Post on 15-Jan-2016
Health Care Reform: 2014 Overview
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November 2013
Health Care Reform 2014 Overview
Erica Storm, Esq. Becca Kopps, Esq.Robert D. Reynolds, CIC,CPIA, AAM, AIS, AU
Presented by:
About the presenters
Erica Storm, Esq. Becca Koops, Esq. Robert D. Reynolds, CIC, CPIA, AAM, AIS, AU
• Employment and benefits attorney
• Expertise in health care reform and health plan issues
• Educates companies on compliance obligations
• Employment and benefits attorney
• Primary focus: health care reform
• Creates educational materials and compliance resources
• President & CEO Morris & Reynolds Insurance
• Insurance & Employee Benefit’s Broker For 30 Years
• Certified Healthcare Reform Expert
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Introduction
Health Care Reform
• Enacted in March 2010• Makes significant changes to health care system• Implemented over several years
Affordable Care Act
• Health care providers• Government programs• Health insurance issuers• Employers/plan sponsors• Individuals
Provisions that impact:
Most employers that offer health plans will be impacted in some way
The Rule
Definitions
Exception Special Rule
Special Rule
Partial delay
More Special Rules
Sub-special Rule
Additional Special
Rule
Confusing Political Action
Confusing Media
Coverage
How Health Care Reform Works
Recent Developments
Recent Guidance
• Health FSA rollovers permitted−Oct. 31, 2013: IRS relaxed “use-or-lose” rule for health
FSAs−Participants can carry over up to $500 in unused funds to
the next year−Plan cannot include both carryover and grace period−Does not impact $2,500 salary reduction limit−Written plan amendment required
• Cafeteria plan election change rules expanded for health care reform changes*
• New hardship exemption from individual mandate penalties for Exchange enrollees*
2013 Compliance Reminders
SBC and 60-Day Notice Rule
Summary of Benefits &Coverage (SBC)
Simple, concise explanation of plan benefits & costs• Model chart available
Applies to issuers and plan sponsors• No duplication required• Issuer can distribute on behalf of
employer
Provide to participants & beneficiaries effective Sept. 23, 2012• 1st day of 1st open enrollment period• 1st day of 1st plan year• Other specific situations
60-Day Notice Rule
Must notify in advance of any material modifications not in connection with renewal • Describe in a summary of material
modifications (SMM) or updated SBC• At least 60 days BEFORE modification
becomes effective
Material modification:• Enhancement of covered
benefits/services• Material reduction in covered benefits/
services• More stringent requirements for receipt of
benefits
Notice of Exchange
Must include information about:Existence of
Exchange and services provided
Potential eligibility for subsidy under
Exchange
Risk of losing employer
contribution
Compliance deadline: Oct. 1, 2013New employees: within 2 weeks of hire date
Employers subject to the FLSA must notify all employees of Exchange/Marketplace informationMust provide in
writingMay provide by mail or
electronically (DOL requirements apply)
Model notices available
Notice of Exchange - Penalties
• Still unclear whether non-compliance can trigger:−Non-ACA penalties−DOL audit−Employee lawsuits
• Providing notice is still required by law, and can benefit employers−Can help answer employee questions
DOL has said there are no fines or penalties for failing to provide notice
Health Plan Fees
2014 and beyond
2013 plan year
Patient-Centered Outcomes Research Institute (PCORI) Fees
2012 plan year
$1 x average number of covered
lives
$2 x average number of covered
lives
Increase based on National Health Expenditures
