Transcript Health Care Reform Update - Jersey Shore Chapter American

APA
Jersey Shore Chapter
Health Care Reform – One Year Later
Ellen Feeney and Meg Ferrero
March 24, 2011
© Copyright 2011 Automatic Data Processing, Inc.
Session Objectives
Provide an overview of where we are with Health Care Reform
one year after its enactment
 Review HCR timeline
 Status of legislative and court challenges
 Regulatory update
Facilitate an open discussion around Health Care Reform
concerns and business challenges
 What rule changes are employers most concerned about?
 How does this impact your bottom line?
 What options are available to help you address the impact
of HCR?
One Year Later - Health Care Reform is Still Law
Patient Protection and Affordable Coverage Act (PPACA):
Signed into law March 23, 2010
Reconciliation modifications March 30, 2010
Many regulations have been issued and many more to
follow over the next few years
Outcome of the last Congressional election may have a
big impact on HCR going forward
One Year Later – Confusion Still Exists
U.S. Health Care Reform Overview
Overall the U.S. Health Care Reform attempts to make changes to the
following areas:
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Health Insurance market reforms
Individual responsibility
Employer responsibility
High cost coverage tax
Employer group health plan related issues
A large portion of the health care reform law is not effective until 2014
and beyond.
 There are a number of provisions in effect now
 Some provisions are effective for plan years that began on or
after September 23, 2010
 A number of tax provisions have varying effective dates
The Timeline – What’s In Effect Now?
Employers must now provide reasonable unpaid breaks to nursing
mothers – Effective March 23, 2010
Tax Exclusion for Adult Child who has not attained age 27 as of
the end of the employee’s taxable year – Effective March 30, 2010
Allowing States to Cover More People on Medicaid - Effective
April 1, 2010
Medicare Prescription Drug “Donut Hole” – First checks mailed in
June, 2010 with monthly continuation throughout 2010
Expanding coverage for early retirees - Applications for employers
to participate in the program available June 1, 2010
Providing Access to Insurance for the Uninsured with Pre-Existing
Conditions - National program established July 1, 2010
Putting Information Online - Effective July 1, 2010
2010
2011
2012
2013
2014
2018
The Timeline – First Plan Year after September 23, 2010?
Insured and self-insured plans must:
 Offer extended dependent coverage to age 26 for
covered employee’s child(ren) – regardless of whether
tax dependent, student, married, or residing with the
employee
 Generally, no lifetime dollar limits
 Restricts annual dollar limits on essential health benefits
 No pre-existing coverage exclusion for children up to
age 19
 Prohibition on retroactive rescissions of coverage except
in cases of fraud or failure to pay required premiums
2010
2011
2012
2013
2014
2018
The Timeline – First Plan Year after September 23, 2010?
Insured and self-insured plans must:
 Provide mandated preventive services with no
cost sharing
 Establish and provide notice of internal and
external appeals procedures
 Insured plans cannot discriminate in favor of
highly compensated individuals (significant
implications for insured executive medical plans)
2010
2011
2012
2013
2014
2018
The Timeline – For Plan Years Beginning in 2011
Over-the-counter medicines and drugs only reimbursable under
HCFSA, HRA, and HSA if prescribed or is insulin
Increased penalty for non-qualified HSA distributions
 Penalty for using HSA funds for non-qualified medical expenses,
including over-the-counter drugs, will increase to 20%
Medicare Part D premium increases for high-income individuals
Medicare Advantage plan payments for 2011 will be frozen at
2010 levels; reductions will be phased in starting in 2012
2010
2011
2012
2013
2014
2018
The Timeline – For Plan Years Beginning in 2012
Inclusion of the value of certain employer-sponsored health coverage on
Form W-2 (changed from a 2011 effective date)
Employers may choose to offer employees voluntary long term care
insurance program - Community Living Assistance Services and Support
Act (CLASS)
Group health plans fee
 $1 per participant, increasing to $2 for the second year and then a formula
thereafter, to fund federal research on comparative effectiveness
 Sunsets in 2019
Uniform benefit summary
 Employers must provide a 4-page uniform benefit summary at initial
enrollment and annual enrollment
 Includes information about covered benefits, exclusions, cost-sharing and
continuation coverage
 In addition to SPD and other currently required disclosures
2010
2011
2012
2013
2014
2018
The Timeline – For Plan Years Beginning in 2013
Annual employee pre-tax salary contributions to health FSA
capped at $2,500
 Adjusted annual for increases in the cost of living beginning with
2014 tax year
Employers must notify new hires about health insurance
exchanges:
 Eligibility for federal assistance to buy exchange-based
coverage if employer’s plan pays less than 60% of
covered benefits
New Medicare taxes for high-income households
Retiree drug subsidy tax treatment changes
2010
2011
2012
2013
2014
2018
2014 – Everyone into the Pool!
