Transcript Health Reform After the Election The Big Picture of Obamacare James R.

Health Reform After the Election
The Big Picture of Obamacare
James R. Griffin
Jeffery P. Drummond
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
[email protected]
[email protected]
214.953.5827
214-953-5781
Conceptual Issues
Jeffery P. Drummond
• Focuses on healthcare transactional, regulatory, and
administrative matters.
• Primarily represents physicians and physician groups,
hospitals and health systems, laboratories, and other
primary and ancillary healthcare providers.
• Particular emphasis on Stark, Anti-Kickback, and other
federal and state anti-referral statutes; HIPAA and
medical record privacy and security issues; pharmacy
and laboratory issues; tax exempt entities and tax
exempt financing.
The Supreme Court Decides:
• National Federation of Independent Business v.
Sebelius
• June 28, 2012
• Chief Justice Roberts, joined by Justices
Ginsburg, Sotomayer, Breyer and Kagan
• Constitutional issues considered
– Individual Mandate
– Medicaid Expansion
The Supreme Court Decides:
• “We do not consider whether the Act embodies
sound policies. That judgment is entrusted to the
Nation’s elected leaders. We ask only whether
Congress has the power under the Constitution to
enact the challenged provisions.”
The Supreme Court Decides:
• “The Framers created a Federal Government of
limited powers, and assigned to this Court the
duty of enforcing those limits. The Court does so
today. But the Court does not express any opinion
on the wisdom of the Affordable Care Act. Under
the Constitution, that judgment is reserved to the
people.”
What’s Wrong with American Healthcare?
(Why so expensive for such bad results?)
• Results aren’t all that bad
– Cancer survival rates are exceptional
– Different data standards (e.g., infant mortality)
– Unhealthy population with bad habits
• Diet/obesity
• Drugs and guns
• We have the best toys
• We get the most care
• We get care up to the last day (No LCP)
Normal Commercial Transaction
Providers
Patients
(Sellers)
(Buyers)
How Does the American Healthcare
System Work?
• Three parties:
– Provider, Patient, Payor
• Unlimited wants
• No natural governor on costs
• A “right,” or just an “expectation”?
– Charity hospitals/providers
– Governmental “safety net” programs
– EMTALA
OPM: Other People’s Money
Payors
Provider standards
Networks
COB
Providers
Copays
Deductibles
Pre-existing cond.
Lifetime limits
No limits
Patients
Conceptual Insurance Issues
• Is health insurance risk management
(purchasing indemnification?)
– Reimbursement to cover costs/expenses
– Calculate whether to self-insure
• Is health insurance a warranty or customer
service plan?
– Pay more upfront for repair/replace defects
– “All you can eat” buffet
How Does Insurance Work?
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Generally provided through employment
Voluntary Participation
Sharing/pooling of Risk
Allocation based on risk profile?
– Higher risk activities, higher premiums
– Risk reduction activities, lower premiums
• Premium = average cost + admin + profit
• The “Free-Rider” Problem
The Free-Rider Problem
• Can you buy fire insurance when your house is
already burning?
• Pre-existing condition is limited fix
• What to do with those who don’t buy
insurance?
• Refuse to provide care
– Safety nets for poor and old
– Possible “charity” for the rest
– Non-”poor” poor, illegals,
The Problem to be cured by Obamacare:
The uninsured
• Large numbers of uninsured (not otherwise in
safety net) “don’t get healthcare”
– Not really true – EMTALA ensures ER coverage
– charity, bad debt account for rest
• Cost-shifting impact
– Insured get “in-network” pricing, so uninsured are
charged huge amounts (which they don’t pay)
– Uninsured costs picked up by insured
– Medicare/caid underpayments add to the shift
Other problems to be cured by
Obamacare:
• Greedy insurance companies drive up
premiums, don’t pay doctors fairly, deny care
and coverage
• MLR, end of pre-existing conditions and lifetime limits,
essential health benefits
• Greedy doctors/hospitals charge too much,
collect debts unfairly
• ACOs and MSSP, end physician-owned hospitals
Potential Non-Obamacare Solutions
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Re-mutualization of insurance companies
Cross-border insurance sales
“Bare minimum” policies
Changes to tax treatment of insurance costs
– Health Savings Plans
• High-deductible plans
ObamaCare’s Solution: the Mandate
(Increase the insured population)
• End the Free-Rider problem by outlawing freeriders.
