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Health Care Reform What Florida’s Local Governments Need To Know

A transformational moment

 Health Care Reform is creating an added catalyst for change in employers’ health care offerings   Employers are considering significant changes in health care strategy to address the anticipated cost of the legislation It’s really a convergence of several issues:    Rising health costs Aging work force with increasing health risks Increasing frustration with provider reimbursement system Health care is becoming a total business issue that will ultimately affect:  Financial planning for public and private organizations  Competitive position of products and services   Workforce strategies  Defining the employee value proposition Benefits and compensation  Administration and payroll

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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Despite recent events in Washington, uncertainty remains

How will Supreme Court rule?

Who controls Congress in 2013?

Who wins Presidential election?

DECIDED DECIDED DECIDED

  

Will funding be Will public What regulatory available?

Exchanges be ready?

guidance is coming?

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

Stakeholders all have their own interests

I want access to good doctors and hospitals, including my own I need a healthy and productive workforce and affordable solutions Participants Employers must offer affordable benefits that are not too high or low I want a health plan that doesn’t cost so much and is easy to use Employers Government I want a payer mix that includes private sector so I can shift costs; I like integrated health systems except for the expectation for risk sharing

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Physicians I want to be paid more for the care I deliver Hospitals Health Plan I want to remain in the lead position of controlling rate increases and I don’t want to be accountable for outcomes or service I want to get out of the health care business if things don’t change

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

Building blocks of Health Care Reform

Key Element Impact Individual mandate Potential for additional enrollment in employer plans Marketplace reform Health Insurance Exchanges Employee communication needs and potential future employer benefit design changes Public Exchanges that will provide individual coverage for retirees and certain employees Premium and cost-sharing subsidies Potential for employees to receive subsidies in Exchanges Employer mandates Expanded public plans Revenue raisers Additional administration requirements; potential change in eligibility for some employees Penalties Delayed / Reporting Relaxed Potential for some employees to enroll in Medicaid Additional payroll taxes and fees; long-term incentive to reduce plan costs to avoid excise tax 4

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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INDIVIDUAL MANDATE

2014 individual mandates

 All U.S. citizens and legal residents are required to enroll in basic health coverage or pay a penalty (limited exemptions)  Tax penalties for noncompliance equal to the greater of an indexed flat dollar amount or percent of income  2014: $95 or 1% of income  2015: $325 or 2% of income  2016: $695 of 2.5% of income  Family cap: 3x the flat-dollar penalty

Comments

 Tax penalties are not expected to significantly influence behavior

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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INDIVIDUAL MANDATE

2014 examples of individual tax penalties

 Examples of individual mandate tax penalties:  Assume $10,250 single/$20,500 family tax filing threshold in 2014 (for those under age 65)  Assume $11,000 single/$22,000 family tax filing threshold in 2017 (for those under age 65)

Family Size

Individual Married Couple Family of 3 (1 child <18) Family of 5 Family of 5

Household Income

$25,000 $40,000 $40,000 $40,000 $150,000

2014 Penalty Calculation 2014 Penalty Est. 2017 Penalty

Maximum of: $95 Flat Dollar OR 1% of ($25,000 – $10,250) Maximum of: ($95 x 2) OR 1% of ($40,000 – $20,500) $148 $195 $695 $1,390 Maximum of: ($95 x 2.5) OR 1% of ($40,000 – $20,500) $238 $1,738 Maximum of: ($95 x 3) OR 1% of ($40,000 – $20,500) Maximum of: ($95 x 3) OR 1% of ($150,000 – $20,500) $285 $1,295 $2,085 $3,200

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

Health Care Reform: Provisions already in place

2011

Dependents covered to age 26 No lifetime maximums and restricted annual maximums No pre-existing condition exclusions for age 18 and under No reimbursement for over-the-counter drugs from account-based plans (FSAs, HRAs or HSAs) Penalty for ineligible HSA withdrawals increased to 20% Medicare Part D “donut hole” begins to close; 50% discount on brand drugs; target cost-sharing is 25% by 2020

