An Update on Health Care Reform Florida Government Finance Officers Association August 15, 2013 © 2013 Towers Watson.
Download ReportTranscript An Update on Health Care Reform Florida Government Finance Officers Association August 15, 2013 © 2013 Towers Watson.
An Update on Health Care Reform Florida Government Finance Officers Association August 15, 2013 © 2013 Towers Watson. All rights reserved. A transformational moment Health Care Reform is creating an added catalyst for change in employers’ health care offerings Health care is becoming a total business issue that will ultimately affect: Employers are considering significant changes in health care strategy to address the anticipated cost of the legislation Financial planning for public and private organizations It’s really a convergence of several issues: Rising health costs Aging work force with increasing health risks Increasing frustration with provider reimbursement system Competitive position of products and services Defining the employee value proposition Workforce strategies Benefits and compensation Administration and payroll 1 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. Despite recent events in Washington, uncertainty remains How will Supreme Court rule? Who controls Congress in 2013? Who wins Presidential election? DECIDED DECIDED DECIDED Will funding be available? Will public Exchanges be ready? What regulatory guidance is coming? 2 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. Building blocks of Health Care Reform Key Element Impact Individual mandate Potential for additional enrollment in employer plans Marketplace reform Employee communication needs and potential future employer benefit design changes Health Insurance Exchanges Public Exchanges that will provide individual coverage for retirees and certain employees Premium and cost-sharing subsidies Potential for employees to receive subsidies in Exchanges Employer mandates Additional administration requirements; potential change in eligibility for some employees Penalties Delayed / Reporting Relaxed Expanded public plans Potential for some employees to enroll in Medicaid Revenue raisers Additional payroll taxes and fees; long-term incentive to reduce plan costs to avoid excise tax 3 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. INDIVIDUAL MANDATE 2014 individual mandates All U.S. citizens and legal residents are required to enroll in basic health coverage or pay a penalty (limited exemptions) Tax penalties for noncompliance equal to the greater of an indexed flat dollar amount or percent of household income 2014: $95 or 1% of household income 2015: $325 or 2% of household income 2016: $695 of 2.5% of household income Family cap: 3x the flat-dollar penalty Comments Tax penalties are not expected to significantly influence behavior in the short term 4 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. INDIVIDUAL MANDATE 2014 examples of individual mandate tax penalties Assume $10,250 single/$20,500 family tax filing threshold in 2014 (for those under age 65) Assume $11,000 single/$22,000 family tax filing threshold in 2017 (for those under age 65) Family Size Household Income 2014 Penalty Calculation 2014 Penalty Est. 2017 Penalty Individual $25,000 Maximum of: $95 Flat Dollar OR 1% of ($25,000 – $10,250) $148 $695 Married Couple $40,000 Maximum of: ($95 x 2) OR 1% of ($40,000 – $20,500) $195 $1,390 Family of 3 (1 child <18) $40,000 Maximum of: ($95 x 2.5) OR 1% of ($40,000 – $20,500) $238 $1,738 Family of 5 $40,000 Maximum of: ($95 x 3) OR 1% of ($40,000 – $20,500) $285 $2,085 Family of 5 $150,000 Maximum of: ($95 x 3) OR 1% of ($150,000 – $20,500) $1,295 $3,200 5 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. MARKETPLACE REFORM Health Care Reform: Provisions already in place 2011 Dependents covered to age 26 No lifetime maximums and restricted annual maximums No pre-existing condition exclusions for age 18 and under No reimbursement for over-the-counter drugs from account-based plans (FSAs, HRAs or HSAs) Penalty for ineligible HSA withdrawals increased to 20% Medicare Part D “donut hole” begins to close; 50% discount on brand drugs; target cost-sharing is 25% by 2020 2012 Women’s preventive services – effective for plan years beginning ≥ 8/1/2012 Summary of Benefits and Coverage (SBC) – first Open Enrollment ≥ 9/23/2012 W-2 Reporting for 2012 Calendar Year of Aggregate Value of Employees’ Health Coverage 2013 Recent guidance requires changes to SBC templates for 2014 -- Adds disclosure regarding Minimum Essential Coverage and whether the plan meets Minimum Value requirements FSA maximum lowered to $2,500 Medicare payroll tax increased for high earners 6 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. MARKETPLACE