Transcript The 2010 Election Cycle

Implementing
Health Care Reform
National Association of Health Underwriters
May 27, 2010
Confused – Implementation
Overload!!
DON’T
PANIC!!
No need to memorize
this! We are at the
end of the beginning —
7 to 10 years of rule
making and changes
Recap on Legislation
• President signed Patient Protection and Affordable
Care Act (PPACA) on March 23
• Reconciliation bill signed on March 30
• Interpretation of legislation now requires examining
multiple sources:
– Senate-passed bill, H.R. 3590 (now P.L. 111-148)
– Manager’s amendment to the Senate bill
– Reconciliation bill, H.R. 4872
• Very important: Check all three sources when
considering how the bill works
Recap on Legislation
• What is the size of a small employer in the new law?
– Two to 50
– One to 100
– One to 200
• What is a full time employee in the new law?
– Thirty hours a week
– Forty hours a week
PPACA Overview
• Makes significant statutory changes affecting the
regulation of and payment for many types of private
health insurance – many insurance market reforms
• Will require almost all private sector employers to
evaluate the health benefits they currently offer and
consider whether they are compliant
• For those without access to employer coverage, new
individual mandate to purchase and maintain
minimum coverage in 2014
Grandfathered Plans
• Essentially all plans in effect on date of PPACA
enactment (March 23, 2010) are “grandfathered”
• What does this mean?
– Grandfather plans exempt from some, but not all, of
PPACA requirements
• Is this is a big deal?
• Law does not address whether a plan that is amended
on or after March 23, 2010 can still retain grandfather
status
– Eligible family members of existing employee plan OK, as
well as new employees and their eligible family members
2010 Issues
• Small business tax credit
• Medicare Part D subsides are not taxable
• High risk pool for the uninsured with preexisting conditions
• Early retiree reinsurance program
• New federal insurance plan requirements
PPACA in 2010
• Eligible small businesses are eligible for phase one of
the small business premium tax credit.
– Small employers with fewer than 25 employees may
receive a maximum credit, based on number of employees,
of up to 35% of premiums until 2014.
•
•
•
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Employer must contribute at least 50% of the total premium cost.
Businesses do not have to have a tax liability to be eligible
Non-profits are eligible
Average salary must be $50,000 or less (owner income exempted)
– Note: the credit reduces amount of premiums that can be
deducted
– This may or may not be helpful.
PPACA in 2010
• Owner’s benefits and
income generally not
included in the credit
calculation.
• IRS has a Q and A
section and helpful
information on its
website.
• Not all questions are
answered at this point.
PPACA in 2010
• Deductibility for Part D subsidies is eliminated in
2013, but this results in an immediate accounting
impact.
– AT&T, Caterpillar, Verizon and other large corporations
reported the fiscal impact immediately
PPACA in 2010
• Creates high-risk pool coverage for people who cannot
obtain current individual coverage due to preexisting
conditions.
– Employers cannot put people in the pool—would pay
penalty
– Eligibility: Uninsured for 6 mos and denied coverage for a
pre-existing condition
• This national program can work with existing state highrisk pools and will end on January 1, 2014, once the
Exchanges become operational and the other preexisting
condition and guarantee issue provisions take effect
• Financed by a one-time $5 billion appropriation
PPACA in 2010
• New Hampshire will participate in the program
– Federal gov’t will operate the pools in about 20 states
• CMS Actuary says $5B could be exhausted by as
early as 2012.
– Further appropriations to fund the program?
• Pool should be operational around June 23, 2010.
PPACA in 2010
• Establishes federal review of health insurance premium rates.
• Secretary of HHS, in conjunction with the states, will have
new authority to monitor health insurance carrier premium
increases beginning in 2010 to prevent unreasonable increases
and publicly disclose such information.
• In addition, $250 Million is appropriated for state grants to
increase their review and approval process of health insurance
carrier premium rate increases.
PPACA in 2010
• 2010 Reinsurance Program for employer “early retiree”
health benefits (age 55-64) provides for subsidies up to
80 percent of the insurance costs (claim corridor of $1590K) IF they invest the difference in wellness and
chronic care management programs, among other things
– Regulations were issued two weeks ago.
– The program becomes effective June 23, 2010.
– Self-funded and fully insured plans eligible.
PPACA in 2010
• Payments are retroactive for a plan year, so employers and early
retirees will be able to take advantage of them for costs incurred
from the date the program is established.
• Payments will be made to employer-sponsored health plans on
behalf of an early retiree.
• To receive assistance, plans must apply, document claims, and
implement programs and procedures to generate cost savings for
participants with chronic and high-cost conditions.
• Savings for enrollees: Plans must use these proceeds to lower
health costs for enrollees (e.g., premium contributions,
copayments, deductibles, etc.)