– “Liberty” issue
– Too many exceptions
– Too little enforcement
• Require businesses to provide insurance (Mass.)
• insurers to provide essential benefits, limit profits
• Establish additional markets to provide additional
avenues for insurance purchases
– Basic economics work against this
• Increase Medicaid population
Tangential Issues: Mandate
• What are “essential” health benefits?
– The contraception kerfuffle
• How to apply burden to employers?
– And how will employers evade it?
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How to deal with those who won’t play?
Medical Loss Ratios (could increase costs)
Problems with Health Insurance Exchanges
“Waiver” abuse (“rule of law” issues)
– Regulatory agencies taking legislative action
The contraception coverage issue
• Broad range of contraceptives/abortifacients
considered to be “essential health benefits.”
• Very limited exception initially offered for
“religious institutions” (effectively only
churches).
• Lawsuits ensued, with mixed results.
• HHS proposed revised regulations last Friday;
separated “religious employers” (churches
themselves) and “eligible organizations.”
The new contraception coverage rule
• “Eligible Organization” is an entity that selfcertifies that it meets the following:
– Opposes providing specified contraceptive services on
account of religious objections
– Operates as a nonprofit entity
– Holds itself out as a religious organization
• Provides self-certification to insurer
• Eligible Organization’s insurance plan then does
not have to include coverage for the specified
contraceptive services.
The new contraception coverage rule
• However, the insurer must automatically
provide insurance for the specified
contraceptive services through a separate
insurance policy for each plan participant
• Insurer may not charge copays/deductibles to
the patient for the separate insurance
• Insurer may not charge premium to the Eligible
Organization for the coverage
The new contraception coverage rule
• Insurer must provide notice of availability of the separate insurance to
beneficiaries/participants
• ““The organization that establishes and maintains, or arranges, your
health coverage has certified that your group health plan qualifies for
an accommodation with respect to the federal requirement to cover
all Food and Drug Administration-approved contraceptive services for
women, as prescribed by a health care provider, without cost sharing.
This means that your health coverage will not cover the following
contraceptive services: [contraceptive services specified in selfcertification]. Instead, these contraceptive services will be covered
through a separate individual health insurance policy, which is not
administered or funded by, or connected in any way to, your health
coverage. You and any covered dependents will be enrolled in this
separate individual health insurance policy at no additional cost to
you. If you have any questions about this notice, contact [contact
information for health insurance issuer].”
The new contraception coverage rule
• Insurer may offset cost of providing the separate
plan against user fees it may otherwise pay to
participate in a federally-facilitated exchange.
• Student health insurance plans appear to be
included in the “Eligible Organization” category if
the sponsoring entity meets the definition.
• “Self-insured” plans are not yet included, but 3
proposed methods would use the TPA to place the
contraceptive insurance with another insurer
Non-Mandate Provisions
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Health Insurance Exchanges (“HIX”)
ACOs and MSSP
Medicare Changes
Medicaid Expansion
New Requirements for Providers
Structural issues
Health Insurance Exchanges
Accountable Care Organizations
• Providers can form ACOs and participate in the
Medicare Shared Savings Program
– Shared savings only
– Shared savings and losses
• Defining and measuring savings and losse
• Structural Issues
– Stark, Anti-Kickback, etc.
– Antitrust
Medicare Changes
• “Part C” (Medicare Advantage) changes
– Restructure payment levels
– MA plans must pay back if MLR is too low
• “Part D” (prescription drug) changes
– Changes in subsidies
– Fill in the “donut hole”
• Experiment with bundled payments, value-based
purchasing
Medicaid Expansion
• Increase pool of eligible individuals to anyone
earning less than 133% of FPL
• Phase-in of state responsibility:
– Federal government pays 100% through 2016
– 95% in 2017, 94% in 2018, 93% in 2019, 90%
thereafter
• Originally, once a state took the first new dollar, it
could not later reduce eligibility
• States not required to participate; may drop out
New Requirements for Providers
• Required to implement an effective compliance
program (details not yet available)
• Must disclose financial relationships with drug
companies and other referring providers
• Non-profit hospitals must perform a “community
needs assessment” every 3 years, publish
financial assistance policy, not “balance bill” if
patients could get financial assistance
• “Whole Hospital” Stark exception ended.
