Transcript The 2010 Election Cycle

Implementing Health Care Reform
Vince Phillips
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PPACA Implementation
• Dates to Note:
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July 31: PCORI Tax Due using Form 720
August 2013: MLR
October 1, 2013: Exchange enrollment
January 1, 2014: Exchanges active; Market changes set in;
Small business tax credit for SHOP exchanges only
- January 1, 2015: Employer Mandate penalties; mandatory
reporting begin
- January 1, 2015: SHOPs fully operational
08/31/13
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PPACA Implementation: Taxes 2013
• Individual EE Medicare tax increase 0.9% if earning $200K plus
or $250K joint filers – does not affect employer contribution
1/1/2013
• Same income trigger: 3.8% Medicare tax on unearned income
• Individual schedule A medical deduction increases to 10%
adjusted gross income 2013 (was 7.5% AGI)
• Health insurer premium taxes after 12/1/2012 starting at $8
billion up to $14.2 billion in 2018, then indexed to amount of
premium growth (not self-insured plans)
• PCORI applies to medical plans, Rx plans, self-insured plans,
HRAs (not HSAs,FSAs,EAPs,separate dental/vision)
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PPACA: A Quick Review
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Minimum essential benefits (Aetna 3.4 POS)
Guidance FT versus FTE and penalties (12/12)
Safe harbor versus household income
First-dollar benefits (except for contraceptive
lawsuits) 09/10 and 08/12
• Patient Bill of Rights (09/10): No recissions: access to
ER, primary care physician, etc.
• Medical Loss Ratio (08/12)
• Summary Benefits Coverages (03/12)
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PPACA: A Quick Review (cont.)
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H S A changes (01/11)
FSA contribution limits (01/13)
Taxes on tanning (07/10)
Small Business health premium tax credit (altho
impacted by sequestration)
• Risk Pool: Out of money
• Early Retiree Reinsurance Program: Out of money
• CLASS employer long-term care program repealed by
Congress; ditto 1099 requirement
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PPACA: A Quick Review (cont.)
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Rate review – Act 134 (12/11)
No medical underwriting for under 19 children
Dependent young adult thru age 25 (09/10)
No yearly or lifetime caps on benefits (altho yearly
still phasing in until 2014)
• Rule on agents and Exchanges (04/13)
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PPACA: A Quick Review (cont.)
• Comparative effectiveness research (PCORI) including
self-funded plans $1 to $2 until 2019
• Deadline for carriers to ask to participate in federallyfacilitated exchanges met; Specifics in 08/13
• Rule on Navigators (04/13); Navigator grants (08/13)
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PPACA: What’s Delayed
• Employer Notice re Exchanges must done by October
1, 2013; Template released 05/13
- Electronic OK; mail OK; what of hard copy?
- What of 2014 plan renewal; lack of 01/14 plan
details by 10/1/13 Notice to employees?
• Full SHOP delayed until 01/15; Final Rule issued
5/31/13
• Employer Mandate, mandatory reporting delayed
until 01/01/15
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PPACA Pending
• Full details on federally-facilitated Exchanges:
• Medicaid expansion in PA?
• 2014 Auto-enroll rules for over 200 EEs
delayed
• 105(h) indefinite
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Pending/Upcoming
• MLR Rebates (Each August)
• Navigator regulation at state level? (HB 1522)
• Adequate funding for PA Insurance
Department – dedicated fund (SB 914)
• Deductible limits 2014 ($2000/$4000)
affecting HDHPs unless there is actuarial value
determination
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PPACA: Next Battles in Congress
• Elimination of 2.3% medical device
manufacturers tax
• Elimination of Medicare independent board
• Obama’s Budget proposal for HHS
• Cuts in wellness programs; diverted by HHS to
other PPACA programs
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PPACA Specific Areas
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The 50 Threshold
The “Shared Responsibility” aka Penalties
Individual Mandate
The Exchanges
Plan particulars in 2014
Taxes
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How Big Are You?
