Transcript Resig - HEALTH BENEFITS PROGRAM OPPORTUNITIES WITH sisc

Affordable Care Act
Solutions to Comply with the Act
March 2014
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A Simple Chart to Get Started
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Objective of Session
• Provide Solutions to Comply with the Act
• No sales – just detailed explanation of how SISC will assist Districts
• No confusing explanation of the law
• Review the issues having near-term impact on SISC member Districts
• Requirements
• Review potential meaningful solutions
• New options offered by SISC
• Safe Harbor compliance with the Act
• Review longer-term considerations
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Exchange/Marketplace “Covered California”
Various Levels Of Coverage – Actuarial Value:
Actuarial value means that for a standard population and utilization, the plan will pay that percent
of their health care expenses, while the enrollee will pay the remaining percent through a
combination of deductibles, copays, and coinsurance.
Plan
Actuarial Value
Deductible
Office Visit
Copayment
Out of Pocket
Maximum
Platinum
90%
$250/surgery or
per hospital day
$20
$4,000
Gold
80%
$600/surgery or
per hospital day
$30
$6,350
Silver
70%
$2,000 per year
$45
$6,350
Bronze
60%
$5,000 per year
$60
$6,350
.
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Exchange Coverage and SISC Coverage
Exchange Coverage
SISC Coverage
No pre-existing conditions
No pre-existing conditions
Guarantee issue
Guarantee issue
No medical underwriting
No medical underwriting
Rates do not vary by health status
Rates do not vary by health status
Rates increase with age
Same rate for all employees
regardless of age
Rates vary by household income
Same rate for all regardless of
household income
Premium paid with after-tax dollars
Premium paid with pre-tax dollars
which reduces the net cost
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Exchange Plans Feature Narrow Networks
Covered California: “Trade-offs are necessary to keep premiums reasonable.”
• UCLA Medical Center and its doctors: Only in one network - Anthem Blue Cross
• Cedars-Sinai Medical Center: Not included in any Exchange plans.
• Blue Shield of California: Exchange customers limited to 36% of its regular physician
network statewide (about 24,000 compared with 66,000 in its full PPO network)
• Most Plans have no out of network benefit: EPO not PPO
• Plans and networks vary by residence of employee
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Overview of Mandates – Covered Employer
• Only covers “large” employers
• 50 or more Full-Time Equivalents (FTE)
• Small Employers have no exposure to penalties under the law
• ACA addresses the responsibilities of a large employer to a full-time employee
only (as defined in the law)
• Excludes retirees
• Employer mandates take effect:
• January 1, 2015 for employers with 100 or more FTE employees
• January 1, 2016 for employers with 50 to 99 FTE employees
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Definition of Covered Employee
• Any individual hired into a full-time position or
• Any individual who at the time of hiring is expected to work on average 30 or more
hours per week (130 hours per month)
• The definition of full-time under ACA does not change the definition of full-time for any
other federal or state purposes, i.e.,
• Pension
• Wage and Hour Laws
• State of California
• Employees whose hours cannot be projected at the time of employment are handled in
a completely different manner (measurement periods, administrative periods and
stability periods).
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Employer Mandate and Enforcement - The Two Penalties
A
B
$2,000 per year times all
full time employees minus
the first 30.
$3,000 for each employee
that goes to the Exchange
AND receives a federal
subsidy
Employer must provide
access to at least one plan
for 95% or more of full-time
employees and their
dependents to age 26
At least one plan offered must
be of minimum value (60%)
and affordable for self-only
coverage
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Overview of Mandates - Employer Responsibility - Penalty A
• To avoid Penalty A, Employers are required in 2016 and beyond* to:
• Offer access to coverage to essentially “all” (95% or more) of FT employees (as
defined) and dependents to age 26. However, there is no mandate to offer coverage
for spouses
• Variable hour, part time, temporary and seasonal employees, including substitutes
could be considered full time
• These employees could expose the District to Penalty A if they represent more
than 5% of the full time work force
• How can you comply to avoid the penalty?
