Transcript Jessica Waltman, National Association of Health Underwriters New Jersey State Policemen’s Benevolent Association March 6, 2013

Jessica Waltman,
National Association of Health Underwriters
New Jersey State Policemen’s Benevolent Association
March 6, 2013
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Recap on Health Reform
 President Obama signed Patient Protection and Affordable Care
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Act (PPACA) on March 23, 2010
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
Focuses on insurance market reforms and subsidies – does not
really address the true cost of health care
Bulk of the reforms take effect in 2014, but there are still many
aspects of the law employers need to be cognizant of between
now and then
Supreme Court Outcome
 The Supreme Court upheld the constitutionality of PPACA and
the individual mandate
 Although the mandate was deemed not constitutional under the
Commerce Clause, it was deemed to be an appropriate use of the
Congressional power of taxation
 Bottom line: Congress can’t force Americans to obtain broccoli,
but they can tax or penalize Americans who don’t
 The court also ruled 7-2 to allow PPACA’s expansion of the
Medicaid program, but it struck down the portion of the law that
would have penalized states that chose not to expand their
Medicaid programs by taking their existing federal Medicaid
funds away. This part of the ruling gives states significant
leverage, as it will create a coverage hole in states that choose
not to expand their programs for financial reasons.
Health Reform Implementation
Already Implemented
2012-2o13
2o14
Beyond 2014
Grandfathered plan
requirements and consumerdirected plan changes
Summary of coverage
requirements for all
plans
Individual mandate
Auto-enrollment for
groups 200+
Small business tax credits for
purchasing private coverage
Exchange notification
requirements for all
employers
Employer responsibility/
minimum value
requirements for 50+ groups
Automatic expansion
of state small group
markets to 100
employees
Sept. 23rd reforms- all plans
Dependent coverage to 26
No pre-ex for children
Restrictions on rescissions and
annual/lifetime limits
Employee FSA
contributions capped
at $2,500
Health insurance
exchanges, private coverage
subsidies and Medicaid
expansion in willing states
States can let large
group join exchanges,
triggering market
reforms for all fullyinsured large groups
Sept. 23rd reforms for nongrandfathered plans
Preventive care
105h nondiscrimination rules
(enforcement delayed)
New coverage appeals process
Comparative
effectiveness research
funding tax impacts all
plans
Insurance market reforms
and new coverage standards
for individual/small group
market plans
The “Cadillac”
40% excise tax
goes into effect for
all high-value
group plans,
including selfinsured plans
Medical loss ratio requirements
Expanded W2
reporting
New national premium tax
for fully-insured plans
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Political Landscape
Washington’s political dynamic is
fractured
Compromise is extraordinarily
difficult--moderates are unable to move
House actions are tempered by
conservative pressure and tight
Democratic majority in the Senate and
President Obama
Policy Innovative State
Governor with Political Ambitions
Budget Concerns
Federal Exchange
Medicaid Expansion
Existing Market Reforms
Preparing for the Big Year Ahead!
 2014 is going to bring great
changes to the world of
employee benefits
 The kinds of coverage
available will change, as
will the requirements and
options for employers and
employees
 Change can be scary but
it’s also a time of great
opportunity
?
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Grandfathered Plans
 To keep a grandfathered plan, insurers and employers have to
meet strict standards.
 Plan design essentially needs to stay static. Exceptions for
collective bargaining agreements and improved benefits.
 Cost-sharing and employer contributions changes are
capped.
 Grandfathered plans are only exempt from certain
requirements.
“If you like your health
care plan, you can keep
your health care plan.”
President Obama, August
2009
 It’s very hard to maintain a grandfathered plan for any length
of time.
 In 2012, 48 percent of those who get coverage through their
jobs were enrolled in a grandfathered health plan, down from
56 percent in 2011. Employers can offer grandfathered and
non-grandfathered plans.
 If you are in a grandfathered plan your employer is required
to provide a notice.