• Paid by issuers and self-funded plan sponsors−Special rules multiple self-funded plans (including HRAs)
• Paid annually on Form 720 by July 31 each year−Apply for plan years ending on or after Oct. 1, 2012−End with the 2018 plan year – do not apply for plan years
ending on or after Oct.1, 2019
• Amount of the fees:
Reinsurance Fees
• Transitional reinsurance program to operate 2014-2016− Fees imposed on health insurance issuers and
self-funded plan sponsors of major medical plans (with some exceptions)
− Exemption expected for some self-funded plans for 2015-2016
• Fees based on annual national contribution rate− 2014: $5.25/month ($63/year) x average
number of covered lives
Nov. 15 Submit
enrollment count to HHS
Dec. 15 (or 30 days) HHS
notifies issuer/sponsor of amount due
30 daysPayment due
Health Insurance Providers Fee
• Annual fee on health insurance providers−Effective in 2014−Due Sept. 30 each year−Allocated according to market share: $8B in 2014 - $14.3B
in 2018 (based on premium growth in later years)
Applies to:
Covered Entities
Including health insurance issuers and HMOs
2014 Health Plan Changes
Waiting Period Limits
• Waiting periods limited to 90 days for all plans −Beginning with 2014 plan year
Strict 90 day limit
• 1st of the month following not permitted
Other eligibility conditions permitted
• Can’t use to avoid 90-day limit
• Limits on cumulative hours of service requirement (1200 hours/one time only)
Variable hour employees
• Measure hours for up to 12 months to determine FT status
• Offer coverage by end of 13th month
Cost-Sharing Limits for Health Plans
• Limits for non-GF group health plans beginning with 2014 plan year
Out-of-Pocket Limits
• All non-GF group health plans• May not exceed HDHP limits for 2014 ($6,350
single/$12,700 family)• Indexed for inflation• Special rule for 2014 delays full compliance
Deductible Limits
• Only insured small group non-GF plans• May not exceed $2,000 (single coverage) or $4,000
(family coverage)• Carriers may have flexibility• Indexed for inflation
Plan Changes
Annual limits eliminated
• Prohibited on essential health benefits in 2014 plan year• Essential health benefits determined according to state benchmark plan
Preexisting condition exclusions prohibited
• Currently prohibited for children under age 19• Prohibited for everyone beginning with 2014 plan year
Small group policies (non-GF plans)
• Must provide essential health benefits package• Premium rating restrictions apply – limited to age, geographic location, family size and
tobacco use
Wellness Programs Changes
• Health-contingent wellness program reward limits increase in 2014− Current limit: 20% of cost of coverage− General limit: 30% of cost of coverage− Tobacco program limit: 50% of cost of coverage
• Health contingent wellness programs divided into:− Activity-only programs− Outcome-based programs
• Nondiscrimination rules apply to health contingent programs (with slight differences)− Opportunity to qualify once/year− Must offer alternative means of qualifying− Outcome-based programs must offer reasonable alternative
standard
Individual Mandate and Exchanges
Individual Mandate
• Rule for individuals: have health insurance coverage by 1/1/14 or else (pay a penalty)
• Penalty applies to taxpayers and their children who don’t have “minimum essential coverage”−Greater of dollar amount or % of income−Kids = half of adult penalty−Family penalty capped
• Annual penalty amounts−2014 = $95 or 1%−2015 = $325 or 2%−2016 = $695 or 2.5%
Employer sponsored coverage Including COBRA and retiree
coverage
Individual coverage
Government programs Medicare Medicaid Children’s Health Insurance
Program (CHIP) coverage Some veterans’ health coverage TRICARE
What is Minimum Essential Coverage?
