Transcript Slide 1

Affordable Care Act
ARE YOU PREPARED?
June 2013
Leah M. Wurth,
Gallagher Grace/Mayer
Employee Benefits Consultant
Healthcare Reform Update
• Ten PPACA Traps for the Unwary
• 2013 PPACA Requirements
• Preparing for 2014
» Upcoming 2014 Requirements
» Spotlight on Fees
• Understanding the Individual Mandate
• 2014 Exchanges
» The Marketplace, Open Enrollment, Rates, Federal VS State Exchange
• Employer Shared Responsibility
»
»
»
»
Applicable Large Employer
Transition Rules
Definition of Minimal Value & Affordable Coverage
Penalties & How to calculate
• Medicaid Expansion
» Potential employer Impact
• Preparing for the Financial Impact – Action Plan
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Ten PPACA
Traps For The
Unwary
Trap #1
Not Planning For The Potential Financial
Impact In 2013 Can Cost You In 2014
- Large Employers (50 + FTE) who do NOT offer
“affordable” health insurance that provides
“minimum value” to all employees working on
average over 30+ hours/ week will face potential
penalties
- It is key to determine your potential impact and
develop a plan and strategic approach to offer or
modify how you currently offer health insurance
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Trap #2
Failing To Plan For The 2014 Mandate Plan
Design Changes Required Under PPACA
- Beginning in 2014 PPACA requires certain plans
changes including limiting employee waiting
periods to no more than 90 days, eliminating
annual dollar limits on Essential Health Benefits,
mandatory coverage of clinical trials for cancer &
life threatening diseases and eliminating preexisting condition exclusions for all enrollees
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Trap #3
Not Amending You Healthcare Flexible
Spending Account Plan Documents
- Effective for plans starting on or before Jan 1, 2013,
employee salary reduction contributions to health
flexible spending accounts will be limited to a
maximum $2,500 limit. Any plan amendment to
conform a cafeteria plan to the $2,500 limit must
be adopted on or before Dec 31, 2014 and may be
effective retroactively, provided it acts in
accordance with this guidance for plans after Dec
31, 2012
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Trap #4
Failing To Amend Your Cafeteria Plan
Documents For A One-time Special Change
In Status
- Within the cafeteria plan change in status regulations, an employer may amend
one or more of its written cafeteria plans to permit either or both of the
following changes in salary reduction elections:
(1)
(2)
Permit an employee who elected to pay for coverage under a health plan
with a fiscal plan year beginning in 2013 to prospectively revoke or change his
or her election once, without a change in status
Permit an employee who failed to make a salary reduction election through
the employer’s cafeteria plan to make a prospective salary reduction election
for accident and health coverage on or after the first day of the 2013 plan
year, without regard to a change in status
Such a change would permit employees to drop employer-sponsored coverage
mid-year to obtain coverage through an Exchange or add coverage under the
employer’s plan to comply with requirements under the “individual
mandate.”
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Trap #5
Overlooking The Need To Plan For
Distribution Of The New Exchange Notice
- Originally employers were slated to issue a notice
to ALL employees about the new state and federal
Health Insurance Exchanges by March 1, 2013,
guidance has provided a delay until a date closer
to the October 2013 open enrollment
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Trap #6
Forgetting About Grandfather Status
- If your organization offers a group health plan that
has been able to retain Grandfathered status there
are certain PPACA requirements that may begin in
2014 for you as well; such as non-discrimination
rules for fully-insured plans, quality of care
reporting, preventative care mandates and patient
protections, including applicable notice rules
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Trap #7
Ignoring The Potential Impact Of New Wellness
Regulations Under PPACA
- As more and more employers look for ways to
control health plan cost, increasing numbers are
turning to wellness and health management
programs to improve employees’ health and
responsibility for the health to thus lower plan cost
and improve over wellbeing. Under the proposed
PPACA regulations employers can change existing
contribution limits to incent employees to
maintain good health
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Trap #8
Waiting To Develop Measurement And
Stability Periods Under PPACA
- Employer may face penalties under PPACA
beginning Jan 1, 2014 for failure to offering
affordable coverage and provide minimum value
health insurance to all full-time (avg 30+ hrs/ week).
