Health Care Reform Presented by Kurt Mann Chief Benefits Consultant First MainStreet Insurance, LLC
Agenda • How it is changing & how soon. • Immediate changes. • September 23, 2010 changes. • Grandfathering of plans. • January 1, 2011 changes. • January 1, 2013 changes. • January 1, 2014 changes.
How (And How Soon) • Patient Protection and Affordable Care Act (PPACA) will impact every business. • The first significant set of changes will affect employer group health plans at the start of the first plan year after September 23, 2010 (1/1/2011 for calendar year plans).
Immediate Impact • Small employer tax credit. • Elimination of pre-existing condition limitations for children (under 19). • Temporary high risk pool for individuals.
Beginning On September 23, 2010 • Lifetime, annual benefit limit restrictions. • Non-discrimination rules for insured plans. • Expansion of dependent coverage rules. • No coverage rescissions/cancellations.
Beginning in 2011 • Government long-term care insurance program (CLASS). • New benefit summaries. • Over-the-counter medications not permitted from FSA, HSA, or HRA. • Form W-2 reporting for health care cost.
Beginning in 2013 • Health flexible spending account cap. • Changes to rules governing itemized deductions for medical expenses. • Increased Medicare tax.
Beginning in 2014 • Employer “Play or Pay” provisions. • Individual mandate provisions. • Market reforms, including elimination of pre-existing conditions and expansion of guaranteed issue and renewability.
Beginning in 2014 cont. • Annual limit and waiting period restrictions. • Additional dependent coverage expansion. • Minimum benefit package for small group market. • Purchasing exchanges for individual and small group insurance.
Beginning in 2018 • “Cadillac Plan” excise tax.
2010 • What to expect in 2010…
Temporary Retiree Reinsurance Program • Employers providing coverage to retirees 55 or older ineligible for Medicare can apply for limited claim reimbursement from government. • Reimbursement limited to 80% of claims between $15,000 and $90,000. • First-come, first-serve basis – draft application forms online. • Government budget limited to $5 billion. • Expires when $5 billion runs out or end of 2014.
National High Risk Pool • $5 billion has been appropriated to create a temporary high-risk insurance pool to help adults with pre-existing conditions if they have been uninsured for 6 months. • Program will be effective through 2013. • Rocky Mountain Health Plans is administrating Colorado. • Premiums may be subsidized by Feds or State depending on status. • Colorado website – www.covercolorado.org.
Small Business Tax Credit • Eligibility is limited to employers with no more than 25 full-time equivalent employees (FTEs) whose annual full-time equivalent wages average no more than $50,000. • The full amount of the credit is available only to employers with 10 or fewer FTEs with annual full-time wages of less than $25,000. • An eligible small employer must contribute on behalf of each employee who enrolls in qualifying health insurance. • The employer contribution must be a uniform percentage (not less than 50%) of the premium cost of the plan. • The credit is initially available for 2010, 2011, 2012, and 2013.
Small Business Tax Credit cont. • Amount of the credit is based on the employer’s contribution to the health insurance premium for each covered employee. • The credit is reduced (1) for employers whose employees’ average wage is between $25,000 and $50,000, and (2) for employers with more than 10 FTEs but not more than 25 FTEs. • The amount on which the credit is based is reduced if the amount of premiums paid by the employer exceeds the “benchmark premium”. • The “benchmark premium” is the average total premium cost in the small group market for employer-sponsored coverage in the employer’s state. (Not published yet.)
Changes Taking Place After 9/23/2010 • Most of the changes you will be living with will take place at your first renewal after September 23, 2010.
No Lifetime Benefit Limits • Insurers and employers are prohibited from imposing lifetime dollar limits in all health plans and insurance policies issued or renewed on or after September 23, 2010.
Allowed Restricted Yearly Limits • Only applies to “Essential Health Benefits”. • Limits apply to all employer plans and all new individual market plans. It does not apply to grandfathered individual plans. • Schedule of annual dollar limits allowed: • Plans issued/renewed beginning: Annual limits allowed: • 9/23/2010 No lower than $750,000 • 9/23/2011 No lower than $1.25 M • 9/23/2012 No lower than $2 M • 9/23/2014 No annual limits allowed
Allowed Restricted Yearly Limits cont. • List of Essential Health Benefits: • Alcoholism-related services • Ambulance services • Bariatric surgery • Chiropractic manipulation and osteopathic manipulation services • Diabetic supplies • Diagnostic services • Durable medical equipment • Home health care • Hospice • Kidney disease treatment • Mental health/substance abuse
Allowed Restricted Yearly Limits cont. • List of Essential Health Benefits cont.: • Ostomy supplies • Outpatient occupational/physical/speech therapy • Physician office visit (diagnostic services) • Preventive care services • Prosthetic devices/limbs • Skilled nursing services • Transplant services • Treatment of temporomandibular joint disorder (TMJD or TMJ) * Please note that the listed services still may be subject to copays and other cost sharing.
