Transcript The Affordable Care Act

Sue Nelson, Gulfshore Insurance
Agenda
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Supreme Court Decision – what it means
ACA Timeline
What’s Already Done?
What’s Coming?
Mandated Coverage – Individual Mandate
Exchanges/Minimum Essential Benefits/Subsidies
Small Employers/Large Employers
Supreme Court Opinion
• Final Regulations Effective: 5/23/2012
– All timelines remain active as previously set
• The Individual Mandate holds (as a tax)
– Individuals must maintain minimal coverage or pay a
penalty beginning 1/1/2014 , allowed under “Congress’s
Power to Tax”
• The Medicaid “threat” fails (unconstitutional)
– States will still be entitled to existing Medicaid funding
even if they don’t expand program
ACA Timeline
What has already been implemented?
• Key preventive services at 100% - no co-pays
• Elimination of lifetime policy limits
• Extension of coverage for “dependents” thru age 26 – regardless
of… (in Florida many are 30)
• No Pre-X on enrollees to age 19
• No rescissions except for fraud
• MLR Rebates (Aug 2012)
• Women’s Preventive Health Services expansion (Aug 2012)
• Summary of Benefits and Coverage (SBC) (Sept. 23, 2012)
• W2 Reporting (cost of coverage / employers w/ 250+ W2’s)
What Happens Next?
• Individual Mandated
Coverage
• Exchanges for Individuals &
Small Employers (?)
• Minimum Essential Benefits
required
• No Pre-Existing conditions
permitted – all lives
• SGR Max Deductible
$2000/$4000 and OOP
Limits capped
• Guarantee Issue required /
Rate Band compression
• 90 day Waiting Periods –
maximum allowed WP
• Non – Grandfathered plans
comply with federal nondiscrimination
• Medicaid Expansion (?)
• Employer Pay or Play
Mandate
• Fees, Fees, Fees and a Tax
Florida – Our “Situation”
Delayed decision making with regard to Exchanges
– Missed the deadline for establishing a State-based exchange (12/14/12)
– Missed the deadline for “partnering” with the Federal government (02/15/13)
– Default to Federally facilitated – watch and learn in 2014- Prep for 2015
Delayed decision making with regard to Medicaid Expansion
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Expansion is targeted at adults without children between 100-138% FPL
Florida has 3rd largest population of uninsured non-elderly (3.1 million)
Florida has the largest number of uninsured in the nation (4 million)
Expansion means approximately 900,000 new enrollees to Medicaid
Failure to expand = more individuals eligible for Exchange subsidies
Feds “promise” to fully fund through 2016 and then at 90% beyond 2016
1.1.2014 – Mandated Coverage
ACA requires individuals to maintain health insurance for
themselves and their dependents beginning January 1, 2014
Most individuals will be required to maintain “minimum essential
coverage”, which includes: employer coverage, individual coverage,
grandfathered plans, student health plans, and Federal programs such as
Medicare, Medicaid, TriCare, and VA benefits
Those who do not maintain minimum essential coverage,
and who are not exempt from the mandate, will be required
to pay a tax penalty for noncompliance
1.1.2014 – Mandated Coverage
Exceptions:
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Individuals not lawfully present in the United States
Individuals who are incarcerated
Individuals residing outside of the United States
Individuals whose contribution for self-only coverage exceeds 8% of HHI
Individuals whose HHI is less than the federal income tax filing threshold
Individuals determined by HHS to have suffered a hardship
Individuals in a health care sharing ministry
Members of Indian tribes
Bona fide residents of any possession of the United States
No penalty imposed on those w/o coverage for less than 3 months
Only one three-month period allowed in a year
1.1.2014 – Mandated Coverage
Annual Penalties:
• 2014: $95 per adult and $47.50 per child, up to a family
maximum of $285 or 1 percent of family income, whichever is greater
• 2015, $325 per adult and $162.50 per child, up to a family
maximum of $975 or 2 percent of family income, whichever is greater
• 2016, $695 per adult and $347.50 per child, up to a family
maximum of $2,085 or 2.5 percent of family income, whichever is greater
Penalty cannot exceed national average for bronze exchange.
