Transcript Does It Matter To Me? Healthcare Reform and The Supreme

NAVIGATING THE AFFORDABLE CARE
ACT: UNDERSTANDING THE INDIVIDUAL
MANDATE, THE EMPLOYER MANDATE,
INSURANCE EXCHANGES AND STRATEGIC
OPTIONS FOR COMPLIANCE WITH PPACA
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Katherine R. Basch
Brennan, Manna & Diamond, LLC
US HEALTH CARE LANDSCAPE
High costs that continue to rise
 Exclusive access to providers
 Scarce resources
 U.S. ranks behind other European countries on
some measures (access to primary care
physicians, quality measures, and information
technology)

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PPACA GOALS
Provide affordable health insurance to Americans
who cannot afford coverage or have pre-existing
conditions.
 Phase out annual and lifetime insurance payout
maximums to ensure continuous coverage for
people with catastrophic illnesses.
 Boost patient health by expanding free and lowcost preventive care services.
 Crack down on Medicare fraud.
 Institute standardized billing and electronic
medical record exchanges.
 Insurance company disclosure on premium
payments – medical care vs. administration
costs.

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501(R) REQUIREMENTS FOR 501(C)(3)
HOSPITALS
Section 501(r) outlines requirements for certain
hospitals to maintain 501(c)(3) status.
 This section requires hospitals to:

Meet community health needs assessment
requirements;
 Meet financial assistance policy requirements
described in this section;
 Meet certain limitation requirements on charges; and
 Meet certain billing and collection requirements.

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PPACA GOALS – SUPREME COURT
OPINION
1.
PPACA requires most Americans to maintain
“minimum essential” health insurance coverage.
For those who are not exempt from this
requirement or do not receive coverage through
an employer or government program, you must
purchase coverage from a private company or
pay a “penalty” beginning in 2014.

The individual mandate that everyone purchase
health insurance is constitutional as the “penalty” is
a “tax” within Congress’s taxing powers.
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PPACA GOALS – SUPREME COURT
OPINION
2.
PPACA expands the current Medicaid program,
which is funded through the federal government
to the states to provide assistance to pregnant
women, children, needy families, the blind, the
elderly, and the disabled. PPACA seeks to
expand the scope of the Medicaid program to
increase the number of individuals the states
must cover.

The expansion of the Medicaid program is
constitutional as it is a new Medicaid program.
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PPACA GOALS – SUPREME COURT
OPINION


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2014, states must cover adults with incomes up to 133%
of the poverty level, including those adults without
children. ($30,000 for a family of 4).
2013, states must also cover preventive services at little
to no cost to patients.
2013, primary care physicians treating Medicaid
patients must be paid no less than 100% of Medicare
rates.
By October 1, 2013, states will receive 2 additional years
of funding to continue coverage for children not eligible
for Medicaid.
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PPACA GOALS – SUPREME COURT
OPINION

Medicaid expansion and border states


Arkansas and Texas
The Medicaid expansion was expected to provide
coverage to 16 million Americans.
6 million have gained Medicaid coverage since
October 2013.
 1.7 million with pending application.


Medicaid exclusion and “credible allegation of
fraud.”
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PPACA GOALS – SUPREME COURT
OPINION
3.
PPACA increases federal funding to the states
for the expanded Medicaid program. However,
if a state did not comply with the new Medicaid
expansion program, the state would lose all of
its Medicaid funding.
The federal government can only withhold federal
funds for the new Medicaid program if a state
chooses not to participate. The federal government
cannot withhold existing Medicaid program monies.
 This was the part of the law that was struck down by
the Supreme Court.

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EFFECT OF HEALTHCARE REFORM CONT’D

The cost of healthcare is expected to rise overall.
7.5% in 2013.
 Premiums are expected to rise for all plans.


Employers and insurance companies are offering
more incentives for good behaviors.

60% of jumbo employers (20,000 or more employees)
provide incentives for employees who participate in a
health management program.
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INDIVIDUAL MANDATE
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INDIVIDUAL MANDATE
All individuals must show proof of insurance or
else pay a penalty.
 Individuals can buy it from state-based insurance
exchanges.

Premium subsidies will be available to those with
limited incomes.
 Those who can afford coverage must obtain it or pay
a fee – this is used to offset the costs for caring for
uninsured Americans.
 Tax credits are available for those between 100-400%
($92,000 for a family of 4) of the poverty level.
 Certain Americans may qualify for reduced
copayments, coinsurance, and deductibles.