• The IRS has developed safe harbor tests
• There are also additional ways to avoid Penalty A altogether
* (Employers with 100 or more FTE employees are required to offer access to 70% or more in 2015)
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Mandate and Safe Harbor - Penalty A
• Employer must provide access to coverage to “all” full-time (as defined in the law)
employees and their dependent children
• Safe Harbor
• Regulations permit a margin of error of 5% or less (95% or more of all full time
employees have access to coverage for themselves and dependent children)
• If the number of full time employees that are not eligible to elect coverage for
themselves and dependent children does not exceed 5% of the total
workforce, the safe harbor is met
• Access to coverage does not mandate a contribution
• Could offer ACCESS to only the lowest cost plan without an employer
contribution
• Example, 90% of full time employees may have coverage and a
contribution from the District and another 10% of full time employees have
access but no contribution
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Overview of Mandates - Employer Responsibility - Penalty B
• Penalty B
• At least one plan offered to full time employees and dependent children to age 26
must be:
• Of minimum value (60% of medical expenses paid by plan)
• Affordable for self-only coverage – 9.5% or less of wages
• No requirement by ACA to offer coverage to spouses
• No requirement to contribute to cost of dependents
• Penalty B is $3,000 per year ($250 per month) on any employee that meets all of
these requirements
• Qualifies for a federal subsidy from the Exchange based on total household
income (excluding MediCal eligible participants)
• Elects and receives subsidized coverage from the Exchange
• Demonstrates that the lowest cost, minimum value coverage offered by the
employer was not affordable for self-only coverage
• Employer safe harbor on affordability: The employee share of the premium
required for the least costly, self only coverage must be less than 9.5% of the W2,
box 1 wages paid to the employee.
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Problem #1 – SISC Eligibility Rules – Penalty A
Current Rule For Active Employees: Permanent or probationary employees who work
a minimum of 50% of a full-time job are eligible. Employees who do not receive District
paid benefits based on a pro rata share of what is contributed towards a full-time
employee are not eligible.
Solution: Effective October 1, 2014, SISC will eliminate the requirement of minimum
percentages of time worked, minimum amounts of District contributions and the
requirement to be in a permanent or probationary status.
Reasoning: Prior to 2014, the individual market was allowed to exclude people from
coverage for pre-existing conditions. In order to protect the SISC pool, strict eligibility
rules were necessary to avoid covering high-risk individuals. As of January 2014, the
individual market is now a viable source of coverage for the uninsured regardless of their
health status.
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Problem #2: The Complexity of “Measurement” and “Stability” Periods
to Avoid Penalty A
Potential Solution: Offer access to minimum value medical plan to all new hires. This
would include variable hour, temporary and seasonal employees.
 Do not provide any District contribution to anyone who does not qualify based on current
District guidelines. Allow two weeks from a new employee’s date of hire for a decision, and
if they choose to decline, require a signed declination.
 Allow those who decline coverage but remain employed with the District another
opportunity to elect or decline the minimum value medical plan at the next open enrollment
period. The only time an offer to participate in the benefits would be made to those who do
not qualify based on current District guidelines would be when first hired and during the
annual open enrollment.
 Access to benefits meets the safe harbor requirements of the ACA and the District would
not have to administer “measurement” and “stability” periods including any testing or
recordkeeping of hours to avoid Penalty A
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Problem #3: Affordable and Minimum Value Plan - Penalty A & B
Requirements to avoid penalties:
Coverage available must be at least a minimum actuarial value (60% of the cost of
services). SISC PPO “Plan N” is our only plan not meeting 60%. It will be replaced
October 1, 2014 with an official 60% “Bronze Plan”.
Solution:
This Spring, SISC renewals will include a minimum value “Bronze” plan. It will not count
against the maximum permitted number of plans SISC allows a group to offer. It will
include only the minimum coverage required by ACA
 It will only feature two-tiers: Employee Only and Employee + Child(ren).
 It will NOT include an option for spousal/domestic partner coverage.
 It will NOT be offered with any option for dental, vision or life coverage.
The primary purpose of the plan will be to allow districts to avoid exposure to Penalty A
and B by:
• offering access to a minimum value plan to employees who HAD NOT previously
qualified for SISC coverage and,
• providing a more affordable plan for single only coverage to employees who HAD
previously qualified for SISC coverage.
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Penalty B: “At Risk” Calculations on Affordability
(A)
(B)
(C)
(D)
(E)
(F)
(G)
Annual
Hrs/Wk
Monthly
Salary
Single Rate
at which Plan is
for the
Monthly
Monthly
"Unaffordable"
Employees for whom the
Lowest Cost
District
Employee
9.5%
District is "At Risk" of paying
a $250/month penalty
% of FT
Plan
Contribution Contribution
Threshold
Example #1 - Tiered Rates
40
100.0%
$425
$425
$0
$0
No Risk, Column (F) is under
138% of FPL ($15,856)
30
75.0%
$425
$319
$106
$13,421
No Risk, Column (F) is under
138% of FPL ($15,856)
Example #2 - Composite Rates and Low District Contribution
40
100.0%
$925
$625
$300
$37,895
At Risk on Employees under
the amount in Column (F)
30
75.0%
$925
$469
$456
$57,632
At Risk on Employees under
400% of FPL ($45,960)
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Problem #4: Affordability of Composite Rates with Low Caps - Penalty B
Solution: This Spring, SISC renewals will include a Minimum Value “Bronze” Plan. It will
not count against the maximum number of plans SISC allows a group to offer. It will only
provide the minimum coverage required by the ACA.
