Transcript Slide 1

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Today’s Meeting Agenda
General Session:
• ACA Latest Developments & Key Provisions
Luther Stueland, Director Health Reform Analysis (BCBSND)
Break Out Session:
• Employer Impact, Analysis & Transition Strategies
Mike Potts, Director of Consulting & Wellness (BCBSND)
• Accounting and Tax Implications
Ross Manson, Partner(Eide Bailly)
• Employee Accounts and Defined Contribution
Jason Christianson, Sales Director, (Discovery Benefits)
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General Session:
ACA Latest Developments & Key Provisions
Luther Stueland – Director, Health Reform Analysis
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Key ACA Provisions
Understanding the impact of reform is the first step to developing a benefits
strategy that aligns with the emerging market landscape
Beginning in 2014
• Guaranteed Issue: All individuals will be able to purchase coverage regardless of health status.
• Benefit Standards: Qualified health plans sold on the exchange are required to cover the essential
benefits and have at least a 60% actuarial value. Non-grandfathered plans will need to be a “metal
tier” plan.
• Consumer Subsidies: Individuals with household incomes at or below 400% of federal poverty
level (FPL)1 will be eligible for income-indexed premium subsidies, and those below 250% of the
FPL will be eligible for cost-sharing reduction.
• Public Exchange: Individuals will be able to purchase subsidized individual coverage on public
exchanges.
• Employer Penalties: All employers with 50 or more full-time equivalents must provide adequate
health benefits to employees or pay a penalty per full-time employee per year. An employee’s
contribution to the group single premium should not exceed 9.5% of his or her income.2
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1) In 2012, $44,680 for an individual and $92,200 for a family of four (source: http://aspe.hhs.gov/poverty/12poverty.shtml)
2) If standards are not met, the employee is eligible for subsidies and the employer pays a $3K penalty per employee receiving exchange subsidies
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Health Insurance Exchange:
North Dakota declined to run its own exchange, the federal government
will manage
• Health Insurance Exchange is an online marketplace where individuals and small
groups purchase health insurance within their state
– Federal government will establish Individual and Small Group (SHOP) exchange
• Options limited to Standard Benefit (Metallic) Plans:
– Bronze 60%, Silver 70%, Gold 80%, Platinum 90%
– Actuarial value = % of total average costs for covered benefits that a plan will cover
– Catastrophic plan offering available to those under 30 years of age
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Overview of Premium Subsidies
Consumers with household incomes at or below 400% of the FPL will be
eligible for individual product premium subsidies on exchanges
Estimated
Premium
Estimated Individual Market
Subsidies (2014)
$6,000
Estimated Individual Premium: $4,9421
$5,000
$4,000
• Subsidies will only be available
through public exchanges
9.5 % of
Income
Government Subsidies
$3,000
9.5 % of
Income
$2,000
$1,000
8.1 % of
Income
2.0 % of
Income
6.3 % of
Income
150
200
250
• Individuals receiving affordable
coverage from an employer are not
eligible for subsidies
• Additional cost-sharing subsidies
are available for individuals under
250% FPL
$100
• Subsidies are based on premiums
for the second lowest cost Silver
plan (actuarial value of 70%)
300
350
400
Household FPL Level
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Source: BCBSA analysis
(1) Premium estimate for 2014 based on an individual between the ages of 46 and 55
(2) Premium cap as described in ACA bill, based on silver level plan
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Exploring Subsidy Eligibility
Government subsidies will be based on the household income and not
exclusively on the employee’s salary
Scenarios: Employee Subsidy Eligibility in the Individual Market (2014)
Employee A: Single Individual
Employee B: Family of 2
50
30
$30,000
$30,000
Spousal Salary:
None
$50,000
Household FPL:
265
Employee Age:
Employee Salary:
Subsidy
Eligible
525
Estimated Premium:
$4,940
$9,010
Government Subsidy:
$2,525
None
Estimated Cost
of Coverage:
$2,415 (premium cap1)
Non-Subsidy
Eligible
$9,010 (full premium)
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Source: BCBSA analysis
(1) Premium cap as described in ACA bill, based on Silver level plan
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Potential Employer Penalties
There are two ways in which employers may be penalized in the
post-reform market
General Penalty Criteria:1
• Employer has at least 50 full-time equivalent employees
• One or more eligible employees purchase subsidized coverage through exchange
Employer Does Not Offer Coverage:
• Employer is penalized on all employees
excluding the first 30 full time employees
(30+ hours/week)
No Coverage Penalty:
$2,000 (per full-time employee)
Employer Offers Unaffordable Coverage:
• Employer is penalized if employees’ premium
contributions exceed 9.5% of wages2 and/or the
plan covers less than 60% of health care expenses
Unaffordable Coverage Penalty:
$3,000 (per full-time employee
obtaining subsidies)
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1)
2)
Penalties go into effect in 2014
Although the IRS has issued guidance providing a safe harbor for employers, the ACA law itself specifies that affordability be calculated based on the
employee’s total household income rather than the employee’s wage
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Calculate Group Size: Full-Time Equivalents
Applicable Large Group : 50+ Full-Time Employees
(Average 30 Hours Per Week)