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INDIVIDUAL MANDATE

IRS will track compliance with the individual
mandate through the individual’s 2014 tax
return.

Penalty is assessed monthly based on the number of
months the individual goes without coverage and is
the greater of the flat rate or the percentage (subject
to annual cap).
For 2014, $95 per uninsured person or 1 percent of
household income over the filing threshold.
 For 2015, $325 per uninsured person or 2 percent of
household income over the filing threshold.
 For 2016 and beyond, $695 per uninsured person or 2.5
percent of household income over the filing threshold.

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“DELAY” OF INDIVIDUAL MANDATE

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
Initially delayed through February 15, 2014.
Delayed further through March 31, 2014.
March 5, 2014 – Hardship exemption expanded and
extended through October 1, 2016.

December 2013 Hardship Exemption – Attest to the
following:




March 2013 Hardship Exemption – Attest that you
experienced another hardship obtaining insurance:




Previous insurance was cancelled due to noncompliance with
PPACA.
Insurance on the exchange is unaffordable.
For 2014 only.
Unaffordable.
Preferred providers not in-network.
Through October 1, 2016.
Documentation “if possible.”
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EMPLOYER MANDATE
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EMPLOYER RESPONSIBILITY



All applicable “large” employers (employ 50 or more
“full-time” employees) must provide affordable
minimal essential coverage to all full-time employees
or face a penalty.
Hot off the Press! – On March 14, 2014, the
Department of Health and Human Services mandated
that plans must cover same-sex spouses in the same
manner as opposite-sex couples beginning in 2015.
May 30, 2014 - The Medicare program now considers
sex reassignment surgery a covered service.
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OVERVIEW OF PENALTIES

Employer Penalties
equivalents)
Do you offer
coverage?
No
(50+
full-time
employees
or
full-time
$2,000 per FTE*
Yes
Does the Plan
provide minimum
value?
No
Yes
Is the coverage
affordable?
No
Lesser of:
$3,000 per FTE
receiving tax credit
Or
$2,000 per FTE*
Only applies to
employees
with household
incomes of
400% FPL or
less
Yes
NO PENALTY!
* Minus the first
30 employees
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DELAY OF EMPLOYER MANDATE
July 1, 2013 – The Department of Treasury
delayed the effective date of the employer
mandate until January 1, 2015.
 February 10, 2014 – The Department of Treasury
issued final regulations that:

Delayed implementation of the employer mandate
until January 1, 2016 for employers with 50-99 FTEs.
 Provided transitional rules in 2015 for employers
with 100 or more FTEs.
 Provided clarifications with respect to certain
categories of employees.
Delays allows employers to consider strategic
options for compliance with the employer
mandate.

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DELAY OF MANDATE FOR EMPLOYERS
WITH 50-99 FTES



Small businesses with fewer than 50 FTEs (about 96% of all
employers): remain unaffected by PPACA and the employer mandate
and will not be required to provide healthcare coverage or fill out any
forms in 2015, or in any year, under PPACA.
Employers with 50 to 99 FTEs (about 2% of employers): must report
on their workers and offer coverage beginning in 2015, but have until
2016 before any employer responsibility penalties may be assessed.
Employers in this category are subject to certain maintenance of
coverage requirements and must certify that they are not reducing the
size of their workforce in order to fall into this category.
Larger employers with 100 or more FTEs (about 2% of employers):
must comply with PPACA beginning on January 1, 2015; however,
these employers must only offer coverage to 70% of full-time
employees in 2015 to avoid increased penalties. This is reduced from
the 95% threshold previously set forth in proposed regulations.
Beginning in 2016, the threshold will be raised to 95% requiring these
employers to offer healthcare coverage to 95% of all full-time
employers in order to avoid increased penalties under ACA. This delay
does not affect other penalties under the mandate such as the
requirement to provide minimum essential coverage and affordable
coverage
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VARIOUS EMPLOYEE CATEGORIES
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Volunteers: Hours contributed by bona fide volunteers for a government or taxexempt entity, such as volunteer firefighters and emergency responders, will not
cause them to be considered full-time employees.
Educational employees: Teachers and other educational employees will not be
treated as part-time for the year simply because their school is closed or
operating on a limited schedule during the summer.
Seasonal employees: Those in positions for which the customary annual
employment is six (6) months or less generally will not be considered full-time
employees.
Student work-study programs: Hours worked by students under federal or statesponsored work-study programs will not be counted in determining whether they
are full-time employees.
Adjunct faculty: The final regulations provide as a general rule that employers of
adjunct faculty are to use a method of crediting hours of service for adjunct
faculty employees that is reasonable under the circumstances and consistent with
the employer responsibility provisions. To accommodate the need for
predictability and ease of administration, the final regulations allow for a “bright
line” test. Employers may credit an adjunct faculty employee with 2 ¼ hours of
service per week for each hour of teaching or classroom time in order to
calculate total hours of service for purposes of determining whether the
employee is full-time or part-time.
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EMPLOYER REPORTING REQUIREMENTS
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HOT OFF THE PRESS: FINAL RULES
ISSUED ON MARCH 5, 2014