 It will only feature two-tiers: Employee Only and Employee + Child(ren).
 It will NOT include an option for spousal/domestic partner coverage.
 It will NOT be offered with any option for dental, vision or life coverage.
The ACA only requires that “employee only” (single) coverage must be affordable as
defined by the law.
Allowing composite rated groups to offer coverage at an employee only rate on a
Minimum Value “Bronze” Plan with no option for dental, vision or life coverage, will help
districts pass the affordability test for even the lower paid full-time permanent and
probationary employees .
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“At Risk” District Penalty B Scenarios
 Employee enrolls in District coverage
No Penalty
 Employee enrolls in spouse’s health plan
No Penalty
 Employee is eligible to enroll in spouse’s “affordable”
health plan
No Penalty
 Employee remains uninsured
No Penalty
 Employee’s household income qualifies for Medi-Cal
No Penalty
 Employee enrolls in individual coverage outside the
Exchange
No Penalty
 Employee enrolls in Exchange and household income
is greater than 400% of the federal poverty level
No Penalty
 Employee enrolls in the Exchange and,
 Demonstrates they were full time employee and,
 Demonstrates District coverage was unaffordable and,
 Employee receives a federal subsidy
District pays $250
per month penalty
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Collecting Penalty B
• Notice for the calendar year will occur after the employee claims premium tax credits
(the subsidy) on their individual tax return.
• The IRS will contact the District regarding the potential liability.
• The District will have an opportunity to respond.
• If the IRS determines the District owes a penalty, the IRS will send a notice and request
payment.
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ACA Plan Sponsor Fees
 Patient-Centered Outcomes Research Institute (PCORI) Fee
 To fund comparative effectiveness research
 1st Year: $1 per individual
 2nd Year: $2 per individual
 Increases in future years
 Ends after September 2019
 Exchange Reinsurance Fee
 To stabilize premiums in the individual market for the first three years of the Exchange
 2014: $63.00 per individual
 2015: $44.00 per individual (estimated)
 2016: $30.00 per individual (estimated)
 Ends after 2016
 SISC Solution: SISC is Handling This for You
 Funding for these fees have already been included in the rates
 The carriers (Anthem, Shield, Kaiser) pay these fees on the HMO plans
 SISC will go through the process of paying these fees on the PPO plans
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Employee Exchange Notices
 Notice requirements:
 To all current employees (including full-time and part-time) by October 1, 2013
 To all subsequent new hires within 14 days of their start dates
 SISC provided guidance to all member districts prior to the effective date of
this new requirement.
 SISC cannot provide this notice. It must be provided by the district.
 COBRA Notice Revision
 SISC changed the COBRA notice we send to terminating employees to comply with the
requirement to include notice about the availability of Exchange coverage.
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Proposed Reporting Requirements
Form 6055 - 6056
• Starts in 2016 for 2015 tax year
• Employer must report to the IRS by January 31, 2016 and each January thereafter, an
electronic listing of every employee and retiree including all dependents enrolled in
medical coverage and the months of coverage
• Name
• Social
• Residence
• Months Covered
• Employer must issue to each employee by January 31, 2016 and each January
thereafter, a certificate of coverage including the above information for the employee or
retiree to file with their tax return to avoid the individual mandate penalty
• SISC Solution: To the extent SISC can do this as a service to member Districts, or, if
not as a service, then provide the information needed to do this to the member
Districts, SISC will.