Structural Issues
• New Taxes: Pharma companies, Insurance
companies, medical devices, tanning salons
• IPAB and “comparative effectiveness”
• CLASS Act (already dead)
• Physician-Owned Hospital changes
• Quality initiatives
• Demo projects
• In-home care
• Bundled payments
Ridiculous and Sublime
• Medicaid coverage for former foster children
• Indian healthcare provisions
• Chain restaurant menu nutrition information
• Revenue provisions
– Tanning bed tax
– Medical device tax
• The law of unintended consequences
How Obamacare will/won’t work
• It’s not a government takeover of the healthcare
industry; it’s a tax on industry participants to drive
more people into insurance coverage
– Make more employers provide coverage (Mass.)
– Tax/subsidize individuals
– Won’t cover everyone, no matter what
• If/when it doesn’t work, it WILL be a stepping
stone in the drive toward a single-payor system
• Counter-reaction could push other factors
– Re-mutualization of insurance
– Tiers of coverage or service
Practical Implications
James R. Griffin
• Focuses on employee benefits and executive compensation,
advising clients on issues arising under the Internal Revenue
Code, ERISA and other laws.
• Addresses issues affecting 401(k) and pension plans, executive
compensation plans, stock option plans, and other group
benefit plans.
• Represents clients in controversy matters, including Internal
Revenue Service (IRS) and Department of Labor (DOL) audits,
investigations, examinations and voluntary compliance
proceedings.
Roadmap
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Individual Mandate
Employer Mandate
Essential Health Benefits and Minimum Value
Market Reforms
Benefits Provisions
Other Tax and Fee Increases
Individual Mandate
• All citizens are required to have qualifying health coverage
• Penalty (tax) greater of $695 individual/$2085 family or 2.5%
of household income, subject to phase in ($95 or 1% in
2014) through 2016, increasing by COLA thereafter
• Exemptions granted: Indians, prisoners, illegal immigrants,
poor, those who would be covered by Medicaid in states that
don’t opt in
• Premium credits available for those who purchase coverage
and are below 400% FPL
Roadmap
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Individual Mandate
Employer Mandate
Essential Health Benefits and Minimum Value
Market Reforms
Benefits Provisions
Other Tax and Fee Increases
Employer Mandate
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Flowchart
Employer Penalties
Employer Penalty Questions
Exchanges
Premium Tax Credits
Cost Sharing Subsidies
Employer Penalties
Employer Play or Pay Penalty
• An employer that does not offer health
coverage to its full-time employees and their
dependents is subject to a nondeductible "play
OR pay" penalty if any full-time employee
enrolls for coverage through an Exchange and
qualifies for the premium tax credit or costsharing reductions
• $2,000 for each full time employee over 30
Employer Play and Pay Penalty
• Applies if a large employer offers its full-time
employees (and their dependents) the
opportunity to enroll in coverage but the
coverage does not provide “minimum value” or
is “unaffordable” and one or more full-time
employees receive subsidized coverage through
an Exchange
• Penalty is $3,000 for each full-time employee
receiving subsidized coverage through an
Exchange
Employer Penalty Questions
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What is a large employer?
How are FTEs counted?
What are variable hour employees counted?
When is coverage affordable?
What is a large employer?
• An employer that employs an average of at least 50 full-time
or full-time equivalent (FTE) employees on business days
during the preceding calendar year
• A full-time employee with respect to any month is an
employee who is employed an average of at least 30 hours of
service per week
• Affiliated entities and entities under common control (such
as a parent corporation and wholly owned subsidiary
corporations) are treated as a single entity for determining
large employer status
• Successor employers are considered to be the same as
predecessors
• Special rule for new employers
How Are FTEs Counted?
• FTEs are determined by calculating for each month of
the prior calendar year the aggregate number of hours
of service (not exceeding 120 hours for any one
employee) worked by all non-full-time employees
(those not employed for an average of 30 hours per
week), including seasonal employees, and dividing by
120, and then adding the number of monthly FTEs
together and dividing by 12
How are Variable Hour
Employees Counted?