Exchanges:
What Are They?
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All states to establish an Exchange by January 1, 2014
Individual Exchange (American Health Benefit Exchange)
Small Business Health Options Program (SHOP) (up to 100 employees)
“The Metals”—Exchanges will require Health Plans to offer four levels of coverage:
– Bronze (60%)
– Silver (70%)
– Gold (80%)
– Platinum (90%)
– AND…a “Catastrophic Plan” for individuals under 30 years of age
Note: Insurers may offer separate health plan products outside of an
Exchange, but they are prohibited from offering rates for those
health plan products that are lower than those offered thru an Exchange
Exchanges & Benefits Required
“Essential Health Benefits” (EHB) to include:
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Ambulatory patient services;
Emergency services;
Hospitalization;
Maternity and newborn care;
Mental health/substance use disorder services, incl. behavioral health
treatment;
Prescription drugs;
Rehabilitative and habilitative services and devices;
Laboratory services;
Preventive and wellness services and chronic disease management; and
Pediatric services, including oral and vision care.
“Premium Assistance/Subsidies”
• Federal subsidies – payments to insurance companies to subsidize lowerincome individuals in state-based exchanges
• Subsidies are not for those eligible for Government programs (Medicaid)
• Subsidies are not for those eligible for affordable group coverage
• Potentially more than 50% of U.S. households could qualify (BLS statistic)
• Dependent on the income, age and family size –subsidy can be substantial
• The subsidy helps lower-income people between 100% and 400% of
Federal Poverty Level (FPL) purchase a silver level plan (70% plan)
• Only available through the Individual Exchanges (not SHOP)
• Application is lengthy and will require verification of citizenship
Small Employer Impacts (2-49)
Small Employers do not have to offer health coverage
to their employees. If coverage is offered – it must
meet Minimum Essential Health Benefits
If the employer has 25 or fewer employees and average
wages up to $50,000, it may be eligible for a health
insurance tax credit – in 2014 credits will be limited
to Exchange-based coverage.
Large Employer Impacts (50+)
• In 2014, the pay-or-play mandate requires employers of 50 FTEEs or more
to offer quality, affordable health insurance coverage to full time
employees (those working on average at least 30 hours per week) and
their families
Penalties apply if:
– Employer does not provide coverage to all FT employees and any FT
employee gets subsidized coverage through exchange OR
– Employer does provide coverage and any FT employee still gets
subsidized coverage through exchange
Large Employer Impacts (50+)
• Employers that do not offer coverage to all full-time
employees:
– $2,000 per full-time employee (if one ee seeks subsidy)
– Excludes first 30 employees
• Employers that offer coverage:
– $3,000 for each employee that receives subsidized
coverage through an exchange
– Capped at $2,000 per full-time employee (excluding first
30 employees)
Things to consider NOW
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Growth Plans – # employees now vs future?
Are current benefits affordable?
Does current plan meet “minimum essential” reqs?
Employee population – household income
Role of benefits in attracting/retaining employees
If not offering benefits, impacts of penalty
Ahhh haaaa haaa haaa haaa
Thank you for Participating!
Sue Nelson
Director of Business Development
[email protected]
239-435-7101
Healthcare Reform Update
Robin Word, CPA, CCIFP
[email protected]
TAX CHANGES TAKING EFFECT IN 2013
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Increased HI tax for high-earning workers
3.8% surtax on unearned income
Higher threshold for medical deductions
Dollar cap on health FSA contributions
Retiree drug deduction eliminated
Fee on health plans
$500,000 comp deduction limitation
Excise tax on medical device manufacturers
TAX CHANGES TAKING EFFECT IN 2014
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Larger employer penalty for no health insurance
Individual mandate penalty
Refundable tax credit for low-income families
“Qualified health plans”/cafeteria plan option
Information reporting of employer health coverage
Excise tax on health insurance providers
Accelerated estimated tax payments large corps
TAX CHANGE TAKING EFFECT 2018
• High-cost plan excise tax
Lillian Chaves Moon, Jackson Lewis
Summary of Plan Benefits and
Coverage (“SBC”)
• The SBC is a new disclosure requirement explaining each benefit
package for which the participant is eligible – “mini-SPD”; applies to
all group health plans.