 Grandfathered plans may not have all of the same benefits
but non-grandfathered may have higher cost
September 23st Reforms
All Plans
NonGrandfathered
Plans
• Dependent Coverage to Age 26
• No Preexisting Condition Limitations for
Children
• Rescission Restrictions
• Annual and Lifetime Limit Restrictions
• Preventive Care
• 105h Nondiscrimination (enforcement delayed)
• New coverage appeals process requirements
What Else Is Already Happening
 Small Business Tax Credits
 Federal Premium Rate Oversight
 Account-Based Plans
 Cannot reimburse OTC drugs without Rx
 HSA distribution tax increase
 FSA Contributions Capped at $2500
 Medical Loss Ratio requirements/rebates
 Summary of Benefits and Coverage
 W2 Reporting begins (requirement is optional for
employers who issue less than 250 W2s until further
notice)
What’s Already Done
Expired
• Annual limit
waivers
• State MLR waivers
Out of Money
• Federal High Risk
Pool
• Federal Retirement
Reinsurance
Program
• Small Business
Wellness Grants
• Co-OP (no
additional money—
Co-OPs already
with grants
continue to exist)
Repealed
• 1099 Reporting
• Employee Fee
Choice Vouchers
• CLASS ACT
Recap
Political Overview
What’s Already Been
Done
What’s About to
Change For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Individual Mandate
Are you:
Do you have:
•
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•
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• Coverage through a job
• Coverage through an
exchange/at least bronze
individual coverage
• Medicaid, Medicare,
CHIP
• Tricare or VA Care
• Student Health Plan
• Grandfathered plan
Part of a religious group with an exception
Incarcerated
Undocumented resident
American Indian
Pay more than 8% of take-home pay for
employer coverage
• So low-income you don’t pay federal income
taxes
• Someone who fall sinto a Medicaid expansion
coverage hole
• Some other hardship exemption
or
YES
No
Penalty
NO
Penalty
• 2014—Greater of 1% family income or $95
adult/$285 family maximum
• 2015—Greater of 2% family income or $325
adult/$975 family maximum
• 2016—Greater of 2.4% family income or $695
adult/$2085 family maximum
Exchange Marketplace
 As envisioned, “streamlined, easy to use, consumer friendly, neutral online
marketplace for health insurance”
 One-stop shopping for Medicaid, CHIP, subsidized coverage and other
individual coverage
 Subsidized coverage will only available for individuals purchasing through
an exchange, not those in an employer group
 People with adequate and affordable group coverage cannot leave group
plan for subsidized individual exchange coverage
Obama Administration is attempting to rebrand Exchanges as “Marketplaces”
 Three Governance Options:
 State-Owned and Operated
 State-Federal Partnership Model
 Federal Fallback Exchange
 NJ will have a federal exchange
 First Open Enrollment 10/1/2013-3/31/2014
18
NJ Will Expand Medicaid
 NJ already has one of the most
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generous Medicaid programs in the
country .
Approximately 7% state residents
have Medicaid coverage now.
Expansion expected to extend
coverage to 300,000 NJ uninsured.
Most of the beneficiaries will be
low income adults.
Pre-health reform NJ adults
without children were not eligible
unless they applied for welfare and
earned no more than $140 a month.
Individual Coverage Subsidies
Premium tax credit (subsidies) only are available to qualified individuals purchasing
individual coverage through health insurance exchanges after January 1, 2014.
Individuals with family incomes between 100-400% of the federal poverty level are eligible
for a premium tax credit. Individuals with family incomes at or below 250% of the FPL also
qualify for reduced cost-sharing.
Individuals and their dependents who have been offered coverage through an employer that
meets an affordability and minimum value test are not eligible to purchase coverage through
an exchange and get a subsidy.
If you get a subsidy inappropriately, there will be tax consequences.
The premium subsidy will come in the form of a refundable and advanceable tax credit paid
directly to the individual’s insurer.
The amount of the refundable premium tax credit received is based on the premium for the
second lowest cost qualified health plan in the exchange (the silver plan) and in the rating
area where the individual is eligible to purchase coverage.
The Congressional Budget Office’s Take on the Subsidies
The Congressional Budget Office
estimates that individual market
premiums are going to be
between 27-30% higher in 2014.
The CBO says “[new health care
law market reforms will] have a
much greater effect on premiums
in the nongroup [individual]
market than in the small group
market, and they would have no
measurable effect on premiums in
the large group market.”