Exemptions to the Mandate
• Available Exemptionso Low income or hardship*o Coverage is unaffordable
(more than 8% of income)
o Religious exemptiono Incarceratedo Member of Indian tribe or
health care sharing ministry
o Not lawfully presento Short gap in coverage
• Exemptions claimed through Exchange or tax filing
• Individuals who lose exemption get special enrollment rights
Special Rule for EmployeesEligible for Non-Calendar Year Plans
•Let employee elect employer coverage for Jan. 1 or leave employer plan to go to Exchange •Optional, but plan must be amended (retroactive amendment ok)•Extended to any employer with a non-calendar year cafeteria plan (not just large employers)
Employers can amend Section
125 plan to allow mid-year
election changes
•Employee will not be subject to penalties if they are not enrolled for 2013-2014 plan year•Relief available until the end of the 2013 plan year
Relief for employe
es
American Health Benefits Exchange
Public health insurance Exchange required by ACA
Primarily online marketplace for purchasing health insurance
(Qualified Health Plans)
Run by state or federal government with consumer assistance from
other entities
For individuals and small employers (generally up to 50
employees)
SHOP Exchange
• Small Business Health Option Program (SHOP) – Exchange for small employers
• Small employers can offer employees enrollment in a QHP through a SHOP− Can offer benefits through a cafeteria (Section 125) plan− Exchange sets contribution methods
2014-15
• States can limit size to up to 50 employees
2016
• States must increase size to up to 100 employees
Employee-Choice Feature Delay
Employee-choice model:
• Employers have the option to offer employees all QHPs at a certain level of coverage • Employer chooses level of coverage and a contribution amount• Employees choose the plan they want
Employee choice model delayed until 2015 for FFE SHOPs
• 2014 implementation optional for state Exchanges• Most state Exchanges will offer employee choice in 2014
Exchanges still planned to be operational
• Employers will have to choose a plan• Employees won’t be able to choose from all plans right away
Qualified Health Plans
Offered by an approved insurer
Certified to meet Exchange requirements
Offers essential health benefits
Meets cost-sharing limitations
Priced like plans outside the Exchange
Provides bronze, silver, gold or platinum coverage (or catastrophic plan for young individuals)
Apples to apples...
QHP Metal Levels
90% of benefit costs covered80% of benefit costs covered70% of benefit costs covered60% of benefit costs covered
Exchange Eligibility
Individuals
•Citizen or legal resident•Not incarcerated•Reside in state covered by Exchange•(Not be enrolled in Medicare)•Separate from subsidy eligibility rules
Small Employers (SHOP
Exchanges)•Qualify as a small employer based on size•Offer QHP coverage to at least all FT employees•Use SHOP in primary office location or employee’s primary worksite location
Most individuals can shop for Exchange coverage
(even if eligible for employer coverage)
Exchange Enrollment
Individuals
• Initial enrollment: Oct. 1, 2013-March 31, 2014
• Must enroll by Dec. 15 for Jan. 1 coverage but: no penalties for anyone who enrolls during initial open enrollment period
• Annual open enrollment: Oct. 15-Dec. 7
• Special enrollment for qualifying events
Small Employers•Can buy coverage for employees any time after Oct. 1, 2013•12 month plan year required•Annual election periods apply•Special enrollment for employees with qualifying events
Restrictions apply to timing of enrollment to prevent adverse selection
Exchange Subsidies
Provide assistance to low income individuals:• 100%-400% of federal poverty level• Not eligible for government programs that
cover health care
To help pay premiums or reduce cost-sharing
Not available to individuals who are:• Eligible for affordable, minimum value
employer coverage or• Enrolled in an employer plan
Employer Mandate (Delayed Until 2015)
Employer Shared Responsibility Rules (Pay or Play)
• No requirement to offer coverage• Can get tax credits for providing
coverage
Small Employers (fewer than 50
FT/FTE employees)
• Must offer coverage to FT employees and dependents to avoid penalties
• Coverage must be affordable and provide minimum value
• Penalties delayed until 2015
Large Employers (50+ FT/FTE employees)
Employer penalties triggered if any full-time employee receives subsidized coverage in an
Exchange
Determining Large Employer Status for Pay or Play Penalties
Who is a Large Employer?
Average 50+ full-time employees
In the prior calendar year
Including full-time equivalent employees
Common ownership rules apply
Special rule for 2014: can count 6 consecutive months in 2013 Will this apply for new 2015 effective date?