Effective Plan Years on/after Sep. 23
– All Plans, Including Grandfathered
• Restrictions on annual limits
– Plans may impose only “restricted annual limits” on the
dollar value of “essential benefits.” HHS to establish
annual limits on the dollar value of essential benefits. On
and after January 1, 2014, no annual limits will be
permitted
• No lifetime limits
– Plans may not impose lifetime limits on dollar value of
“essential benefits”
Effective Plan Years on/after Sep. 23
– All Plans, Including Grandfathered
• New strictures on “rescissions”
– Plans may not rescind coverage unless person commits
fraud or makes a material misrepresentation prohibited
under the terms of the plan
• Pre-Ex Restrictions
– Plans may not impose any preexisting condition restriction
on children under the age of 19. After January 1, 2014,
plans may not impose preexisting condition restrictions on
anyone
Effective Plan Years on/after Sep. 23
– All Plans, Including Grandfathered
• Coverage for dependents to age 26
– If a plan offers dependent coverage of children, such
coverage must extend to a child until the child reaches age
26
– Some carriers are implementing this change early
– For grandfathered plans, this requirement applies before
January 1, 2014 only if the adult child is not eligible to
enroll in another plan
– Point of confusion: the legislation increased the IRS
definition of dependent up to age 27
Effective for Plan Years on/after Sep.
23, 2010 (Grandfathered Exempt)
• Nondiscrimination rules under IRS Code 105(h)
applies to fully-insured plans
• Preventive care without cost sharing on services that
receive an “A” or “B” rating from the US Preventive
Services Task Force
• New appeals process rules for coverage
determinations and claims
• Certain new patient protections
New Patient Protections
(Grandfathered Plans Exempt)
• For all group and individual plans, including selfinsured plans, emergency services covered innetwork regardless of provider
• Enrollees may designate any in-network primary care
physician as their primary care physician
• New coverage appeal process
2011 Issues
• New requirements for insurance plans
• Payroll deduction for a new long-term care
program
• Federal wellness grants for small businesses
without wellness programs
PPACA in 2011
• Minimum loss ratio requirements will be established
for insurers in all markets. How will this affect
coverage?
• The MLR is 85% for large group plans and 80% for
individual and small group plans (100 and below).
– May impact provisions that reduce claims cost, such as pay
for performance, nurse lines, disease management, etc.
– May result in fewer carriers offering coverage in some
areas, particularly rural, resulting in less consumer choice.
• Carriers will have to issue a premium rebate to
individuals when MLR is too low.
PPACA in 2011
• Creates a new public long-term care program.
• Premiums could be collected as early as January 1,
2011.
– Unknown what the premium will be but CMS
actuary estimates premium as high as $240/mo.
with 2% enrolled
• Benefits won’t be known until October 2012.
• Cannot make a claim for 5 years so earliest would be
2015, but more likely 2017.
• Must be attached to work to be eligible.
PPACA in 2011
• Employers are expected to auto-enroll employees
– Employees can opt-out.
• In order to meet actuarial requirements, the price of
the plan will have to be very high.
• Administrative burden on employers.
PPACA in 2011
– Beginning in 2011, $200 million over 5 years in
grants for employees of small businesses to
participate in comprehensive workplace wellness
programs
• Eligible employers are those 100 employees who work 25 hours or
more per week, and did not have a workplace wellness program as of
March 23, 2010
• First-come, first-serve
– Grants to allow state and local health departments to design
community-based public health interventions and screenings
for people age 55-64; and
– $25 million child obesity demonstration project
PPACA in 2011 and 2012
• All employers must include 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
• A new federal tax on fully insured and self-funded group
plans, equal to $2 per ee/yr, takes effect to fund federal
comparative effectiveness research takes effect in 2012
PPACA in 2013
• FSA contribution limits of $2,500
• Additional 0.9% Medicare Hospital Insurance tax on selfemployed individuals and employees with respect to earnings
and wages received during the year above $200,000 for
individuals and above $250,000 for joint filers (not indexed)
– Self-employed individuals are not permitted to deduct any portion of
the additional tax
• Reconciliation measure levied a new 3.8% additional
Medicare contribution on certain unearned income from
individuals with AGI over $200,000 ($250,000 for joint filers)
– The “House tax” email
2014 Issues
• Individual mandate
• Employer mandate
• Other significant changes:
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Modified community rating
Individual market guaranteed issue
Subsides available
New taxes on fully-insured plans
PPACA in 2014
• Imposes new annual taxes / fees (non-deductible) on
private health insurers based on net premiums
– $8.1 billion annually beginning in 2014 and rising to $14.3
billion by 2018 (and indexed for medical inflation
thereafter)
– Small businesses and employees could be
disproportionately affected because tax only applies to fully
insured health benefits (self-funded plans exempt)
PPACA in 2014
• Coverage must be offered on a guarantee issue basis
in all markets and be guarantee renewable
• Exclusions based on preexisting conditions would be
prohibited in all markets
• Full prohibition on any annual limits or lifetime limits
in all group (even self-funded plans) or individual
plans
• Redefines small group coverage as 1-100 employees.
– States may also elect to reduce this number to 50 for plan
years prior to January 1, 2016
PPACA in 2014
• Creates sliding-scale tax credits for non-Medicaid
eligible individuals with incomes up to 400% of FPL
to buy coverage through the exchange.
