Transcript PRESENTATION TITLE - Rollins Insurance

Healthcare Reform
Client seminar
11/16/10
1
Participants
Moderators:
 Michael Brachlow
 Chuck Rollins
2
Health Coverage Declines
3
Health Insurers First-Half 2010
Results
4
Recap on Legislation
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President signed Patient Protection and Affordable Care Act
(PPACA) on March 23
Reconciliation bill signed on March 30
Interpretation of legislation new requires examining three sources:
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Senate-passed bill, H.R. 3590 (now P.L. 11-148)
Manager’s amendment to the Senate bill
Reconciliation bill, H.R. 4872 (now P.L 111-152)
Very important: Check for all three sources when
considering how the bill works
6
PPACA
Implementation Timeline
• First renewal, 6 months after law passed
(3/23/10)
• Renewals after September 23,2010 affects
fully insured and self insured unless
Grandfathered
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon enactment
(3/23/10)
Automatic Enrollment for Groups 200+*
Effective 90 days following
enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
*Final regs not released
** Not affected by Grandfathering
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Grandfather Status
To be a grandfathered plan, the policy or group health
plan must have had at least one individual enrolled in
coverage on March 23, 2010, and the policy or plan
must have continuously covered someone since
March 23, 2010 (even if not the same individuals).
Any new policy, certificate, or contract of insurance
(versus renewal) issued after March 23, 2010 is not
grandfathered.
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Loss of Grandfathered Status
Any of the following made after March 23,2010
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Elimination of benefits
Increase in % cost sharing, e.g. coinsurance
Increase in fixed-amount cost sharing, e.g. deductible or out of pocket*
Increase in copayments*
Decrease in employer contribution by more than 5 percentage points
Decrease in annual limits
Entering into a new insurance policy, certificate or contract
If multiple plans are offered, it is possible for one to be grandfathered and another not.
*unless less than medical inflation +15%
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
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Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
Federal Dependent to Age 26
Requirements:
A.
B.
C.
May be unmarried or married. Extended eligibility does not apply to adult child’s
spouse or children
Covered until child reaches age 26
Plans that do not provide dependent coverage are not required to do so under the act.
The young adult does not have to live with a parent, be financially dependent on a
parent, or be a student.
Federal law supersedes State law
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New York Dependent to Age 29
1.
2.
Make Available Option
Young Adult Option
Requirements:
A.
B.
C.
D.
E.
Be unmarried
Be 29 years of age or under
Not be insured by, or eligible for comprehensive (i.e. medical and hospital) health
insurance through his or her own employer
Live work or reside in NYS or the health insurance company’s service area; and
Not be covered by Medicare
The young adult does not have to live with a parent, be financially dependent on a parent, or be a
student
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New Jersey Dependent to Age 31
Requirements:
A.
B.
C.
D.
E.
Be unmarried and must not be a parent of a child
Covered until the day dependent turns 31
May be eligible for other coverage
Policy must be issued in State of New Jersey
Dependent must be resident of State of NJ, or fulltime student elsewhere at accredited
public or private higher education institution
The young adult does not have to live with a parent, be financially dependent on a parent, or be a
student.
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
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Restricted Annual Limits
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Health care reform defines essential benefits as the
following health care service categories
No lifetime limits on ESSENTIAL
benefits
Restricted annual limits on
ESSENTIAL benefits
What are “essential” benefits?
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Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health substance use disorder
services, including behavioral health
treatment
Prescription drugs
Rehabilitative and habilitative services and
chronic care management
Laboratory services
Preventive and wellness services
Pediatric services, including oral and vision
care
* Still subject to change
HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
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Small Business Health Care Tax Credit
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New Code Section 45R provides a tax credit of up to 35% of
health care costs of small employers, effective for (so, this credit
is currently available) 2010.
To qualify for the credit the employer must employ no more than
25 “full-time equivalent” employees (“FTEs”), and must pay
average wages of less than $50,000 per FTE.
The full credit is only available if the number of FTEs is 10 or less,
and the average annual wages are $25,000 or less.
The credit is gradually phased out as the number of FTEs
increases from 10 to 25, and the average annual wages increases
from $25,000 to $50,000.