The Timeline – For Plan Years Beginning in 2014
No waiting periods greater than 90 days
Auto enroll employees in a plan (effective date unclear – applies to
employers with 200+ employees)
Individual coverage mandate
 Individuals must obtain minimum essential coverage or generally be subject
to a penalty
Health insurance exchanges
 Federal funding for states to create health insurance exchanges to facilitate
purchase of insurance by individuals and small groups
Employer shared responsibility penalties:
 Employers with 50+ FT employees may be subject to shared responsibility
penalties if at least one full time employee obtains exchange-based coverage
and is eligible for financial assistance to better afford it.
2010
2011
2012
2013
2014
2018
The Timeline – For Plan Years Beginning in 2014 & Beyond
Employee free-choice vouchers
 Any employer offering health coverage and making plan
contributions must provide “free-choice” vouchers to
eligible employees
Health plan standards – all major medical plans
 Insured and self-insured plans
 Offer coverage to adult children to age 26 regardless of
eligibility for employer provided coverage other than
that of parent
 No pre-existing condition exclusions
 No waiting periods exceeding 90 days
 No annual dollar limits on essential benefits
2010
2011
2012
2013
2014
2018
The Timeline – Fast Forward to 2018 … Excise Tax
40 percent excise tax is imposed on “coverage providers” in months
where the aggregate value of employer-sponsored health coverage for
the employee exceeds 1/12 of $10,200 for individual coverage and 1/12 of
$27,500 for family coverage
The amounts are increased to $11,850 and $30,950 for retirees and high
risk professions
“Coverage providers” are defined to include the following:
 Broaden the population that receives health care coverage
through either public sector insurance programs or private sector
insurance companies
 In the case of fully insured plans, the health insurer
 In the case of health savings account contributions, the employer
making the contributions
2010
2011
2012
2013
2014
2018
What is Public Opinion of Health Care Reform?
According to a nationwide survey from Quinnipiac
University, 47 percent of US voters want to repeal
the health care law
Given three choices on the health care reform law:
• 30 percent of US voters say expand it;
• 18 percent say leave it as it is;
• 47 percent say repeal it.
Quinnipiac surveyed 2,424 respondents nationwide Nov. 8-15, 2010.
The poll's margin of error is +/- two percentage points.
What is Public Opinion of HCR?
Gallup, Jan. 4-5: 46 percent want repeal; 40 percent
want the law to stay
CNN/Opinion Research, Jan. 14-16: 50 percent want
repeal; 42 percent want to leave the law in place
These polls are consistent with the public's overall
opposition to the health-care law by an average
margin of about five percent, and as high as 10
percent in some polls. President Obama's approval
on the issue of health care is still low on average.
What Should Congress Do?
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Status of Legislative Challenges to HCR
On January 19, 2011, the U.S. House of
Representatives, with many new members and a
Republican majority, passed the Repealing the JobKilling Health Care Law (H.R. 2)
The bill was passed along party lines with all 242
Republicans and only three Democrats in favor. If
passed by the Senate and signed into law by the
President, the new legislation would repeal the
Patient Protection and Affordable Care Act (PPACA)
and the health-care related provisions in the Health
Care and Education Reconciliation Act of 2010
Status of Legislative Challenges to HCR
A majority of Senators and President Obama publicly
have stated that they do not support repealing these
laws. The House of Representatives actions,
however, seem to indicate that the House, in its
current composition, will work to change or replace
many aspects of Health Care Reform , especially
parts of the law that will come into effect in later
years.
Status of Court Challenges to HCR
Several court actions challenging Health Care Reform
are making their way through the lower federal
courts.