2012

Women’s preventive services – effective for plan years beginning ≥ 8/1/2012 Summary of Benefits and Coverage (SBC) – first Open Enrollment ≥ 9/23/2012 W-2 Reporting for 2012 Calendar Year of Aggregate Value of Employees’ Health Coverage

2013

Recent guidance requires changes to SBC templates for 2014 -- Adds disclosure regarding Minimum Essential Coverage and whether the plan meets Minimum Value requirements FSA maximum lowered to $2,500 Medicare payroll tax increased for high earners

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

DOL Releases Guidance on the Required Notice to Employees on Exchange Operations

 By October 1, 2013, employers must provide their employees information on how the Exchanges will operate  Includes a description of the services provided by the Exchange (also known as the Marketplace) and the manner in which the employee may contact the Exchange to request assistance  Shares with employees that if their employer plan does not satisfy Minimum Value requirements, the employee may be eligible for federal subsidies  Confirms that if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefit plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes 

Notice must be in writing and can be delivered via first class mail or electronically

The model language is available on the DOL's website: dol.gov/ebsa/healthreform

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

Provisions beginning in 2014 Waiting period

 Plan may apply an eligibility waiting period of up to 90 days  Coverage under the group health plan must begin no later than the 91st day of employment  Employees in waiting period should not be counted for purposes of determining the employer’s tax assessment regarding play-or-pay mandate

Comments

 Common waiting periods: — Immediate eligibility — 1 st of month following date of hire

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

Provisions beginning in 2014 Maximum out-of-pocket limits

 PPACA provides that a group health plan (which includes insured and self-insured plans of large employers) may not require out-of-pocket (OOP) payments that exceed the out-of-pocket limits for HSA-compliant HDHPs (e.g., for 2014 $6,350 for an individual, $12,700 for a family)  Under HDHPs, OOP limits must be ‘comprehensive’ (i.e., all OOP costs, including medical and Rx, must count toward OOP limit and all expenses, which again include medical and Rx, must be covered at 100% once OOP limit is met (rules apply to in-network services)  This differs from prevalent practice for non-HDHPs under which: (a) Rx benefits are carved out from medical and do not apply to medical OOP limit, and: (b) copays for services such as Rx and office visits continue to apply after medical OOP limit reached  Recent federal guidance confirms that OOP limits must be comprehensive starting in 2014; one year delay is allowed for plans that carve Rx out to separate administrator

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

Provisions beginning in 2014 Maximum out-of-pocket limits (continued)

 Significant implications for non-HDHP plans:  Plan value becomes richer, thus impacting plan cost, unless changes to OOP limit or other design features are adopted to offset this increased cost  Rx and medical vendors need to share claim data for combined accumulation toward comprehensive OOP limits

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

MARKETPLACE REFORM

Automatic enrollment (delayed until 1/1/2015…or later

 Employers with more than 200 full-time employees that offer health coverage are required to automatically enroll employees in health coverage  Employees must be given notice and opportunity to opt-out or enroll in another option  Employers can subject employees to waiting period  U.S. Department of Labor to issue guidance

Comments

 Administrative burden: — Continuous turnover can create challenges — Process and procedures will have to be evaluated and adjusted  Significant employee communication considerations

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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HEALTH INSURANCE EXCHANGES

Health insurance exchange defined Public Exchanges

 As enacted under Health Care Reform, public exchanges will offer plans with standardized relative values to individuals and small groups, with federal subsidies based on income to offset premium cost  May be operated at state or federal level  Scheduled to become operational in 2014 for all eligible individuals under age 65 (will not apply for individuals eligible for Medicare)

Private Exchanges

 Fall into two general categories:  An arrangement where participating employers would offer their employees and/or retirees a pre-defined selection of health plans that have been designed and selected by a third party  Medicare exchanges supporting transition from group to individual coverage

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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HEALTH INSURANCE EXCHANGES

Public health insurance exchanges

 Comprehensive "one-stop shopping" market for commercial health insurance that brings together buyers (employers, individuals) and sellers (insured health plans) by providing  Plans that meet specified standards in terms of design and underwriting, and  Centralized services to support plan assessment, comparison, enrollment and administration  For all eligible individuals under age 65 (will not apply for individuals eligible for Medicare)  U.S. citizens and legal residents  Reside in state in which exchange operates  Not incarcerated  May be operated at state or federal level  Employer eligibility to participate in Exchange  Small employers (≤100 employees; States could lower to ≤50 employees) -

DELAYED

 Exchanges may allow large employers (200+ employees) same options in 2017+

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HEALTH INSURANCE EXCHANGES

How will an individual likely get coverage in 2014?