Regulations issued in late 2012 provide safe harbor
methods for determining whether employees are
seasonal or variable hour employees and which
employees constitute that of a “full-time”
employee for purposes of the employer shared
responsibility
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Trap #9
Disregarding New Fees And Taxes Under
PPACA
- PPACA introduced a number of new fees and taxes
with varying due dates and calculation methods,
most notably
- Patient Centered Outcomes Research Fees (or Comparative
Effectiveness Research Fee) PCORI or CER; established to advance
comparative effectiveness research related to patient-centered
outcomes
- Transitional Reinsurance Fee meant to provide excess coverage
for high risk individual in the exchanges
- Payroll Tax on High Income Earners there is an additional payroll
tax for compensations in excess of $200,000 single/ $250,000
married filing jointly
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Trap #10
Failing To Provide Required Notices Under
PPACA
- PPACA has created over a dozen new notice
requirements covering areas from new appeals
procedures to grandfather status to information
about Exchanges, not all new notices apply to all
employers, but some do. And Properly providing
the correct notices is crucial to avoid audit
penalties
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2013 PPACA
Requirements
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2013 PPACA Requirements
• Summaries of Benefits & Coverage – Patient
Protection and Affordable Care Act (PPACA) require
accurate description of benefits and coverage
• Annual contributions to FSA limited to $2,500
» UPDATE: Effective with plan years
beginning on or after January 1, 2013
» UPDATE: Cafeteria plan documents
must be amended by December 31, 2014
• Employers must amend cafeteria plan
documents to reflect this change
• Additional Medicare Payroll Tax = 0.9% on
high-income workers*
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2013 PPACA Requirements
• Employer notice explaining Exchange
» Beginning 10/1/13, state and government run exchanges
begin, PPACA requires employers to provide notice to
employees late summer/fall 2013
• W-2 Reporting Requirements
» Employers filing over 250 W-2s from
the preceding year must be reporting
the cost of employer-sponsored
healthcare coverage
• Grandfathered Plan Determinations
• Begin measurement periods for determining full-time
employee status “Counting Hours”
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Upcoming 2014
PPACA
Requirements
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Timeline for Plan Sponsors
• Early retiree
reinsurance
• High-risk
pools
• OTC drug
reimbursements
• Comparative Effectiveness Research Fee
• HSA penalties
• Itemized medical expense deduction changes
• Employee
notification
requirements
• Medicare tax increase
6/23/10
9/23/10
• Coverage
expansion
mandates
•
•
•
•
•
• Patient
protections
1/1/11
• FSA limit to $2,500
• Part D drug subsidy deduction eliminated
• Employee Exchange notification
1/1/12
W-2 Reporting (begin implementation for 2012 W-2s)
Internal and External Claims and Appeals Procedures
“CLASS” LTC Program (suspended)
SCOTUS Decision
Women’s Preventive Services (plan years beginning on or
after August 1, 2012; certain exemptions apply)
• Medical Loss Ratio Rebate Distributions (August 2012)
• Summary of Benefits and Coverage (open enrollments
beginning on or after 9/23/2012)
• Quality of Care Reporting (guidance was due March 2012)
1/1/13
1/1/14+
• Employer and individual
mandates
• Insurance exchanges
• Patient protections
• Automatic enrollment?