• Variable hour employees work 30 or more hours in
some weeks and fewer in other weeks
• Optional Look Back Measurement Method
– Measuring Period
– Administrative Period
– Stability Period
Variable Hour Employees—Initial
Initial Measurement Period
Initial Administrative Period
The initial measurement
period must start no later than
the first day of the month after
the employees start date and
must be:
The initial administrative period
starts immediately after the last
day of the initial measurement
period and must be:
The initial stability period starts immediately after the
last day of the initial administrative period and must
be:
 no longer than 90 days
 for employees who were determined to be full time,
no shorter than the longer of:
 no shorter than 3 months,
and
 no longer than 12 months
Initial Stability Period
 the same length as the standard stability period
- 6 calendar months, or
- the initial measurement period, and
 for employees determined to be part time, no longer
than the shorter of:
- The initial measurement period plus 1 month, or
- the remainder of the standard stability period in
which the initial measurement period ended.
Variable Hour Employees—Standard
Standard Measurement
Period
Standard Administrative
Period
The standard measurement
period must be:
The standard administrative
period starts immediately
after the last day of the
standard measurement
period and must be:
• no shorter than 3 months,
and
• no longer than 12 months
• no longer than 90 days
Standard Stability Period
The standard stability period starts immediately after the
last day of the standard administrative period and must
be:
• for employees who were determined to be full time,
no shorter than the longer of:
- 6 calendar months, or
- the standard measurement period, and
• for employees who were determined to be part time,
no longer than the standard measurement period
When is Coverage Affordable?
• Coverage is affordable if the employee’s premium obligation for
self-only coverage does not exceed 9.5 percent of the
employee’s household’s modified adjusted gross income
• Employer Safe Harbors
– W-2
– Lowest cost employer coverage
– 9.5% of FPL
Exchanges
• Regulated public marketplace to provide eligible individuals and
small businesses with access to quality, affordable health care
coverage under Qualified Health Plans
• Open enrollment scheduled to begin in October 2013
• Challenges
– Getting the state and Federal exchanges built
– Getting the exchanges ready to accept a flood of applications
– Informing and educating the uninsured
– Federally facilitated exchanges (FFEs)
• “SHOPS” to be provided, but there is little guidance available
Exchanges—State and Federal
Exchanges—Notices
• Employers are required to provide their employees with written notice
about the Exchanges by March 1, 2013. On January 24, 2013, the
Department of Labor officially announced a delay until Summer or Fall
of 2013.
• Content of Exchange Notice
– Information about the existence of the Exchange, including a
description of the Exchange services and how an employee may
contact the Exchange
– If the employer's share of the cost of coverage is less than 60
percent, a statement that the employee may be eligible for
premium tax credits and cost-sharing reductions if purchasing
coverage through the Exchange
– If the employee purchases coverage through the Exchange, a
statement that the employee will lose the employer contributions
and that employer contributions are excludable from income tax
Individual Premium Tax Credits (“PTC”)
• Purpose is to reduce the cost of health coverage
obtained through an Exchange
• Citizens and legal residents (and not in jail)
• Incomes between 100% and 400% of the Federal
poverty level
• Credit is refundable and advanceable
• Paid monthly to lower the premium that is required for
Exchange coverage
PTC—2013 Federal Poverty Level
One Person
Family of Four
100%
$11,490
$23,550
400%
$45,960
$94,200
PTC—Employer Health Plan Exception
• PTCs are not available to an employee who is offered
employer health coverage unless:
– The plan does not have an actuarial value of at least
60%, or
– the employee’s share of the premium for SELF ONLY
employer plan coverage exceeds 9.5% of income
– Premium tax credits not available for those enrolling in
catastrophic plans
PTC--Amount
• PTC amount is based on the premium for the second
lowest cost silver plan in the Exchange and area where
the person is eligible to purchase coverage
• A silver plan is a plan that provides the essential
benefits and has an actuarial value of 70%
• The amount of the tax credit is variable so that the