Section 6055 Insurer Reporting Requirements:



Information about entity providing coverage and contact
information.
Individuals enrolled, identifying information, and months
covered.
Section 6056 Employer Reporting Requirements:
Information about employer, contact information, and number
of full-time employees.
 For each full-time employee, information about coverage
offered, by month, and lowest employee cost of self-only
coverage offered.


Single combined form:



Self-insured employers – must fill out both sections.
All other employers – must fill out top section for Section 6056
information. Insurers fill out bottom section for Section 6055.
Previous proposed rule:


Employer annual return.
Employee statements.
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ALTERNATIVE FILING REQUIREMENTS

Simpler form – for all full-time employees:



Employer certifies that for each month, it provided
minimum essential coverage at the minimum value
of 9.5% of the federal poverty level to one or more
employee; and
The employer offered minimum, essential coverage to
spouses and dependents.
Alternative reporting for 2015 only:
Employer certifies that it made a qualifying offer of
coverage to at least 95% of all full-time employees
and their spouses and dependents.
 Must provide the following for each employee:


Name. SSN, address, months covered, and an employee
statement to each employee.
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REPORTING DEADLINES

The forms must be filed electronically, unless the
employer is filing fewer than 250 returns.


Each return for an employee is a separate return and
all returns filed by the employer will be aggregated,
including PPACA forms and Form W-2.
Employers must file the return with the IRS by
February 28 (March 31 if filed electronically).
March 1, 2016 (nonelectronic)
 March 31, 2016 (electronic)


Employers are encouraged to voluntarily report
in 2015 for information pertaining to 2014.
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THE EXCHANGE
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GOAL OF EXCHANGES
“One-stop shopping” for health insurance
Provide a venue where insurance companies can
sell insurance and purchasers can compare and
choose from multiple options available
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FOUR LEVELS OF COVERAGE

Bronze: plan pays for 60% of covered services

Silver: plan pays for 70% of covered services

Gold: plan pays for 80% of covered services

Platinum: plan pays for 90% of covered services
THE STATE OF THE EXCHANGE

Exchange enrollment:

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8.1 million enrolled before March 31st open
enrollment deadline.
HHS goal was 8 million.
25% (2 million) have data discrepancies – income,
citizenship, and immigration status.
Exchange demographics:
59% are over age 45.
 25% are age 18-24.
 “Invincibles” are not signing up at the projected rate
necessary to spread risk.

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THE STATE OF THE EXCHANGE

Exchange Projections:
2.4% higher costs than premium revenues.
 On average, insurance companies have a profit
margin of 4-6%.
 Insurers may have duplicate enrollment information.
 1 in 4 enrollees will receive coverage termination
notices for failure to pay premiums.


Provider Payment Issues for Exchange Products:
“All products” clauses
 90-day grace period for premium nonpayment

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STATE PARTICIPATION IN EXCHANGES



18 states and Washington D.C. will run their own
exchange
7 states will operate exchanges as a federal-state
partnership
25 states opted out of running their own
exchange. Federal government will create these
exchanges.
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STATE PARTICIPATION IN EXCHANGES
Source: Center on Budget Policies and Priorities (June 14, 2013).
SMALL BUSINESS HEALTH OPTIONS
PROGRAM (SHOP) EXCHANGES



SHOP exchange allows certain small employers
to make qualified plans available to employees
States can allow employers with up to 100
employees participate in SHOP exchange, or can
limit to participation to businesses with no more
than 50 employees
SHOP exchange has same characteristics as
individual exchange – only offers qualified health
plans, determines eligibility, facilitates
enrollment
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SUBMITTING INFORMATION TO AN
EXCHANGE

On May 16, 2014, a final ruling established civil
penalties for all persons, including individuals,
corporations, Exchanges, Medicaid and CHIP
agencies, and other entities gaining access to
personally identifiable information submitted to
an Exchange:
$250,000 maximum fine imposed if a reporting
person knowingly and willfully provides false or
fraudulent information to an Exchange.
 $25,000 maximum fine if a reporting person fails to
report information to an Exchange due to negligence
or disregard of any rules, or uses or discloses
confidential information as defined by PPACA
§1411(g).

