Health Care Reform: Top Employer Questions

1. Health Care Reform: Top Employer Questions November 2013

2. Health Care Reform • Affordable Care Act • Enacted in March 2010 • Makes significant changes to health care system • Implementation continues through 2020 • Provisions that impact: • Health care providers • Government programs • Health insurance issuers • Employers/plan sponsors • Individuals Most employers that offer health plans will be impacted in some way

3. Public Opinion of ACA • 55% say they have enough info to understand how it will impact their own family (^8%) • 64% say they have not been personally impacted so far • 23% say impacted negatively • (higher cost, impact on job, • changes to benefits) • 14% say positively impacted • (dep age, lower costs, better • access) www.kff.org October 2013

4. Delay, Amend, Rescind At least 14 changes, some minor • Delay Auto Enroll • W-2 Informational Reporting (250 or more W-2’s) • Large Employer Mandate (Pay or Play) (50 employees) • Time to send Exchange Notices • Delay on Full Time Employee Hours • Delay on SHOP Exchange

5. Q: What is a grandfathered plan (and do I have one)?

6. Grandfathered Plans • Definition • Health plan or health insurance coverage that covered individuals on March 23, 2010 • Determination made separately for each benefit package • Requirements • Do not significantly change costs or benefits • Provide notice to participants and beneficiaries in plan materials • Keep records of plan terms • Status • Depends on each plan • New plans are not grandfathered • Check with your broker or carrier • Does not automatically expire

7. Changes to Grandfathered Plans • Permitted Changes • Prohibited Changes • Routine coverage changes • Premium changes* • Adding new employees or family members • Changing insurance carriers • Significantly reducing benefits • Increasing coinsurance • Significantly increasing copays or deductibles • Adding annual limit • Significantly reducing employer contribution (by more than 5%)

8. My Plan is Grandfathered. So What? Grandfathered plans do have to comply with many health care reform rules

9. My Plan is Grandfathered. So What? Grandfathered plans are exempt from some health care reform rules

10. Q: What is an Exchange or Marketplace?

11. Exchanges Small Businesses If up to 100 employees, can buy thru Exchange Under 50 employees 2014 & 2015 A web portal “marketplace” for health insurance Individuals (no subsidies for ones offered employer-based coverage, unless that coverage is “unaffordable”) Self-insured plans not eligible to Participate States • each sets up own Exchange • will be involved in premium reasonableness reviews; can approve/reject as provided under state law Federal Government • sets criteria for plan participation • and purchaser eligibility • provides subsidies for small businesses and individuals • sets up Exchange if a state fails to

13. Continuum of Exchange Options State-based Exchange State operates all exchange activities 16 states plus DC, approximately 34.9% of population State-Federal Partnership Exchange State operates plan management and/or consumer assistance activities; may determine Medicaid/CHIP eligibility 9 states, approximately 12.5% of population Federally-Facilitated Exchange HHS operates all exchange activities; state may determine Medicaid/CHIP eligibility 25 states – approximately 52.6% of the population

14. Qualified Health Plans (QHP) • Offered by an approved insurer • Certified to meet Exchange requirements • Offers essential health benefits • Meets cost-sharing limitations • Priced like plans outside the Exchange • Provides bronze, silver, gold or platinum coverage (or catastrophic plan for young individuals) Apples to apples...

15. SHOP Exchange • Small Business Health Option Program (SHOP) – Exchange for small employers • DELAYED at least 1 year on Federal Exchange • Small employers can offer employees enrollment in a Qualified Health Plan through a SHOP • Can offer benefits through a cafeteria (Section 125) plan • Exchange sets contribution methods • 2014-15 • 2016 • 2017 • States can limit size to up to 50 employees • States must increase size to up to 100 employees • States can let any size employer participate