• “Cadillac” excise tax (2018)
• Annual Health Insurer Fee
• Transitional Reinsurance
Fee
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Upcoming Requirements for 2014
• No waiting periods longer than 90 days
• Elimination of Pre-existing Condition Exclusions
• No Annual Limits for Essential Benefits
• Non-grandfathered plans:
» Cannot deny participation in a clinical trial
» Cannot discriminate based on health status
• Small group insured plans
» Must provide essential benefits
» Deductibles must not exceed limits for
qualified high deductible health plans
($2,000 individual/$4,000 family in 2014);
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Upcoming Requirements for 2014
• Out-of-pocket limits cannot exceed applicable
limits for qualified high deductible health plans
($6,250 individual/$12,500 family for 2013)
• Automatic Enrollment
» Employers with over 200 full-time employees must
automatically enroll employees in employer-sponsored
group health plan coverage beginning in 1/1/14
(effective date TBD)
• Employer Shared Responsibility
» Beginning in January 2014, applicable large employers
who average 50+ Full-Time Equivalents (FTE) during the
preceding year will be required to offer affordable
group health coverage or pay a penalty
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Spotlight on Fees
Spotlight on Fees
• Comparative Effectiveness Research Fee (“CER” Fee)
Due by July 31 of following year
Effective for plans with plan or policy years ending after 9/30/12
First payment due 7/31/2013
Report on Form 720
Amount of fee
• $2 per participant/enrollee annual
fee
• $1 for fiscal year 2013
» Finances Patient-Centered
Outcomes Research Institute
• Fee also referred to as
“PCORI” Fee
» Fee ends in 2019
• Plan years ending after 9/30/19
are not included
» Guidance issued April 2012
» UPDATE: final regulations issued December 2012
»
»
»
»
»
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Spotlight on Fees
• Transitional Reinsurance Fee
» Intended to stabilize premiums by partially offsetting claims
for high-cost individuals in non-grandfathered individual
market plans
» Insured and self-funded plans
• Fee paid by TPA in case of self-funded plans, but plan responsible
for funding payment
» Payments due annually (submit enrollment count by 11/15,
HHS responds by later of 15 days later or 12/15, payment
due 30 days later; e.g., 1/15/2015, but could be as early as
12/31/2014)
» Payment amount proposed regulations set fee amount at
annualized rate of $63/member annually
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Individual
Mandate
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Individual Mandate -2014
Minimum
Essential Coverage
Exception
OR
OR
Penalty
Premium
Assistance
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Individual Penalty
Penalty amount is the greater of*:
Year
Flat Dollar Amount**
(max of 300 % for family)
% of Household
Income
Penalty
• 2014
• 2015
• 2016
• After 2016
• $95
• $325
• $695
• $695, indexed for
inflation in $50
increments
• 1.0
• 2.0
• 2.5
• 2.5
*Capped at the national average of the annual cost of a bronze level health insurance plan, for the family size,
offered through the state exchange.
**Halved for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for
those NOT insured by taxpayer)
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Individuals’ Choices in 2014
Employer
Silver Plan
Spouse
Value of
Benefits
&
Household
Income
With/Without
Premium
Assistance
Gold Plan
Platinum Plan
HEALTH INSURANCE EXCHANGE
Bronze Plan
Medicaid
Catastrophic Plan
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2014 Exchnages
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2014 Exchanges
The 'Marketplace'
Employer Notice
Call Center
Website
Navigator
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Individuals
Silver Plan
Gold Plan
Small Group
< 100 employees
Platinum Plan
Large Group
> 100 employees
PROVIDERS
Government
Subsidy
CHOICE POOL
Bronze Plan
CONSISTENT MARKET RULE BASE
Exchanges - 2014
Catastrophic Plan
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Exchanges – Premium Assistance
To qualify for premium assistance credit, an
individual must:
Premium
Assistance
• NOT be eligible for an employer-sponsored plan that is
affordable and has a minimum value
• Have a household income between 100% and 400% of the
Federal Poverty Level
• NOT receive benefits through Medicare, Medicaid, CHIP,
TRICARE, VA or other coverage as determined by HHS
• Be a citizen or legal immigrant
• Be a resident of the state where the Exchange is located
• NOT be claimed as a dependent on anyone’s tax return
• Purchase a qualified health plan through the Exchange
(not including a catastrophic plan)
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Exchanges – Open Enrollment
Initial open enrollment period
from October 1, 2013 February 28, 2014
In following years, annual open
enrollment from October 15December 7
Coverage effective January 1
HIPAA special enrollment rights
apply
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Exchanges – Rates
Charge the same premium as plans
purchased outside of the Exchange
Rates will vary only by:
•
•
•
•
Individual vs. Family Coverage
Geographic area
Age (no more than 3 to 1)
Tobacco use (no more than 1.5 to 1)
Actual rates won’t be determined
until closer to 2014
Exchange will determine eligibility for
premium assistance credit to help pay
premiums
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State Decisions on Exchanges
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Employer Shared
Responsibility
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Employer Shared Responsibility
Have at least 50 FTEs?
