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Health care reform

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  1. Health care reform

    What You Need to Do from Now to 2015 This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.
  2. agenda Summarize the key provisions affecting plan sponsors Provide action steps for each Review long-term plan sponsorship options
  3. Setting the Stage 1,000 pages of legislation drafted and enacted very quickly Rules are still being developed Federal agency guidance Role of states
  4. 2014 Cornerstone year of Health Care Reform State Exchanges Individual mandate Federal premium tax credit to purchase Exchange coverage “Employer responsibility”
  5. State exchanges States must build Exchanges or federal government will provide default Bronze, silver, gold, and platinum options Coverage will be guaranteed issue, no preexisting condition limits, no individual medical underwriting
  6. Individual mandate Must obtain minimum essential coverage or pay a tax, beginning January 1, 2014 Penalty is capped at average cost of bronze level Exchange coverage Exceptions if coverage is unaffordable, for low income taxpayers, and short coverage gaps
  7. Federal Premium tax credit May use to purchase Exchange coverage Available to certain individuals with household income up to 400% FPL Credit not available if eligible for: Adequate/affordable employer coverage Government provided coverage
  8. Free rider penalty Penalty may apply if: No coverage offered to full-time employees and dependents Coverage is “unaffordable” or “inadequate” Employee enrolls in Exchange coverage and qualifies for a federal premium tax credit Effective January 1, 2015
  9. Free rider penalty (cont’d) Transitional relief for non-calendar year plans Large employer : 50+ full time equivalents Members of a controlled group treated as single entity to determine “large employer”
  10. Free rider penalty (cont’d) Full-time employees: 30+ hours/week or 130+ hours/month Includes non-work time for which pay is due
  11. Free rider penalty (cont’d) Variable hour and seasonal employees: Optional “measurement” and “stability” periods Look-back over measurement period to calculate actual hours worked Measurement period may be 3-12 months Stability period must be as long as measurement and not less than 6 months
  12. Free rider penalty (cont’d) Special rules for educational institutions: Two methods for determining full-time employees Use “measurement period” excluding employment breaks Treat employee as credited with hours for employment breaks
  13. Free rider penalty (cont’d) Penalty for failing to offer coverage : 1/12th x $2,000 per month/per employee (after 1st 30 employees) Must offer to “substantially all” full-time employees Includes children to age 26; does not include spouses
  14. Free rider penalty (cont’d) Penalty if available coverage is inadequate or unaffordable: 1/12th x $3,000 per month (per employee who qualifies for a federal premium tax credit) Inadequate: plan pays <60% allowable costs Unaffordable: employee pays >9.5% household income for employee-only coverage
  15. Free rider penalty (cont’d) Affordability examples: Coverage is affordable Coverage is unaffordable Enroll in coverage anyway Enroll in spouse’s plan Enroll in Exchange
  16. Free rider penalty (cont’d) Mechanics: Notice Timing Method of payment
  17. Free Rider Penalty

