-sponsored health plans • Implementation dates will vary and are dependent upon: • The plan’s effective date • Whether the plan is subject to a CBA • If plan is self- or fully-insured

8. Large vs. Small Employers • 50 employees or more = large employer • Jurisdiction-wide, not by Local • Part timers count • Calculation # FTE + # of PTE hours worked ÷ 120 = _____

9. Union Issues: Large/Small Employers • Full time is defined as an average of 30+ hours/ week with respect to any month • Non-seasonal is defined as working 120+ days in a taxable year

10. Wellness Programs • Wellness programs may provide an opportunity to improve overall health of Americans and control health care spending • Premium difference • Possible biometric screenings required • ACA and wellness standards

11. Union Issues: Wellness Programs • May become more frequent topic of bargaining • Possible 30% difference in premiums • Fire fighters and wellness • Utilize claims history in negotiations • Fire fighters and fitness level should bring down premium costs of group plan • Have a plan audit performed

12. W-2 and Summary of Benefits • W-2 Reporting • Informational • Not taxable • Summary of Benefits • Mandatory under ACA • Easy to understand

13. Union Issues: W-2 and Summary • Ensure correct dollar amount is reported on W-2 • Employer should have implemented this requirement in January 2012 • Work with employer to educate employees on the change

14. Excise Tax • Not until 2018 • 40% of premiums that exceed the threshold (employer paid) • Indexed to inflation after 2018 • Premiums $27,500 (family) and $10,250 (individual) – medical plans • Excise tax will apply to trusts and retirees • Meant to drive more people to Exchanges

15. Union Issues: Excise Tax • Employers may try to begin to shift costs to employees to offset the excise tax • Locals should begin to consider alternatives such as total health management, chronic disease management and wellness programs • Request current plan costs for both single and family plans, as well as projected costs up to and including 2018 • Analyze data for high costs and high usage rates

16. Additional Taxes • 3-7% in taxes, in general • High Income Earners and Unearned Income Tax (2013) • Insurer Fees (2014) • Reinsurance Assessments (2014)

17. ACA Metal Levels

18. Union Issues: ACA Metal Levels • Union negotiated plans • Wages versus benefits

19. Cost Controls • Know and understand your plan design • Engage employer • If not active in health insurance process, you should be • Have plan audit • Can expose unnecessary components or identify missing pieces • Wellness Programs

20. Early Retiree Reinsurance Program This was a temporary re-insurance program providing federal grants to help employers offer group health coverage to early retirees; it would reimburse certain claims between $15,000 and $90,000. Its effective dates are June 1, 2010 through January 1, 2014.

21. Child Coverage Before Age 26 • Currently implemented • Adult children do not have to be students, live at home or be financially dependent • Can be married, but do not have to cover spouse or children from marriage • Terms and conditions should be the same as for dependent children

22. Union Issues: Child Coverage • Employer may want to shift additional costs to employees • Make sure that benefits are the same as for regular dependent children • Request average claim costs for employees in the same age bracket

23. Lifetime and Annual Limits • Lifetime Limits • All plans must provide unlimited lifetime coverage for essential health benefits as of January 1, 2011 • Annual Limits • Cannot be less than $2 million as of January 1, 2013 • Eliminated altogether as of January 1, 2014

24. Union Issues: Lifetime/Annual Limits • Lifetime Limits • Some negotiated plans have lifetime limits ($1-2 million) on amount paid out per individual • Lifetime and Annual Limits • Elimination of limits may increase cost of plan • Look at plan summary to determine if plan has lifetime or annual limits • If yes, limits will have to be removed unilaterally, through bargaining or phased out • Employer should request data to determine how many individuals reached the limits (last 3-5 years) and what was cost in excess of limit

25. Essential Health Benefits Sources: http://www.healthcare.gov/news/factsheets/2011/12/essential-health-benefits12162011a.html http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf

26. Union Issues: Essential Health Benefits • Review the summary plan description to determine which essential health benefits are covered • If essential health benefits are not offered they will need to be added by the employer or through negotiations

27. FSA and HSA Limits • Flexible Spending Accounts (FSA) • Pre-tax contribution limited to $2500 per year in 2013 (was previously $5000) • Indexed by inflation in subsequent years • “Use it or lose it” accounts • Employee contributions reduce taxable income • Health Spending Accounts (HSA) • 20% penalty on using funds for other than qualified medical expenses, up from 10% • Typically used with high-deductible plans • Balance in account can be carried over from one year to the next

28. Union Issues: FSA and HSA Limits • Request data from employer • For FSAs, determine the number of employees enrolled and the average and range of contributions • For HSAs, determine the number of employees enrolled, how many have used funds for non-qualified medical expenses and average amount spent • Work with employer to educate employees on changes to these accounts

29. Medicare • Improvements to Medicare preventive care • Effective January 2011, Medicare covers preventive care and screenings with no deductible or copays • Change in tax treatment of Medicare Part D subsidy for employers • No tax deduction for cost of subsidized drug claims • Previous law allowed employers to receive a subsidy of 28% for retiree drug coverage and take a tax deduction for total costs of drug plan • New law removes this benefit

30. Union Issues: Medicare • Improvements to Medicare preventive care • May result in a reduction in cost to the employer retiree health plan • If employer does offer retiree health plan, determine if plan wraps around or coordinates with Medicare • Request employer to provide information about use of preventive screenings for Medicare-eligible retirees • Ask the cost for these deductibles or copays

31. Union Issues: Medicare • Change in tax treatment of Medicare part D subsidy for employers • If employer received subsidy, determine: • amount of the subsidy • amount of claims paid by retirees for copays, deductibles and coinsurance • net cost of the drug plan: subtract the amount of the subsidy and the amount paid by retirees from the total amount of retiree drug plan costs

32. Exchanges Defined • Some states run their own exchange; others defer to the federal government • Exchanges are designed to enable consumers to compare a selection of qualified health plans to find the ones that best meets their needs and budget • Set standards for essential health benefits, oversee pricing, and set rules insurers must follow to participate

33. Exchanges Defined Individuals and small employers would select their coverage within this organized arrangement • Individuals • Small Business Health Operations (SHOP) exchanges

34. Exchanges Pursuing state-run exchange (16 + DC) Pursuing state-federal partnership exchange (7) Pursuing a state-run small business exchange and a federally run individual exchange (1) Pursuing federally facilitated exchange , state will be responsible for the plan management functions (7) Pursuing federally facilitated exchange (19) Expanding (22 + DC) Expanding with variation (3) Unclear/undecided (4) Not expanding (21) *HHS denied Mississippi’s application for a state-run marketplace on February 7, 2013. **In New Mexico, the federal government will operate the individual market in 2014. Source: National Conference of State Legislatures, Federal Health Reform: State Legislative Tracking Database. http://www.ncsl.org/default.aspx?TabId=22122 ; Avalere State Reform Insights; Center of Budget and Policy Priorities Politico.com; Commonwealth Fund Analysis. THE COMMONWEALTH FUND

35. Exchange Timeline

36. Medical Loss Ratio • ACA requirement began in 2011 and provided first rebates in 2012 • Many insurance companies spend substantial portion of money on administrative costs (including executive salaries, overhead and marketing) • Insurance companies will be required to spend 80% or 85% of premium dollars on medical care and health care quality improvement

37. Union Issues: Medical Loss Ratio • If employees pay into plan premium, they should receive a proportional share of any rebate • Increased benefits, reduced premiums • This will be monitored by states