• Effective the first day of the first open enrollment period that
begins on or after 9/23/12; 1/1/13 for those who enroll outside of
open enrollment (new hires).
• The requirement applies to both plans and insurers.
• Insurers must automatically provide the SBC to the plan sponsor
prior to renewal and upon request.
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SBC – Who Receives It and When?
• Must be provided to eligible employees, spouses and dependents.
• At initial enrollment, open enrollment, upon request, and when
there is a material modification.
• As soon as possible after a request, (including a request for special
enrollment) but no later than 7 days after the request.
• At least 30 days prior to renewal/open enrollment.
• At reenrollment, only the summary of the benefit package in which
the participant is enrolled must be provided.
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SBC – Who Receives It and When?
• Must be provided at least 60 days prior to any mid-year change
taking effect.
• Can be provided in paper form or electronically if ERISA
requirements for electronic disclosure are met.
• A plan that “willfully” fails to provide a summary may be fined up to
$1,000 for each failure; separate fine for each individual who
doesn’t receive the summary.
• Separate tax penalties and civil fines under ERISA.
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“Play or Pay”/“Shared Responsibility”
• Large employers (more than 50 full-time equivalent employees
“FTEs” (30 hrs/wk)) in the previous year must offer adequate,
affordable coverage to “substantially all” of their full-time employees
and dependents or potentially pay a penalty.
• Dependents generally include children under age 26; spousal
coverage not required to avoid the penalty.
• Effective January 1, 2014. Transition rule for non-calendar year plans.
• Two different potential penalties apply if any full-time employee is
certified to receive a premium tax credit or cost sharing reduction
when accessing coverage through a state exchange.
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“Play or Pay”/“Shared Responsibility”
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“No Offer Penalty”: If an employer does not offer minimum
essential coverage to substantially all (95%) of its full-time
employees and their dependents, the penalty is $2,000/yr for
each full-time employee in excess of 30 full-time employees; the
penalty is based on the number of all full-time employees.
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“Inadequate Coverage Penalty”: If an employer offers minimum
essential coverage that is unaffordable (if the employee’s
required contribution exceeds 9.5% of the employee’s
household income) or coverage that doesn’t provide minimum
value (pays for at least 60% of plan
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“Play or Pay”/“Shared
Responsibility”
benefits without regard to co-pays, deductibles, and employee
premiums), the penalty is $3,000/yr for each full-time employee
that receives the premium credit on the exchange, but no more
than the $2,000/yr penalty that would apply if no coverage was
offered.
• The penalty is a non-deductible excise tax that is due to increase
over time; the tax-advantage to the Employer of being able to
deduct the cost of providing medical coverage must be considered
when deciding whether it is “cheaper” to provide the coverage
(play) or pay the penalty (pay).
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“Play or Pay”/“Shared
Responsibility”
• The penalty is assessed on an employer-by-employer basis (not
imposed on all members of the controlled group).
• Employees who have access to affordable, minimum essential
coverage under an employer plan will not be eligible for a premium
tax credit.
• Deciding whether to Play or Pay will involve more than just a
monetary decision; consider company culture, workplace morale,
recruitment, and unionization efforts.
• Anti-Abuse Rule.
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“Play or Pay”/“Shared
Responsibility”
• Individual mandate penalty – for individuals with no coverage
o 2014 - greater of $95 per uninsured person or 1% of household
income over 4x poverty level.
o 2015 – greater of $325 per uninsured person or 2% of
household income over 4x poverty level.
o 2016 and beyond – greater of $695 per uninsured person or
2.5% of household income over poverty level.
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Applicable Large Employer
• Penalties for the failure to offer coverage are only applicable to
those employers who employ at least 50 Full-Time or Full-Time
equivalent (“FTE”) employees in a year.