On average, Exchange
subsidies will only
cover approximately
2/3 of premiums
Fifty-six percent of
Individual Exchange
Consumers Will Get A
Subsidy
Subsidized
Consumers
Unsubsidized
Consumers
Premium Tax Credit’s Varying Impact
Source: Kaiser Family Foundation’s Subsidy Calculator
Individual
Family Status
Income
Percentage of
income that may be
spent on health
insurance
Estimated value of the employee’s annual tax credit in
2014
30 year old with qualified
employer coverage
Married, two
children
$35,000
9.5% of household
income
No one in the family qualified to buy subsidized exchange
coverage
30 year old with no
employer coverage
Single
$35,000
9.5% of household
income
$155 (based on Kaiser Family Foundation’s projection of a
$3440 annual single premium in 2014)
Individual’s annual premium costs would be $3325
30 year old with no
employer coverage
Married, two
children
$35,000
3.97% of household
income
$8,720 (based on Kaiser Family Foundation’s projection of a
$10,108 annual family premium in 2014)
Family’s annual premium costs would be $1,388
45 Year old with qualified
employer coverage
Married, three
children
$55,000
9.5% of household
income
$0 --No one in the family qualified to buy subsidized
exchange coverage
45 year old with no
employer coverage
Single
$55,000
N/A
$0 – Individual may buy coverage in the exchange but
would not qualify for subsidy
Individual’s annual premium payments would be $5,609
based on Kaiser Family Foundation’s projection of 2014
single premium
45 year old with no
employer coverage
Married, two
children
$55,000
7.52% of household
income
$10, 100 (based on Kaiser Family Foundation’s projection of
a $14, 250 annual family premium in 2014) Family’s annual
premium costs would be $4,135
Price and Design of Small Group and
Individual Market Plans
Pricing
Changes
• Community rating that limits rate variability to age,
family status, smoker status and geographic area with
an overall variation of 3 to 1 meaning that the highest
rate offered for a product may be no more than three
times the lowest rate.
• New Jersey already has similar rules in place, so this
change will not impact prices as much as in other states
Plan
Design
Changes
• Qualified individual and small group plans will have to
meet:
• Essential health benefit requirements
• Actuarial value requirements
• Cost-sharing limitations
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to
Change for Coverage
at Work
Cost and Taxes
Questions
Basic Coverage Rules for Large Employers
Large employers may be
subject to an excise tax if
at least one full-time
employee whose
household income is
between 100-400% of FPL
level receives a premium
tax credit for Exchange
coverage and the
employer either:
Fails to offer coverage
to full-time
employees and their
dependents
Offers coverage to
full-time employees
that does not meet
the law’s affordability
or minimum value
standards
Summary of Potential Employer Penalties under PPACA, Congressional Research
Service, May 14, 2010
Large Employer Coverage Tests
Affordable
Employee’s share of the premium cannot
exceed 9.5% of household income.
Minimum Value
Lowest tier plan must be at least a 60%
actuarial value
Actuarial value is based on cost-sharing and
out-of pocket expenses, not premiums
Affordability test is based on the
cheapest minimum value plan the
employer offers.
Test is also based on the employee-only
rate, regardless of whether or not the
employee selects family or dependent
coverage
Employer contributions to account-based
plans will factor into actuarial value
Administration has a calculator and there
are other safe harbors employer can use
Administration estimates that more than
90% of large employer plans meet this
standard now.
Who has to be offered coverage?
Full Time Employees (30 hours or more a week)
Dependents who are defined as employee’s
children under age 26 (IRC §152(f)(1))
•Employers will not face tax penalties for electing
not to offer coverage to spouses.
If a spouse has no other source of affordable
employer-sponsored coverage, he/she could get
an exchange subsidy.
Other Key Points About Coverage Offers
•A large employer will be considered as offering coverage to full-time employees if they offer
coverage to 95% of their full-time employees and dependents(or, if greater, to 5 employees). Note:
if any of the 5% of full-time employees who are not offered coverage receive premium tax credits
from an Exchange, the employer will be required to pay an annual penalty of $3,000 for each of
those employees.
Many Employers May Try To Be
49ers and 29ers
Employers are only subject
to the employer mandate
requirements if they have 50
or more Full-Time
Equivalent employees.
Employers only have to offer
coverage to employees who
work an average of 30 hours
or more per week
Determining Full-Time Employee Status
 Generally, an employee who was employed on average at least 30 hours of service
per week or 130 hours of service per month is considered full-time.
 When calculating hours of service, the following rules apply:
 The common law definition of employee is used.
 All hours of service an employee performs for members of the controlled group
are counted.