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OVERVIEW OF STRATEGIC OPTIONS FOR
COMPLIANCE WITH HEALTHCARE REFORM
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INTRODUCTION

Healthcare reform has done NOTHING to
reduce the cost of:
Healthcare insurance; or
 Healthcare items and services.

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OPTION #1: FOLLOW PPACA AS ORIGINALLY
CONTEMPLATED AND OFFER A TRADITIONAL
EMPLOYER-SPONSORED PLAN.

Employer provides healthcare coverage through a
traditional employer-sponsored plan to all fulltime employees.
No penalties are assessed under PPACA.
 May be self-funded or fully-funded.


This may not be a viable option for many
employers due to the rising costs of healthcare.
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OPTION #2: DO NOT OFFER COVERAGE, AND PAY THE PENALTY
UNDER §4980H(A) BEGINNING JANUARY 1, 2015.
ALTERNATIVELY, OFFER A STIPEND FOR EMPLOYEES TO OBTAIN
COVERAGE THROUGH THE PUBLIC EXCHANGE.

Employer no longer offers an employer-sponsored
plan.


Employees must obtain individual coverage
under PPACA’s individual mandate.


Employer will pay PPACA penalties.
Employees are likely to look to the Exchange.
Employer may offer a stipend and/or assist
employees in signing up for the Exchange.
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A NOTE ON OPTION #2

BEWARE! Employer Payment Plans
Employer reimburses employee for or directly pays
the cost of individual health insurance policy
premiums, and
 Excludes such information from employee’s gross
income.

EPPs are subject to a $100 per day excise tax.

Option #2 Compliance:
Cash compensation.
 After-tax reimbursement.

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OPTION #3: OFFER COVERAGE THROUGH
A PRIVATE EXCHANGE.
Attractive alternative for employers that can no
longer afford Option #1, but do not want to push
employees to the public Exchange under Option
#2.
 Private exchange is an employer-sponsored plan.


No penalty under PPACA.
Defined contribution for the employer.
 Can include a variety of plan designs and
insurers.

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COMPARATIVE DATA

Background
450 enrolled employees
2013 cost per employee is $12,747 ($5,736,150)
All projected costs are net of employee contributions and
federal income tax
 Includes reinsurance fee of $63 and PCORI fee of $2,
estimated at $56,030 for 2015.




Option #1


Option #2 (pay the penalty)


$962,193 ($2,000 per FTE)
Option #2 (pay the penalty and provide a stipend)



2015 projected cost is ($3,889,401)
$3,889,401
Incorporates penalty, taxable stipend, anticipated
unemployment insurance tax and increased employee
benefit costs (401(k), life and disability insurance
premiums)
Option #3

Bronze plan projected cost is $2,791,968
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OPTION #4: BECOME SELF-INSURED AND NEGOTIATE
AGGRESSIVE FEE SCHEDULES WITH COMMUNITYBASED AND TERTIARY FACILITIES.
Excellent alternative for very large employers
that can steer employees to providers.
 Negotiate favorable fee schedules with targeted:



Community health system.
Tertiary health system.
All other providers are out-of-network.
 May also include a partnership with insurance
companies.

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OPTION #5: PROVIDE VALUE-ADDED
BENEFITS.
Can be combined with Options #1 - #4.
 Examples:







Preventive services and screenings.
Wellness check ups.
Urgent care services.
Gym memberships.
Wellness incentives.
Drive down the cost of health insurance coverage
or provide the employer with access to premium
plans.
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SPOUSAL MERP

Incentivize employees to utilize alternative
healthcare coverage that is available to them through
marriage.
Can be an overlay to a group health plan or a stand-alone
group health plan.
 Can be mandatory or voluntary.


Employer reimburses its employees for:
Employee contributions required under the spouse’s group
health plan,
 Deductibles and copayments paid under the spouse’s group
health plan, and
 Any other out-of-pocket expenses incurred by the employee
under the spouse’s group health plan.


May include reimbursement for medical care that
would have been covered under the employer’s group
health plan, but is not covered under the spouse’s
group health plan.
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QUESTIONS?
Katherine R. Basch
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Brennan, Manna & Diamond,
LLC
75 East Market Street
Akron, Ohio 44308
330-374-6249
[email protected]