Two federal judges have declared the health care law
unconstitutional and two federal judges have upheld
the law as constitutional.
Status of Court Challenges to HCR
Specifically, a federal judge in Pensacola, Florida
ruled the entire law unconstitutional.
In December, a federal district court judge in
Richmond, Virginia ruled that it was unconstitutional
for Congress to enact a health care law that requires
all individuals to obtain insurance.
Several other court cases concerning health care law
are pending and it is likely that these challenges will
make their way through the court system and may
change how the law is applied.
Many of these cases will eventually reach the US
Supreme Court.
Regulations – The Beat Goes On
In the meantime, regulatory guidance and
implementing regulations will continue to be issued
in 2011.
Many Regulations Already Issued
Effective March 23, 2010, Health Care Reform Law requires employers to
provide breaks for breastfeeding. The National Conference of State
Legislatures provides a list of breastfeeding laws by state –
http://www.ncsl.org/issuesresearch/health/breastfeedinglaws/tabid/143
89/default.aspx
The Department of Labor (DOL) created a webpage containing a number
of health care reform related resources –
http://www.dol.gov/ebsa/healthreform/
On May 10, 2010, the DOL, Internal Revenue Service (IRS), and
Department of Health and Human Services (HHS) issued interim final
regulations regarding the requirement to make coverage available to an
enrollee’s adult child to the age of 26. An official fact sheet and list of
frequently asked questions have also been released by the government
agencies.
Many Regulations Already Issued
The DOL, HHS, and the Treasury Department (Treasury) jointly issued
interim regulations on the grandfathering provisions under the Health
Care Reform Law. (The DOL has published a table showing how the
relevant provisions of the Health Care Reform Law apply to grandfathered
plans at http://www.dol.gov/ebsa/pdf/grandfatherregtable.pdf.) On
November 17, 2010, the DOL, HHS and Treasury released an amendment
to the interim final regulations on grandfathered health plans, effective
prospectively. The amendment provides that a group health plan can
change policies or carriers without losing grandfathered status, provided
no other changes are made that would cause the plan to lose
grandfathered status.
HHS published interim final rules on May 5, 2010 with regard to the Early
Retiree Reinsurance Program.
Many Regulations Already Issued
The Health Care Reform Law places two new requirements on health care
Flexible Spending Accounts (FSAs). Beginning January 1, 2011,
participants in an FSA may only obtain reimbursement for over-thecounter (OTC) medications if the medication is prescribed; and beginning
January 1, 2013, annual contributions to an FSA will be limited to $2,500.
In September 2010, the IRS released further guidance, Notice 2010-59, in
relation to the reimbursement eligibility of OTC medicine and drug health
expenses under a health FSA. In addition to Notice 2010-59, the IRS also
released “Questions and Answers on Over-the-Counter Medicines and
Drugs.” In this guidance, the IRS provides information on several topics
including the definition of “prescribed” and the documentation required
to demonstrate that an OTC medicine or drug has been prescribed. On
December 23, 2010, the IRS released Notice 2011-5 which stated that the
use of health FSA and HRA debit cards is allowable when certain
conditions are met.
Many Regulations Already Issued
In the June 28, 2010 Federal Register, HHS, DOL, and Treasury jointly
published interim final rules regarding the group health plan design elements
of preexisting condition exclusions, annual and lifetime limits, coverage
rescissions, and patient protections.
On July 14, 2010, HHS, DOL and Treasury issued interim final regulations on
preventive care. New plans and issuers must cover certain preventive services
without any cost-sharing for the enrollee when services are delivered by innetwork providers for the following four categories: general preventive care,
immunizations, preventive care for children, and preventive care for women.
In the July 23, 2010 Federal Register, the IRS, DOL, and HHS issued interim
final rules in relation to the internal appeals and external claims review
requirements. The guidance addressed both the group and individual market.
There are several new requirements, in addition to the requirement to
implement the existing claims and appeals procedures as required under the
Employee Retirement Income Security Act of 1974 (ERISA).