16. Q: Who can shop for coverage in an Exchange/Marketplace?

17. Exchange Eligibility Most individuals can shop for Exchange coverage (even if eligible for employer coverage)

18. Exchange Subsidies • Provide assistance to low-income individuals: • 100%-400% of federal poverty level (chart) • Not eligible for government programs that provide coverage • To help pay premiums or reduce cost-sharing (deductibles, out of pocket costs) • Not available to individuals who are: • Eligible for affordable, minimum-value employer coverage or • Enrolled in an employer plan

19. 2013 Federal Poverty Level Chart In States that expanded the Medicaid to include those people making up to 138% of FPL, those people will be covered by Medicaid. In states that opt out of expanding Medicaid, some people making below this amount will still be eligible for Medicaid, some will be eligible for subsidized coverage through Marketplaces, and others will not be eligible for subsidies.

20. Q: When is Exchange enrollment?

21. Exchange Enrollment Restrictions apply to timing of enrollment to prevent adverse selection • Individuals • Small Employers • Initial enrollment: Oct. 1, 2013-March 31, 2014 • Selections must be made by Dec. 15 for Jan. 1 coverage • Annual open enrollment: Oct. 15-Dec. 7 • Special enrollment for qualifying events • Update – No penalty for 2014 as long as you apply by March 31, 2014 • Can buy coverage for employees any time after Oct. 1, 2013 • 12 month plan year required • Annual election periods apply • Special enrollment for employees with qualifying events

22. Q: What information do I have to give my employees about the Exchange?

23. Notice to Employees of Coverage Options Current employees: by Oct. 1, 2013 New employees hired after Oct. 1: within 2 weeks of hire • Employers subject to FLSA must inform all employees of Exchange information • Include information on: • Exchange and services • Potential subsidy eligibility • Impact on employer contribution • Model notices available DOL: no legal penalties for failing to provide notice, but compliance encouraged Other consequences may apply (?)

24. Delivering the Notice • May be provided by first-class mail • May be provided electronically • (if DOL requirements are met) • Must be provided in writing • In a manner calculated to be understood by the average employee

25. COBRA and Exchanges • COBRA Model Notice was revised to include language encouraging Qualified Beneficiaries (QBs) to explore coverage through the Health Insurance Marketplace • Loss of employer coverage is an Exchange/ Marketplace special event to allow enrollment • QBs may be eligible for Subsidy through exchange if they decline COBRA • If they elect COBRA they are not eligible for subsidy as they are covered by an employer plan

26. Q: What fees do we have to pay under health care reform?

27. Who pays for the Affordable Care Act? • Drug Manufacturers • Health Insurers • Medical Device Manufacturers • Indoor tanning services • 0.9% Individual Medicare Tax increase Earned Income (1/1/2013) • 3.8% Medicare Tax Net Investment Income (1/1/2013) • Taxpayers, in part through the Individual Mandate • Employers/Health Plans, in part through the Business Mandate

28. Patient-Centered Outcomes Research Institute (PCORI) Fees • $1 x average number of covered lives (belly buttons) • $2 x average number of covered lives • Increase based on National Health Expenditures • Fee to fund research on informed health decisions • Paid by issuers and self-funded plan sponsors • Special rules for multiple self-funded plans (including HRAs) • Paying the fee • Using Form 720 by July 31 each year • Beginning with plan years ending on or after Oct. 1, 2012 • Ending with the 2018 plan year 2012 plan year 2013 plan year 2014 and beyond

29. Reinsurance Fees • Fee to fund reinsurance program to stabilize individual insurance market • Program to operate 2014-2016 • Update – some groups will be exempted for paying fees in 2015 & 2016 • Paid by health insurance issuers and self-funded plan sponsors (with some exceptions) • Fees based on annual national contribution rate • 2014: $5.25/month ($63/year) x avg number of covered lives • Nov. 15 • Submit enrollment count to HHS • Dec. 15 (or 30 days) HHS notifies issuer/sponsor of amount due • 30 days • Payment due