Affiliated Companies
For most purposes, affiliated companies are determined on a
"controlled group" or "affiliated service group" basis under Code
sections 414(b), (c) or (m). While the details can get tricky, parent
and 80% subsidiaries are aggregated. Additionally, two or more
entities are aggregated where (very broadly) 5 or fewer persons
own more than 50% of the two or more entities (subject to detailed
rules about identical ownership among the entities). Very
generally, if you have multiple entities that are owned my a small
group of individuals and the ownership is relatively similar among
the different entities, then you must aggregate the entities. As a
specific example, if four people each own 25% of three entities, the
three entities would be aggregated.
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
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Minimum Loss Ratio
Healthcare Reform
• Small groups (less than 100 employees) 80%
• Large groups (100 or more) 85%
New York 82%
New Jersey?
What Goes into the MLR?
* “The Secretary may adjust [the MLR] percentage with respect to a State if the Secretary determines that the
application of such 80 percent may destabilize the individual market in such State.”
21
HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization is treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
22
HEALTH REFORM IMPLEMENTAITON
TIMELIME
Effective upon
enactment (3/23/10)
Automatic Enrollment*
Effective 90 days
following enactment
Temporary Retiree Reinsurance Program
High-Risk Pool
Effective plan years
beginning on or after
September 23, 2010
Adult Children Coverage to age 26
Restricted Annual Limits on Essential Benefits (to be defined)
No Lifetime Limits on Essential Benefits
Tax Subsidy
Minimum Loss Ratio
No Pre-existing Condition Exclusions for enrollees under age 19
No Rescissions (primarily individual and small group coverage)
First-Dollar Coverage for Preventive Care**
Revised Appeals Process**
Non-discrimination Rules Extended to Insured Plans**
Grandfathered Plans
Emergency Services without prior authorization/treated as in-network**
Choice of Providers (pediatrician and OB-GYN)**
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Non Discrimination Rules
Extends prohibition against discrimination in favor of Highly Compensation
Individuals (HCI) to fully insured plans, unless plan is grandfathered.
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Effective first renewal after 9/23/10
No Executive Carve Outs
If point of enrollment plans are offered and all employees are eligible this is
most likely acceptable
The above materials have been prepared based upon our current understanding of the health care reform legislation, but are not intended as
legal advise. As you know, the new law is very complex and many issues are not fully addressed and may be subject to different
interpretations. In addition, new regulations have recently been issued on virtually a weekly basis. Thus, our understanding of the new
law is constantly changing as additional guidance is issued. Please consult your own counsel if you have specific questions.
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Highly Compensated Individual (HCI)
Internal Revenue Code section 105(h) has rules prohibiting selfinsured medical plans from "discriminating" in favor of "highly
compensated individuals." For purposes of this test, a
"highly compensated individual" is an individual who is: a)
one of the five highest paid officers, b) a 10% shareholder,
or c) among the highest paid 25% of all employees
(excluding certain individuals who are not participants, such
as employees with less than 3 years of service, employees
who have not attained age 25, part-time or seasonal
employees, employees covered by a collective bargaining
agreement, and nonresident aliens).
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Eligibility Test
To pass the eligibility test the plan must benefit one of the following:
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At least 70% of all employees
At least 80% of all employees who are eligible for benefits (if at least 70% of all
employees are eligible to participate in the plan)
A non discriminatory classification of employees
You can exclude from the test employees that:
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Have 3 years or less with the company
Are younger than 25
Part time, seasonal or collectively bargained
Non residents aliens who do not receive US earned income
Changes not affected by
Grandfathering
• No lifetime limits on essential health
benefits
• Restricted annual limits on essential health
benefits
• No rescissions of coverage
• Extension of coverage for dependents
under 26 years old
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Tax on Indoor Tanning Salons
The Healthcare
Bill imposes
a 10% tax on
Indoor
Tanning
Salons
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
January 1, 2011
March 23, 2012
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No Reimbursement for OTC Drugs unless prescribed under FSA
Form W-2 Reporting of Value of Benefits (for W-2 issued in January
2012 with respect to 2011) Long-Term Care Program
Increased Penalty for Non-Medical HSA Withdrawals
Increased penalties for non medical HSA withdrawals
Uniform Explanation of Coverage
4-page pre-enrollment coverage document sent outlining benefits and
exclusions
60-Day Notice in Advance of Material Modifications
January 1, 2013
Medicare Tax Increase for High Earners