REFORM DOL Releases Guidance on the Required Notice to Employees on Exchange Operations By October 1, 2013, employers must provide their employees information on how the Exchanges will operate Includes a description of the services provided by the Exchange (also known as the Marketplace) and the manner in which the employee may contact the Exchange to request assistance Shares with employees that if their employer plan does not satisfy Minimum Value requirements, the employee may be eligible for federal subsidies Confirms that if the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefit plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes Notice must be in writing and can be delivered via first class mail or electronically The model language is available on the DOL's website: dol.gov/ebsa/healthreform 7 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. MARKETPLACE REFORM Provisions beginning in 2014 Waiting period Plan may apply an eligibility waiting period of up to 90 days Coverage under the group health plan must begin no later than the 91st day of employment Employees in waiting period should not be counted for purposes of determining the employer’s tax assessment regarding play-or-pay mandate Comments Common waiting periods: — Immediate eligibility — 1st of month following date of hire 8 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. MARKETPLACE REFORM Provisions beginning in 2014 Maximum out-of-pocket limits PPACA provides that a group health plan (which includes insured and self-insured plans of large employers) may not require out-of-pocket (OOP) payments that exceed the out-of-pocket limits for HSA-compliant HDHPs (e.g., for 2014 $6,350 for an individual, $12,700 for a family) Under HDHPs, OOP limits must be ‘comprehensive’ (i.e., all OOP costs, including medical and Rx, must count toward OOP limit and all expenses, which again include medical and Rx, must be covered at 100% once OOP limit is met (rules apply to in-network services) This differs from prevalent practice for non-HDHPs under which: (a) Rx benefits are carved out from medical and do not apply to medical OOP limit, and: (b) copays for services such as Rx and office visits continue to apply after medical OOP limit reached Recent federal guidance confirms that OOP limits must be comprehensive starting in 2014; one year delay is allowed for plans that carve Rx out to separate administrator 9 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. MARKETPLACE REFORM Provisions beginning in 2014 Maximum out-of-pocket limits (continued) Significant implications for non-HDHP plans: Plan value becomes richer, thus impacting plan cost, unless changes to OOP limit or other design features are adopted to offset this increased cost Rx and medical vendors need to share claim data for combined accumulation toward comprehensive OOP limits 10 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. MARKETPLACE REFORM 11 Automatic enrollment (delayed until 1/1/2015…or later Employers with more than 200 full-time employees that offer health coverage are required to automatically enroll employees in health coverage Comments Employees must be given notice and opportunity to opt-out or enroll in another option Employers can subject employees to waiting period U.S. Department of Labor to issue guidance Administrative burden: — Continuous turnover can create challenges — Process and procedures will have to be evaluated and adjusted Significant employee communication considerations 11 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES Health insurance exchange defined Public Exchanges As enacted under Health Care Reform, public exchanges will offer plans with standardized relative values to individuals and small groups, with federal subsidies based on income to offset premium cost May be operated at state or federal level Scheduled to become operational in 2014 for all eligible individuals under age 65 (will not apply for individuals eligible for Medicare) Private Exchanges Fall into two general categories: An arrangement where participating employers would offer their employees and/or retirees a pre-defined selection of health plans that have been designed and selected by a third party Medicare exchanges supporting transition from group to individual coverage 12 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES Public health insurance exchanges Comprehensive "one-stop shopping" market for commercial health insurance that brings together buyers (employers, individuals) and sellers (insured health plans) by providing Plans that meet specified standards in terms of design and underwriting, and Centralized services to support plan