Transcript Slide 1

Healthcare Reform Essentials
Steve Love, Senior Benefit Consultant, REBC, RHU, GBDS
What we will cover in this session:
Current Events Update
Healthcare Reform Overview
Beyond HealthCare Reform
Q&A
Healthcare Reform………..what does it really mean?
A Quick Poll ….
• How many people believe that Healthcare Reform is still in
force?
• How many people think that Healthcare Reform is no
longer in force?
• How many people aren’t sure?
Recent Results of the Public Poll
• How many people believe that Healthcare Reform is still
in force?
• 52%
• How many people think that Healthcare Reform is no
longer in force?
• 26%
• How many people aren’t sure?
• 22%
Quick Update
LEGISLATIVELY
• 1/19/2011 House of Rep’s voted to Repeal. Later turned down by
the Senate
• House voted in February to defund Healthcare Reform.
JUDICIALLY
• Federal judge says the individual mandate is unconstitutional,
representing 26 states.
• Question is under the Commerce Law, can you force someone to
purchase health insurance
• White House asked for clarification on what exactly the federal judge
intends. Judge stayed his opinion.
• Appeal hearings are expected quickly.
Quick Update
Early Retiree Reinsurance Program (ERRP)
• Reimburses 80% of claims for early retirees ($15,000 - $90,000)
• $5 Billion appropriation planned to sunset in 2014
• funds expected to be exhausted in 2012
• Over 5,000 applications approved
• $1.8 Billion paid as of 3/17/2011
• 5/5/2011 is the deadline for new applications
Big Winners in 2010:
• California Public Employees Retirement System $57 million
• State of NJ Treasury Dept $38 million
• Georgia Dept of Community Health $34 million
• Commonwealth of Kentucky $29 million
• Employees Retirement System of Texas $20 million
Controversy Update
Compliance Waivers (Temporary)
• Namely for compliance with the removal of lifetime limits and MLR
requirements
• Lifetime limits were removed under healthcare reform.
• Annual limits on plans are still in effect
• $750,000 up to 9/2011
• $1,250,000 up to 9/2012
• $2,000,000 up to 12/31/2013
• Unlimited as of 1/1/2014
• Waivers granted to 28+ unions, as well as some insurance carriers
(mini medical carriers)
• 1 state has been granted a Waiver
Provision Delay Update
• Non-Discrimination rules
• Plans that lost their grandfathered status would have had to
comply with Section 105h of the Internal Revenue Code rules
• W-2 Reporting (2012 plan year; issued in 2013) Relief or employers
filing less than 250 W-2s
• Free – Choice Vouchers (De-Funded)
• 1099 Requirement (Repealed)
• Remember, the majority of provisions go into effect as of 1/1/2014
Patient Protection & Affordable Care Act (PPACA)
Healthcare & Education Reconciliation Act (HCERA)
• Passed into Law March 23 & March 30th, 2010
• Effective for plan years after September 23, 2010
The Vision
• Every citizen has access to a comprehensive medical
plan through employment, state operated exchange, or
other regulated program such as Medicaid, Medicare or
Tri-Care.
• No one is denied coverage due to health condition
• Medical coverage is affordable to lower and middle
income individuals & families
Key Elements
• Goal is to have almost all U.S. citizens and legal immigrants
covered by health insurance
• State run health care exchanges make it easier for individuals to
obtain coverage
• Incentives and penalties encourage individuals to procure heath
care coverage
• Policies will have built in consumer protections (such as
prohibitions on preexisting condition limitations, rescissions, and
certain other unfavorable insurance practices)
• Incentives and penalties designed to encourage employers to
offer health care coverage to their employees
• PPACA is more focused on increasing access to health care than
reducing health care costs.
New Challenges for Employers
• Anticipated mandates on coverage included in employer health
plans
• New reporting and disclosure requirements
• New subsidies and tax credits
• New penalties
• Many changes will not become effective for several years
• Guidance (from the Department of Health & Human Services)
to follow on many provisions
2014 Individual Mandate
• Effective in 2014, most US residents will be required to have
“minimum essential health coverage” (which can be achieved through
purchase of a plan sold in the Exchange), or via a “qualified” employer
plan.
• Penalty for each individual without coverage will be the greater of:
– $95 or 1% of income in 2014
– $695 or 2.5% of income in 2016
• Financial Aid
– Individuals with family income up to 133% of Federal Poverty
Level (FPL) will qualify for Medicaid
– Individuals with family income between 133 - 400% of FPL can
receive premium assistance tax credits to buy coverage at an
Exchange.
