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Health Care Reform Patient Protection and Affordable Care Act (PPACA)

Health Care Reform Patient Protection and Affordable Care Act (PPACA). Chris Harrison, President EBENCONCEPTS David Smith, Vice President EBENCONCEPTS. Version 50 July 24, 2013. Questions?. Just stop me and ask…. this is more fun when you participate. . Deadlines & Regulations.

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Health Care Reform Patient Protection and Affordable Care Act (PPACA)

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  1. Health Care ReformPatient Protection and Affordable Care Act (PPACA) Chris Harrison, President EBENCONCEPTS David Smith, Vice President EBENCONCEPTS Version 50 July 24, 2013

  2. Questions? • Just stop me and ask…. this is more fun when you participate.

  3. Deadlines & Regulations 2010 2011 2012 2013 2014

  4. Timeline

  5. 2010 Preventative Service Mandates • Controversy over birth control pills mandate – final version • Must be a religious employer (includes all houses of worship and their affiliated organizations e.g. church-affiliated hospitals, daycares) • No mandate to provide coverage for contraceptives (object on moral grounds) but must notify insurer or TPA of objection • Insurer/TPA must provide written notice of the right to free contraceptives for any participant, and the cost of those contraceptives will be paid through the ACA program • Litigation • All over the place – lots of cases pendingwith private employers related to the mandate and religious freedom • Likely headed to Supreme Court

  6. 2011 Minimum Medical Loss Ratio • Carriers who spend less than… • 85% for large group plans • 80% for small group and individual • …must rebate the amount spent below minimum loss ratios back to purchaser (group or individual) • Remember: it’s not how your group does… it’s how that carrier’s entire market segment performs • Also, self-funded plans are not subject to these rules • What counts toward HC Expenses? • Reimbursement of clinical services • Activities that improve health care quality • All other non-claims expenses excluding state and federal taxes, licensing or regulatory fees

  7. 2011 Minimum Medical Loss Ratio • Estimated to have saved over $4B in premiums directly and indirectly though MLR program • 2011 Rebates: $1.1B • 2012: $500M • So what if you got a rebate? • Employer paid 100% of premiums for employees and dependents: they keep it • Employees paid for a part of the cost of coverage, fiduciary duty to “give” a portion “back” • Former employees or COBRA continuants: eligible for a portion to be returned as well

  8. 2011

  9. 2011 Minimum Medical Loss Ratio • What are we doing? • Excel spreadsheet to assist employers with determining what portion of the rebate could be owed to participants and to assess the economic cost of doing so • Corporate resolution form so that the employer can, on behalf of the Plan, show how the funds are being handled: • Returned to current and/or former participants • Rebates kept in the Plan and applied toward future participant premium payments and/or benefit enhancements • Draft letters to give to current and former plan participants to reduce confusion about what is being done with the “sizeable” rebate they think they are receiving

  10. 2012 W-2 Reporting • Applies to all businesses for 2013 Reporting • Make sure your payroll provider is ready to do this! • Reporting the aggregate cost of employer-sponsored health benefits • Not taxable, and is informational only • Reported in Box 12 via Code DD on W-2 • Not required to include HRA spending, separate dental and vision plans

  11. 2012 W-2 Reporting • What is the employer reporting • Entire Health Insurance Premium Amount • portion paid by EE and ER • Unique to each employee • Will be different for different tiers of coverage (EE, ES, EC, EF) • Employer Contributions to FSA (but not HSA contributions) • Wellness Programs and/or Onsite Medical Clinics that are COBRA-eligible • How to determine what to report • If insurance coverage: Premium charged • If self-funded: core COBRA rates • Should reflect cost changes during the year

  12. 2012 PCORI Fee • Why? • To provide information regarding the effectiveness, risks and benefits of various medical treatments • How Much? • First year: $1 x average number of covered lives (not just EE’s) for year that begins 10/1/12 and ends 9/30/2013 • Second and subsequent years: $2 per covered life • Who pays? (Included in COBRA rates too) • Insured: carrier • Self-funded: employer (TPA cannot pay on behalf of group) • Plan assets may not be used to pay fee, but is a business expense • Must be paid by July 31 on IRS Form 720

  13. 2012 PCORI Fee • Some twists and turns: • If separate HRA from health plan and • Health plan is fully-insured – must collect fee twice • Once for health insurance plan, for each plan participant (including dependents) • Again for the HRA, but only for the number of employees covered • Health plan is self-funded, and HRA plan year runs concurrent with insurance plan – must only collect fee once • FSA is exempt if • the employer offers group health coverage to their employees the reimbursement max is capped the greater of two times the employee contributions or employee contributions plus $500. • If not, then they must pay the PCORI fee.

