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Health Care Reform, How will it Impact your Business

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  1. Health Care Reform, How will it Impact your Business Business Education Series Training Arvada City Hall August 2013 by Ellen E. Stewart, MSHA, JD, FHFMA Berenbaum Weinshienk, PC estewart@bw-legal.com

  2. Outline • Where we are now • Benefits – Required Changes • Penalties • Accountable Care Organizations • Rebate Calculations • Grandfathering of plans • New ERISA requirements • Next steps in 2014 and Beyond • Health Benefit Exchange in Colorado

  3. ACA • First plan year on or after 9/23/10: • Age 26 Coverage – Up to age 26, or end of year in which turn 26, regardless of “tax dependency” or marriage. • Grandfathered plans may exclude dependents who have other employer-sponsored coverage. • No retroactive rescissions, unless intentional fraud or misrepresentation. Affects dependent audits and COBRA. • Prohibition on lifetime limits on essential benefits. • Only restricted annual limits on essential benefits permissible until 2014. • 2011: $750,000 • 2012: $1,250,000 • 2013: $2,000,000 • No pre-existing condition exclusions for kids under 19.

  4. ACA • First plan year on or after 9/23/10 • Coverage of preventive health services and immunizations without cost sharing. • If emergency services provided, no pre-authorization for emergency care and must have same cost sharing in- and out-of-network. • Ability to choose own primary care provider, OB/GYN, and pediatrician. • One year grace period for compliance with internal appeals and external reviews processes.

  5. ACA 2011 Changes • Non-Discrimination Rules for Insured Plans – affects executive / management–only plans. May affect post-employment executive agreements. • Value of health coverage reported on W-2s, but not taxed. • No longer permissible to reimburse OTC drugs without a prescription, excluding insulin, from an Flexible Spending Accounts, Health Spending Account, or Health Reimbursement Account. • Eligible small businesses and non-profits may claim a health care tax credit on their 2010 business taxes.

  6. ACA – Changes in 2012 & 2013 • As of 1/1/12, 1099s must be issued for certain payments made to another person in the course of the payer’s trade or business that constitute fixed or determinable income aggregating $600 or more in any tax year. • As of 1/1/13, $2,500 cap (indexed) on contributions to FSAs offered under a cafeteria plan.

  7. ACA – Changes in 2014 • Individuals required to maintain “minimum essential coverage” for self and dependents, or pay penalty. • Play or Pay Penalties: “Applicable large employers” must pay penalty if a full-time employee receives certain subsidized coverage through exchange. (more than 50 FTE’s – excluding seasonal employees who work less than 120 days during the year and FTE must work 30 hours per week) • Type of coverage that triggers penalty depends on whether employer offered coverage. POSTPONED

  8. Penalities • Large Employer Penalty (not offering coverage) POSTPONED • Penalty is if any employee receives a premium credit toward their exchange plan • A monthly penalty in 2014 • Formula: • Number of FTEs – 30 x 1/12 of $2,000 (2014) • After 2014 indexed by the premium adjustment percentage for the full year • Large Employer Penalty (offering coverage) POSTPONED • Penalty if amount of employee contribution for the coverage exceeds 9.5% of the employee’s household income or if the plan pays for less than 60% of covered expenses. • Small employers are not affected BUT can receive a tax credit if meet certain requirements (see HBE discussion below)

  9. Health Care Structures Under Health Care Reform (cont.) • Accountable Care Organizations (ACO) – are a new form of entity outlined under the Affordable Care Act (ACA). ACO’s may be assuming financial risk for the care of patients under global fees/capitation/case rates. Originally designed for Medicare recipients may be expanded to include commercial payers. • Colorado has a Pioneer ACO, Physician Health Partners

  10. Rebate Calculations • Rebate calculations based on medical loss ratio (MLR) • MLR = incurred claims plus expenses to improve quality* • (adjusted for blended rate calculation) • earned premium less taxes and fees So, if plan • MLR = claims $10,000,000 • premiums (net) $12,000,000 • *quality expenses include: evidence-based medicine, clinical guidelines/protocols (but not designed primarily to control cost), can also include IT expenses to enhance quality

  11. Rebate Calculations Credibility adjusted MLR • Credibility adjustment means an adjustment to account for random fluctuations in claims for smaller plans • Minimum loss ration standards are calculated each year by type of plan – individual, small group, large group (under Public Health Service Act)

  12. Rebate Calculations Calculation of Rebate = Minimum MLR 80% CA – MLA 83% No rebate = <%> But if minimum Minimum MLR 85% CA – MLA 83% = 2% then multiply by earned premium ($12,000,000) = rebate Rebate would be = $240,000 Rebates must be paid as either a premium credit against future premiums or by a check

  13. ERISA • Substantive benefit changes apply to group health plans and issuers offering individual and group policies - does not apply to: stand-alone dental and vision plans retiree-only plans • Different substantive benefit changes apply to grandfathered and non-grandfathered plans

  14. Grandfathering • Grandfathered Status – Automatically if in effect on March 23, 2010. • Status applies to each individual group, not product being sold. • Originally appeared desirable to remain grandfathered. Upon issuance of regulations, not a large impact if lost.