Individual Mandate Penalty Tax
Household Income
2014 Penalty
2015 Penalty
2016 Penalty
$10,830
$108.30
$325.00
$695.00
$21,660
$216.60
$433.20
$695.00
$32,490
$324.90
$694.80
$812.25
$43,320
$433.20
$866.40
$1,083.00
$55,125
$551.25
$1,102.50
$1,378.13
$66,150
$661.50
$1,323.00
$1,653.75
$77,175
$771.75
$1,543.50
$1,929.38
$88,200
$882.00
$1,764.00
$2,205.00
2014 Health Exchange Plans
States will establish and administer American Health Benefit Exchanges
where certain
individuals and small businesses (initially, those businesses with up to 100
employees) can
buy “qualified health plans.”
• Exchange plans will have limits on cost-sharing.
• Actuarial Coverage for benefits will be available in 5 levels:
– Bronze - 60% coverage;
– Silver - 70% coverage;
– Gold - 80% coverage;
– Platinum - 90% coverage;
– Young Adult Catastrophic Coverage under age 30
2014 Employer Mandates
• Employers not legally required to provide coverage but large
employers (50+ ees) that do not offer minimum essential coverage or
do not contribute sufficiently for coverage will be liable for penalties
• Numerous other reporting and disclosure requirements are also
applied to employers with 50 or more employees starting in 2014
2010 All Plans
•
“Grandfathered” Plans : A Plan in effect prior to March 23, 2010 does not
have to comply with some of the otherwise-mandatory changes
•
However, even grandfathered plans must conform with certain provisions:
– Coverage for Pre-Existing Conditions for:
• Children as of 2010 (NOTE: Individual grandfathered plans ARE
exempt from this)
• Adults as of 2014
– Lifetime limits - for “essential health benefits” eliminated
• “Non-essential” benefits may have lifetime limits
– Annual Limits Restrictions
– Rescission of Coverage - Prohibited except in cases of fraud or intentional
misrepresentation
Effective Date: Plan Years after 9/23/2010
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
Preventive Care Services
9/23/2010: Preventive Care & Screening services include:
•
Evidence-based items or services with a rating of `A' or `B' in the current
recommendations of the United States Preventive Services Task Force
•
Immunizations - Child and Adult
•
For infants, children, and adolescents
– Expanded List (Likely to have 2 levels of Preventive Services)
– Autism Screening
– Childhood Obesity Screening
•
For Adults
– Expanded List (Likely to have 2 levels of Preventive Services)
– Colorectal Screening
– Depression Screening
Effective Date: PY’s after 9/23/2010
Employer Size: All
Applies to: Fully Insured  Self Funded Grandfathered
Grandfathered Plans
• Plans in existence on March 23, 2010
– To be “Grandfathered” cannot make material changes to plan
– Grandfathered plans do not have to comply with the following
new Mandates:
• Coverage for emergency services at in-network levels
• First-dollar coverage for certain preventive services (No cost
share)
• Must allow OB/GYN as primary care provider; cannot require
referrals for OB/GYN services
• Enhanced claim appeal procedures, including implementation
of an external appeals process
• A prohibition on discriminating in favor of highly
compensated individuals (same nondiscrimination rules apply
to both insured and self-funded plans). DELAYED!
Changes That DISQUALIFY Grandfathered Status
Plan-structure changes
• Eliminate coverage to diagnose or treat a particular condition;
• Increase coinsurance % or cost sharing;
• Increase deductibles more than medical inflation plus 15% (19% total);
• Increase copays by greater of:
– Medical inflation plus 15%; or $5
• Decrease employer contribution by more than 5%;
• Adopting or decreasing annual benefit limits.
Admin changes
• Changing carriers (Self funded plans MAY change networks and TPA’s).
NOW ALLOWED.
• Switching to another grandfathered plan that, compared to the current plan,
has less benefits or higher cost sharing as a means of avoiding new consumer
protections.
Steps Employers Need to Take Now to
Maintain Grandfathered Status
• A written statement to employees that includes language indicating
the employer believes the plan complies with grandfathered status.
Statement must also provide contact information for questions and
complaints.
• Employer must maintain records that verify grandfathered status and
these records must be available for examination by a plan participant,
beneficiary and government agencies.