No Coverage Rescissions/Cancellations • Insurers and plans will be prohibited from rescinding coverage except for fraud or intentional misrepresentation. • Individual and group market plans apply. • Applies to all plans – grandfathered or not. • Effective 9/23/2010, no insured or self-insured health plan may rescind coverage once an enrollee has become covered. • “Rescission” means retroactive cancellation or discontinuance of coverage.
No Cost-Sharing for Preventive Services • No cost sharing allowed for services provided in network. • Do not have to provide coverage out of network. • Effective 9/23/2010, group health plans must cover certain types of preventive care, immunizations, child preventive services, and women’s preventive without any cost-sharing charges. • Cost-sharing for these purposes includes co-payments, co-insurance charges, and deductibles. • HHS is required to establish a minimum interval for various types of preventive services, which shall not be less than one year. • Four categories of preventive care under regulations not issued yet. • Grandfathered plans not subject to these requirements.
Dependent Coverage up to Age 26 • Health plans that provide dependent coverage must cover children to age 26. • Grandchildren need not be covered. • Uniformity irrespective of age (except for children who are age 26 or older). • Opportunity to enroll. Must give adult child whose coverage ended an opportunity to enroll for minimum period of 30 days following written notice of right to enroll. • Notice may be provided to employee on behalf of child. • May be included with other enrollment materials. • Must be offered the same coverage available to similarly situated individuals who do not lose coverage by reason of change in dependent status.
No Pre-Existing Condition Exclusions for Dependent Children (Under 19 years of age) • Cannot deny coverage to anyone under 19 based on a pre-existing condition. • Applies to group plans whether grandfathered or not. • Applies to new individual plans. Grandfathered individual plans exempt.
No Higher Out-of-Network Cost-Share for ER • Cannot charge higher copays or co-insurance or require prior authorization for out-of-network ER visit. • Applies to individual and group plans. • Grandfathered plans exempt for individual and group plans.
Non-Discrimination Rules • Prohibits limiting eligibility for fully insured health plans in order to discriminate in favor of highly compensated individuals (i.e. executive or manager carve out health plans). • If plans fail to comply, highly compensated participants are taxed on all or part of plan benefits. • Grandfathered protection important here.
Automatic Enrollment • Employers with more than 200 full-time employees that offer coverage must automatically enroll new and current full-time employees in one of the plans offered with the opportunity to opt out. • Not effective until regulation issued.
Grandfathered Plans • What is a grandfathered plan? (“If you like your current plan…”) • Health coverage in effect on March 23, 2010. • Determined by individual coverage options available under a plan. • New regulations were issued on June 14, 2010.
Grandfathered Plans cont. • Grandfathered plans are exempt from: • Effective 9/23/2010: • Age 26 dependent coverage for dependent with other employer-provided group health plan until 2014. • Wellness services (check-ups) with no cost sharing. • Nondiscrimination rules for fully insured plans (carve outs). • Expanded claims review process.
Grandfathered Plans cont. Grandfathered Plans are NOT exempt from: • Allowing members to add dependents up to age 26 regardless of student status in accordance with terms of the plans. • Eliminating lifetime limits on policies. • Removing pre-existing exclusions for members under age 19. • Adjust certain other annual limits on policies.
Grandfathered Plans cont. • What changes will not affect a plan’s grandfathered status? • Enrolling new employees, current employees or family members. • Employees dropping coverage or changing coverage options. • Changes to premiums at renewal. • Changing the third party administrator. (TPA) • Increasing benefits or decreasing costs to participants.
Grandfathered Plans cont. • What changes will cause a plan to lose its grandfathered status? • Elimination of benefits to treat a particular condition. • An increase in fixed-amount cost sharing such as a deductible. • An increase in a fixed-amount copayment. • A decrease in the employer’s contribution rate. • An increase in percentage of co-insurance. • Imposing or decreasing annual or lifetime limits. • Entry into a new policy, certificate or contract of insurance. • Transition Rule: • Employers may unwind changes that would affect grandfathered status. • Change made between 3/23/2010 and 6/14/2010 must be revoked prior to their next renewal.
Grandfathered Plans cont. • Why preserve grandfathering? • Avoid benefit designs which may raise cost of providing health care coverage for employers or significantly raise premiums offered by insurers. • Underwriting of new benefit designs may be uncertain and create risk that health insurers under price their new products. • Avoid administrative costs and burden of effecting changes. • Employees and insureds like what they have now.