• PPACA has numerous definitions of small
versus large employer
- Fewer than 25 employees is small (tax credit)
- More than 200 employees is large (mandatory
coverage in 2014 with opt-out
- Under 50 for no penalties (includes FT and PT)
- 50 for SHOP exchange eligibility; 100 in 2016
- 50-plus FT: mandatory offering
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How Big Are You? Are You at 50?
• Under 50 employee firm requirements
- Minimum essential benefits, no caps, first-dollar
preventive care, etc.
- No penalties if under 50 employee threshold
• Employers with 50 or more full-time (or full-time
equivalent) employees must offer coverage to 95% of
full-time employees or pay a $2,000 per employee
fine (after the first 30)
• Employee is one who receives a W2, not a 1099.
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Cont.: Are You at 50?
• Core guidance is December 28, 2012 from IRS (www.irs.gov)
• Measurement or look-back period of 12 months, for example 2012
calendar year or make it coincide with health plan year.
• For each month in that year, add full-time permanent employees. How
many? 50? If so, you’re there.
• Separately, add the hours worked by your part-time and seasonal
employees for a month in that period and divide by 120 to get full-time
equivalent or FTEs.
• Why 120? Because PPACA counts 30 hours a week as full time
• Do this for every month for the base period.
• NOTE: Must include sick time, vacation, personal; Teachers are counted as
FT even though they may have the summer off.
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Cont.: Are You at 50?
January
1) How many worked more than 30 hours per week? Assume
30.
2) How many worked less than 30 hours per week? Assume 40
who worked 25 hours per week and 20 who worked 20.
Add their hours.
3) 40 x 25=800 total hours; 20 x 20 = 400 (800 plus 400 = 1,200)
4) And divide by 120 to get full-time equivalent or FTE (1,200
divided by 120 = 10
5) For January, you had 30 FT plus 10 FTE = 40, below the 50
threshold BUT
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Cont.: Are You at 50?
• BUT, it’s the entire measurement period. What
were your FTs and FTEs in January, February,
March, April, May June, etc.?
• Suppose the numbers of FT and FTE were Jan
40, Feb. 60, March 70, April 70, May 50, June
60 etc. That number divided by 12 (base
period) will tell you if you have crossed the
threshold.
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Cont.: Are You at 50?
• What about seasonal employees?
- Must calculate separately
- If the seasonals’ hours make the difference and push the
employer over 50, they can be backed out. An example would
be a Christmas store with high seasonal hours for two months
of the year.
- A seasonal is someone who works four months (120 days),
either consecutive or not, and is not limited to agriculture or
retail workers.
- Does not have to be consecutive months
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Cont.: Are You at 50?
• Aggregation (controlled group) where one entity
has controlling interest/ownership of several
businesses- not a new IRS rule. IRC 414 (b),(c ),(m), (o)
• There may be a waiver opportunity (check with
accountant)
• FT and FTEs for all are counted together towards the
50 threshold
• Each firm is subject separately to penalties for noncompliance. If one firm is non-compliant, it pays but
the other firms would not be fined.
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Cont.: Are You at 50?
• Transition relief for employers which may base their
threshold calculation on six months in 2013
• Effective date is 01/1/14 unless plan year begins later
in 2014 (did you offer insurance in 2013?)