• Full-time is defined as at least 30 hours per week or 130 hours per
month.
• Hours of Service include hours for which the employee was paid but
did not work (vacation, holidays, leave).
• Must count part-time employees for purposes of determining fulltime equivalents (but coverage for part-time employees is not
necessary to avoid penalties).
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Applicable Large Employer
• Determined monthly by aggregating all hours of part-time employees
for the month (up to 120) and dividing by 120; average the hours
across the months in the year.
• The determination of whether an employer is a large employer is made
on a controlled group basis.
• Special rule for “seasonal employees” - If seasonal employees cause an
employer to exceed the 50 employee threshold to be considered a
“large employer,” seasonal employees may be excluded if they were
employed for 120 or fewer days in the year.
• Transition rule for 2013 under which the determination can be based
on any consecutive 6-month period in 2013 (instead of the whole
calendar year).
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Full-Time Employees
• Once you have determined you are a large employer subject to the
Play or Pay requirements, you must determine who is a full-time
employee who must be offered coverage.
• The IRS has issued safe harbor rules to assist with determining who
is considered a full-time employee – “Measurement Periods” and
“Stability Periods”.
• Variable Hour Employees are employees for whom it cannot be
determined whether they will average 30 hours a week.
• If a Variable Hour Employee averages 30 hours a week over a
“Measurement Period”, he is treated as a full-time employee for
the following “Stability Period”.
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Full-Time Employees
• The employer can select the length of the Measurement Period,
between 3-12 consecutive calendar months.
• Measurement and Stability Periods must be applied in a uniform
and consistent basis, but may use different periods for (1)
collectively bargained and non-collectively bargained employees;
(2) each group of collectively bargained employees covered by a
separate collective bargaining agreement; (3) salaried and hourly
employees and (4) employees whose primary hours of employment
are in different states.
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Full-Time Employees
• Administrative Period – the Employer can set a period of up to 90
days between the end of the Measurement Period and the beginning
of the Stability Period to determine who is eligible and notify eligible
employees; the Administrative Period must overlap with the prior
Stability Period.
• Ongoing Employees:
o The Employer selects the months for the “Standard Measurement
Period”.
o If an employee averages 30 hours/week during the Standard
Measurement Period, he must be offered coverage for the entire
Stability Period that follows; the Stability Period must be at least
as long as the Standard Measurement Period and no less than 6
months.
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Full-Time Employees
• New Employees
o The Employer selects months for the “Initial Measurement
Period”; it can begin on any date between the employee’s start
date and the 1st day of the month following the start date.
o If an employee averages 30 hours/week during the Initial
Measurement Period, he must be offered coverage for the
entire Stability Period that follows; the Stability Period for new
employees must be the same length as the Stability Period for
ongoing employees.
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Minimum Value
• The Plan must pay for at least 60% of total allowed costs for
benefits covered under the Plan.
• IRS and HHS will provide a “minimum value calculator” that looks at
certain plan information, i.e. deductibles and
co-pays to determine whether the plan provides minimum value.
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Affordability
• To avoid a potential penalty, coverage must be “affordable”.
• This means the employee’s portion of the premium for individual
coverage only must be no more than 9.5% of his household income.
• Three safe harbors to determine affordability:
o W-2 – the premium is no more than 9.5% of Box 1, W-2 wages;
determined at year end.
o Monthly Pay Rate – the employee’s portion of the premium is no
more than 9.5% of monthly pay or hourly rate of pay times 130
hours.
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Affordability
o Federal Poverty Line – the employee’s portion of the premium is
no more than 9.5% of the most recent federal poverty line for a
single individual as of the first day of the plan year.
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Non-Discrimination
Certain plan design options that may be considered discriminatory:
– Charging different premiums.
– Different eligibility/waiting periods.
– Providing employer-paid post-termination coverage to
executives.
– Penalty for noncompliance:
• Excise tax imposed on the plan sponsor equal to $100/day
for each employee who is affected (i.e. each non-highly
compensated employee who does not receive the benefit or
coverage).
