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Health Care Reform
2014 - 2015
Now What?!
Strategies for Tomorrow
Paul Catania, CEBS, PHR
Andrea Esselstein, J.D
February 2014
»
WHERE DOES THE LAW STAND TODAY?
LEGAL RECAP
KEY CONSIDERATIONS FOR EMPLOYERS
MARKET IMPACT – CARRIERS, FUNDING & PROJECTIONS
STRATEGIES FOR EMPLOYERS
TAKE AWAYS
3
IMMEDIATE CONSIDERATIONS
REMINDERS
Ban on Lifetime Dollar Limits (2010) & Annual Dollar Limits for Essential Health Benefits (2014)
Dependent Coverage Expansion to Age 26 for ALL, Regardless of Other Coverage Eligibility (2014)
Form W-2 Reporting Requirements
Employers Filing at Least 250 Forms W-2 in 2012 Must Report Aggregate Value of Health Coverage on
2013 Form W-2
Guaranteed Issued for COBRA Continuants & Pre-65 Retirees: January 1, 2014
COBRA Notices Should be Modified to Provide Notice of New Exchange Options
Summary of Benefits and Coverage (SBC): 4 Page Uniform Benefits Summary
Revised Template for Plan Years on/after January 1, 2014
SBCs Should Be Distributed to New Hires within 14 Days of Hire (If Eligible for the Medical Plan)
Employee Exchange Notice Requirement: October 1, 2013
Notice Should be Distributed to New Hires within 14 Days of Hire
(ALL Employees -- Regardless of Plan Eligibility)
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IMMEDIATE CONSIDERATIONS
REMINDERS
Medicare Part D Reporting of Creditable or NonCreditable Drug Coverage
Centers for Medicaid & Medicare Services (CMS) Should be Notified within 60 Days of the Beginning of the
Plan Year as to the Creditable or NonCreditable Coverage Status of RX Plans
90 Day Waiting Periods
Plan Years on or after January 1, 2014
Health Flexible Spending (FSA) Account : $500 Carryover Opportunity
Carryover Option May Not be Used with Plans that have Grace Periods
o Which has more Value to Employees?
o Which is more Easily Understood by Employees?
Mental Health Parity Final Rules
Effective Date: Plan Years on or after July 1, 2014
No Significant Difference than the 2009 Proposed Rules
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Employer Shared Responsibility:
NEW EFFECTIVE DATE: 2016 FOR EMPLOYERS W/50-99 FTE; 2015 FOR EMPLOYERS 100+
Does your organization
employ > 50 full-time
employees (FTE) ?
(Controlled Group Rules)
No
Employer NOT subject
To PAY-OR-PLAY
employer shared responsibility
NO PENALTY
Yes
Does your organization
offer qualified coverage
to Substantially All FTEs?
30 Hrs/wk; 130 Hrs/Mo?
No
Has at least one employee
received a federal subsidy to
purchase coverage in an
exchange?
Yes
NONDEDUCTIBLE
EMPLOYER PENALTY OF
Cap = $2,000 x Total FTEs
Less 30
Yes
Does plan cover a minimum
value of at least 60% of
covered expenses?
No
Yes
Do any FTEs pay > 9.5%
of Household Income*
for the lowest cost
employee-only coverage?
No
NO PENALTY
Yes
Qualifying FTEs may choose to
purchase coverage in an
exchange by receiving a
federal subsidy
(if household income
< 400% Of FPL)
NONDEDUCTIBLE
EMPLOYER PENALTY OF
Yes
$3,000 x Number FTEs
Who Purchase Coverage
In An Exchange
Cap = $2,000 x Total FTEs
Less 30
Employee subsidy eligibility if
household income < 400% of FPL
and not offered affordable coverage
(9.5% or 60% of covered expenses)
* Household Income Affordability Safe
Harbor Defined As: Employee Only W2 Income OR using an IRS-issued
Calculation for Hourly Employees;
OR FPL
IN THE NEWS
• Further delay on “Shared Responsibility” for Employers 50-99 eligible until 2016.