• The requirement that the subsidies are only available
through the exchange is a significant problem.
• It is a particular threat to employer plans due to other
provisions that allow employees to opt out of
employer sponsored coverage.
Agent/Broker Issues
• Individual, small group and large group coverage will
be available inside and outside of the exchanges
• Agents and brokers are included in the legislation
• Commissions will be a state-level or carrier issue
• Exchange will contract with “Navigators” to promote
exchanges, tax credits and subsidies and send
consumers to new consumer advocates called
“ombudsmen”
– Massachusetts did something similar: contract with groups
to enroll the uninsured in Medicaid
– Large Medicaid expansion in 2014
PPACA in 2018
• 40% excise tax on insurers of employer-sponsored
health plans with aggregate values that exceed
$10,200 for singles and from $27,500 for families
takes effect in 2018.
• Arbitrary numbers and lack of adequate indexing
make this a very unfair tax.
• Many people will be impacted due to the way the bill
defines what is included in the premium calculation.
– Dental and vision not included
Employer Responsibilities
Employer Responsibilities
• Key Concepts
– Only employers with 50 or more full-time (or full-time
equivalent) employees must offer coverage
– Unlike original House bill (approved last November), large
employers are not required to meet minimum benefit
requirements (applicable to individual and small groups)
or make minimum contributions to premiums
– The requirement is to offer essential coverage to full-time employees
• Essential coverage = minimal benefits. The Secretary of Health and Human
Services will determine what “essential coverage” is.
Employer Responsibilities
• Do these employers required to offer coverage?
• If so, to whom?
– Employer A: 40 full-time employees and 10 part-time
employees (60 hours/month)
– Employer B: 20 full-time employees and 20 part-time
employees (100 hours/month)
– Employer C: 10 full-time employees and 100 part-time
employees (60 hours/month)
– Employer D: 30 full-time employees and 30 seasonal
employees (120 hours/month for fewer than 120 days)
Employer Responsibilities
• Effective starting January 1, 2014
• Employer must count all full-time employees and
part-time employees – on a full-time equivalent basis
– in determining if they have 50 or more employees
– Certain seasonal workers are not counted in determining if
employer has 50 workers
– Full-time = 30 or more hours per week, determined on a monthly
basis. Aggregate part-time hours and divide by 120.
– Reconciliation repealed the construction industry mandate (5+)
• Penalties assessed for “no coverage” or coverage that
is not “affordable”
No Coverage
• If an employer fails to provide 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, then
• Employer penalty = $2,000 for each of its full-time
employees in the workforce, first 30 exempted
No Coverage
• Employer of 60 full-time employees and 20 part-time
employees (20 hours a week) does not offer coverage.
• What is the fine?
– 60-30 = 30
– $2,000 X 30 = $60,000
No Coverage
• In 2014, all Americans will be required to have health
insurance that meets minimal benefits standards
• Penalties for noncompliance
– $95 in 2014
– $225 in 2015
– $695 in 2016
Unaffordable Coverage
• 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
income, 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
Unaffordable Coverage
• What is 9.5% of income?
–
–
–
–
$15,000 = $1425
$25,000 = $2375
$40,000 = $3800
$60,000 = $5700
• So how will this work?
• The employer is only required to offer coverage to full time
employees
Additional Details
• Actuarial value = the portion of allowable costs paid by
plan.
• Penalties assessed on a monthly basis.
• No penalties apply to part-time employees.
• No penalties for waiting periods (if any), not exceeding
90 days.
• Total “affordability” penalty is capped. May not exceed
penalty for “no coverage.”
• Employer does not determine if employee is eligible for
premium tax credit based on household income, but is
notified by the exchange if full-time employee qualifies.
Other Responsibilities
• Employers must automatically enroll “new full-time
employees” in employer-sponsored coverage
– Must provide adequate notice and opportunity to opt out
– Applies to employers with “more than 200 full-time employees”
– 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)
• Notice to current employees and new hires about exchange and
subsidies
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–
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Existence of exchange, services and how to obtain assistance
Availability of premium assistance if plan value below 60%
Loss of employer contribution and tax exclusion for contribution
Effective March 1, 2013
Health & Wellness
Health & Wellness
For services
performed on or
after July 1, 2010:
o New 10% excise tax on
amounts paid for indoor
tanning services, whether
or not insurance policy
covers service. Service
provider to asses tax on
customer
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
•
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
Health & Wellness
• Within 2 years after enactment, HHS will develop
reporting requirements for use by group health plans
designed to:
– Improve health outcomes
– Implement activities to prevent hospital discharge readmissions
– Implement activities to improve patient safety and reduce
medical errors
– Implement and design wellness programs.
What can you do?
• Working with NAHU members in addressing questions
to regulatory agencies —
[email protected]
• Those of you with “practical” business knowledge give a
unique perspective
• Talk with your clients, your payroll vendors and tax
advisors
• Will be updating as more information is available
Discussion and Questions
Adam Brackemyre
Director of Federal Affairs
(703) 276-3808
[email protected]