Family Income Less Than 133% of Poverty

Family is eligible for Medicaid Family may also participate in Exchange If employer coverage is available Family may choose the employer plan or Medicaid

Family Income Less Than 400% of Poverty

Family is eligible for subsidy in Exchange If employer coverage is available, but either inadequate (<60% benefit) or unaffordable (premiums >9.5%) Family may choose the employer plan or subsidized coverage in Exchange If employer coverage is available and adequate and premiums are affordable Family may choose the employer plan or

unsubsidized

coverage in Exchange

Family Income Greater Than 400% of Poverty

Family may purchase

unsubsidized

coverage in Exchange If employer coverage is available Family may choose the employer plan or

unsubsidized

coverage in Exchange

2014 FPL 100% 133% 400%

Estimated for 2014

Single Individual $11,850 $15,796 $47,401 Family of 4 $24,454 $32,597 $97,815 towerswatson.com

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

HEALTH INSURANCE EXCHANGES

What kind of exchange coverage will be available?

Platinum

(90% Value)

Gold

(80% Value)

Plan Offerings Silver

(70% Value)

Bronze

(60% Value)

Key Requirements

 Guarantee issue  No medical underwriting  No pre-existing condition limits  Rating rules (highest age bracket can be no more than 3 times lowest age bracket)

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 Essential health benefits  Preventive care at 100%  No lifetime or annual limits  Maximum Out-of-Pocket limits As enacted under Health Care Reform, public exchanges will offer plans with standardized relative values to individuals and small groups, with federal subsidies based on income to offset premium cost

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

HEALTH INSURANCE EXCHANGES

Roles in exchange development and operation

 Issue rules regarding implementation and operations of exchange   Issue rules around broad qualified health plan requirements Issue standards for “Navigators”  Develop IT systems to help exchanges: — Rate qualified health plans — — — Evaluate member satisfaction Make eligibility determinations for federal programs and subsidies Provide standardized information  Develop streamlined application for income based plans and subsidies  Provide funding until 2015

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Health and Human Services (HHS) must: States can choose:

 How many exchanges there will be: — More than one in state?

— Separate for individual and small group?

— — Participation in a regional exchange?

No state-sponsored exchange (federal exchange)  — State-federal partnership?

Whether it’s a governmental or not-for-profit entity  Exchange governance  Regulatory role with insurers  Determine product offering requirements within HHS guidelines in the exchange  Interaction between products and rates in the exchange vs. those sold outside of the exchange

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

HEALTH INSURANCE EXCHANGES

Employer interaction with exchanges Frequency and intensity will vary based on play-or-pay strategy

Play or Pay Decision Play



coverage is always affordable Play



coverage is unaffordable Pay Possible exchange participants

    Medicaid eligible employees COBRA participants Non-FTEs Early retirees      Employees with unaffordable coverage Medicaid eligible employees COBRA participants Non-FTEs Early retirees  All categories of active, inactive and retired employees

Exchange Interactions with employer

  Administrative (verifying access to affordable coverage, etc.) No employer penalties   Major administrative (verifying access, appeals re: status of affordable coverage, etc.) Employer penalties for those who enroll in exchange when unaffordable, or broader if coverage unavailable   Considerable administrative effort in verifying no access to employer plan, etc.