• For Groups over 100+, must cover 70% of FTE in 2015. Full-time defined as 30
hrs/wk on average; 130 hrs/mo.
• Volunteer Firefighters and others who volunteer not considered employees under
the law.
• Adjunct Faculty will be considered to have worked 1.5 hours for each classroom
hour. (i.e.; 15 classroom hours = 37.5 worked hours)
• Dependent eligibility requirement delayed until 2016.
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INDIVIDUAL MANDATE IMPLEMENTATION
NEW CONSUMER OPTIONS
ALL Americans
Must have
Qualified
Coverage, as of
March 31, 2014
or Pay Penalties
in 2014
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Enrollment by
December 23, 2013
for Coverage on
January 1, 2014
AND
March 31, 2014
to Avoid the
Individual Mandate
Penalties in 2014
IMPLICATIONS
FOR ALL
EMPLOYERS?
IN THE NEWS
NONDISCRIMINATION RULES: IRS CODE 105(h))
Consider Plan
Design Changes
if Offering Richer
Benefits to Highly
Compensated
Employees
IRS Code 105 (h)
Limitations are
Currently
Effective for
Self Funded Plans
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Highest Paid 25% of
All Employees
Delayed from
January 1, 2011
Effective Date
Unknown
(Awaiting Guidance)
$100 Per Day Per
Individual Affected
(Discriminated Against)
»
STRATEGIC OVERVIEW
Key Considerations for Employers
“With Change Comes NEW Opportunities…”
“IT’S NOT YOU , IT’S YOUR SPOUSE…”
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SPOUSAL BENEFIT STRATEGIES – SPOUSES ARE NOT DEPENDENTS!
EMPLOYER OPTIONS
“Carving Out” Spouses
Not offering coverage to
any spouse eligible for
his or her own employer
coverage
“Spousal Surcharge”
Disincentive to take up
spousal coverage by
charging an average of
$100/mo extra per spouse
(or per spouse not eligible for
his or her own coverage)
2013: 4% of Employers
2014: 12% of Employers
National Benefits Study
October 2013
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2013: 20% of Employers
2014: 33% of Employers
National Benefits Study
October 2013
Combined, these
two practices will
increase from 24%
in 2013 to 45% in
2014
Numbers will Rise
with New Exchange
Options
Employers Must
Avoid offering a
“Magnet” Plan
PREMIUM TAX CREDITS (SUBSIDIES)
If an Individual has a
Valid Offer of
Affordable and
Minimum Value
Employer-sponsored
Coverage….
Subsidized Coverage
will Only be Available
for Individuals
Purchasing through an
Exchange, and NOT
those in an Employer
Group Health Plan
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…the Individual
(and Dependents)
will NOT Qualify for
Federal Subsidies to
Begin on
January 1, 2014
» 2014
Premium Tax Credit Eligibility:
Federal Poverty Level Scale
Persons in Household
14
100 %
133 -138 %
400 %
1
$11,498
$15,294
$45,992
2
$15,531
$20,659
$62,126
3
$19,565
$26,024
$78,259
4
$23,598
$31,389
$94,393
5
$27,632
$36,754
$110,527
6
$31,665
$42,119
$126,660
7
$35,698
$47,484
$142,794
8
$39,732
$52,849
$158,928
For each additional person, add:
$4,033
$5,365
$16,134
UNDERSTANDING COVERAGE REQUIREMENTS
»