• Gray area is moving renewal to 12/2013 so as to gain
almost a year under pre-PPACA terms
• Earlier renewal date means that deductibles kick in
again
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Measurement & Stability Periods:
A Different 50 FT Threshold
- IRS Notice 2012-58: Look-back period of 3-12 months
measures actual hours to see if specific EE is fulltime; If so, employee must be offered health
insurance in 2014 in so-called stability periods which
must equal the look-back period
- Ongoing measurement period every year
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Measurement & Stability Periods
Another Period to Know About: Optional
Administration Period between measurement
period and stability period to determine which
employees are eligible and to enroll them
- Cannot exceed 90 days
- For ongoing employees must overlap stability period
- May not extend measurement or coverage period
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Measurement & Stability Periods
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Periods may differ if:
Collective bargaining versus non-union
Salaried versus hourly
Employees of different business if there is
aggregation (controlling interest)
- Employees in different states
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Measurement & Stability Periods
• New employees have an initial measurement period
based on date of hire (not to be confused with 90day window for health insurance to be offered)
• For newly hired variable hour or seasonal employees,
combined length of initial measurement period and
optional administrative period cannot extend beyond
last day of first month after anniversary date (13
months)
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Measurement & Stability Periods
• Example: New Hire
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Hired April 1, 2014: Initial measurement period begins thru March 31,
2015
Administrative period April 1, 2015 – April 30, 2015
Stability period May 1, 2015 – April 30, 2016
• Example: Ongoing Employee
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Assume plan year begins October 1, 2014; Measurement period Oct 1,
2014 – Sept. 30, 2015
Administrative period October 1, 2015 – December 31, 2015
Stability period October 1, 2015 – December 31, 2015
• Administrative Period Optional
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“Shared Responsibility”
• To avoid penalties, a large (over 50) must offer
insurance to 95% of FT employees which:
- Includes PPACA benefit mandates (no caps; first-dollar
preventive care, etc.) Has a bronze level actuarial value
- Does not require more than a 9.5% of household income (or
W2)employee contribution
- Covers dependents (up to age 26) but this mandated offering
does not include spouse
- NOTE: minimum essential benefits (Aetna 3.4 POS) applies to
groups under 50
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“Shared Responsibility”: $2,000
• If an employer fails to offer its full-time employees
(and their dependents) the opportunity to enroll in
“minimum essential coverage,” and
• One or more full-time employees enrolls for coverage
in the Exchange and qualifies for a premium tax
credit or cost-sharing reduction, then
• Employer penalty = $2,000 for each of its full-time
employees in the workforce, first 30 exempted
• Penalties do not begin until 01/01/15 (07/13)
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“Shared Responsibility”: $3,000
• If employer offers its full-time employees (and their dependents) the
opportunity to enroll in minimum essential coverage, and
• One or more full-time employees enrolls for coverage in an Exchange and
qualifies for a premium tax credit or cost sharing reduction because
– The employee’s share of the premium exceed 9.5% of household
income, (W2) or
– The actuarial value of the coverage was less than 60%, then
• Employer penalty = $3,000 for each full-time employee who receives a
tax credit or cost-sharing reduction from the Exchange
• NOTE: If an employer plan is compliant and an employee opts for the
Exchange, there is no employer penalty.
• NOTE: Amount of $3,000 penalty may not exceed cost if employer
offered no insurance and had to pay a $2,000 penalty.
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“Shared Responsibility”
• Actuarial value/Minimum Value = the portion of allowable medical costs
paid by plan. (Guidance November 2012 and February 2013)
• Penalties assessed on a monthly basis.
• No penalties apply for part-time employees.
• Penalties for waiting periods exceeding 90 calendar days; Latest DOL
update March 18, 2013
• Employers will have to report that its group plan provides “minimum
essential coverage”, coverage documentation to IRS means that IRS has
trip wire if employee is approved for Exchange subsidy (includes selfinsured plans); Optional in 2014 (07/13)
• Individual application form (05/13) includes an employer page re
employer-offered coverage that HHS/IRS can cross check
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Employer Reporting Requirements
• Employers with 250+ W-2s report aggregate cost of
employer-offered coverage (but not employer
contributions to HSAs and FSAs -2012 reportable in
2013)
• 1/31/15 to IRS coverage information (includes selfinsured)
• 1/31/15 large employer certification that a compliant
plan was offered, number of FT employees
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2014 Market Changes
• No medical underwriting
• Age rate band 3:1; Tobacco 1.5:1; family
composition, geographic regions
• Guaranteed issue (in and out)
• Exchanges subsidies up to 400% FPL using
Qualified Health Plans (QHPs)
• Essential benefit requirements
• Minimum value standard 60% medical costs
covered (Bronze); Latest from IRS 05/13
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Individual Mandate
• In 2014, all Americans will be required to have health
insurance that meets minimal benefits standards
• Unlike Employer Mandate, this is not delayed
• Penalties for noncompliance
– $95 in 2014 or 1% AGI up to
– $695 in 2016 or 2.5% AGI
– Uncertain re enforcement mechanism since many
Americans do not pay federal taxes or file income tax
returns
– IRS has limited compliance club
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Employer Responsibilities
• Over 200 EE employers must automatically enroll “new fulltime employees” in employer-sponsored coverage starting in
2014
– Must provide adequate notice and opportunity to opt out
– No effective date specified, but must be “in accordance with
regulations promulgated by the Secretary (of DOL)…” (so presumably
not effective until regulations are issued)
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Exchanges
• PA said no to a state-based exchange in
December 2012, citing unanswered questions
re implementation, state’s role and cost to PA
• We will be under a federally-facilitated
exchange
• Excellent basic resource is Federal Register
March 16, 2012 as to US’ thinking
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Exchanges
• Basic parameters:
- There are two types of Exchanges, Individual and SHOP (SHOP is for
businesses under 50 employees)
- NOTE: 50 includes FT and PT…warm bodies with W2s for SHOP
- Individuals get tax subsidies when enrolling (up to 400% of FPL);
Employees enrolled through a group plan do not.