1. Calculate your Full-Time Employees
2. Calculate your (part-time and seasonal) FTEs
3. Add the two numbers in steps 1 and 2
4. Add up the 12 monthly numbers in 3 and divide by 12
5. If less than 50, not applicable large employer
6. If more than 50, was it for greater than 120 days due to seasonal employees?
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Full-Time Employee Coverage
•
ACA mandates that employers offer affordable coverage to full-time employees
working an average of at least 30 hours/week or 130 hours/month or pay a
penalty
•
Employer may utilize safe harbor “look-back” measurement option of up to 12
months to determine whether new variable hour and seasonal employees are
full-time employees. (See IRS Notice 2012-58 and related)
•
Provides the option to use specified measurement and administrative periods for
on-going employees and certain newly hired employees to determine future
coverage periods known as the stability period.
•
Educational institution employees are based on hours worked during expected
operating months (school year)
•
REG-138006-12, comments due by 3/18/2013, public hearing 4/23/2013
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Key Small Group Provisions
Small employers with <50 full-time equivalent employees and
non-grandfathered benefits will be affected by new requirements
• Existing small groups with non-grandfathered coverage will be placed on a
metallic plan that is part of a single, new rating pool
• The new rating pool allows for geographic, age and tobacco rating factors
• Specific group claim experience cannot be a rating factor
• Rating rules expand to groups up to 100 in 2016 & potentially large groups in
2017
• Grandfathered plans are exempt
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Regulations on Grandfathering
Grandfathering allows employers to maintain their health plans without
being required to implement certain aspects of ACA
Criteria for Grandfathered Status
Employers can maintain grandfathered status past 2014 but are restricted from making the
following changes:
 Reducing or eliminating benefits for a specific condition (e.g., diabetes or cystic fibrosis)
 Raising co-insurance charges or significantly raising co-payments and deductibles
 Significantly lowering employer premium contributions
 Materially modifying existing benefits by purchasing coverage from a different insurer
Applicable to Grandfathered Plans
• No lifetime limits on coverage amounts
• A maximum waiting period of 90 days for
new employee coverage
• Coverage of dependent children up to the
age of 26
Not Applicable to Grandfathered Plans
• Required package of essential health
benefits and full coverage of preventive
services
• Limit on rate variation by age
• Limited cost sharing
• For small groups, deductible cap of $2K for
an individual and $4K for a family
• Non-Discrimination Issues
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Health Care Reform
Break Out Session
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Break Out Session Agenda:
• Accounting and Tax Implications
Ross Manson, Partner(Eide Bailly)
• Employee Accounts and Defined Contribution
Jason Christianson, Sales Director, Discovery Benefits
• Employer Impact, Analysis & Transition Strategies
Mike Potts, Director of Consulting & Wellness (BCBSND)
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HealthCare Reform
Ross Manson
Partner
www.eidebai lly.com
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Employers Key Number Is
> 50 = Large Employer
and subject to penalties
< 50 = Small Employer and
NOT subject to penalties
Full-time equivalent employees
www.eidebai lly.com
Large Employer ( > 50) NOT Offering
Insurance
•
Employers NOT offering health insurance:
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A penalty of $2,000 per year/per FT employee (and
seasonal employees the month they work full-time)
•
Exempts the first 30 employees from computation
•
Example: 100 employees and one goes to an Exchange and
receives a subsidy
•
Penalty = (100-30) x $166.67 = $11,667/month
• $140,000 annually
•
•
Triggered on all full-time employees if one full-time employee
goes to the exchange and receives a subsidy
Penalty is NOT tax deductible
www.eidebai lly.com
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Large Employer ( > 50) Offering Insurance
•
Potential $3,000 penalty if employer OFFERS
health insurance – must pass 2 tests!
•
Subsidy eligibility based on unaffordable or
inadequate insurance
•
Unaffordable = Employee insurance premiums exceeding
9.5% of HHI (Safe Harbor created for employers – single plan
premiums paid by employee cannot exceed 9.5% of wages)
• Inadequate = Insurance policy less than 60% of actuarial value
(determined by health plan)
•
A penalty of $3,000 per year/per FT employee who goes
to the exchange and receives an exchange subsidy
• Capped by the amount of penalty for not offering
insurance coverage
www.eidebai lly.com
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Controlled Group Provisions
•
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Internal Revenue Codes 1563 and 414:
Parent – Subsidiary – 80% rule;
Brother/Sister corporations – 50% stock;
Combined Group
Section 801 Companies
www.eidebai lly.com
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Non-discrimination in Insured Health Plans
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•
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•
Non-grandfathered insured group health plans that
impermissibly discriminate in favor of highly compensated
employees face significant liability under new rules.
Relates to the 1986 Tax Law – Internal Revenue Code (IRC)
Section 105(h)(2).
Prohibition on discrimination in favor of highly compensated
individuals.
Effective date for plan years beginning after ___________?
(waiting for final guidance).