1. Does Coverage Provide MINIMUM ESSENTIAL COVERAGE?
2. Does Coverage Meet the MINIMUM VALUE STANDARD?

MINIMUM VALUE: Think “Employers”
If > 50 Full-time Employees (FTEs): Employer-Sponsored Plans Must Pay 60% of Covered
Expenses (Cost of Benefits) to Qualify as “Minimum Value” OR Pay Penalties

MINIMAL ESSENTIAL COVERAGE (MEC): Think “Individuals”
Individuals Must be Enrolled in a Plan with MEC OR
Pay the Individual Market Penalty
Minimum Essential Coverage

Minimum Essential Coverage is a Lower Standard than
Minimum Value Resulting in the LOOPHOLE
to Offer a Lower Value “Skinny” Plan
•
•
•
•
Employer-Sponsored Plan Coverage
Qualified Individual Market Coverage
Grandfathered Health Plan Coverage
Government Sponsored Programs
(Medicare, Medicaid, CHIP & TRICARE)
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INDIVIDUAL HEALTH INSURANCE COVERAGE MANDATE
MINIMUM ESSENTIAL COVERAGE
Individual Health Insurance
Mandate Unchanged
Requires All U.S. Citizens have
Minimum Essential Coverage OR
Pay Penalties
As of January 1, 2014
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• INDIVIDUAL INSURANCE MARKET
PENALTIES GREATER OF:
• 2014: $95 per Uninsured Individual or
1% of Household Income above the
Filing Threshold
• 2015: $325 per Uninsured Individual or
2% of Household Income above the
Filing Threshold
• 2016 and Beyond: $695 per Uninsured
Individual or 2.5% of Household Income
above the Filing Threshold
TRACKING HOURS
UNDERSTAND ALL OPTIONS & IMPLICATIONS
IDENTIFY
IF Employing “Variable Hour”
“Variable Hour” Employees
Typically Working Overtime
Employees in 2014
CONSIDERATIONS
ACA Definition of
Full-time is using
“Hours of Service”
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Employers CANNOT
Rely on “Regularly
Scheduled” Hours,
as Documented in
HR Manuals
Revisions to
Employment
Manuals,
Plan Documents,
Training Manuals,
Hiring Posters, etc.
Training of
Supervisors &
Communication
Steps with
Employees
KEY CONSIDERATIONS FOR EMPLOYERS
INITIATE A
COMPREHENSIVE
DEMOGRAPHIC
ANALYSIS TO
EXPLORE ALL NEW
OPPORTUNITIES
Track Hours
of Service for
Full-time
Employees
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EVALUATE ALL PLAN
DESIGNS,
CONTRIBUTION
STRUCTURES &
FUNDING OPTIONS
Benchmark
Plans to Avoid
Becoming a
“Magnet Plan”
Consider
Defined
Contribution
Options
LEVERAGE DATA
INTEGRATION TOOLS
IN KEY DECISION
MAKING
Complete a
Revised
Compliance
Checklist
MAXIMIZE (AND
REITERATE) THE
VALUE OF YOUR PLAN
Invest in
Employee
Education &
Engagement
2014 Exchange Models & Second-Lowest-Cost Silver Plan Premium (for a Single 40-Year-Old)
Rates were pulled from the rating area of the largest city in each of these states or
Washington, DC (please note that rates may vary substantially across rating areas).
$413
$283
$258
$154
$201
$390
$264
$271
$255
$295
$250
$295 $285
$253
$293
$328
$228
$242 D.C.
$212
State-based Exchange (14 states & DC)
Supported State-based Exchange (1 state - Idaho)
Partnership Exchange (7 states)
Bifurcated SG/Indv. Exchange (2 states)
Federally-facilitated Exchange w/ Plan Mgmt (7 states)
FFE [By declaration or default] (19 states)
THE CONGRESSIONAL BUDGET OFFICE
The Congressional Budget Office Estimates
that Individual Market Premiums will
Increase by 27-30% in 2014
The CBO says “[new health care law
market reforms will] have a much
greater effect on premiums in the
nongroup [individual] market than in the
small group market, and they would
have no measurable effect on premiums
in the large group market.”
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Exchange
Subsidies Will Only
Cover Approximately
2/3 of Premiums
(on average)
Fifty-six percent of Individual
Exchange Consumers Will
Receive a Subsidy
Subsidized
Consumers
NEW TAXES & FEES
2014
Small Group Market
< 50 Full-Time Employees (FTEs)
$8 Billion
Large Group Market
> 50 Full-time FTEs & Self-Funded Plans
$8 Billion
Insurer Fee
2.5%-4% of premium for PPO/0.75%-1.5% of premium for
HMO
2.5%-4% of premium for PPO/0.75%-1.5% of premium for
HMO
Medical Device Fee
$2.7 Billion
2.7 Billion
Pharmaceutical Company
Fee
$3 Billion
$3 Billion
Transitional Reinsurance
Fee
$63 Per Covered Life
To fund the Adverse Selection in
the Exchanges for 3 yrs
PCORI Fee
To Fund the Patient Centered
Outcomes Research Institute for
6 yrs
Cadillac Tax
(2018)
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$5.25 per member per month. May be adjusted based on
the national contribution rate$63 Per Covered Life
$63 Per Covered Life
$5.25 per member per month. May be adjusted based on
the national contribution rate.