No Deduction for Retiree Drug Subsidy
Cap on Salary Reduction Health FSA Contributions ($2,500 limit)
Comparative Effectiveness Fee (policy years ending after November 30,
2012)
March 1, 2013
Employer Notification Regarding Exchanges
New Taxes – “Hospital Insurance” Tax Increase
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Health Care Reform increase the rate of the Hospital Insurance (“HI”) tax on
employees (but not employers), from 1.45% to 2.35%, but only for certain
taxpayers:
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joint returns of more than $250,000,
returns for “married filing separately” in excess of $125,000
all other returns of more than $200,000
Although tax is only on employees, employers must deduct and withhold for
the tax from employee compensation
For the self-employed, Health Care Reform also increase the HI tax by .9%
(from 2.9% to 3.8%), and the additional tax is not deductible
Effective date. These changes for the HI tax are effective for taxable years
beginning after 12/31/2012
New Taxes – Tax on “Unearned Income”
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Health Care Reform imposes a new tax of 3.8% upon individuals
& certain estates and trusts on so-called “unearned income”
For individuals, tax equals 3.8% of the lesser of:
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the excess, if any, of the modified adjusted gross income for such taxable year above the “threshold” amount
“Net investment income” is generally the sum of gross income
from:
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“net investment income” for a given taxable year, or
Interest , Dividends, Annuities
Royalties , Rents, and
other gross income from certain “passive activities” or financial
instrument/commodity-type businesses
New Taxes – Tax on “Unearned Income ”
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Excluded from definition of “net investment income”
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Distributions from certain, qualified employee benefit plans, and
Any item taken into account in determining self-employment income for such taxable year on which the
“Hospital Insurance” tax on self-employment income is imposed (Code Section 1401(b))
Limits are also imposed on the gain taken into account from sale of an active interest in a partnership or S
corporation
Threshold amount. The so-called “threshold amount” for
purposes of the above-described formula is the same as for
the HI tax increase
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for joint returns or surviving spouses: over $250,000,
for married taxpayers filing separately: over $125,000
for all other taxpayers: over $200,000
Effective date. The new, “unearned income” tax would
apply to taxable years beginning after 12/31/2012
OTC Eligible
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Recent Changes
• OTC- IRS granted a two week extension
through January 15,2011
• W2 – Reporting NOW OPTIONAL to the
employer
• For children only plans will allow insurers to
charge more for children with serious
medical conditions
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HEALTH REFORM IMPLEMENTAITON
TIMELIME
January 1, 2014
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State-based exchanges
Free rider penalty
No preexisting condition exclusions
Employer certification of coverage
Increased wellness program incentives (from 20%-30%)
Employer notification regarding exchanges
Individual mandate
Free choice vouchers
Employer mandate (50+ Groups)
No annual limits
Required coverage for clinical trials for life-threatening diseases
90-day limit on waiting periods
Retiree reinsurance program ends if money has not already run
out
Minimum Essential Coverage
Beginning in 2014, all U.S. citizens are
required to have “minimum essential
coverage” or pay the greater of a flat dollar
penalty ($95 in 2014, $325 in 2015, and
$695 in 2016, indexed by CPI) or a penalty
based on a percent of income (1% in 2014,
2% in 2016 and thereafter).
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Shared Responsibility Fee
Beginning in 2014, employers with at least 50 full-time
employees that do not offer coverage must pay a
fee of $2,000 multiplied by the total number of fulltime employees (minus 30) if any full-time employee
receives premium assistance through an Exchange;
employers who do offer coverage must pay the
lesser of: $3,000 fee for each full-time employee
who receives premium assistance through an
Exchange or $2,000 per full-time employee (minus
30).
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This presentation is made to try and assist
you in understanding the new Healthcare
Reform.
You should consult your own legal counsel for
further insight.
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The Material
•
39
The above materials have been prepared based
upon our current understanding of the health care
reform legislation, but are not intended as legal
advise. As you know, the new law is very complex
and many issues are not fully addressed and may
be subject to different interpretations. In addition,
new regulations have recently been issued on
virtually a weekly basis. Thus, our understanding of
the new law is constantly changing as additional
guidance is issued. Please consult your own
counsel if you have specific questions.
Questions?
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THANK YOU FOR
PARTICIPATING
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