HealthCare Reform Overview: Key Changes, Implications, and Strategies

1. HealthFlex: Health Care Reform Discussion AUMCPBO Meeting October 27, 2010

2. 2010 Programs • Early Retiree Reinsurance Program • Small Business Tax Credit • Pre-Existing Condition Insurance Plan • Federal/State Plans

3. 2011 Changes • Age 26 Dependent Coverage • Grandfathered Plan Rules • No Rescissions • No Pre-Existing Conditions Under Age 19 • Over-the-Counter Drugs: ineligible for flexible spending account (FSA) and health reimbursement arrangement (HRA)

4. 2011 Changes • No Lifetime Limits • Annual limits restricted • Patient Protections • Provider choice • No cost-share for emergencies • Preventive Care • New Claims and Appeals Procedures

5. HealthFlex Concerns • Church Plan Eligibility for the Small Business Tax Credit • Controlled Group Rules • Example—Who is the employer: local church, annual conference or denomination? • Nondiscrimination Rules for Health Plans

6. 2012 to 2014 Changes • W-2 Reporting Value (Cost) ofHealth Coverage (2012) • Medical FSA limited to $2,500 (2013) • Uniform Summary of Benefits (2013) • Automatic Enrollment (large employers, 2013) • New Taxes on High Earners (2013)

7. Changes to Medicare • Medicare Advantage payments reduced in 2012 • Part D donut hole begins to be filled • 2011 • 50% discount through donut hole in brand-name Rx (discount increases each year to 2020) • 7% discount on generic Rx (discount increases each year to 2020)

8. 2014 and Beyond • Exchanges for individuals and small employers • Exchange plan premiums subsidized for families earning less than 400% of federal poverty level (FPL) • Employer participation in exchanges • Small employers eligible to offer in 2014 • Large employers by 2017 • Employer “pay or play” begins • Individual mandate applies (tax penalty)

9. Exchanges • State-based (regional pacts allowed) • Single risk pool • Only insurance carriers may offer coverage • Rating system based on quality, price and enrollee satisfaction • Premium rate variation limits: age (3:1), tobacco use (1.5:1), family structure and geographic area • Platinum, Gold, Silver and Bronze plans

10. Applied Examples • UMC minister making median compensation: • Median pay 2010: $56,795 • Housing allowance: $12,695 • MAGI*: $44,100 • UMC minister in lower-paid annual conference: • Lower pay 2010: $49,888 • Housing allowance: $11,151 • MAGI: $38,737 * Modified adjusted gross income (MAGI)

11. Applied Examples • Lower-paid minister (MAGI $38,737) with spouse • Median-paid minister (MAGI $44,100) with spouse and child

12. Applied Examples • Lower-paid minister with part-time working spouse and child (MAGI $51,987) • Median-paid minister w/ full-time working spouse and child (MAGI $70,600)

13. Mandates and Penalties • Employer penalty: • No coverage offered: • Total number of FTEs x $2,000 • Coverage offered, but one FTE receives an exchange subsidy—lesser of: • Total number of FTEs receiving a subsidy x $3,000, or • Total number of FTEs x $2,000 (i.e., the “no coverage” penalty) • Individual mandate tax penalty: • 2014: greater of $95 or 1% of income • 2015: greater of $325 or 2% of income • 2016: greater of $695 or 2.5% of income (indexed)

14. HealthFlex Concerns • Church Plan Access to Exchanges (subsidies) • Controlled Group Rules (penalties) • “Minimum Essential Coverage” definitionto avoid penalties • Unsettled Future: elections in 2010, 2012 and court challenges to the law

15. Retiree Coverage Strategy • Medicare-Eligible Retirees • Part D “donut hole” being filled • Retiree Drug Subsidy (RDS) remains • Eventual shift to medical-only supplemental coverage coupled with Part D • Early Retirees • After exchanges—fixed dollar retiree health benefits

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