No penalty applies!
Offering Minimum
Essential Coverage?
$2,000 penalty per full-time
EE (minus first 30) if at least
one full-time EE receives the
tax credit
Plan provides minimum
required value?
Is coverage affordable?
No penalty applies!
Lesser of:
• $3,000 per full-time EE
receiving tax credit*
Or
• $2,000 per full-time EE
(minus first 30)
* Only applies to full-time employees s with household incomes of
between 100% and 400% of FPL
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Employer Shared Responsibility
• Transition Rules – Employers can utilize any 6-12
month period in 2013 to determine applicability for
2014 Employer Shared Responsibility
• Controlled Group Rules – Rules are similar to
retirement plan testing utilized to aggregate ownership
and avoid abuse
• How to determine if you are an Applicable Large
Employer
» Aggregate the number of full-time employees and full-time
equivalents (to determine FTE; total number of hours
worked by variable hour employees, divided by 12, divided
by 130) if sum is greater than 50 = Applicable Large
Employer
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Employer Shared Responsibility
• Full-Time Employee – Any employee working 30
hours or more per week or 130 hours per month
• Full-Time Equivalent (FTE) – Combination of
employees who separately do not constitute fulltime employees, but who constitute a full-time
employee when aggregated
• Hourly Employees – Use actual hours of
service and for which payment is owed
• Non-Hourly Employees – use (1) actual
hours of service (2) days worked or (3) weeksworked
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Employer Shared Responsibility
• Non Citizen Employees
» Non citizen employees are considered common law
employees and who are lawfully present must be
counted for purposes of the employer shared
responsibility rules in determining whether the “lawfully
present” noncitizen employee is entitled to be offered
coverage as a “full-time” employee
» Must be counted if they are (or are reasonably expected
to be) present noncitizen employees for the entire
enrollment period of an exchange
» Some may qualify as seasonal workers
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Employer Shared Responsibility
• Penalty for failure to offer coverage
» If an employer is determined to be and Applicable Large
Employer, such employer must offer and the opportunity
to enroll all of it’s full-time employees and dependents
(up to age 26)
» Spouses NOT listed as a requirement
• When is a penalty triggered
» Failure to offer minimum essential coverage to
“substantially” all full-time employees (5% buffer) and
ONE or more full-time employees subsequently acquires
and receives premium assistance from an exchange
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Employer Shared Responsibility
• Calculation for penalty for failure to offer coverage
» Penalty is assessed on a monthly basis
» Rate of 1/12th of $2,000 per full-time employee
employed by the employer
» Less 30 “free” full-time employees
» Penalty to be indexed for cost of living adjustments
» Penalty is based on ALL full-time employees, not just
those not offered coverage
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Employer Shared Responsibility
• Penalty for failure to offer affordable coverage
» Applicable large employer may be subject to a separate
penalty if coverage does not provide both “minimum value”
and is not “affordable”
» Penalty triggered if coverage is either unaffordable or does
not provide minimum value, and if one or more full-time
employees are certified by an exchange to receive a
premium tax credit or cost sharing reduction
» Affordable coverage is determined by the employee
contribution for employee only coverage, which cannot
exceed 9.5% of employees annual box W-2 wage for the
calendar year
» Rate of Pay Safe Harbor Method – use employee’s
computed monthly wages (multiply hourly rate of pay for
each hourly employee by 130 hours per month)
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Employer Shared Responsibility
• “minimal value” – Health coverage that fails to meet a
60% actuarial plan value (sharing 60% of the total
allowed cost of benefit) will incur a penalty assessed to
the employer only for each employee for whom is
granted a subsidy on the governmental exchange.