Employer penalties for all active full-time employees

Penalties Delayed / Reporting Relaxed 18

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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HEALTH INSURANCE EXCHANGES

Key Exchange functions

Key Functions:

 Determine eligibility     For Exchange participation  For insurance affordability programs (Medicaid, CHIP, premium tax credits, Basic Health Plan)  Notify individuals and employers about determinations; provide appeals process Certify, rate and communicate qualified health plans Maintain Web site and call center with toll-free number Notify IRS and enrollees of Exchange coverage

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Relaxed

Concerns

 Interactions and administrative requirements related to eligibility determinations  Potential for adverse selection — Overall member experience in exchanges and perceptions on quality and value of coverage  Uncertainty surrounding exchange development, readiness for 2014 and future viability  Coverage expansions likely to strain primary care capacity due to additional demand of the newly covered

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

HEALTH INSURANCE EXCHANGES

State Exchanges by Model and Certification Status

AK HI* CA* WA* OR* NV* ID* AZ UT* MT WY CO* NM* ND SD NE KS OK MN* WI NY* MI IA* MO AR* IL* PA IN OH WV* VA TN KY* NC SC MS ** AL GA LA TX VT* ME NH* CT* NJ MA* RI* DE* MD* DC*

    State exchange Partnership exchange Federally-facilitated exchange Unknown * Conditional certification by HHS ** State-based exchange blueprint rejected by HHS

Source: Towers Watson, as of April 17, 2013

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HEALTH INSURANCE EXCHANGES

HHS Bulletin: Verification of Access to Employer-sponsored Coverage

 HHS Bulletin: Verification of Access to Employer-Sponsored Coverage  Requests input on interim (2014 and 2015 plan years) and long-term (2016+ plan years) strategies for the purpose of verifying an employee’s eligibility for federal subsidies to purchase Exchange-based coverage  Proposed interim strategy: — Provide a standardized way for employees and employers to voluntarily collect and communicate employer-sponsored coverage information needed to complete an Exchange application — Allow Exchanges to verify employer-sponsored coverage through use of limited pre-enrollment verification based on data sources available to an Exchange and a post-enrollment verification screening process where data sources are not available during the eligibility determination process

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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HEALTH INSURANCE EXCHANGES

HHS Bulletin: Verification of Access to Employer-sponsored Coverage

 Proposed long-term strategy: — HHS is looking for ways to foster the identification and/or development of data sources that would facilitate real-time verification of access to employer-sponsored coverage information during the enrollment process — HHS seeks comment from employers and other stakeholders on data sources so as to minimize the need for employers to respond to requests from employees or Exchanges for information — Interest in leveraging any data accumulated through other reporting requirements; agencies considering a number of existing reporting mechanisms to identify opportunities for streamlining, with the goal of minimizing the burden on employers  The preamble of the August 2011 proposed Exchange regulations requested comment on two proposed interim strategies: (1) a sample template that could be used voluntarily by employers and employees to assist applicants in filling out the Exchange application; and (2) a database that employers could voluntarily populate with relevant information and that Exchanges could access

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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EMPLOYER MANDATES

Employer mandate – 2014

Generally, beginning in 2014, applicable large employers must either:  Offer coverage to 95% of full-time employees (and their child dependents) that is affordable and meets minimum value

OR

 Pay tax penalties for those employees who receive tax credits/subsidies for Exchange coverage

Comments

 Many State and Local Government employees are likely to qualify for federal subsidies  Estimated 2014 FPL levels

Family Size

Individual Family of four

1x FPL

$11,850 $24,454

4x FPL

$47,401 $97,815

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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EMPLOYER MANDATES

Definitions: Full-time employee (FTE)

 Full-time is defined as working an average of 30 hours or more per week each month  Regulations provide that 130 hours of service in a calendar month will be treated as the monthly equivalent of 30 hours/week 

Comments

Will require monitoring to ensure that part-time employees do not inadvertently become full-time — even temporarily, which could generate penalties  If an employer cannot determine whether an employee will work a consistent, full-time schedule, coverage can be delayed during measurement period   Measurement period must be at least 3 months and cannot exceed 12 months If during measurement period employee is determined to be full-time, coverage must be offered going forward for a period of time at least equivalent to the measurement period, but not less than 6 months

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

EMPLOYER MANDATES

Overview of employer penalties

No Employer Plan

 $2,000 1 x all full-time employees (FTEs)  Triggered if any employee receives subsidized coverage through Exchange  Penalties nondeductible by employer

Employer Offers Minimum Value Coverage

 Employee contributions for self-only coverage exceed 9.5% of household income and employee household income at or below 400% of federal poverty level (FPL) 

