Transcript Slide 1
Health Care Reform – Timeline Implementation Impact to Baker Hughes Year 2010 (Disclaimer: The costs represented below are through 2011) Health Care Reform Provision Impact to Baker Hughes Accounting recognition of change in taxability of RDS payments Reinsurance for retiree medical coverage $250 rebate for seniors who hit Medicare Part D coverage gap Immediate coverage and consumer protection requirements for non-calendar year plans starting 6 months after effective date No financial impact to Baker Hughes (BHI) Immediate coverage reforms (calendar year plans) Extended dependent coverage No lifetime and restricted annual limits No preexisting condition exclusions for individuals 18 and younger W-2 reporting of aggregate value of employees’ health coverage HSA withdrawal penalty increased No reimbursement of OTC medicines from accountbased health plans CLASS* Act long-term care benefit enrollment Begin phasing out Medicare Part D donut hole 2012 Presidential election No financial impact 2013 Deduction for employer Part D retiree drug subsidy Medicare payroll tax increased for high-wage employees and new tax on unearned income Cap on salary-reduction contributions to health FSAs $1.6M Part D retiree drug subsidy eliminated $12,400 cost increase from additional FICA taxes resulting from FSA cap 2011 1 © 2010 Baker Hughes Incorporated. All Rights Reserved. Increased costs of roughly $776,000 Additional administration associated with W-2 reporting Health Care Reform – Timeline Implementation Impact to Baker Hughes Year 2014 Health Care Reform Provision 2016 2018 - 2024 Total (Disclaimer: The costs represented below are through 2011) Employer mandates: play-or-pay, automatic enrollment, free-choice vouchers Individual health coverage mandate Health Benefit Exchanges operational Premium and cost-sharing subsidies for low- and middle-income individuals Medicaid eligibility expanded Additional consumer protections and market reforms, such as guaranteed issue, premium rating restrictions, prohibition on excessive waiting periods, prohibition on annual dollar limits, etc. Impact to Baker Hughes BHI health care costs in 2014 are projected to be $256 million before accounting for health care reform Should BHI continue to offer health coverage: Additional mandates will increase costs by $2.4 million These costs could potentially be offset by as much as $52 million through reductions in plan design Should BHI opt to exit employer sponsored health care coverage: BHI would owe a federal penalty of $50 million An additional cost of $316 million would be necessary to make employees whole, but is not required No financial impact Cross-border sales of health insurance Presidential election Excise tax on high-cost group health plans BHI is projected to exceed the cost threshold in 2018, resulting in an excise tax of $1.9 million. Aggregate 2018-2024 excise tax total $37 million Total costs assumes no change to Health Care Reform provisions as outlined. $41.78M Blue = Health Care Reform costs factored 2 © 2010 Baker Hughes Incorporated. All Rights Reserved. U.S. Health Care Reform: High Level Timeline PPACA signed into law (March 23, 2010) Some immediate health plan mandates and insurance market reforms Reinsurance program for early retiree medical coverage Accounting recognition of change in taxability of Medicare D RDS payments $250 rebate for seniors who hit Medicare Part D coverage gap 2010 W-2 reporting of aggregate value of employees’ health coverage Comparative effectiveness research tax begins HHS required 4-page health plan summary of benefits disclosure Presidential election Supreme Court ruling on individual mandate (likely) 2011 2012 2013 2014 Individual health coverage mandate Employer mandates: play-or-pay, automatic enrollment Health Benefit Exchanges operational Premium and cost-sharing subsidies for low- and middle-income individuals Medicaid eligibility expanded in all states to 133% of FPL Additional group health plan mandates, such as prohibition on excessive waiting periods, coverage for clinical trials, and limits on annual OOP maximums and annual deductibles Sales of health insurance across state borders permitted 2015 2016 W-2 issued using 2012 health plan data Medicare payroll tax increased for high-wage employees and separate new tax on unearned income $2,500 cap on salary-reduction contributions to health FSAs Change employer tax treatment for Medicare Part D RDS payments HHS approves/conditionally approves state Exchanges Adult child coverage to age 26, no lifetime dollar limits/’restricted’ annual dollar limits on essential health benefits, no preexisting condition exclusions for children under age 19, etc. (calendar-year plans) HSA withdrawal penalty increased to 20% No reimbursement of over-the-counter (OTC) medicines from account-based health plans, unless prescribed 2017 2018 - 2024 States may open Exchanges to large employers 40% nondeductible excise tax on high-cost employersponsored health coverage (“Cadillac” plan tax) Evolving interpretations, proposed regulations, (interim) final regulations, technical corrections, legislative amendments, judicial decisions, elections, preparation for major changes, unpredictability 3 © 2011 Baker Hughes Incorporated. All Rights Reserved.