The penalty for plans will have an excise tax of $100 per day
for the plan per person discriminated against, with a
maximum penalty of $500,000!
www.eidebai lly.com
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Key Definitions
•
Government Entity
•
•
•
•
Government of United States
Any State or Political subdivision thereof
Indian Tribal Government or agency
Hours of service
•
Paid for work, vacation, holiday, illness, incapacity,
layoff, jury duty, military duty or leave of absence
www.eidebai lly.com
Determining Full Time Employees
•
Hourly
• Non Hourly
•
Actual hours
• Days worked equivalency
• Weeks worked equivalency
• You cannot intentionally use a method to lower their
actual hours (3 ten hour days using days worked
would be an example)
www.eidebai lly.com
Permissible employee categories
•
Collectively Bargained employees and noncollectively bargained employees
• Each group of collectively bargained employee
under separate agreements
• Salaried and hourly employees
• Employees in different states
www.eidebai lly.com
Section 1411 Certification
•
Department of Health and Human services will
establish a process to notify employers of those
employees receiving Premium tax credit or cost
sharing reductions
www.eidebai lly.com
Discovery Benefits
Jason Christianson
•
History
•
Growth and Stability
•
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96% client retention rate
Market Presence
•
•
•
7,500 clients
450,000 benefit participants
1 million covered lives (COBRA)
Our Clients
Reimbursement Accounts
Updates
Flexible Spending Accounts
•
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2013 Medical FSA max - $2500
“Use it or lose it” being reconsidered
Health Reimbursement Arrangements
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1/1/2014 – All HRA plans must be tied to a medical plan
Employee must be enrolled in Health plan to access HRA
Health Savings Accounts
•
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Seeing increase in employers offering HDHP with an HSA
Employer and Employee contributions to the HSA available
Defined Contribution Plans
Defined Contribution Plans
• What are they?
• Why are employers considering Defined
Contribution Plans?
• Predictable Budgets
• Flexibility for Employees
• Employees can continue to pay their portion of premiums
on a pre-tax basis
• Administration is simplified for employer using BCBS ND’s
enrollment platform
Individual Exchange
• Individual Exchange• If employer is dropping group coverage and directing
employees to the state exchange
• Things to consider:
• Employer contribution to FSA/HSA to attract and
retain employees with rich benefit offerings
• HRA not applicable as it’s no longer tied to a health
plan
Thank You
Impact, Analysis & Transition Strategies
Mike Potts, Director Employer Consulting & Wellness
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Employer Impact
Refining Benefit Strategy
As employers develop their post-reform benefits strategies, it is important
to consider key factors for sponsoring coverage
There are many important considerations
to choosing the right benefit strategy:
Economics
Industry
Trends
• Financial incentives to sponsor group
healthcare coverage
• Talent acquisition, retention, and
employee engagement
Company
Culture
Talent
Management
• Company culture and the nature of the
social contract with employees
• Industry trends and competitor positioning
• Employee health and wellness
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Analysis & Transition Strategies
Group Analysis Steps
BCBSND will be proactive in engaging with employers to help consult and
provide solutions for the group market
Next Steps:
1. Assess Group Goals & Current Status
2. Review Financial Impact
Analysis Report From BCBSND
3. Review 2014 Baseline Renewal
4. Explore Alternative Options
5. Decide on 2014 Plan
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Employer Impact
Understanding Employer Impact
The economic impact of reform to employers will vary depending on
existing benefit solutions and characteristics of the workforce
Factors that Impact Decisions around Healthcare Reform
Employer Specific:
Employee Specific:
Market Based:
• Employer size
• Average employee incomes
• Individual premiums
• Employer premiums
• Workforce demographics
(e.g., family structure
and age)
• Penalties and subsidies
• Premium cost sharing levels
• Employee participation rate
• Grandfather Status
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Methodology
Employer Incentives
Employer incentives are determined by the net savings or cost to each
employee if coverage is dropped
Post-reform Environment
Est. 2014
Premium
Contribution
Make
Whole
Payment
$
Payroll
Tax
Corporate
Tax
Deduction
Penalty
Expense
Per Employee
Expense or
Savings
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Methodology
Net Employer Incentive
An employer’s net financial incentive to drop or keep coverage is assessed
through the evaluation of the financial impact to each of its employees
Calculate Incentives
Per Employee
Employee 1:
Cost of $500
Employee 2:
Savings of $200
Sum Employee Incentives to Calculate
Net Employer Impact
Employer ABC
Aggregate Savings: $100K
Total Savings: $500K
Total Cost: -$400K
Employee 3:
Savings of $150
Employees Incented
to Drop Coverage
Employees Incented to
Maintain Coverage
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Group A Report
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Range of Scenarios
BCBSND will help employers evaluate their current
position and determine the best options for 2014.
Grand
Fathered
Group
Non-Grand
Fathered
Group
Key Questions:
•
•
•
How Does ACA Affect 2014 premium?
What is Potential Financial Impact of
Public Exchanges?
Stay Grandfathered?
Public
Exchanges
Individual
Options:
•
•
•
•
•
Maintain or Modify Current Coverage?
Defined Contribution?
SHOP or Private Exchange?
Self-Funding (>25)?
Out of Pocket Impact to Employees on
Exchanges?
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Questions
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