• Section 1251 of Act supplies sample (model notice) language;
available at www.dol.gov/ebsa/grandfatherregmodelnotice.doc
Extended Dependent Coverage
•
Coverage for “dependent” who has yet to attain the age of 26.
– Includes married dependents, but no requirement to cover a child or
spouse of the dependent.
•
Grandfathered plans do NOT have to offer coverage to dependents who
have another source for their own coverage.
•
The IRS also intends to amend the regulations under IRC § 106, retroactive
to March 30, 2010, to provide that premium cost for coverage for an
employee’s dependent under age 27 is excluded from gross income.
– Plans already providing extended dependent coverage impute income in
2010 only for January, February, March.
Effective Date: PY’s after 9/23/2010
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2010 New (Non GF) Plans Required Coverage
•
PCP and Ob-Gyn Choice Allow plan participants to designate any network
doctor, Ob-Gyn, or specialist as a primary care provider
– Prohibition of prior authorization for women to see obstetriciangynecologists.
•
Provide emergency care services without prior authorization as an in-network
service.
•
Prevention and Wellness Requirements. Cover preventive and wellness
benefits (e.g., immunizations and infant screenings) with no deductibles or
other cost-sharing.
•
Clinical Trial Coverage (effective 1/1/2014)
•
New Appeals Process - plans will also be required to distribute notices of
new, written internal and external appeals processes to their employees
Effective Date: PY’s after 9/23/2010
Employer Size: All
Applies to: Fully Insured  Self Funded
Grandfathered
2010 New Plans Required Coverages DELAYED!
Prohibition on Discrimination - Prohibition on new group health plans
from establishing any eligibility rules for health care coverage that
have the effect of discriminating in favor of higher-wage employees
– Grandfathered plans are exempt from this requirement
– This is a new requirement for fully-insured plans.
– Medical plan eligibility and benefits may not favor higher wage employees.
– Non-discrimination test rules expected to be similar to current test rules for selffunded medical plans [IRS § 105(h)].
Effective Date: PY’s after 9/23/2010
Employer Size: All
Applies to: Fully Insured  Self Funded
Grandfathered
FSA, HRA, HSA
• 1/1/2011: Amend Plan documents.
– Health FSA, Health Reimbursement Arrangement, Health Savings
Accounts no longer reimburse for non-prescription over-thecounter medications (except for insulin).
• 1/1/2011: “Unqualified”
– HSA distributions taxed at 20% instead of the previous 10%.
• 1/1/2013: Health FSA election limit reduced to $2,500 (beginning
1/1/2014, the cap will be indexed to inflation).
– This change does NOT affect the Dependent Care FSA limit.
Effective Date: 1/1/2011, 1/1/2013
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2012: Plan Disclosure
• 2/23/2012: Distribute new Standardized Summary Plan Descriptions
to plan participants.
• The SPD must be designed to meet new format and language
standards set by the DOL
– Maximum of 4 pages long and using 12 point type
– Benefits described using standard phrases
• Also, any plan design changes that entail a “material modification”
need to be communicated IN WRITING to participants 60 days before
the change becomes effective
Effective Date: PY’s after 2/23/2012
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2012: Research Fee
1/1/2012: Annual fee on insured and self-funded
plans to fund the Patient Centered Outcomes
Research Trust Fund
• $1 per plan participant in 2012
• $2 per plan participant in 2013-2019
Effective Date: 1/1/2012
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2013: High Income Additional
Medicare Payroll Tax
• Currently employers and employees each pay 1.45% of employee
wages (total of 2.9%) for Medicare taxes.
• Starting 1/1/2013, an additional 0.9% Medicare tax imposed on the
employee on wages in excess of $200,000.
• Employer continues to pay 1.45%
• Employee will now pay 2.35% on wages above $200,000
Effective Date: 1/1/2013
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2013: Notice of Exchange
•
3/1/2013: Provide Notice of Existence Exchanges to all employees. Notice
is also included in all future new hire packets:
– Must include a description of the services provided by the Exchange,
how to contact the Exchange to request assistance, and clearly state:
• If the plan’s coverage does not have an actuarial value of at least
60% (i.e., is not at least a “Bronze-level” plan),
• OR the employee’s share of the premiums is greater than 9.5% of
income,
• Then the employee may be eligible for a premium tax credit and a
cost-sharing reduction if the employee buys a qualified health plan
through the Exchange
Effective Date: 3/1/2013
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
2014: Penalty for Large Employers (50+)
that do NOT Offer Coverage…
If You “Can the Plan”
• Assessment is $2,000/year x the number of full-time employees for
the month, reduced by first 30 employees.