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Non-Discrimination Requirements
• Only applies to Non-Grandfathered plans.
• Effective date delayed pending future guidance.
• Requires that plans not discriminate in favor of “highly
compensated individuals” in terms of coverage and benefits.
• Waiting for guidance, but will be similar to how nondiscrimination
rules under Code section 105(h) currently apply to self-insured
plans.
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Wellness Plans
• Maximum premium discount you can offer for rewards for healthbased standards (e.g., low BMI, or cholesterol) is increased to 30%
effective 1/1/14 (current limit 20%); HHS has discretion to increase
limit to 50%.
• Other rewards for merely participating in a program do not count
towards the limit.
• Can structure incentive as a reward or penalty (can charge smokers
more subject to 20%/30% limit); must offer a reasonable alternative
for those who are medically incapable of meeting the standard
(such as attending a smoking cessation class for someone who is
certified as addicted to smoking) to allow the employee to avoid
the penalty.
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Other Misc. Mandates to Keep in
Mind
• Health FSAs limited to $2,500 (1/1/13).
• Employers will have to provide notice to employees about health
exchanges and eligibility for premium credits (deadline extended
until future guidance is issued). Timing of distribution of notices is
expected to be late summer or fall to coordinate with open
enrollment period for exchanges; model language expected.
• Plans will need to limit waiting periods to enroll to 90 days (1/1/14).
• Fully-insured, small employer plans will have to offer “minimum
essential benefits” (2014).
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Other Misc. Mandates to Keep in Mind
• In addition to uninsured individuals, small employers (generally those
with less than 50 employees) can purchase insurance for their group
through the state exchange; some states may allow employers with
up to 100 employees to purchase through exchange.
• Exchanges will offer fully-insured contracts that provide minimum
essential health benefits at different levels of coverage (Platinum, Gold,
Silver, Bronze).
• Employers with at least 50 FTEs must submit annual health insurance
coverage returns to the IRS (1/1/14).
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Other Misc. Mandates to Keep in Mind
• Patient Centered Outcomes Trust Fund Fees – Plans will have to pay
an annual fee ($1 (subject to increase) times the average number of
covered lives) to fund research to determine effectiveness of
various forms of medical treatment.
• Employers with more than 200 employees that offer health
insurance will have to automatically enroll new full-time employees
in coverage (with the opportunity to opt-out); Much like autoenrollment in 401(k) plans; (effective once regulations are issued).
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Other Misc. Mandates to Keep in Mind
• Cadillac Plan Tax (2018) –
o 40% excise tax on employers providing coverage valued in excess
of $10,200 for individual coverage and $27,500 for family
coverage.
o Higher limits for certain high-risk professions (law enforcement,
firefighters, construction, mining).
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Why Should I Care
• Negative consequences to employees.
• Negative monetary consequences to employer.
• Fiduciary Responsibility to:
Act prudently.
In the exclusive interest of plan participants.
• Opportunity to redesign plan/benchmark.
• DOL Audits beginning on compliance with requirements already in
effect.
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What to Do Now
• Discuss health care reform changes with your broker, insurer, third
party administrator, and legal counsel.
• Create a timeline for ensuring each mandate is properly
implemented.
• Assess your workforce; decide whether you will “Play or Pay”.
• Make sure you have reliable systems in place to accurately track
and monitor hours of service.
• Even if a particular mandate has not yet gone into effect, often
“good faith” compliance is required.
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What to Do Now
• Conduct a Self-Audit – ensure you have all documents to
demonstrate compliance with the Act.
• Make sure you are keeping good records.
• All of these requirements are constantly evolving. Consult legal
counsel with any questions and to review any plan materials.
© Copyright 2013. Please note that these materials were delivered in connection with a verbal panel presentation on February
27, 2013, and are incomplete without the accompanying oral comments. Since these materials and related discussions are
informational and educational in nature and represent the speakers’ own views, attendees should consult with legal counsel
before taking any actions and should not consider these materials or discussions thereabout to be legal or other
advice. Professional advice should be obtained before attempting to address any legal situation or problem.
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