Many Regulations Already Issued
Effective July 30, 2010, a new program was created to make health insurance
available to individuals who have been denied coverage by private insurance
companies because of a pre-existing condition – The Pre-Existing Condition
Insurance Plan (PCIP) Program. This program is also being referred to as a
“temporary high risk pool.” The PCIP program will be in place until 2014, at which
time all individuals will have access to affordable health insurance choices through
a competitive marketplace called an Exchange.
On October 12, 2010, the IRS announced via Notice 2010-69 that reporting the
cost of health coverage under an employer-sponsored group health plan on Form
W-2 will not be mandatory for Forms W-2 issued for 2011. In addition, the IRS
released a 2011 Forms W-2 DRAFT (link below) stipulating that if the cost of
coverage under an employer-sponsored group health plan is reported on the 2011
Forms W-2, it will be reported on Box 12 using Code DD. The IRS also made it
clear that “the amount reported in Code DD is not taxable.”
http://www.irs.gov/pub/irs-utl/draft_w-2.pdf
On November 1, 2010, the DOL, HHS and IRS jointly released an additional three
frequently asked questions (FAQ). This new guidance, as summarized below,
contains two questions regarding grandfathered plans and one question regarding
expense reimbursement of learning-disabled children with physical, mental, or
developmental disabilities.
Many Regulations Already Issued
On December 22, 2010, the IRS released Notice 2011-1 stipulating that
the requirement to comply with the nondiscrimination rules imposed for
insured plans under Section 2716 of the Health Care Reform Law is
delayed.
On December 22, 2010, the DOL’s EBSA issued an additional set of FAQs
concerning the non-discrimination rules, automatic enrollment,
dependent coverage and grandfathered plans, amongst others. The DOL,
HHS and Treasury released an FAQ stating that employers will not be
required to comply with the automatic enrollment requirements until
regulations are issued. The DOL stated that it expects to solicit comments
as part of the rule-making process and intends to issue the regulations by
2014.
On January 8, 2011, the IRS and Departments of Treasury, Labor and
Health and Human Services determined that compliance with the nondiscrimination provisions of Affordable Care Act should not be required
until after the regulations or other guidance has been issued and that
such guidance, once issued, will not apply until plan years beginning after
a specified period after the issuance of the guidance.
Provisions of Interest to Businesses
Optional W-2 reporting. Employers do not have to
report the cost of insurance on employee W-2s in
2011. This reporting is optional in 2011.
The reporting requirement is intended to be
informational and provide employees with greater
transparency into health care costs. The amounts
reported are not taxable.
W-2 Reporting Optional for 2011
Employer-Provided Health Coverage — Not
Taxable; Reporting Requirement Optional in 2011
The revised Form W-2 for 2011 is now available in
draft for viewing. This is the W-2 that most
employees will receive in early 2012. The draft form
includes the codes that employers may use to report
the cost of coverage under an employer-sponsored
group health plan.
W-2 Reporting Optional for 2011
Employer-Provided Health Coverage — Not
Taxable; Reporting Requirement Optional in 2011
This reporting is for informational purposes only, to
show employees the value of their health care
benefits so they can be more informed consumers.
The amount reported does not affect tax liability, as
the value of the employer contribution to health
coverage continues to be excludible from an
employee's income, and it is not taxable.
Provisions of Interest to Businesses
No mandate to provide insurance. HCR does not
have a mandate for employers to provide health
insurance. Starting in 2014, large businesses (those
with 50 or more full-time workers) that do not
provide adequate health insurance will be required
to pay an assessment if their employees receive
premium tax credits to buy their own insurance.
These assessments will offset part of the cost of
these tax credits. The assessment for a large
employer that does not offer coverage will be $2,000
per full-time employee beyond the company's first
30 workers.
Tax Provisions in Effect Now
Small Business Health Care Tax Credit – This credit
helps small businesses and small tax-exempt
organizations afford the cost of covering their
employees and is specifically targeted for those with
low- and moderate-income workers. The credit is
designed to encourage small employers to offer
health insurance coverage for the first time or
maintain coverage they already have. In general, the
credit is available to small employers that pay at
least half the cost of single coverage for their
employees
Tax Provisions in Effect Now
Changes to Flexible Spending Arrangements Effective Jan. 1, 2011, the cost of an over-thecounter medicine or drug cannot be reimbursed
from Flexible Spending Arrangements or health
reimbursement arrangements unless a prescription
is obtained. The change does not affect insulin, even
if purchased without a prescription, or other health
care expenses such as medical devices, eye glasses,
contact lenses, co-pays and deductibles.