assessment, comparison, enrollment and administration For all eligible individuals under age 65 (will not apply for individuals eligible for Medicare) U.S. citizens and legal residents Reside in state in which exchange operates Not incarcerated May be operated at state or federal level Employer eligibility to participate in Exchange Small employers (≤100 employees; States could lower to ≤50 employees) - DELAYED Exchanges may allow large employers (200+ employees) same options in 2017+ 13 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES How will an individual likely get coverage in 2014? Family Income Less Than 133% of Poverty Family Income Less Than 400% of Poverty Family Income Greater Than 400% of Poverty Family is eligible for Medicaid Family is eligible for subsidy in Exchange Family may also participate in Exchange If employer coverage is available, but either inadequate (<60% benefit) or unaffordable (premiums >9.5%) Family may purchase unsubsidized coverage in Exchange If employer coverage is available Family may choose the employer plan or subsidized coverage in Exchange Family may choose the employer plan or Medicaid If employer coverage is available and adequate and premiums are affordable If employer coverage is available Family may choose the employer plan or unsubsidized coverage in Exchange Family may choose the employer plan or unsubsidized coverage in Exchange Estimated for 2014 2014 FPL Single Individual Family of 4 100% $11,850 $24,454 133% $15,796 $32,597 400% $47,401 $97,815 towerswatson.com 14 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES What kind of exchange coverage will be available? Plan Offerings Platinum (90% Value) Gold (80% Value) Silver (70% Value) Bronze (60% Value) Key Requirements Guarantee issue Essential health benefits No medical underwriting Preventive care at 100% No pre-existing condition limits No lifetime or annual limits Rating rules (highest age bracket can be no more than 3 times lowest age bracket) Maximum Out-of-Pocket limits As enacted under Health Care Reform, public exchanges will offer plans with standardized relative values to individuals and small groups, with federal subsidies based on income to offset premium cost 15 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES Employer interaction with exchanges Frequency and intensity will vary based on play-or-pay strategy Play or Pay Decision Play coverage is always affordable Possible exchange participants Exchange Interactions with employer Play coverage is unaffordable Pay Medicaid eligible employees COBRA participants Non-FTEs Early retirees Employees with unaffordable coverage Medicaid eligible employees COBRA participants Non-FTEs Early retirees All categories of active, inactive and retired employees Administrative (verifying access to affordable coverage, etc.) No employer penalties Major administrative (verifying access, appeals re: status of affordable coverage, etc.) Employer penalties for those who enroll in exchange when unaffordable, or broader if coverage unavailable Considerable administrative effort in verifying no access to employer plan, etc. Employer penalties for all active full-time employees Penalties Delayed / Reporting Relaxed 16 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES Key Exchange functions Key Functions: Determine eligibility For Exchange participation For insurance affordability programs (Medicaid, CHIP, premium tax credits, Basic Health Plan) Interactions and administrative requirements related to eligibility determinations Potential for adverse selection — Notify individuals and employers about determinations; provide appeals process Certify, rate and communicate qualified health plans Maintain Web site and call center with toll-free number Concerns Relaxed Notify IRS and enrollees of Exchange coverage Overall member experience in exchanges and perceptions on quality and value of coverage Uncertainty surrounding exchange development, readiness for 2014 and future viability Coverage expansions likely to strain primary care capacity due to additional demand of the newly covered 17 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. HEALTH INSURANCE EXCHANGES State Exchanges by Model and Certification Status WA* AK VT* ME MT ND OR* WY WI SD IA* UT* CA* PA IL* CO* AZ MO MD* DC* TN SC MS towerswatson.com CT* NJ DE* NC AR* TX VA KY* OK NM* Source: Towers Watson, as of May 29, 2013 OH WV* KS State exchange Pursuing or considering split state, federal model Partnership exchange Federally-facilitated exchange (FFE) FFE with unofficial partnership * conditional certification from HHS IN MA* RI* NY* MI NE NV* HI* NH* MN* ID* AL GA LA FL 18 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. EMPLOYER