  14. 2012 Notice of Material Modification • If you change benefits mid-year (off renewal), you must provide 60 days notice of the change • Modified “Notice of Material Modifications” • Must be provided when there is change in benefits which an “average participant” to be an “important change in covered benefits, or other terms of coverage” • Enhancements or reductions in benefits such as deductible, copays, or the plan now covering a previously excluded benefits • Increases in cost-sharing • Change in health insurance carrier or administrator • How? SBC and additional information if relevant

  15. 2013 Notices on Marketplaces • All employers must provide notice to employees of the existence of Health Insurance Marketplaces by late summer or fall of 2013 • Draft Model Notices have been released, to communicate: • Health Insurance Marketplaces exist • You may be eligible for subsidizedcoverage through the HIM • Not eligible if employer offers coverage to their employees • Employer info to assist with applyingfor coverage in the Marketplaces • Enforced by USDOL Wage & Hour Division

  16. 2013 Notices on Marketplaces • Who gets the notice? • Yes: Full- and part-time, eligible or not eligible in the health plan, enrolled or not enrolled in the health plan and “independent contractors” and contract and leased workers may need to receive the notice depending on the nature of their relationship to the employer, based on FLSA “economic reality test” • No: dependents or others who may become eligible for coverage but are not employees and former employees even if enrolled retiree or on COBRA • There are some folks exempt from sending out notice • If you are not covered under FLSA: Receipts of less $500K annually and have no interstate commerce.

  17. 2013 Notices on Marketplaces • Other requirements: • Provide to new employees hired on/after October 1, 2013 • Distributed by first class mail or electronically • EbenConcepts will work with our clients to have these notices available for distribution by August, when finalized by USDOL • Also modifying COBRA notices to include information about the Health Insurance Marketplaces • Will actually encourage former employees or their dependents who lost coverage to seek subsidized coverage through the Marketplace • Overall positive changes

  18. 2014 is Nearly Here… 2014

  19. 2014 Individual Mandate • All American citizens and legal residents to purchase qualified health insurance coverage. • Exceptions (which really aren’t exceptions): • religious objectors • individuals not lawfully present • incarcerated individuals • taxpayers with income under 100 percent of poverty, and those who have a hardship waiver • members of Indian tribes • those who were not covered for a period of less than three months during the year (if coverage gap is greater than 3 months, each month in the gap is subject to penalty) • People with no income tax liability • Undocumented workers

  20. 2014 Individual Mandate • Were you insured for the whole year through a combination of any of the following sources? • Medicare • Medicaid or the Children’s Health Insurance Program (CHIP) • TRICARE (for service members, retirees, and their families) • The veteran’s health program • A plan offered by an employer • Insurance bought on your own that is at least at the Bronze level • A grandfathered health plan in existence before the health reform law was enacted • If so – no penalty to be paid…

  21. 2014 Individual Mandate • “Individual Responsibility Penalty” • 2014: • $95 per adult and $47.50 per child (up to $285 for a family) or • 1.0% of family income …whichever is greater. • 2015 • $325 per adult and $162.50 per child (up to $975 for a family) or • 2.0% of family income …whichever is greater. • 2016 and beyond • $695 per adult and $347.50 per child (up to $2,085 for a family) or • 2.5% of family income …whichever is greater.

  22. 2014 Individual Mandate • But it could be even higher…

  23. 2014 Health Insurance Marketplaces • SHOP Marketplace for Small Employers • Open to individuals who are employed by employers with less than 50 FTEs • No premium subsidies – employer receives 50% tax credit for the non-elective costs of coverage • Some provisions delayed until 2015 (e.g. employee choice) • AHB Marketplaces for Individual Purchasers • Open to individuals whose: • employers do not offer coverage • employer-sponsored coverage is deemed inadequate or unaffordable • are ineligible for Medicaid • The only place where premium subsidies can be received Used to be known as Exchangesofficially changed 1/16/13 (couldn’t translate into Spanish)

  24. 2014 Health Insurance Marketplaces • State-based or Federal or some Combination? • 18 states are setting up their own Marketplaces • Six more will have a “partnership” HIMs • All other states will fall under the federally-facilitated state HIMs meaning run by the US Government and its contractors

  25. 2014 Health Insurance Marketplaces • Carriers have submitted rates and plans • Most states have more than one carrier in the individual exchange, less in SHOP • Sebelius: Administration Is Negotiating Rates In Federal Exchanges • “Negotiations are underway and we will be negotiating rates across the country.” • Impact: Who knows? No one until mid-September.