premium a person would have to pay for the Silver
Plan would not exceed the specified percentage of
income, adjusted for family size
PTC—Premium Based on Income Level
Household Income (as percentage of
Federal Poverty Line (FPL)
Up to 133%
Premium as a Percent of
Household Income
2% of income
133-150%
3 – 4% of income
150-200%
4 – 6.3% of income
200-250%
6.3 – 8.05% of income
250-300%
8.05 – 9.5% of income
300-400%
9.5% of income
PTC—Example
• Pat is 45 years old and has an income in 2014 that
is 250% of poverty (about $28,735)
• The cost of the Silver plan in the Exchange in Pat’s
area is projected to be about $5,733
• Pat would not be required to pay more than 8.05%
of income, or $2,313, to enroll in the silver plan
• The tax credit available to Pat would be $3,420
($5,733 premium minus the $2,313 limit on what
Pat must pay)
Cost-Sharing Reductions
• Protect lower income people with health
insurance from high out-of-pocket (“OOP”)
costs at the point of service
– Limit the plan’s maximum OOP costs
– Reduce cost sharing amounts (i.e., deductibles,
coinsurance or copayments)
• Reduced cost-sharing is available for families
with incomes at or below 250% of the FPL so
that they may enroll in plans with higher
actuarial values
CSS—Reduced OOP and Average Value
Household Income
Reduction in Maximum
OOP Limit
Plan AV Requirement
100-150% of FPL
2/3
94%
150-200% of FPL
2/3
87%
200-250% of FPL
1/2
73%
250-300% of FPL
1/2
70%
300-400% of FPL
1/3
70%
Question and Answer Break
Roadmap:
• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases
Essential Health Benefits
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Listed Services and State Benchmark Plan
Applicability
Out of Pocket and Deductible Limits
Actuarial Value
EHB—Listed Services
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Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services, including
behavioral health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic
disease management
Pediatric services, including oral and vision care
EHB—Benchmark Plan
• EHB must be covered at least to the extent they
they are covered by the state’s benchmark plan
• Proposed Texas EHB Benchmark Plan
– Blue Cross Blue Shield of Texas
– BestChoice PPO, RS 26
• The largest enrollment plan of any product in
the state’s small group market
• No coverage for adult dental or vision, cosmetic
orthodontia or long-term care
EHB—Applicability
• Applies to Individual and small group markets
• Applies to non-grandfathered Plans
• EHBs do not apply to self-insured or large
group plans
Out of Pocket Limits
• No group plan—including self-insured and large
group plans—can require OOP payments that
exceed the HSA limits
• For 2013:
– $6,250 for an individual
– $12,500 for a family
• Cost sharing for care received out of network in
network plans does not count toward the cost
sharing limits
• Emergency care must be provided out of network
without increased cost sharing
Deductible Limits
• Deductible limit on small group plans
– $2,000 for single coverage
– $4,000 for family coverage
• Subject to inflation adjustments and to
variances that are necessary to reach the
actuarial value of a specific “metal” level plan
Actuarial Value
Metal Plans
Bronze
60%
Silver
70%
Gold
80%
Platinum
90%
• Actuarial value is defined as the percentage that is paid by a
health plan for the total allowed costs of benefits for a
standardized population
• It is a measure both of the value of services covered by the plan
and of the cost-sharing that a plan member must cover
Actuarial Value—HRAs and HSAs
• HRA and HSA contributions can count toward
medical spending if they are expected to be
spent in a benefit year
• Proposed regulations do not address counting
employer contributions to HRAs that are used
to pay insurance premiums
Roadmap
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Individual Mandate
Employer Mandate
Essential Health Benefits and Minimum Value
Market Reforms
Benefits Provisions
Other Tax and Fee Increases
Market Reforms
• Applies to individual and small group markets
– 1 to 100 employees
• Applies to non-grandfathered plans
• Insurers are required to sell insurance coverage
to any applicant
• No exclusions for pre-existing conditions
Market Reforms—Permitted Factors
• Permitted factors in premium rates:
– Age with a maximum 3 to 1 ratio
• 1 year bands
– Tobacco Use with a 1.5 to 1 ratio
– Geographic location
– Household composition and size
Market Reforms—Prohibited Factors
• Prohibited factors in setting premium rates:
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Individual or family status
Rating area
Age, except as stated above
Tobacco use, except as