Grandfathered Plans cont. • Why avoid grandfathering? • Administering health benefit designs on a myriad of platforms may be costly, inefficient and give rise to more errors. • Danger of adverse selection by sicker individuals into new plans, making premium/pricing for new plans inadequate. • No guarantee that the government will permit grandfathering indefinitely. • Consumer groups are putting pressure on the Administration to narrowly construe grandfathered status to allow more individuals access to more robust health insurance coverage.
2011 • What to expect in 2011…
New Long-Term Care Program (CLASS Act) • Establishes a new long-term care program funded through voluntary payroll deductions. • Employers are automatically enrolled but may opt-out. • Employers must collect the new payroll deductions effective January 1, 2011. • Long-term care program includes 5 year vesting period and $50 per day benefit. * See insert in your binder.
Industry Taxes • Imposes new fees on health care industry, based upon market share, including pharmaceutical manufacturers (2011), medical device manufacturers (2013), and health insurance companies (2014).
Medical Loss Ratios (MLR) • Limits medical loss ratios of fully-insured plans, including grandfathered plans, to no less than 80% (for small employers with less than 100 employees) or 85% (for large employers with more than 100 employees), based upon NAIC standards due by 12/31/2010. • Purpose is to expose percentage of premium dollars spent on true administrative expenses. • For calendar year 2010, health insurers will report these percentages for information purposes only. • For calendar year 2011, if health insurers spending does not exceed MLR requirement, then health insurers will have to rebate excess premium to their enrollees.
Flex Plan (FSA or Cafeteria Plans) Over-the-Counter Drugs • The change in law: • Over-the-counter (OTC) drug expenses incurred 1/1/2011 and after will require a doctor’s prescription. • OTC supplies and equipment remain eligible without such supporting documentation. • This date is effective regardless of the plan year.
Flex Plan (FSA or Cafeteria Plans) Over-the-Counter Drugs cont. • Impact to participating employees: • Data shows this change in OTC eligibility impacts 7% of debit card transactions. • Inventory Information Approval System (IIAS) merchants (typically pharmacies and grocery stores) will be updating their systems which govern debit card approvals. Participants must pay for OTC drugs out-of-pocket starting 1/1/2011. • Participants must submit manual claims with supporting documentation to be reimbursed for OTC drugs incurred 1/1/2011 and after. Participants in off-calendar plans will be impacted during the current plan year.
HSA Distributions • Effective 1/1/2011, the penalty for the use of funds from a Health Savings Account for non-qualified medical expenses will increase, doubling the additional tax on these types of withdrawals from 10% to 20% for anyone under the age of 65. • Qualifying Medical Expenses under HSA’s, HRA’s, and MSA’s, are being revised and uniform.
New “Simple Cafeteria Plans” • The provisions for “Simple Cafeteria Plans” become effective January 1, 2011. • Plan shall be treated as meeting any applicable non-discrimination requirements. • 100 or fewer employees. • Uniform percentage not less than 2% of employees compensation. • Amendment signed week after PPACA restricted simple cafeteria to C-Corporations only. S-Corps and LLC’s not allowed. • Owners will now be able to participate.
W-2 Reporting Requirements • Employers must include the aggregate cost of employer-sponsored coverage on an employee’s W-2, starting with the 2011 tax year. Government employees are included. • Aggregate cost includes both employee and employer contribution. • Employer-sponsored coverage includes health care plans such as major medical plans and Health Reimbursement Accounts. • Health FSA, life insurance or disability, and stand-alone dental and vision plans are excluded from reporting.
W-2 Reporting Requirements cont. • Law requires employers to use the rules for COBRA Continuation Coverage in determining the value of employer-sponsored health coverage. • As a result of this requirement, employees should better understand the true cost of their coverage. • The cost of these benefits remain tax free.
2013 • What to expect in 2013…
Notice of Availability of Exchanges • Employers will need to provide all newly hired employees with a notice of availability of coverage options, explaining the existence of Exchanges available 2014, and how, if plan doesn’t provide minimum level of coverage, the employee may be eligible for federal premium assistance. All current employees will need to receive this notice no later than 3/1/2013.
Health FSA Limit • Effective 1/1/2013, the law limits the amount an individual may pre-tax under HFSA to $2,500, per individual, per tax year. • Prior to health care reform, employers established the maximum amount a participant could pre-tax under the HFSA by plan design. • The $2,500 cap does not include employer contributions.
Health FSA Limit cont. • Data shows the average annual election for a Health FSA is about $1,400 with 15% of HFSA participants electing to pre-tax an amount greater than $2,500. • Those participants who generally elect an amount greater than $2,500 should consider increasing their election prior to the effective date of the cap to take advantage of higher limits currently available. • Employees will need to re-evaluate their HFSA expenses.