$2 Per Covered Life
$2 Per Covered Life
$1 PMPY (2013) ; $2 PMPY (2014)
$2 PMPY Plus Medical Inflation
(2015-2019)
$1 PMPY (2013) ; $2 PMPY (2014)
$2 PMPY Plus Medical Inflation
(2015-2019)
40% Excise Tax on High-Value
(High-Premium) Plans in 2018
40% Excise Tax on High-Value
(High-Premium) Plans in 2018
N/A in 2014; however, employers are preparing, in
advance, by adding wellness programs and raising
employee out of pocket costs
N/A in 2014; however, employers are preparing, in
advance, by adding wellness programs and raising
employee out of pocket costs
NEW TAXES & FEES
2014
Small Group Market
< 50 Full-Time Employees (FTEs)
Women’s Preventive Care
+0.7% Total Claims
Approaching 2014
No cost Sharing
Community
Rating
Common Risk Pool
+20-100%
Estimated Cost Increases
Large Group Market
> 50 Full-time FTEs & Self-Funded Plans
+0.7% Total Claims
Approaching 2014
N/A
Cost Shift : Transitional Reinsurance Fee: Intended
to fund high claimants in exchanges
Varies by Plan Design
Essential Health Benefits
(EHBs)
State Variance
Large Group Plans are Not Required to Cover all ENH;
however, if covered, EHB cannot have lifetime or annual
dollar limits
Medical Trend
+8.0 – 13.0%
+8.0 -13.0%
Estimated Total Per Member Per Month:
$22 -$27 PPO / $9 - $13 HMO
Average Estimated Total Increase: 17-23%
Estimated Total Per Member Per Month:
$22 -$27 PPO / $9 - $13 HMO
Average Estimated Total Increase: 17-23%
Total Cost Increase
(Estimate)
22
+3.0 – 5.0%
Small Group Plans Required to Cover all Essential Health
Benefits
COMMUNITY RATING: JANUARY 2, 2014 (SMALL GROUP MARKET)
New
New Federal
FederalRules
Rulesfor
for Rating
RatingEmployer
EmployerPremiums
Premiums
• No Rating Based on Employee Health
History
• Rating for Adults Limited to 3:1 ratio
(Oldest to Youngest)
• One-year Age Bands from 21-63
• 63 and Older
• Single Age Band < Age 21
• Geography within a State
• Tobacco Use (1.5:1)
• Coverage Tier
Overview
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• No Immediate Impact
• Grandfathered Plans
• 100+ Employees
• 2014 Rates May Substantially
Increase (< 50 Full-time Employees)
• Employers in States Shifting to
Community Rating
• Largest Rate Increases for Young,
Healthy Groups
• Potential Decrease for Older,
Unhealthy Groups
Cost Control
Incentive for Groups?
Elephant in
the Room?
Right Now,
Rates and Price
Predictions are
all Over the
Map!
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»
Health Care Reform
KEY 2014 CONSIDERATIONS
NEW RISKS
NEW OPPORTUNITIES
»
Survey of Employees Says…
42%
12%
7%
23%
49%
Unaware that PPACA is the Law
Believe it was Repealed
Overturned by the Supreme Court
Don’t Know the Status
Don’t have Enough Information to Understand the Impact to Families
(Household Impact: Financial and Medical Circumstances)
Where do you get your information?
40%
36%
30%
11%
- Friends and Family
- Newspapers, Radio or Online
- Cable News
- My Employer
Also at 11%: “My doctor” and “health insurer”
Kaiser Family Foundation Poll [Summer 2013]
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WHAT TO EXPECT NEXT?