• After 2014, the $2,000 amount will be adjusted for inflation
(Big Unknown).
• This penalty is NOT tax deductible for the employer!
Effective Date: 1/1/2014
Employer Size: 50+
Applies to: Fully Insured  Self Funded  Grandfathered
2014: Premium Tax Credit Penalties for Large Employers (50+)
That Do Offer Coverage (Only Applies To Unaffordable Plans)
•
Employer Penalty if:
– Employee Opts out of employer-plan onto an Exchange plan; and,
– Employer’s Plan is Considered “Unaffordable.”
• Employer plan is “unaffordable” if the employee's required contribution
exceeds 9.5 percent of the employee's household income or if the plan’s
actuarial coverage is less than 60% (“Bronze-level”)
•
Penalty Assessment Amount:
– Lesser of: $3,000/year times only the number of full-time employees with
Exchange coverage, OR $750/year times all full time employees
– Total assessment will not exceed the amount that would be assessed if the
employer does not offer any coverage
•
If employer offers a plan that is “Qualified and Affordable”, no penalties are assessed
Effective Date: 1/1/2014
Employer Size: 50+
Applies to: Fully Insured  Self Funded  Grandfathered
2014: Free Choice Voucher
DE-FUNDED! No Longer Applies!
•
A Free Choice Voucher must be provided to an employee if:
– The employee does not participate in the employer-sponsored plan and
– Employee qualifies for affordability exemption but not for premium tax credit and
– Employee has household income less than 400% of FPL, and
– Employee’s required contribution for the employer plan is between 8 and 9.5 percent of the
employee's household income
•
The amount of the Free Choice Voucher will be equal to employer’s contribution of the most
expensive plan.
Employer pays exchange the voucher amount
Employee chooses plan in exchange
If voucher amount exceeds cost of plan in exchange, exchange rebates excess amount back to
employee
•
•
•
Effective Date: 1/1/2014
Employer Size: 50+
Applies to: Fully Insured  Self Funded  Grandfathered
Simple Exchange Grid
Exchange Premium Tax Credit
Applies To Unaffordable
Coverage Only
Free Choice Voucher Applies To
Both Unaffordable and
Affordable Coverage
• Employee Qualifies to Opt Out
Employer Offers
OR
Employer Offers
OR
Employer Offers
No Coverage
Affordable or Unaffordable Coverage
• $2,000 Per Employee less 30 Employees
• Employer Pays to Exchange the
contribution equal to most
expensive plan offered
Unaffordable Coverage
• Employee Opts Out
• Lesser of $3,000 Per Opt Out or $750 X FT
Employees
Affordable Coverage
• No Penalty
Free Choice Vouchers Do Not Apply
2019 Est. Enrollment Employer Sponsored Plans Versus
Exchange/Medicare/Medical/CHIP
Source: Center for Medicaid and Medicare Services, April 2010
2014: Employer Reporting Requirements to IRS
Large employers (50+) will send an annual health report to IRS stating:
•
•
•
•
•
•
•
Whether the employer offers minimum essential coverage to FT employees
Monthly premium for the lowest cost option in each of the enrollment tier
Employer's share of total allowed costs of benefits provided under the plan
If employee contribution exceeds 8% of wages paid to any employee
Option for which the employer pays the largest portion of the cost of the plan
and the portion of the cost paid by the employer in each tier under that
option
Number of full-time employees for each month during the calendar year
Name, address, and TIN of each full-time employee during the calendar year
Effective Date: 1/1/2014
Employer Size: Generally, 50+
Applies to: Fully Insured  Self Funded  Grandfathered
Other Requirements
• 1/1/2014: All pre-existing condition exclusions eliminated
(adults)
• Essential Health Benefits Requirement
– Requirement for all qualified health benefit plans to offer
at least the essential health benefits package
• Wait periods may not exceed 90 days
Effective Date: PY’s after 1/1/2014
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
Qualified Health Coverage
1/1/2014: Qualified health coverage must:
• Contain an "essential health benefits" package
• 60% minimum coverage
• Annual out-of-pocket limits equal to HSA limits - for 2011:
– $5,950 individual
– $11,900 family
• Small group market may not impose deductibles that exceed
– $2,000 individual
– $4,000 family
• Grandfathered Plans are exempt from this requirement
Effective Date: 1/1/2014
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
Qualified Health Coverage Essential Benefits
•
1/1/2014: Essential Health Benefits include:
– ambulatory patient services
– emergency services
– hospitalizations
– maternity and newborn care
– mental health and substance abuse services
– prescription drugs
– rehabilitative services and devices
– laboratory services
– preventative and wellness services
– chronic disease management
– pediatric services
– other services as defined by the Department of Health and Human Services
– No Lifetime or Annual Maximum Limits on essential benefits
Effective Date: 1/1/2014
Employer Size: All
Applies to: Fully Insured  Self Funded  Grandfathered
Other Requirements
• 1/1/2014: Employers with more than 200 full-time employees
are required to automatically enroll new employees in a plan.