Pay lesser of:

  $3,000 1 for each subsidized FTE that receives Exchange-based premium subsidy, or $2,000 1 x all FTEs in controlled group 1 Indexed to national average increases in health care premiums

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Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

Premium and cost sharing subsidies – 2014

PREMIUM / COST SHARING SUBSIDIES

 Federal premium subsidies available for low-/middle-income individuals with household income at or below 400% of the federal poverty level (FPL)  Available only for Exchange-based coverage; unavailable to those offered affordable minimum coverage by employer  Sliding scale: Individual to pay 2% - 9.5% of income toward premiums  Cost-sharing subsidies also available

Comments

 Employees earning below 133% of FPL may be able to enroll in Medicaid for no monthly premium  Next tranches of employees may actually be better off in Exchange plans, depending on required contribution levels

Family income as % of FPL

< 133% 133% - 150% 150% - 200% 200% - 250% 250% - 300% 300% - 400%

Max premium cost as a % of family income

2.0% 3.0% - 4.0% 4.0% - 6.3% 6.3% - 8.05% 8.05% - 9.5% 9.5%

Actuarial Value

94% 94% 87% 73% 70% 70%

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

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PREMIUM / COST SHARING SUBSIDIES

Affordability and the 9.5% rule

Is employer coverage “affordable”?

1) Lowest single contribution ≤ 9.5% of

family

income, and 2) plan pays at least 60% of plan eligible expenses (based solely on plan design) Yes No No employees eligible for federal premium subsidies to purchase Exchange coverage Is family Yes income ≤ 4x Federal Poverty Level?

No No $3,000 employer “play” penalty per employee obtaining subsidies Employee may qualify for federal premium subsidies for Exchange coverage (if declines employer plan)

Delayed

Employer pays $3,000 "play" penalty per employee Employee does not qualify for federal premium subsidies to purchase Exchange coverage (unlikely to decline employer plan) Employer not subject to $3,000 “play” penalty per employee Employees with access to family coverage that costs more than 9.5% of family income will NOT qualify for federal subsidies if single contribution is set at or below 9.5% of family income

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EXPANDED PUBLIC PLANS

A difficult decision regarding Medicaid expansion

 Federal government can offer states 90% of the cost of expanding Medicaid to millions of new individuals  States may agree to expand coverage in exchange for those new federal funds  If a state accepts the Medicaid expansion funds, it must obey the new rules and expand coverage  However, a state must be able to decline participation in the

expansion

losing all of its Medicaid funds without  States have the option to continue a current Medicaid plan – as is – without losing the 50% federal share of the costs for original Medicaid  Federal tax credits for Exchange-based premiums do not extend to individuals under 100% of FPL  A potential gap in access to premium tax credits for those not meeting states’ current Medicaid eligibility guidelines, but under 100% of FPL

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EXPANDED PUBLIC PLANS

Medicaid expansion: Where states stand

25 Governors Support Medicaid Expansion AK WA VT ME MT ND HI CA OR NV ID AZ UT WY CO SD NE KS MN IA MO WI IL IN MI TN KY OH PA WV VA NY NC CT NJ DE NH MA RI MD OK NM AR SC MS AL GA LA TX

     Participating (25) Leaning Toward Participating (2) Undecided/No Comment (6) Leaning Toward Not Participating (3) Will Not Participate (14)

Source: The Advisory Board, April 1, 2013. The District of Columbia plans to participate in Medicaid expansion and will operate its own exchange.

http://www.advisory.com/Daily-Briefing/2012/11/09/MedicaidMap#lightbox/1/

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

REVENUE RAISERS

Transitional reinsurance fee WHY?

 Meant to stabilize premiums for coverage in the individual market during the first three years public exchanges are operational (2014-2016)  Reinsurance payments provided to individual market issuers that cover individuals with high medical costs

WHO PAYS?

 “Contributing entities,” (i.e., health insurance issuers and self-insured group health plans), are required to make reinsurance contributions for “major medical coverage”

HOW MUCH?