MANDATES Employer mandate – 2014 Generally, beginning in 2014, applicable large employers must either: Offer coverage to 95% of full-time employees (and their child dependents) that is affordable and meets minimum value OR Pay tax penalties for those employees who receive tax credits/subsidies for Exchange coverage Comments Many State and Local Government employees are likely to qualify for federal subsidies Estimated 2014 FPL levels Family Size 1x FPL 4x FPL Individual $11,850 $47,401 Family of four $24,454 $97,815 19 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. EMPLOYER MANDATES Definitions: Full-time employee (FTE) Full-time is defined as working an average of 30 hours or more per week each month Comments Will require monitoring to ensure that part-time employees do not inadvertently become full-time — even temporarily, which could generate penalties Regulations provide that 130 hours of service in a calendar month will be treated as the monthly equivalent of 30 hours/week If an employer cannot determine whether an employee will work a consistent, full-time schedule, coverage can be delayed during measurement period Measurement period must be at least 3 months and cannot exceed 12 months If during measurement period employee is determined to be full-time, coverage must be offered going forward for a period of time at least equivalent to the measurement period, but not less than 6 months 20 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. EMPLOYER MANDATES Overview of employer penalties Employer Offers Minimum Value Coverage No Employer Plan $2,0001 x all full-time employees (FTEs) Triggered if any employee receives subsidized coverage through Exchange Penalties nondeductible by employer 1 Indexed Employee contributions for self-only coverage exceed 9.5% of household income and employee household income at or below 400% of federal poverty level (FPL) Pay lesser of: $3,0001 for each subsidized FTE that receives Exchange-based premium subsidy, or $2,0001 x all FTEs in controlled group to national average increases in health care premiums 21 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. PREMIUM / COST SHARING SUBSIDIES Premium and cost sharing subsidies – 2014 Federal premium subsidies available for low-/middle-income individuals with household income at or below 400% of the federal poverty level (FPL) Available only for Exchange-based coverage; unavailable to those offered affordable minimum coverage by employer Sliding scale: Individual to pay 2% - 9.5% of income toward premiums Cost-sharing subsidies also available Comments Employees earning below 133% of FPL may be able to enroll in Medicaid for no monthly premium Next tranches of employees may actually be better off in Exchange plans, depending on required contribution levels Family income as % of FPL Max premium cost as a % of family income Actuarial Value < 133% 2.0% 94% 133% - 150% 3.0% - 4.0% 94% 150% - 200% 4.0% - 6.3% 87% 200% - 250% 6.3% - 8.05% 73% 250% - 300% 8.05% - 9.5% 70% 300% - 400% 9.5% 70% 22 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. PREMIUM / COST SHARING SUBSIDIES Affordability and the 9.5% rule Is employer coverage “affordable”? 1) Lowest single contribution ≤ 9.5% of family income, and 2) plan pays at least 60% of plan eligible expenses (based solely on plan design) Yes No No employees eligible for federal premium subsidies to purchase Exchange coverage Is family income ≤ 4x Federal Poverty Level? No $3,000 employer “play” penalty per employee obtaining subsidies Yes No Employee may qualify for federal premium subsidies for Exchange coverage (if declines employer plan) Employee does not qualify for federal premium subsidies to purchase Exchange coverage (unlikely to decline employer plan) Delayed Employer pays $3,000 "play" penalty per employee Employer not subject to $3,000 “play” penalty per employee Employees with access to family coverage that costs more than 9.5% of family income will NOT qualify for federal subsidies if single contribution is set at or below 9.5% of family income 23 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. EXPANDED PUBLIC PLANS A difficult decision regarding Medicaid expansion Federal government can offer states 90% of the cost of expanding Medicaid to millions of new individuals States may agree to expand coverage in exchange for those new federal funds If a state accepts the Medicaid expansion funds, it must obey the new rules and expand coverage However, a state must be able to decline participation in the expansion without losing all of its Medicaid funds States have the option to continue a current Medicaid plan – as is – without losing the 50% federal share of the costs for original Medicaid Federal