- It is an Internet-based system where an individual (or employee in a SHOP
plan) chooses between certain insurance options, called Qualifying Health
Plans. (NOTE: SHOP partial delay until 2015)
- In PA, the HHS sets criteria for a Qualified Health Plan although it is
uncertain as to PA Insurance Department authority regarding solvency, rate
review etc.
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Exchanges
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For individuals or employees under SHOP, the plan selection process is
similar.
But the employer contracts with the SHOP Exchange and then employees can
select their option. (NOTE: Employee choice delayed until 2015)
Result will be several different Qualified Health Plans under one employer.
HR issues: Different plans will have different claims processes even though
the plan designs will all be similar. This underscores role of broker since in a
sense you have several individual policies under the employer plan/SHOP
umbrella.
Employer pays one premium invoice.
Penalties are triggered for over 50 full-time employee firms if one or more
employees enroll individually and receive the tax subsidy; not so with SHOP
employers since they are under 50 FT.
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Exchanges
• Unanswered question: If an employee goes into the Exchange,
how will that affect my participation rate per the carrier?
• Notice to current employees and new hires about Exchange
and subsidies: Was March 1, 2013; Now by October 1
– Existence of Exchange, services and how to obtain assistance
– Availability of premium assistance if plan value below 60%
– Template issued by US Dept. Labor (05/13)
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Questions for Employers
• Strategies: self-funded; defined contribution
and private exchanges; HDHPs?
• Increase pay and send to Exchange?
• Don’t increase pay and send to Exchange?
• Advantages/disadvantages re dropping
coverage?
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Should I Drop Insurance: Factors to Consider
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Cost
Type of employee: skilled, semi-skilled?
What my competitors are doing
Fines not deductible
Will dropping insurance have a gov’t
procurement impact – “Have you ever…”
• Are there other options like self insured or
defined contribution/private exchanges?
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Employer Questions cont.
• EPLI/EBLI re compliance issues?
• Summary of Benefits & Coverages (Sept. 2012)
distribution documented?
• Do I know what to do if there is an MLR rebate?
• Will some PPACA requirements for 1/1/2014 allow
for plan year versus calendar year? (Transition Relief)
• How will I know if I am non-compliant?