  26. 2014 Health Insurance Marketplaces • Main purposes • Marketplace where individuals and small employers will be able to shop for insurance coverage. • Facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit “CO-OP” plans • Determine if non-Medicaid eligible individuals can receive a premium credit based on a sliding scale • Will also direct people to Medicaid if they're eligible • Must have a website for comparative data about health plan options and create a common enrollment form • Premium Subsidy/Advance Tax Credit…

  27. 2014 Metal Levels • Estimate of the overall financial protection provided by a health insurance plan – how measured? • Four level of benefits, based on percentage of benefits that the insurance plan pays for (vs. what those covered would pay) • Flexibility allowed +/– 2% of actuarial value • Deductible and Out-of-Pocket Maximums • Deductible: $2,000/$4,000 — OOP Max: $6,350/$12,700 Richer benefits More expensive Less Rich Benefits Less expensive

  28. 2014 Premium Subsidy/Advance Tax Credit • For individual coverage only • Estimated 26 Million American Estimated to be eligible for a premium credit under ACA • Can only if not eligible for other “minimum essential coverage” through group or government-sponsored health plans • AHB Marketplace will determine amount of premium subsidy based on household income • Will look at last tax year, or most recent information available • Using new “simplified” form to collect the income information • If a taxpayer/household gets too much – will pay it back on their taxes • Advise new employees to notify exchange about new salaries • We’ll provide you language for this purpose

  29. 2014 Premium Subsidy/Advance Tax Credit • Amount of premium subsidy will vary based on three factors: • Household income (total household income) • Household size (# of family members) • Age of the participant(s) • Then amount of premium subsidy then set based on: • Premium of “second lowest Silver plan” • Not required to buy Silver plan though – will pay difference to higher plans • Defined % of Household income relative to FPL

  30. 2014 Premium Subsidy/Advance Tax Credit

  31. 2014 Who falls where? To see what the subsidy amounts look like: http://healthreform.kff.org/SubsidyCalculator.aspx

  32. 2014 Role of Employer Information • Employers will have to provide information to Marketplaces to assist in determining an employee’s eligibility for subsidy • Making changes? • What are they? When are they effective? • How will they effect EE contributions? • Offer benefits today? • EE eligible? • Meet benefits standards? • How much does EE pay per pay period? • EE information • How much do they earn in wages? • How many hours do they work each month?

  33. 2014 Small Employer Options • New Market Options AHB Marketplace SHOP Marketplace Small Group Market

  34. 2014 Taxes and Fees • Imposes annual premium taxes on health insurers based on net premiums • Estimated to raise $101.7B over 10 years • Self-Funded Plans are exempt from this premium tax • Transitional Reinsurance • Fee will be charged to cover reinsurance for the individual market: $25B to be collected from 2014-16 • A federally-established amount will be collected during first 3 yrs designed to spread risk among carriers in individual market • How much? • 2014: $63 per participant (employees and dependents) • How do you determine the number? Insured: monthly average; self-funded: 5500 counting method • Reducing the next two years: 2015: $42 and 2016: $26 • Example: 220 employee group that also covers 25 dependents: $15,435 in 2014 • Applies to all fully-insured and self-funded plans, including those on COBRA as well as government employees • Does not apply to FSAs, HSAs, HRAs, dental or vision plans • Will be collected by insurers and TPAs

  35. 2014 Rating Changes • Strict modified community rating standards for pricing all small group and individual products • Premium variations only allowed for age (3:1), tobacco use (up to 50%), family composition and geography • Age bands: 0-20, 21-63, 64 or older • One-year bands for 21-63 – above and below will have a single rate for everyone falling in those age ranges • Wellness discounts are allowed for group plans under specific circumstances. • Grandfathered groups are exempt from these changes • Cost of transition felt in 2014 – will reduce factors increasing costs for small businesses annually for 2015 and beyond

  36. 2014 Employer Mandate • Requires Applicable Large Employers to offer coverage to their eligible employees and that those benefits meet certain minimum standards and maximum contribution levels • Two Important Notes • Does not require you to provide coverage to employees who work less than 30 hours a week • They are likely eligible for subsidized coverage in Marketplace • Does not apply to Small Employers who have less than 50 FTEs • No Mandate, but can still offer coverage, or employees can go to Marketplace for subsidized coverage • Exceptions? • No – applies to all employers regardless of if they are for-profit, nonprofit (including churches) or governmental entities

  37. 2014 Employer Mandate • DELAYED but not really delayed. • Announced on July 2 – Why? • Reporting requirements for employers were taking longer to figure out than expected • Employer groups were lobbying on strongly on the issue • 98% of employers with 50 or more employees already offer health coverage to their employees • DOES NOT CHANGE REQUIREMENT to offer coverage, only the penalties for noncompliance • By delaying reporting, also delayed employer penalties • So what’s the real impact?