»
TRENDS TO WATCH IN THE HEALTH INSURANCE INDUSTRY
Increasing Employer Activism: Shared Financial Responsibility with Employees
Narrowing Provider Networks: Accountable Care & Integrated Health Systems
Consumerism & Consumer Driven Health Care Options: HSAs
Electronic Health Records: New Data Tools
Continued Focus on Prevention: Wellness Plan Incentives to Control Costs
Growing Enrollment in Government-Sponsored Plans: Regulatory Oversight
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Employer Shift to Defined Contribution
Will Drive Growth in Private Exchanges
Defined Benefit
Defined Contribution
Variable employer cost of health care;
employees pay a portion for each
benefit
Fixed employer subsidy provided to
employees who decide which benefits
to purchase
Uncertain annual health care cost
increases
Employer controls their annual cost by
adjusting the subsidy
Limited product options selected
by employer
Increased number of product options
offered so employees have a wider
range of choices
Limited employee decisions; little
focus on cost
Employee has much more latitude to
choose; decision making centers on
how to spend the employer provided
“budget”
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Defined Contribution Value Prop
Employer Value
Proposition
Consumer Value
Proposition
• Greater control over total benefit
costs and annual spending
increases
• Expands consumer choice and
control
• Can reduce administrative burden
and costs
• Allows customized package based
on employee needs, financial status
and risk tolerance
• Promotes increased employee
awareness of costs and cost
variance
• Allows consumers to trade between
benefit values that are more
specific to their personal needs
• Provides engaging, consumerfriendly channel
• Delivers familiar, online consumerfriendly retail experience
29
Defined Contribution:
Design Decisions
•
•
Amount of employer contribution
Benefits which can be selected with the contribution
– Medical
– Dental
– Vision
– Supplemental Life
– Disability
– FSA or HSA account contribution
– Other?
•
30
Rules for unused contributions
Private Exchange Benefits
•
For Employers
– Packaged approach to offering
benefits
– Administrative efficiency,
simplicity
– Option to offer Defined
Contribution Health Plan
•
For Employees
– Select benefits package that
meets their needs
– Enrollment efficiency & simplicity
31
Private Exchanges by Size of Employer
Coverage choices, scope of services, and the opportunity to create
customized solutions vary by employer size.
Specifics are evolving rapidly.
Small
Mid to Large
Under 100 EE’s
100 to 1,000 EE’s
Limited Options
Fully-Insured
Single Carrier
Expanded Options
Fully-Insured or Self-Insured
Single Carrier
Multi-Carrier Uncertain
Largest National
Accounts
Customized Options
Fully-Insured or Self-Insured
Multi-Carrier for Largest
The <50 segment competes with Public Exchanges in 2014
and for 2016 that expands to <100 segment
32
TAKEAWAYS
DISCUSSION OVERVIEW
Vet All New Coverage Options for Employees & Families in 2015
Public Exchanges, Private Exchanges, Defined Contribution Alternatives
 Calculate Employee Contribution / Affordability Limits and a Minimum Value
Plan Design to Mitigate Penalty Exposure in 2015
 Estimate Employee Subsidy Eligibility with Assumptions
(FTEs Earning < 400 % of FPL)
INITIATE A
COMPREHENSIVE
DEMOGRAPHIC
ANALYSIS TO
EXPLORE ALL NEW
OPPORTUNITIES
EVALUATE ALL
PLAN DESIGNS,
CONTRIBUTION
STRUCTURES &
FUNDING OPTIONS
LEVERAGE DATA
INTEGRATION
TOOLS IN KEY
DECISION MAKING
 Anticipate Cultural Impact of Plan/Network Changes
(Morale, Recruiting & Retention)
 Execute a Long-Term, Tailored Employee Communication Platform
(Over-Invest in Employee Education)
33
MAXIMIZE (AND
REITERATE) THE
VALUE OF YOUR
PLAN
CONTACTS
34
•
Paul Catania, CEBS, PHR
[email protected]
330-252-2430
•
Andrea Esselstein, J.D.
[email protected]