Tax Provisions in Effect Now
Changes to Flexible Spending Arrangements (con’t)
The new standard applies only to purchases made on
or after Jan. 1, 2011, so claims for medicines or drugs
purchased without a prescription in 2010 can still be
reimbursed in 2011, if allowed by the employer’s
plan. A similar rule goes into effect on Jan. 1, 2011
for Health Savings Accounts (HSAs), and Archer
Medical Savings Accounts (Archer MSAs).
For more information, see news release IR-2010-95,
Notice 2010-59, Revenue Ruling 2010-23 and the IRS
questions and answers.
Tax Provisions in Effect Now
Changes to Flexible Spending Arrangements (con’t)
FSA and HRA participants can continue using debit
cards to buy prescribed over-the-counter medicines,
if requirements are met. For more information, see
news release IR-2010-128 and Notice 2011-5.
Tax Provisions in Effect Now
Health Coverage for Older Children
Health coverage for an employee's children under 27
years of age is now generally tax-free to the
employee. This expanded health care tax benefit
applies to various work place and retiree health
plans. These changes immediately allow employers
with cafeteria plans –– plans that allow employees to
choose from a menu of tax-free benefit options and
cash or taxable benefits –– to permit employees to
begin making pre-tax contributions to pay for this
expanded benefit.
Tax Provisions in Effect Now
Excise Tax on Indoor Tanning Services
A 10-percent excise tax on indoor UV tanning
services went into effect on July 1, 2010. The first
payment of the tax was due Monday, Nov. 1.
Payments are made along with Form 720, Quarterly
Federal Excise Tax Return. The tax doesn't apply to
phototherapy services performed by a licensed
medical professional on his or her premises. There's
also an exception for certain physical fitness facilities
that offer tanning as an incidental service to
members without a separately identifiable fee.
Tax Provisions in Effect Now
Group Health Plan Requirements. HCR establishes a
number of new requirements for group health plans.
Interim guidance on changes to the
nondiscrimination requirements for group health
plans can be found in Notice 2011-1, which provides
that employers will not be subject to penalties until
after additional guidance is issued. Other
information on requirements is available on the
websites of the Departments of Health and Human
Services and Labor.
Business Challenges – Cost Impact and Other Opinions
Top Provisions Impacting Plan Costs
Respondents were asked to select the provisions of Health Care Reform legislation (becoming effective in 2011)
that will impact plan costs the most.
International Foundation of Employee Benefit Plans
Health Care Reform: What Employers are Thinking
Survey Results from May 2010
Business Challenges - What are Employers Considering?
Only one in five employers is planning to change
primary medical plan eligibility requirements for
employees’ adult children up to age 26
Close to half of employers surveyed have no
preexisting condition exclusions in their plans
Almost half of employers are not sure how to
address cost-sharing for dependent coverage
Over half of employers are not sure if they will
change the eligibility requirements for dependents
on other benefit plans (e.g., dental, vision, etc.)
Approximately 42% of employers plan to extend
dental coverage to adult children International Foundation of Employee Benefit Plans
Health Care Reform: What Employers are Thinking
Survey Results from May 2010
Business Challenges – Dependent Coverage to Age 26
Changes to Eligibility Requirements of Medical Plans for
Dependents
International Foundation of Employee Benefit Plans
Health Care Reform: What Employers are Thinking
Survey Results from May 2010
Business Challenges – Dependent Coverage to Age 26
Cost Sharing for Dependent Coverage
International Foundation of Employee Benefit Plans
Health Care Reform: What Employers are Thinking
Survey Results from May 2010
Business Challenges – Grandfathered Plan Status
Having it, losing it, quantifying it:
 Any plan in place before March 23, 2010 was a
grandfathered plan
 Losing grandfathered status:
 Plans can enroll new hire and family members of existing
participants and stay grandfathered
 Limited information on how or when a plan could lose
grandfathered status? Plan cannot:
 Significantly cut or reduce benefits
 Raise co-insurance charges
 Significantly raise co-payment charges
 Significantly raise deductibles
 Significantly lower employer contributions
 Change insurance companies (okay, unless coupled with other
changes)
Business Challenges – Maintaining Grandfathered Status
What does grandfathered status offer (if you could keep it)?