  15. Grandfathering • Loss of Grandfathering Possible if: • Enter into new insurance policy, even if previously offered by insurance company. • Elimination of all benefits to diagnose/treat a condition. • Certain increases in co-insurance, deductibles, out-of-pocket limits, or copayments. • Lowering current annual limit or instituting new annual or lifetime limit. • Certain decreases in plan sponsor’s contribution towards cost of coverage. • Merger, acquisition, restructuring if principal purpose is to cover new individuals under grandfathered plan.

  16. Grandfathering • No Effect on Grandfathering • Stop covering all individuals covered on 3/23/10, provided have continuously covered at least 1 person since 3/23/10. • Enroll family members of individuals covered prior to 3/23/10. • Change premiums. • Legal compliance. • Change TPAs. • Certain Transitional Rules Available

  17. ERISA • This means now ERISA plans must: - include as denials, reductions, terminations or failure to provide a payment for a benefit. - urgent claims must be decided in 24 hours. - claimants must be given a “full and fair” review. • Claimants can review claim file with all information relevant to the claim • Must be able to present evidence and testimony • Plan must give claimant new or additional evidence considered. • no conflict of interest (i.e., paying adjustors based on number of denials) • culturally and linguistically appropriate notices • requires strict adherence to claims procedures • mandates continued coverage while waiting for an appeal • must adopt either a state external review process or the federal external review process

  18. ERISA State Process:Each state must have a process for independent external review of denied claims (only 5 states do not have a process currently) Federal Process: • Allow claimant to file request for review up to 4 months after receipt of adverse benefit determination • Plan must complete a preliminary review of the claim in 5 days • 1 day after completing review, plan must issue a written notice to claimant • Plan must assign an accredited IRO (independent review organization) to review the claim. Plans must contract with 3 IRO’s and rotate claims among them (IOR’s must be accredited by a URAC (formerly Utilization Review Accreditation Commission, a non-profit organization), accredited reviewer

  19. Patient Protection and Affordable Care Act (PPACA) (cont.) Federal Process (cont.): • IRO must review claim de novo and decide in 24 or 72 hours • If IRO reverses decision of plan, plan must provide immediate coverage. No financial incentives to IRO for denying claims. Failure to follow process subjects plans to tax of $100 per day of non-compliance. TPA’s must comply with these rules.

  20. Health Benefit (Insurance) Exchanges (HBE) – Colorado is Connect for Colorado • January 1, 2014 states required to establish exchanges to facilitate the purchase of qualified health plans in the individual and small group markets • Can be governmental or non profit • If a state fails to set up an exchange then the federal government will operate the exchange for the state • Federal dollars are available to help establish exchanges

  21. HBE • There can be more than one exchange in each state • Each HBE must however serve a region but the regions can cross state lines • The HBE’s are designed to facilitate enrollment in health insurance plans as well as Medicaid, CHIP and other health plans. Employees may be eligible for a subsidy on a sliding scale from 138 to 400% of the Federal Poverty level. • HBE’s must conduct public education about the products, enrollment and also operate a grievance mechanism

  22. Connect for Colorado • Will be ready October 1st • Plans anticipated to be available: Anthem, Cigna, Colorado Choice, Colorado Health OP, Denver Health, Humana, Kaiser Permanente, New Health Ventures, Rocky Mountain Health Plans, and a division of United. • Check the CFC website at www.connectforhealthco.com

  23. Plan Analysis - Colorado Consumer Health Initative (CCHI) • Denver Individual Plans 27 year old: $207 to $373 per month 40-year old: $253 to $454 per month Denver Family Plan (2 parents age 40, children under 18) $756 to $1,360 per month • Durango Individual Plans 27-year old: $207 to $504 per month 40-year old: $253 to $615 per month Durango Family Plan (2 parents age 40, children under 18) * $756 to $1,840 per month

  24. Plan Analysis • Fort Collins Individual Plans • 27-year old: $197 to $406 per month • 40-year old: $240 to $495 per month • Fort Collins Family Plan (2 parents age 40, children under 18) $718 to $1,481 per month

  25. Colorado HBE • Information for businesses includes: a calculator for the small employer tax credit (fewer than 25 employees who earn an average less than $50,000 per year) FAQ’s including sample letters Effects on COBRA And more

  26. Connect for Colorado • Connect for Colorado has information for individuals including the following: • A calculator to determine the amount of the subsidy you may be entitled to receive • FAQs about: • Cover Colorado (now Get Us Covered) and the transition on 2014 to the marketplace • Navigators or Health Coverage Guides

  27. QUESTIONS ?