 Each hour for which an employee is paid, or entitled to payment, for
performance of duties for the employer is counted including vacation, holiday,
illness, incapacity (including disability), layoff, jury duty, military duty or leave
of absence
 For union/multi-employer plans, an employer won’t be penalized if:
The employer is required to make a contribution to a multiemployer plan with respect to a full-time
employee pursuant to a collective bargaining agreement or appropriate related participation
agreement
 Coverage under the multiemployer plan is offered to the full-time employee (and the employee’s
dependents)
 The coverage offered to the full-time employee meets the law’s affordability and minimum value
standards

SHOP Exchanges
 SHOP Exchanges will be a new
purchasing environment for
small employers
 Only place an employer can
receive the small business tax
credit post-2014
 States can allow large groups
entry in 2017 if they choose
 All small groups, including
those who purchase SHOP
coverage for employees will be
subject to new market rules and
plan design changes in 2014
Is SHOP Coverage Subsidized?
 Subsidized coverage will only be available for individuals
purchasing individual coverage through an exchange
 Low-income individuals who are part of an employer group
that buys coverage through a SHOP exchange are not eligible
for a personal premium tax credit
 Only subsidies that will be distributed through the SHOP
exchanges are the small business tax credits
 People with “adequate” and “affordable” group coverage
cannot leave group plan and buy subsidized coverage through
the individual exchange, even if they are low-income
Other Employer Requirements
Waiting
periods
• Limited to 90 days
• Employers will have to report the complete value of you health benefit plan on
your W2 statement for tax years 2012 on forward
• Requirement currently optional for employers that issue less than 250 W2s
W2
Reporting • Requirement is currently for “informational” purposes, not the taxation of benefits
• Employers with more than 200 employees will have to begin auto-enrolling new
employees in benefit plans
• Still need regulations on how opting out will work, coverage waivers, waiting
Auto
periods, etc.
Enrollment • Effective date is unclear—not until 2015 at least
Coverage
Verification
• Employers will have to report income and plan data to IRS and HHS for the
employer mandate and individual mandate and subsidy verification
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Cost of Health Reform
 Originally projected to cost the federal government
approximately $1 trillion over 10 years.
 Now projected to cost $1.3 trillion over 10 years.
 Vast majority of the cost of the law to the federal
government is paying for the Medicaid expansion
and the coverage subsidies for Americans without
affordable employer coverage who earn between 100400% of the federal poverty level.
 While the law does provide for some savings through
increased efficiencies, it also contains a significant
amount of revenue enhancements too.
New Direct Tax Changes for
Individuals and Employers
New Medicare taxes on unearned income and higher income
employees and self-employed
Individual mandate tax penalty
FSA cap of $2500
OTC RX reimbursement limitation for account-based plans
HSA Penalty Distribution Increase
Individual medical cost deduction threshold increased from 7.5%
AGI to 10% AGI
Employer mandate tax penalty
End of Your Bill Taxes
National Health
Insurance Premium
tax
National Comparative
Effectiveness Tax
(PCORI)
New National
Reinsurance Fee
• Only on fully-insured plans.
• The fee would equal $8 billion for 2014, $11.3 billion for 2015 and 2016,
$13.9 billion for 2017, and $14.3 billion for 2018. For years after 2018, the
fee is adjusted for inflation.
• Average cost per family in 2014 will be $500
• $2 per covered individual
• $63 per covered individual for now
• Phases out in three years but may be reauthorized
New Taxes That Will Increase
Costs of Goods/Services
Pharmaceutical Industry
• New taxes $4.8 billion over 10 years will be passed on to
consumers
Medical Device Tax
• 2.3% of the price for which the medical device is sold. The tax
will not apply to eyeglasses, contact lenses, hearing aids, and
any other device deemed by the Secretary to be of the type
available for regular retail purposes
Tanning Tax
• 10% excise tax paid by the provider but leveied on the
consumer
Cadillac Tax
40% Excise Tax on high-cast health plans that begins
in 2018
• High-cost health plan is defined as costing more than
$10,200 for an individual or $27,500 for a family, including
worker and employer contributions to flexible spending or
health savings accounts.
• The threshold may be adjusted based on the age and
gender of workers covered by the plan. Plans covering
workers in high risk professions and retirees will also have
their thresholds increased by:
$1,650 for single plans and $3,450 for family plans
• For the first three years of the tax, the cost threshold in the
17 states with the highest health care costs would be higher
than in the rest of the country
• Vision and dental values are not included.
• The tax would be paid by the insurer, but would be passed
on directly to the employer.
Recap
Political Overview
What’s Already Been
Done
What’s About to Change
For Individuals
What’s About to Change
for Coverage at Work
Cost and Taxes
Questions
Thank you!
Jessica Waltman
Senior Vice President of
Government Affairs
National Association of
Health Underwriters
[email protected]