stated above
– Health status
– Claims experience
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Gender
Industry
Occupation
Duration of coverage
Eligibility for tax credits
Prior source of coverage
Credit worthiness
Roadmap
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Individual Mandate
Employer Mandate
Essential Health Benefits and Minimum Value
Market Reforms
Benefits Provisions
Other Tax and Fee Increases
Benefit Plan Provisions
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Reduced Limit on FSA Balances
Summary of Benefits and Coverage
Wellness
Contraception Coverage
Medical Loss Ratio Rebates
Reduced Limit On Flexible Spending
Account (FSA) Balances
• Health FSA contributions by employees will be limited
to $2,500 per year starting in the 2013 plan year
• Not applicable to dependent care assistance
(day care) benefits
• Grace period amounts that remain after the 2012
plan year for up to 2-1/2 months are not affected
Summary of Benefits and Coverage (SBC)
• Effective September 23, 2012
• Provide improved information to:
– better understand the coverage they have, and
– allow them to compare their coverage options
across different types of plans and insurance
products
• Fully insured and self insured plans
• Grandfathered and non-grandfathered plans
Wellness
• ACA promotes the implementation and expansion
of employer wellness programs to:
– Improve health, and
– Help control health care spending
• Wellness programs are authorized under the ACA as an
exception to the general prohibition on health status
underwriting by plans, which takes effect on Jan. 1, 2014
• Applies to grandfathered and non-grandfathered plans
• Effective for plan years that begin on or after Jan. 1, 2014
Wellness—Participatory
• Generally available without regard to an
individual’s health status
• Examples include programs that:
– Reimburse for the cost of a fitness center
membership
– Provide a reward to employees for attending a
monthly, no-cost health education seminar
– Provides a reward to employees who complete a
health risk assessment without requiring them to
take further action
Wellness—Health Contingent
• Generally require individuals to meet a specific
standard related to their health to obtain a
reward
• Examples include programs that:
– Provide a reward to those who do not use, or
decrease their use of, tobacco
– Provide a reward to those who achieve a specified
cholesterol level or weight as well as to those who
fail to meet that biometric target but take certain
additional required actions
Wellness
• 30% of cost of coverage discount or
surcharge/50% for participation in a smoking
cessation program
• May be structured as rewards or as surcharges
There are a number of ways to structure your wellness program. To
explore your options, contact [email protected] or
call (866) 227-2099
Contraception Coverage
• ACA requires employer-provided health care
plans to provide all FDA approved contraceptive
methods, sterilization procedures, and patient
education and counseling for all women with
reproductive capacity, without cost
Contraception Coverage
• Effective for plan years that begin on or after
August 2012
• Exemptions for:
– Churches and houses of worship
– Nonprofit religious employers whose employees
primarily share its religious tenets and who
primarily serve persons who share its religious
tenets. (1 year delay only)
Contraception Coverage
• Penalty is $100 per day per individual for each day
the plan does not comply
• More than 40 lawsuits have been filed
• 7th Circuit temporarily barred enforcement of the
contraception mandate against an Illinois
contruction firm (12/28/12). 8th Circuit—same;
10th Circuit opposite
• United States Supreme Court denied Hobby
Lobby’s emergency appeal to suspend the fines
during the time that it appealed its challenge to
the ACA in the court of appeals
Medical Loss Ratio Rebates
• Insurers must spend a minimum percentage of premium
dollars on medical services and activities designed to
improve health care quality
– 80% for Individual and Small Group markets
– 85% for Large Group markets
• Aggregated market data in each state
• Not specific to a particular group health plan’s
experience
• Fully insured policies/not self-funded plans
• Paid to policyholder of ERISA plans by August 1
• Notices to subscribers
Roadmap
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Individual Mandate
Employer Mandate
Essential Health Benefits and Minimum Value
Market Reforms
Benefits Provisions
Other Tax and Fee Increases
Other Tax and Fee Increases
• W-2 Reporting
• Non “Fiscal Cliff” Tax Increases
• Fees
– Patient Centered Outcomes Research Institute