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Cadillac Tax
 Effective 2018: 40% non-deductible excise tax on amounts over cost
thresholds
 Based on total cost of coverage: Employer plus Employee share
 Excludes Dental and Vision
 Includes HSA, HRA and Flexible Spending Account Amounts
 2018 Cost Thresholds:
 $10,200 individual coverage
 $27,500 family coverage
 No regulation on composite rates have been issued
 Indexed for inflation (CPI not Medical Inflation)
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Cadillac Tax Example – Tiered Rates (Excludes FSA Amounts)
Individual Coverage
Premium
Cost
Cadillac
Tax
Threshold
Estimated Inflation
9%
2014 Monthly Rate
Months in Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
$550
x 12
$6,600
$7,194
$7,841
$8,547
$9,316
$10,155
$11,069
$12,065
$13,151
$14,334
$15,625
Family Coverage
40% Tax on
Amount
Amount
Over
Over
Threshold Threshold
Premium
Cost
Cadillac
Tax
Threshold
3%
9%
3%
$10,200
$10,506
$10,821
$11,146
$11,480
$11,825
$12,179
$1,500
x 12
$18,000
$19,620
$21,386
$23,311
$25,408
$27,695
$30,188
$32,905
$35,866
$39,094
$42,613
$27,500
$28,325
$29,175
$30,050
$30,951
$31,880
$32,836
$248
$919
$1,671
$2,510
$3,445
$99
$368
$668
$1,004
$1,378
40% Tax on
Amount
Amount
Over
Over
Threshold Threshold
$1,013
$2,855
$4,915
$7,214
$9,776
$405
$1,142
$1,966
$2,886
$3,910
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Cadillac Tax Example – Composite Rates (Excludes FSA Amounts)
Individual Coverage
Premium
Cost
Cadillac
Tax
Threshold
Estimated Inflation
9%
2014 Monthly Rate
Months in Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
$1,200
x 12
$14,400
$15,696
$17,109
$18,648
$20,327
$22,156
$24,150
$26,324
$28,693
$31,275
$34,090
Family Coverage
40% Tax on
Amount
Amount
Over
Over
Threshold Threshold
Premium
Cost
Cadillac
Tax
Threshold
3%
9%
3%
$10,200
$10,506
$10,821
$11,146
$11,480
$11,825
$12,179
$1,200
x 12
$14,400
$15,696
$17,109
$18,648
$20,327
$22,156
$24,150
$26,324
$28,693
$31,275
$34,090
$27,500
$28,325
$29,175
$30,050
$30,951
$31,880
$32,836
$10,127
$11,650
$13,329
$15,178
$17,213
$19,451
$21,911
$4,051
$4,660
$5,332
$6,071
$6,885
$7,780
$8,764
40% Tax on
Amount
Amount
Over
Over
Threshold Threshold
$1,254
$501
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New Options for Early Retirees
• Employers that offer health insurance plans to retirees who are not yet
eligible for Medicare might explore the potential savings of directing them to
plans offered through the Exchange. Retirees may be better off in exchanges.
Premium subsidies are available to retirees younger than 65.
• Such a move could be financially advantageous for both employers
(depending on whether they subsidized early retiree coverage) as well as the
pre-Medicare-eligible retirees. It would also remove the administrative burden
of offering the coverage.
• At this point, very few employers are terminating early retiree health care
plans due to uncertainty about how much Exchange insurers will boost rates
over the next several years.
• Of course, most school districts would have to resolve collective bargaining
issues as well.
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Covering The ACA May Be Almost As Hard As Implementing It
Kaiser Family Foundation - June 04, 2013 | Drew Altman
Judgment by anecdote. Critics will feed reporters ACA horror stories and supporters will sell
them success stories.
Let’s say Bill Smith in Arkansas chains himself to the IRS building and refuses to pay his fine in protest
of the law’s requirement that Americans buy health insurance, but that overall, the mandate works
smoothly. No doubt, Smith will be “breaking news” on your favorite cable channel. Powerful anecdotes
stick in the public mind in ways statistics never will.
Deciding what to cover.
When the “death panel” story broke, many news organizations sprang into action to fact check and
debunk the claim. Today, 40 percent of the American people still believe there are death panels in the
act.
The “balance trap” — the pressure to present the views of the organized right and left rather
than the facts.
This is a general problem for journalism today but one that is particularly relevant to ACA because
views on it are so sharply divided along partisan lines. It is not always easy to find the facts, but often
they are in a government report or a study from a respected organization.
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Additional Resources
 Health Reform: http://www.healthcare.gov/
 Dept. of Health & Human Services (HHS):
http://cciio.cms.gov/resources/other/index.html#sbcug
 Dept. of Treasury/Internal Revenue Service:
http://www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6
 Dept. of Labor: http://www.dol.gov/ebsa/healthreform
 SBC Information: http://cciio.cms.gov/resources/other/index.html
 SBC Frequency Asked Questions (FAQs):
‒ http://www.dol.gov/ebsa/faqs/faq-aca8.html
‒ http://www.dol.gov/ebsa/faqs/faq-aca9.html