• The penalty is calculated as 1/12 of $3,000 per month
per employee for whom offered coverage was either
unaffordable or did not meet minimal value standards,
limited to a maximum penalty equal for failure to offer
coverage (full-time employees less 30 * 1/12 of $2,000
per months)
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Medicaid
Expansion
Unites States Supreme Court Ruling
• Upheld constitutionality of individual mandate
• Government has limited ability to penalize states
for not expanding Medicaid
» 100% of Federal Poverty Level = Medicaid Eligible
» PPACA would have required states to expand Medicaid
eligibility up to 133%* of FPL
» It is now effectively optional for states
*138%, with an adjustment allowed by federal law
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State Decisions on Medicaid Expansion
Source: The Advisory Council, www.advisory.com, as visited January 15, 2013
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Impact
• Impact on employers where states say no
» PPACA provides premium credits to eligible individuals and
families with incomes 100% - 400% of FPL to purchase insurance
through the Exchanges
» Individuals with incomes 100% - 133%/138% of FPL (who might
otherwise have been Medicaid beneficiaries pre-SCOTUS ruling)
can buy federally subsidized coverage on the exchanges
potentially triggering a penalty for employers (if affordability
and/or actuarial value requirements are not met)
» Total federal subsidy spending could be greater than originally
forecast
» Could result in increased number of employees who could
potentially trigger an employer shared responsibility penalty
under PPACA
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Preparing for the
Financial Impact
What to Expect
Opportunities
• Insurance carriers
restructure plans
and networks
• State exchanges
open in 2014
• Small business get
tax credits beginning
in 2014
• Employees become
more knowledgeable
about healthcare
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Forecast Financial Impact
Now
2014
2018
Estimate cost effect of near-term
mandates on current plan
Model
“play”
scenario
Model
“pay”
scenario
Project trend on current plan to
2014 and 2018
Model
“play limited”
scenario
Estimate
impact on EEs
Forecast impact of “Cadillac” tax
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Action Steps
Action Steps
What Employers Must Do
Areas of Impact
FINANCIAL
1
Forecast impact
STRATEGIC
2
Build a plan
OPERATIONAL
3
Execute & communicate
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Action Steps
1. Forecast financial impact
2. Re-examine how benefits and compensation
relate to organizational objectives, market
position and reputation; what effect benefits
have on productivity
3. Set up administrative process to identify and
track employees for status as full-time, parttime, and variable. Also identify seasonal
employees; Start counting hours NOW!
4. Set measurement and stability periods
5. Revise plan document eligibility language to
cover applicable employees through the
stability period
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Action Steps
6. Focus on total rewards; communicate
7. Follow “Cadillac” tax developments to assess if
change in strategy is needed in future
8. Reevaluate strategy and options once the
reformed marketplace is in place and rules have
been finalized
9. Continue current strategy of aggressively
managing healthcare cost while increasing
employee engagement and productivity;
implement wellness and risk management
programs to sustain total rewards costs.
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Stay Informed –
GBShealthcarereform.com
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Questions?
Thank you!
The intent of this presentation is to provide you with
general information regarding the status of, and/or
potential concerns related to, your current employee
benefits issue. It does not necessarily fully address all
your specific issues. It should not be construed as, nor
is it intended to provide, legal or tax advice. Questions
regarding specific issues should be addressed by the
client's general counsel, tax advisor, or an attorney
who specializes in this practice area.
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