  38. 2014 Employer Mandate • DELAY is actually a little tricky on how to handle • Makes early renewal process less important • Likely eliminates the transition rule provisions – will have to be compliant no later than January 1, 2015 • Don’t ignore the “gotcha” dates we’ve already seen • December 27, 2012 • May 3, 2013 • Our advice: No simple answers – we’ll look at each situation on a one-on-one basis • Remember – the other requirements for 1/1/2014 still go into effect and do not change from this delay.

  39. 2014 Employer Mandate • There is no true requirement to buy: • “Pay or Play” – Don’t offer coverage: pay a penalty • If you do offer coverage, then… • Employees can’t pay too much for EE only coverage, or the employer pays a penalty • The plan must meet the minimum benefit levels, or the employer pays a penalty

  40. 2014 If over 50 FTEs… • Really only one question: • We’ll get there in a second… Who do I have to offer coverage to?

  41. 2014 Applicable Large Employer? FTEs 30+ Hours 1-29 hours

  42. 2014 Common Ownership • What if there are multiple employers which are commonly owned? • Common Law Test • Control Group rules apply (IRC §414(c)) • Look at percentage of ownership

  43. 2014 Common Ownership • Multiple owners at different shares of different businesses • Look at the common percentage of ownership among the various businesses • Why does this matter? • Business 1: 20 employees • Business 2: 40 employees • Business 3: 5 employees • On their own, none have the mandate • Under common ownership, all three must offer coverage to their respective employees

  44. 2014 Common Ownership • If multiple entities • Considered as one to determine whether the employer mandate applies • Each entity responsible for their share of the penalty for either not offering or for other penalties • Focusing penalty on noncompliant instead of entire group of companies

  45. 2014 FTEs • Once you get everyone into one “group” of employees… or if you are just one employer: • Are we an “Applicable Large Employer”? • FTEs: How many hours do each employee work? • What is an Hour? • An hour paid: Any time that you pay someone, regardless of whether they are at work or out of work but entitled to payment: • Vacation • Holiday • Illness • Incapacity/disability • Layoff • jury duty • military duty • leave of absence

  46. 2014 Sorting employees Owner • not counted if a sole proprietor, a partner in a partnership, a shareholder owning more than 2% of an S corporation or an owner of more than 5% of other businesses(but can’t use for purpose of avoiding coverage) Salary or Hourly

  47. 2014 Variable Hour Employees • Someone who, as of his/her start date, you cannot tell whether that employee is reasonably expected to work an average of at least 30 hours per week • Should look at the number of hours worked during “initial measurement period” to determine if eligible • Facts and circumstances determination • Cannot take into account the likelihood that an employee will terminate employment before the end of their probationary period

  48. 2014 Ongoing “Variable Hour” Employees • Track number of hours worked by all employees to determine FTE count and who is working 30+ hours and now eligible • Can measure every 3 months up to every 12 months Administrative Period • Counting: How hours worked by “variable hour” employees during measurement period • Notify and Enroll: Get those newly eligible enrolled on health plan • Can last 30-90 days • Employees who work 30+ hours in measurement period must be covered during stability period • Must remain covered for at least six months (or length of measurement period, whichever is longer) regardless of number of hours worked in stability period • Limited exceptions for those who work 30+ hours during MP

  49. 2014 Seasonal Employees • Most will not be counted toward FTE count or eligible for benefits • A seasonal employee is defined in the context of whether the employer is subject to the shared responsibility requirements • These requirements indicate that a seasonal employee is works 120 days or less during the calendar year • However, it does NOT appear that an employee working more than 120 days automatically would lose seasonal status • Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carries on throughout the year • Employer must make a “good faith interpretation” of whether employees are or are not seasonal • Further guidance is definitely needed...

  50. 2014 “Independent Contractors” • Will not count toward FTE or be eligible for benefits since they are not “common law employees” • However… be careful about what you call an independent contractor • More than just because you pay them via 1099 • IRS/DOL have been closely scrutinizing this issue • Look to 11-point test from IRS • EbenConcepts has developed a tool to help our clients “figure out” whether or not they are truly independent contractors

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