•
Automatically enrolled employees must have the opportunity
to opt out of the coverage
Effective Date: 1/1/2014
Employer Size: 200+
Applies to: Fully Insured  Self Funded  Grandfathered
The Horizon
• 2017: Large Employer Participation in Exchanges. Permission for
states to allow large employers (100+ full-time employees) to offer
coverage to their employees through the exchanges.
• 1/1/2018 Cadillac tax 40% excise tax on value of coverage in excess
of $10,200 for individual or $27,500 for family.
Effective Date: PYs after 1/1/2017
Employer Size: All
Applies to:  Fully Insured  Self Funded Grandfathered
Beyond Health Care Reform Part II
We will get through this as well.
Exchanges and Their Implications
• Two Choices
– Employers can opt out and pay fines
– Or create a sustainable benefits program
Either way, culture shifts surrounding Employee Benefits philosophies
will occur….
Will Employers Pay Exchanges to Opt Out of
Offering HealthCare?
• Why do employers offer health care benefits in the first place?
• Old School of Thought…
– To attract and retain quality employees
• New Thinking…(Most Progressive Companies)
– To create a culture of health and well being for the employee.
– ROI is much greater here…Culture Shift, not plan design changes
Culture Shift…Opting Out
• Employer may save money by paying fine in lieu of paying for benefits
• Administrative burden relieved
• Other Consequences
– Employee perception…Take Away
– How will company culture actually be affected?
– Plans may be limited (potential rationing) in future
– Employee taxed if they do not participate in Exchange
– Employee pays for Exchange coverage with “after” tax dollars
– Reputation/Credibility of employer may suffer
– Do employees count on their employers to be their estate planners?
Most surveys indicate this is true.
– Employee retention may suffer
We Think Many Employers Will Not Opt-Out
Here’s Why….
•
Factors to consider
– 7 in 10 workers prefer employer-sponsored health care coverage,
according to EBRI
– 90% of employees believe employers should offer benefits even
if workers pay most or all of the cost (MetLife Study)
– Only 10% of workers are confident they could afford to purchase
coverage on their own, while 60% rank health insurance as most
important employer-sponsored benefit (EBRI)
We Think Many Employers Will Not Opt-Out
Here’s Why….
• Exchanges could cost employees more money
• After-tax dollars used by Employees to participate in exchanges;
employees lose money
• Employers do not get a tax deduction for Exchange penalty
• Employers will still need to compete with Benefits for Employees
• “Culture of Health” mentality is quickly taking off – becoming norm
• Limited plan designs in Exchange
• Employer may lose ability to self fund
Recommended
Approach
Build Action Plan
Perform a Workforce Evaluation
Forecast Effect of Mandated Plan Changes
Physician - Preventive services
The tool will also calculate
“actuarial value”, or the portion
of cost reimbursed by the plan
Model Potential Impact of Mandates
Employee Communication: Start Conversations
Surveys to help better define
your employees’ needs and
priorities
User-friendly communications
helping employees understand
the impact of reform on them
personally
What is on the Horizon?
•
•
•
•
Cost Transparency & Opportunity Cost
Sale of insurance across state lines (and impact on healthcare pricing)
More notices to employees
Wellness Programs
Legislative/Judicial
• Modifications & Compromise possibly continue – repeal unlikely
• Positioning in preparation for the 2012 elections
• Watch the states and the courts
Thank you for your time!
Steve Love, REBC, RHU, GBDS
Senior Benefit Consultant
[email protected]
www.GBShealthcarereform.com