(“PCORI”)
– Reinsurance Program
• Cadillac Tax (2018)
W-2 Reporting
• Applies to employers that were required to
file 250 or more W-2 forms in the preceding year
• Applies to 2012 W-2s that are distributed to
employees starting in 2013
• Report total cost of group health benefit
plan coverage
• Box 12, Code DD
• Informational only/Reported cost is not taxable
• Employee coverage only is reported
W-2 Reporting
• Total cost includes
– Employer portion
– Employee portion
• Pre-tax
• After-tax
• Cost of coverage
– Any reasonable method that is applied consistently
for all employees who terminate employment
during the year
W-2 Reporting
• Does not apply to
– “excepted benefits”, such as accident, disability
income, supplemental liability and workers
compensation insurance
– Stand-alone dental and vision plans
– HRA, HSA and Health FSA amounts
– Employee assistance plans, wellness programs and
on-site medical clinics if the employer does not
charge a premium
Non-Fiscal Cliff Tax Rate Increases
• Additional Medicare Tax
– Starts in 2013
– Rate is 0.9%
– Applies to Married Filing Jointly filers with
combined wages, other compensation and selfemployment income of more than $250,000
– Employer withholding begins, per employee, on
wages in excess of $200,000 in a calendar year
– Employer is not required to notify affected
employees
Non-Fiscal Cliff Tax Rate Increases
• Investment Income Surtax
– Starts in 2013
– Medicare contribution tax
– Rate is 3.8%
– Applies to lesser of
• Net investment income
• Excess of modified adjusted gross income
over $250,000 for married filing jointly
Non-Fiscal Cliff Tax Rate Increases
• Reduced Medical Itemized Deductions
– Taxpayers under age 65 can deduct unreimbursed
medical expenses that are more than 10% of
adjusted gross income
– If taxpayer or spouse is 65 before December 31,
2012, 7.5% floor continues to apply through 2016
PCORI
• Fee to fund research to evaluate and compare the
health outcomes and clinical effectiveness, risks
and benefits of:
–
–
–
–
Medical treatments
Services
Procedures
Drugs
• Applies to:
– Insured plan—Issuer liable
– Self-insured plan—Plan sponsor liable
PCORI
• Plan and policy years ending after Sep. 30, 2012
• Does not apply in policy years ending after
Sep. 30, 2019
• $1 for the first year (and $2 for later years)
times the average number of lives covered
under the plan (including dependents)
• Due July 31, 2013
• IRS Form 720
PCORI
• Counting Covered Lives
– Actual count method—count the number of covered
lives covered on each day in the plan year and divide
that result by the number of days in the year
– Snapshot method—quarterly average
• Actual count for dependents, or
• 2.35X for dependents
– Form 5500 method—may only be used if the 5500 is
timely filed without regard to extensions
• July 31 for calendar year plans
PCORI
• Covered Plans
– Accident and health plans
– Health reimbursement arrangements
• Excluding an HRA that is integrated with a self-insured
group health plan or health insurance coverage
– Retiree only medical plans
PCORI
• Exemptions
– Stand-alone dental and vision plans
– Health flexible spending accounts
– Health Savings Accounts
– Employee assistance programs, wellness programs
and disease management programs that do not
provide significant benefits
– Plans designed specifically to cover primarily
employees working and residing outside the US
Transitional Reinsurance Program
• Established by ACA to fund state non-profit
reinsurance entities for the purpose of
establishing a high-risk pool for the individual
market
• Applies to
– Health insurance issuers
– Third party administrators on behalf of self-insured
group health plans
Transitional Reinsurance Program
• Annual contribution rate for 2014 is estimated to be
$63 per covered life
• Methods for counting covered lives are similar but
not identical to PCORI
• Counting will be done during the first 9 months of
2014, 2015 and 2016
Enrollment
count provided
to HHS before
November 15
HHS issues bill
by December
15
Payment
required in 30
days
Where do we go from here?
• Review forms and notices to confirm compliance
• Determine if you are a large employer
• Determine whether additional planning is needed for
variable hour employees
• PLAN for 2014 renewals to understand the big picture
Frost Insurance can help you structure employee
benefits solutions that work, and navigate the
complex regulatory system resulting from the reform
Health Reform After the Election
The Big Picture of Obamacare
James R. Griffin
Jeffery P. Drummond
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
[email protected]
[email protected]
214.953.5827
214-953-5781