 For the 2014 benefit year, the national per capita contribution rate will be $5.25 per covered life per month (or $63 per covered life per year)  Expected to decline to ≈$42 per covered life in 2015 and ≈$26 per covered life in 2016

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

REVENUE RAISERS

Transitional reinsurance fee

WHEN?

 Contributing entities will be required to make the first reinsurance contributions payment in December 2014 or January 2015

WHAT ELSE?

 Plan expense: The Department of Labor indicated that the reinsurance contributions constitute a permissible plan expense under ERISA; this means that plan assets may be utilized to pay the reinsurance contributions

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

REVENUE RAISERS

Patient-Centered Outcomes Research Institute (PCORI)

WHY?

 Established by PPACA to research comparative effectiveness of treatments for health issues; evidence-based information may affect plan design and consumer behavior

WHO PAYS?

 Sponsoring employer – single employer self-insured health plans   Insurer – insured health plans (including HMOs)

HOW MUCH?

 Multi-employer fund – multi-employer health plans $1 per year/covered life (employee, spouse, dependent) in the first year; $2 per year/covered life in the second year, and indexed for the remaining five years

WHEN?

 Self-insured plan years and insured policy years ending on or after 10/1/12 and before 10/1/19  No later than July 31 of the year following the last day of the plan year or policy year (i.e., 7/31/13 for calendar year plans)

Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finaliz ing a course of action based on this material.

REVENUE RAISERS

Excise tax on “Cadillac” plans Effective 2018

 40% non-deductible excise tax on high cost group health benefits*    Plans whose cost exceeds $10,200 for single coverage, $27,500 for family coverage annually Indexed CPI-U+1% in 2019, CPI beginning in 2020 Adjustments for age, gender, high-risk populations, early retirees and cost growth greater than benchmark  Aggregate premium for employer sponsored health benefits *  NOT applicable to separate fully-insured vision and dental plans, and dread disease and fixed-dollar indemnity policies

Comments

  Without significant design or contribution changes, many employer plans will hit the excise tax limit in 2018 Many employers will be reviewing their medical benefits strategy in order to manage costs below the excise tax threshold  Employers will look for proactive health plan management strategies that reflect: business, workforce and reward strategies; engagement strategies and ways to improve the workforce health and productivity *Group health benefits includes: medical (e.g., PPO, HDHP), health FSA, HRA, employer and employee pre-tax HSA contributions, EAP, on-site primary care medical clinics (and self-insured dental and vision plans)

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Discussion

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Thank you

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Transcript www.floridaleagueofcities.com

Health Care Reform What Florida’s Local Governments Need To Know

A transformational moment

Despite recent events in Washington, uncertainty remains

  

Stakeholders all have their own interests

Building blocks of Health Care Reform

2014 individual mandates

Comments

2014 examples of individual tax penalties

Health Care Reform: Provisions already in place

DOL Releases Guidance on the Required Notice to Employees on Exchange Operations

Notice must be in writing and can be delivered via first class mail or electronically

Provisions beginning in 2014 Waiting period

Comments

Provisions beginning in 2014 Maximum out-of-pocket limits

Provisions beginning in 2014 Maximum out-of-pocket limits (continued)

Automatic enrollment (delayed until 1/1/2015…or later

Comments

Health insurance exchange defined Public Exchanges

Private Exchanges

Public health insurance exchanges

How will an individual likely get coverage in 2014?

What kind of exchange coverage will be available?

Roles in exchange development and operation

Employer interaction with exchanges Frequency and intensity will vary based on play-or-pay strategy

Key Exchange functions

Concerns

State Exchanges by Model and Certification Status

HHS Bulletin: Verification of Access to Employer-sponsored Coverage

HHS Bulletin: Verification of Access to Employer-sponsored Coverage

Employer mandate – 2014

OR

Comments

Definitions: Full-time employee (FTE)

Comments

Overview of employer penalties

Premium and cost sharing subsidies – 2014

Comments

Affordability and the 9.5% rule

A difficult decision regarding Medicaid expansion

Medicaid expansion: Where states stand

Transitional reinsurance fee WHY?

WHO PAYS?

HOW MUCH?

Transitional reinsurance fee

Patient-Centered Outcomes Research Institute (PCORI)

Excise tax on “Cadillac” plans Effective 2018

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