 Delayed enactment of specific plan standards
 No discrimination in favor of highly compensated
employees in insured plans
 Grandfathered plans do not have to allow enrollees to
choose instead of being assigned a participating Primary
Care Physician
 Nor do they have to eliminate pre-authorization of
emergency service and referral for a OB-GYN
Business Challenges – Maintaining Grandfathered Status
What changes would result in the forfeiture of
grandfathered plan status?
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A significant cut or reduction in benefits
An increase in co-insurance charges
The raising of co-payment amounts paid by participants
A significant increase in plan deductibles
A significant decrease in employer contribution toward cost
of coverage
Administrative and Communication Challenges
Capturing and processing new information
 Household income and exchange elections
 Medicaid eligibility
 Vouchers, payments and taxes
New reporting and tracking needs
 Plan standards
 Tax withholding and reporting
 CLASS enrollment
Communication – requirements and needs
 New plan summaries
 New options: Medicaid, Exchanges and Vouchers
 New plan standards and limitations: from free
preventive care to caps on FSA contributions
What You May Be Considering?
Implementing of new plans
New or increased length of waiting periods
Addition of coverage tiers or per participant contribution
structure
Removal of all plans
Implementation or increase of wellness program premium
differential
Auto enrollment of new hires into medical plans
Auto enrollment of employees into long term care insurance
program (CLASS)
How are you going to get it all done?
Immediate Impact for 2011
Adult Child Medical Coverage to Age 26
 Health & Welfare
 Use annual enrollment window
 One time enrollment event prior to the start of the plan year or
leveraging another event to facilitate the change
 Dependent Verification Services
 Consider using a Dependent Audit service to help verify your
employees’ dependents’ eligibility for coverage
 FSA
 FSA claims processes will remain the same
 HR / Payroll
 Not impacted by the change
Immediate Impact for 2011
Flexible Spending Accounts – OTC Drugs
 Paper claims submissions for over-the-counter drugs only
 Under the guidance released, adequate substantiation is generally
satisfied by the submission of the required third-party documentation
(reflecting date of service or purchase, description and amount of
service or item) including the prescription (or a copy of the
prescription or other documentation that a prescription has been
issued).
 In lieu of the prescription, a pharmacy receipt with name of purchaser
(or person using the OTC), the date and the amount of the purchase,
and an RX number will also serve to meet the substantiation
requirements.
 Restricts the use of Debit Cards for OTC Medicine and Drug purchases
Future Payroll Impact
Reporting the cost of the benefit on the Form W-2
 Employers eventually will need to calculate and transmit
total cost of employer-provided health coverage on
Form W-2
 Effective date delayed
Reporting Value of Benefits on Form W-2
ADP Proprietary and Confidential
Employee Communications – Benefits of HCR
Receive cost-free preventive services. New health plans must give
employees access to recommended preventive services such as
screenings, vaccinations and counseling without any out-of-pocket costs
to the employee
Keep young adults on a parent’s plan until age 26. If the employer’s
health plan covers children, employees can now most likely add or keep
their children on the employer’s health insurance policy until the children
turn 26 years old if those children don’t have coverage from their job
Choose a primary care doctor, ob/gyn and pediatrician. New health
plans must let employees choose the primary care doctor or pediatrician
they want from the health plan’s provider network and let them see an
OB-GYN doctor without needing a referral from another doctor
Use the nearest emergency room without penalty. New health plans
can’t require employees to get prior approval before seeking emergency
room services from a provider or hospital outside the plan’s network –
and they can’t require higher copayments or co-insurance for out-ofnetwork emergency room services
Where to Get More Information
International Foundation for Employee Benefits: Health Care Reform
Updates
http://www.ifebp.org/Resources/News/TopicsInDepth/Health+Care+Re
form+Discussion/default.htm
Official U.S. Government Site - www.healthcare.gov
ADP.com – http://www.adp.com/tools-and-resources/health-carereform.aspx
Questions?
Thank you!