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W2s
• All employers over 250 W2s must report on their W2s the
aggregate cost of employer-sponsored health benefits
• If employee receives health insurance coverage under
multiple plans, the employer must disclose the aggregate
value of all such health coverage,
– Excludes all contributions to HSAs and Archer MSAs and
salary reduction contributions to FSAs
– Applies to benefits provided during taxable years after
December 31, 2010
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W2s
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Employers must factor in:
Major medical
On-site clinics (depends)
Medigap
Employer FSA contributions
Employee assistance & wellness (depends)
Employer premium contribution or EE cafeteria plan
contributions
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Health & Wellness
• HHS tasked with coordination among all Federal agencies with
respect to prevention, wellness, and health promotion practices
Public Health. Beginning FY2010, administer the Prevention &
Public Health Fund to expand and sustain national investment
in prevention and public health programs ($500 billion)
• Wellness Programs
– HHS to enforce employer wellness provisions for group market and work
with DOL and Treasury to implement a 10-state pilot program to apply
wellness program provisions to the individual market
– Employer-sponsored wellness plans under HIPAA incentives up to 50% at
HHS’ discretion
– Wellness rules released 5/30/13
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More on Taxes
There are numbers of new taxes and increases on existing:
• Indoor tanning tax 10% 7/1/2010
• $4.8 billion tax on brand name drugs starting 2011 on 2010 sales
• Per enrollee tax dedicated to comparative effectiveness research
first plan year after 9/30/2012, ending after 9/30/2019 including
self-funded plans: NOTE IRS Form 720 does not include a space
for that yet
• Tax on medical devices 2.3% gross sales starting 1/1/2013
• Tax on health insurance carriers starting at $8 billion in 2014
going up to $14.3 billion by 2018. This is in addition to state
premium taxes.
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Taxes 2013
• Individual EE Medicare tax increase 0.9% if earning $200K plus
or $250K joint filers – does not affect employer contribution
1/1/2013
• Same income trigger: 3.8% Medicare tax on unearned income
• Individual schedule A medical deduction increases to 10%
adjusted gross income 2013 (was 7.5% AGI)
• Health insurer premium taxes after 12/1/2012 starting at $8
billion up to $14.2 billion in 2018, then indexed to amount of
premium growth (not self-insured plans)
• PCORI tax
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More on Taxes
• FSA contributions for medical expenses limited to $2,500
starting 1/1/2013
• 2018 Cadillac Tax of 40% on employer sponsored health plans
with aggregate values exceeding $10,200 for individual
coverage and $27,500 for family coverage
- Value includes FSA, H R A reimbursements and employer
contribution to HSAs
- Stand alone dental and vision excluded as well as LTC,
accident, disability, and specific disease coverage
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Taxes
• Increases penalty for H S A use to 20% for non-approved
medical expenditures such as OTC
• Health insurer executive compensation deductibility limited to
$500,000 2013 (officers, employees, directors)
• Although not called a tax, there will be a “transitional
reinsurance” fee of approx. starting at $63 per enrollee in
2014 including self-insured plans to help fund high-risk
individuals in individual market
- Plans must report enrollment counts (incl.
spouse/dependents) by November 15 and HHS will invoice by
December 15 – for 2014, 2015, 2016
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Taxes
• More on “transitional reinsurance “ fee:
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Includes grandfathered plans too
Includes self-insured plans too
Includes COBRA beneficiaries
Is tax deductible
Does not include: FSAs; HSAs; Rx; HRAs; Employee Assistance
Plans; secondary to Medicare coverage; LTCi
• Plan sponsors may use 5500 counts; actual count for first
three quarters of the year; snapshot using representative
dates
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Non-Health Provisions
• This law is filled with non-health provisions as well including
such things as environmental tax credits, changing the student
loan program, posting nutrition information in restaurants,
etc.
• Of greatest employer interest are Fair Labor Standards Act
rules regarding nursing mothers at work effective March 23,
2010 for businesses. Businesses must provide:
- Reasonable break time for mothers to express milk
- A private area safe from intrusion
- This area may NOT be a bathroom
- Already litigation
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Medicare
• This law is filled with non-insurance provisions dealing with health
care generally, workforce development in health care, Medicare
changes designed to reduce Medicare Advantage program; This is
where $701 billion cut in Medicare came in as political issue
• April 2013: HHS move to cut 2.2% from Medicare Advantage
blunted
• Eliminate so-called Medicare ‘donut hole’, expand Medicaid program
etc.
• Lots of Medicare coverage changes such as type of wheelchair that
can be purchased vs. rented
• Resource for health, Medicare, Medicaid provisions are best found
at Kaiser Family Foundation (www.kff.org)
• MLR applies to Medigap policies
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Discussion and Questions
National Association of
Health Underwriters
(NAHU)
www.nahu.org
www.pahu.org
Vince Phillips
PHILLIPS ASSOCIATES
(717) 346-1063 Office
[email protected]
[email protected]
vphillipsassoc.com
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