Full-Time EmployeeAn employee who is employed on average at least 30 hours of service per week
130 hours of service in a calendar month = the monthly equivalent of 30 hours of service/week
Full-Time Equivalent Employees
Add hours of service in a
month for PT employees (up to
120 hours/person)
Divide total hours by 120
Result: Number of FTEs for the
month
Counting Employees
Add full-time employees (including seasonal) for each calendar month in prior calendar year
Add FTEs (including seasonal) for each calendar month in prior calendar year
Add full-time employees and FTES together for each month of prior calendar year
Add 12 monthly totals and divide by 12
* Special rule for 2014: can use 6 consecutive months in 2013
Special RulesSeasonal Employees
An employer is not a large employer if:
(1) the employer's workforce exceeds 50 full-time
employees for 120 days (4 months) or fewer during the
calendar year and (2) the employees in excess of
50 employed during that period were seasonal workers
New EmployersUse average number of full-time employees the
employer is “reasonably expected
to employ” on business days in the current
calendar year
Providing Coverage to Full-Time Employees
Employer SharedResponsibility Penalties
Penalties may apply if the employer:• Fails to offer minimum essential coverage to FT
employees (and dependents)• Offers coverage that is not affordable or does
not provide minimum value
Penalties triggered if any FT employee gets subsidized coverage through Exchange•Not offered employer coverage or offered coverage that is unaffordable not of minimum value (and doesn’t enroll)•Not eligible for government programs (Medicare, Medicaid)•Income below 400% of federal poverty level
Enrolling in Exchange coverage without subsidy will not trigger penalties
Affordability and Minimum Value
Affordable Coverage
Minimum Value Coverage
• Employee’s cost for self-only coverage does not exceed 9.5% of household income
• Employer can generally compare cost of coverage to W-2 income, rate of pay or federal poverty level
• Plan covers at least 60% of costs of covered benefits and services for average person
• HRA/HSA amounts may be included
• HHS-approved methods for calculation
• Some HRA amounts may be included
• Most wellness incentives cannot be taken into account
Potential Penalties
Penalty A
• Employer did not offer coverage to substantially all FT employees and dependents (children)
• $2,000 x (all FT employees – 30)
Penalty B
• Employer offered coverage to substantially all FT employees/dependents• But not all OR coverage is not affordable or does not provide minimum value• $3,000 x each employee who gets subsidized coverage (capped at Penalty A amount)
49
Penalty Potential
Not a large employer: Less than 50 full-time equivalent employees
Large employer: 50 or more full-time equivalent employees
Does not offer coverage to substantially all FT employees (and dependents)
Offers coverage to substantially all FT employees (and dependents)
Scenario ANo full-time employees
receive credits for exchange
coverage
Scenario B1or more full-
time employees receive credits for exchange
coverage
Scenario CNo full-time
employees receive credits for
exchange coverage
Scenario D1or more full-time employees receive credits for exchange
coverage
No penalty No penalty Number of full-time employees minus 30 multiplied by $2,000
No penalty Lesser of: Number of full-time employees minus 30, multiplied by $2,000.
Number of full-time employees who receive credits for exchange coverage, multiplied by $3,000.
(Penalty is $0 if employer has 30 or fewer full-time employees-because penalty is based on the lesser of the two calculations)
Offering Coverage
• Must be offered to substantially all FT employees and dependents
• Substantially all − 95% general rule− May fail to offer to up to 5% (or 5, if greater)− Does not have to be inadvertent
• Children up to age 26 must be offered coverage− Not spouses− Dependent coverage does not have to be
affordable
• Opportunity to elect must be offered once per year− Employee must be able to opt out of coverage
that is unaffordable/not MV
Measuring Full-Time Status
Statutory Requirement
• Employers would have to determine full-time status on a monthly basis−Would have to know status to offer coverage
• Administrative issues−Not an issue for employers/employees with standard
schedules−Problematic for variable hour employees
Employees Expected toWork Full-Time
• Employer must offer coverage by the end of the first 3 full calendar months of employment
• Applies to an employee who is “reasonably expected at his or her start date to be a full-time employee (and is not a seasonal employee)”
• If coverage is not offered by the deadline, penalties can apply for:−The first 3 calendar months−Any subsequent months where
coverage is not offered
Safe Harbor for Variable Hour/Seasonal Employees
Look Back Measurement Method
Measurement Period
Admin Period
Stability Period
Nov. 1 Dec 31
Jan 1 Nov. 1 Dec 31
Jan 1 Dec 31
2013
2014
2015
Measurement Period cont.
Questions?
For more information about Health Care Reform visit: www.morrisandreynolds.com/health-reform/
Morris & Reynolds Insurance14821 South Dixie Highway, Miami, FL 33176Telephone 305.238.1000 | Fax 305.255.9643
Thank you!
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