30. Health Insurance Providers Fee • Annual fee on health insurance providers • Effective in 2014 • Due Sept. 30 each year • Allocated according to market share: $8B in 2014 - $14.3B in 2018 (based on premium growth in later years) • Applies to: • Does not apply to: • Covered Entities • Companies with $25M or less in net premiums • Including health insurance issuers and HMOs • Self-insured employers • Government and non-profit entities • VEBAs

31. Indirect Employer/Health Plan Costs • TPA Fees • IRS Compliance and Reporting • Technical Systems for Compliance • Workforce Analytics • Employee Communication & Education

32. Q: Do I have to offer health coverage to my employees?

33. Employer Shared Responsibility Rules (Pay or Play)

34. Potential Penalties

35. Avoiding Penalties Offer coverage to FT employees and dependents that: • Employee’s contribution for self-only (employee) coverage does not exceed 9.5% of income • Safe harbors for what income and premium amount to use • Is affordable • Plan covers at least 60% of costs on average • MV calculator or design-based checklists • Provides minimum value

36. Q: Who is a full-time employee? Slides included but will not be covered – Implementation Delayed

37. Full-time vs. Full-time Equivalent If employer meets transition requirements can delay until 2015 • Full-time employees • Counted for large employer determination • Must be offered coverage (along with dependents) to avoid penalties • Full-time equivalent employees • Counted as a fraction for large employer determination • Do not have to be offered coverage • Seasonal employees • Special rules apply for large employer determination • Special rules apply for offering coverage (along with variable hour employees)

38. Full-Time Employee • With respect to a calendar month • An employee who is employed on average at least 30 hours of service per week 130 hours of service in a calendar month = the monthly equivalent of 30 hours of service/week

39. Full-Time Equivalent Employees • Add hours of service in a month for PT employees (up to 120 hours/person) • Divide total hours by 120 • Result: Number of FTEs for the month

40. Offering Coverage to FT Employees • New employees expected to work full-time • Reasonably expected at start date to work full-time (not seasonal) • Offer coverage by end of first 3 full calendar months of employment • Ongoing (current) employees • New variable hour employees • New seasonal employees • Optional IRS safe harbor method to determine if they average full-time hours over a period of time and must be offered coverage • “Look-back measurement method”

41. Safe Harbor for Variable Hour/Seasonal Employees • Measurement Period • Counting hours of service (3-12 months) • Administrative Period • Time for enrollment/disenrollment (Up to 90 days) • Stability Period • Coverage provided (or not) – length depends on type of employee and whether FT or not

42. Look-Back Measurement Method 2013 Nov. 1 Dec 31 Measurement Period 2014 Jan 1 Nov. 1 Dec 31 Measurement Period cont. Admin Period 2015 Dec 31 Jan 1 Stability Period

43. Q: Can my plan still have a waiting period?

44. Waiting Period Limits • Waiting periods limited to 90 days beginning with 2014 plan year • Strict 90 day limit • Other eligibility conditions permitted • Variable hour employees • 1st of the month following not permitted • DOL recommendation: use shorter period for 1st of the month enrollment • Can’t use to avoid 90-day limit • Limits on cumulative hours of service requirement (1200 hours/one time only) • Measure hours for up to 12 months to determine FT status • Offer coverage by end of 13th month

45. Q: Can we give better benefits or contributions to our executives (or senior employees or some other group)?

46. Nondiscrimination Rules May Apply Prohibit discrimination in favor of highly-compensated employees Prohibited group and specific rules vary by type of benefit Discrimination has negative tax consequences

47. Nondiscrimination Rules Self-funded Plans • Code section 105(h) • Eligibility test • Benefits test • Cafeteria Plans • Eligibility to participate test • Benefits and contributions test • Concentration test • Some safe harbors apply • Fully-insured Non-GF Plans • Rules similar to 105(h) will apply after regulations are issued (no date given yet) • Originally supposed to take effect in 2010

48. Questions?