tax credits for Exchange-based premiums do not extend to individuals under 100% of FPL A potential gap in access to premium tax credits for those not meeting states’ current Medicaid eligibility guidelines, but under 100% of FPL 24 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. EXPANDED PUBLIC PLANS Medicaid expansion: Where states stand 25 Governors Support Medicaid Expansion WA AK VT ME MT ND OR NH MN ID WI SD WY CA MI IA NE NV IL CO MO SC AR TX MD VA NC TN MS Participating (25) Leaning Toward Participating (2) Undecided/No Comment (6) Leaning Toward Not Participating (3) Will Not Participate (14) OH KY OK NM IN WV AZ CT NJ DE PA UT KS HI MA RI NY AL GA LA FL ? Source: The Advisory Board, April 1, 2013. The District of Columbia plans to participate in Medicaid expansion and will operate its own exchange. 25 http://www.advisory.com/Daily-Briefing/2012/11/09/MedicaidMap#lightbox/1/ © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. REVENUE RAISERS Transitional reinsurance fee WHY? Meant to stabilize premiums for coverage in the individual market during the first three years public exchanges are operational (2014-2016) Reinsurance payments provided to individual market issuers that cover individuals with high medical costs WHO PAYS? “Contributing entities,” (i.e., health insurance issuers and self-insured group health plans), are required to make reinsurance contributions for “major medical coverage” HOW MUCH? For the 2014 benefit year, the national per capita contribution rate will be $5.25 per covered life per month (or $63 per covered life per year) Expected to decline to ≈$42 per covered life in 2015 and ≈$26 per covered life in 2016 26 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. REVENUE RAISERS Transitional reinsurance fee WHEN? Contributing entities will be required to make the first reinsurance contributions payment in December 2014 or January 2015 WHAT ELSE? Plan expense: The Department of Labor indicated that the reinsurance contributions constitute a permissible plan expense under ERISA; this means that plan assets may be utilized to pay the reinsurance contributions 27 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. REVENUE RAISERS Patient-Centered Outcomes Research Institute (PCORI) WHY? Established by PPACA to research comparative effectiveness of treatments for health issues; evidence-based information may affect plan design and consumer behavior WHO PAYS? Sponsoring employer – single employer self-insured health plans Multi-employer fund – multi-employer health plans Insurer – insured health plans (including HMOs) HOW MUCH? $1 per year/covered life (employee, spouse, dependent) in the first year; $2 per year/covered life in the second year, and indexed for the remaining five years WHEN? Self-insured plan years and insured policy years ending on or after 10/1/12 and before 10/1/19 No later than July 31 of the year following the last day of the plan year or policy year (i.e., 7/31/13 for calendar year plans) 28 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. REVENUE RAISERS Excise tax on “Cadillac” plans Effective 2018 40% non-deductible excise tax on highcost group health benefits* Plans whose cost exceeds $10,200 for single coverage, $27,500 for family coverage annually Indexed CPI-U+1% in 2019, CPI beginning in 2020 Adjustments for age, gender, high-risk populations, early retirees and cost growth greater than benchmark Aggregate premium for employersponsored health benefits* NOT applicable to separate fully-insured vision and dental plans, and dread disease and fixed-dollar indemnity policies Comments Without significant design or contribution changes, many employer plans will hit the excise tax limit in 2018 Many employers will be reviewing their medical benefits strategy in order to manage costs below the excise tax threshold Employers will look for proactive health plan management strategies that reflect: business, workforce and reward strategies; engagement strategies and ways to improve the workforce health and productivity *Group health benefits includes: medical (e.g., PPO, HDHP), health FSA, HRA, employer and employee pre-tax HSA contributions, EAP, on-site primary care medical clinics (and self-insured dental and vision plans) towerswatson.com 29 © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. Discussion 30 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved. Thank you 31 towerswatson.com © 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson Client Use Only. Towers Watson is not a law firm and therefore cannot provide legal advice. Please seek qualified legal counsel before finalizing a course of action based on this material. © 2012 Towers Watson. All rights reserved.