    Questions?
  18. Summary of benefits and coverage Plan sponsor must provide a Summary of Benefits and Coverage (SBC) Effective for annual enrollments/plan years beginning on or after September 23, 2012 Distribute with annual enrollment materials, following special enrollment events, and upon request
  19. Summary of Benefits and coverage (cont’d Government provided template Fully insured – get SBC from insurer Self-funded – employer fills in template In either case, the employer is responsible Must also provide Uniform Glossary upon request
  20. HEALTH FSA CONTRIBUTION LIMIT Employee contributions are limited to $2,500 Effective plan years beginning on or after January 1, 2013 Applies per individual Must amend plan by December 31, 2014
  21. Stand-Alone hras Stand-alone HRAs violate prohibitions on annual and lifetime limits Employees must elect HRA and other coverage (not just have the option to elect) HRAs may not be used to pay for individual market insurance coverage
  22. Medicare tax Two components effective January 1, 2013 Additional 0.9% Medicare tax on wages New 3.8% Medicare contribution tax on unearned income
  23. Medicare tax (Cont’d) Generally applies to income over $200,000 for individuals, $250,000 for couples Employers must withhold 0.9% tax once employee’s wages exceed $200,000
  24. PCORI fee Plan sponsors and insurers must pay a fee to help fund comparative effectiveness research Fee must be paid by the following July 31st File tax form 720 First forms due July 31, 2013
  25. PCORI Fee (cont’d) Amount of the fee is based on the average number of covered lives $1 per individual for 1st plan year ending after Sept. 30, 2012 $2 per individual for the next year Increases in subsequent years
  26. Employee exchange notice Employers subject to FLSA must provide information about the state Exchanges One or more employees Generally firms with $500,000+ annual business Plus hospitals, schools, and government agencies Internet compliance tool is available to determine applicability
  27. Employee exchange notice (CONT’d) Notice must be provided: To all current employees (including full-time and part-time) by October 1, 2013 To all subsequent new hires in 2013, at the time of hire and for new hires in 2014 within 14 days
  28. Employee exchange notice (CONT’d) May be paper or electronic (if satisfy DOL safe harbor rules) Two model notices were provided Model COBRA notice was also updated
  29. 2014 Mandates All plans must comply Waiting periods Annual limit prohibition Preexisting condition limits Coverage for adult children
  30. 2014 Mandates Additional requirements for non-grandfathered plans Essential health benefits (insured small group plans) Clinical trials Limits on deductibles (insured small group plans) Limits on out-of-pocket maximums Provider nondiscrimination Copyright 2013 American Fidelity Assurance Company
  31. Restrictions on rescissions Limited to fraud or intentional misrepresentation of material fact Plan document must allow and must provide notice May want to consider dependent verification reviews
  32. Nondiscrimination Fully-insured, non-grandfathered plans may not discriminate in favor of highly compensated individuals Self-funded plans are subject to similar rules, regardless of grandfathered status Effective for plan years beginning on/after 9/23/2010; IRS enforcement is delayed
  33. Exchange Reinsurance Fee Insurers and plan sponsors of group health plans must pay fee to HHS Applies for 3 years beginning 2014 HHS estimate for 2014: $63/covered life
  34. Free Rider Penalty Reporting Originally January 1, 2014, one year delay Employers with 50+ full-time employees must report extensive details about the employer’s health coverage and workforce to the IRS Employers are also required to submit the same information to each employee plus contact information
  35. Minimum essential coverage reporting Future regulations are expected to establish the form and content First reports will be due January 2016 Employers must collection information beginning January 1, 2015 Must provide a written statement to each employee named in the return each year
  36. Automatic enrollment Plan sponsors with 200+ full-time employees must automatically enroll newly eligible full-time employees Must provide notice Employees may opt out Effective date to be established by regulations
  37. Cadillac tax Effective 2018: 40% non-deductible excise tax Imposed on aggregate value of health coverage that exceeds threshold amounts Applies for specified health coverage
  38. Cadillac tax (cont’d) General thresholds: $10,200 individual coverage $27,500 family coverage Indexed for inflation CPI-U: 3-4% per year Medical inflation: 7-10% per year
  39. Copyright 2013 American Fidelity Assurance Company
  40. Action Plan Assess the impact of the Free Rider Penalty Obtain/complete/distribute SBCs Amend Health FSA if necessary Consider status of stand-alone HRAs and possible revision Prepare to withhold additional Medicare tax
  41. action plan (cont’d) Prepare to pay PCORI fee Send Exchange notices Grandfathered plans Reassess eligibility and value Gather documentation Plans losing grandfathered status – Adopt additional plan design mandates – Revise employee communication Copyright 2013 American Fidelity Assurance Company
  42. action plan (cont’d) Comply with 2014 mandates Budget for Exchange Reinsurance Fee Watch for guidance May want to begin considering cost-management strategies or changes in health coverage
  43. What do you do now? Understand your responsibilities Assess whether costs are sustainable Understand your choices Design an implementation strategy Implement your plan
  44. Choice spectrum
  45. Health Care Reform Made Easy AFAS is ready to assist: HCReducation.com http://benefitsblog.americanfidelity.com VIP emails and monthly webinars Health Care Reform consulting (packages, retainer arrangements, and custom solutions)
  46. Health Care Reform Made Easy AFAS is ready to assist (cont'd): Time management software to assist with the Free Rider Penalty Variable hour employee billing Notice compliance support and fulfillment Resources to help communicate plan changes to employees
  47. Thank you! This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations.  All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.