1 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Health...

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The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association.

Health Care Reform:Health Care Reform:

Key Impacts Every Employer Should KnowKey Impacts Every Employer Should Know

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The Required Disclaimer

• Health insurers continue to receive information from Health and Human Services regarding the Patient Protection and Affordable Care Act. Therefore, this information has and will continue to change.

• The information provided in this presentation should not be construed as legal advice.

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How a Bill Becomes a (Messy) Law

• Patient Protection and Affordable Care Act

• Signed into law March 23, 2010

• Later titles in law amend earlier titles

• Reconciliation Act

• Resolved critical issues between House and Senate reform bills

• Signed into law March 30, 2010

• Waiting for regulations, interpretations, state laws

• Some issued “interim final”

• “Guidance”

• Still waiting for others

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Timeline – Reform Overview

1/1/2010 3/23/2010Plans renewed

after

9/23/20102011-2013 1/1/2014

And beyond

Phase I small business tax credits

Medicare Part D “donut hole” rebates

Rate review

Grandfather status

90 daysNational high risk pool

Early retiree insurance

June 1HHS internet portal Ind/small group

No-pre ex for children < 19

Coverage for dependents <26

Lifetime limit restrictions

Annual max restrictions

No cost-sharing for preventive benefits

Appeal rights

Non-discrimination

Rescissions limited

HSA/FSA/HRA changes (2011)

Medical loss ratio rebates

Summary benefit requirements

Quality care reporting

Comparative effectiveness research fee

Medical device manufacturer tax

W2 reporting

FSA Cont. cap – $2500 (2013)

Individual mandate

Employer “pay or play” penalty

Exchanges

Subsidies

Medicaid expansion

Phase II small business tax credits

Insurer fee

2018: Cadillac Plan Tax

2020: Close Medicare Part D donut hole

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Reform Topics Covered

• Grandfathered Plans

• “Immediate” Reforms

• Non-discrimination

• Small Employer Tax Credit

• W2 Reporting

• FSA, HSA, HRA Changes

• Reinsurance for Early Retirees

• Retiree Drug Subsidy

• Individual Mandate

• Exchanges

• Cadillac Plan Tax

• Miscellaneous Impacts

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Grandfathering

“If you like your health care plan, you’ll be able to keep your health care plan.” –

President Obama

• Coverage that an individual or group had in place on 23 March 2010

• Special rules for collectively bargained plans

• Grandfather status avoids some, but by no means all reforms

For example:

• First dollar preventive care

• Limits on certain lifetime and annual $ maximums

• Rating limitations

Note: status does not avoid pay-or-play employer penalties

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Grandfathering (cont.)

• Easy to lose grandfather status:• Elimination of benefit for particular condition

• Increase coinsurance at all

• Increase copayments by more than greater of:• Medical inflation plus 15% points• $5, increased by medical inflation

• Increase other fixed amount cost-sharing by more than medical inflation plus 15% points

• Reduce employer contribution > 5% points

• Reduce or add certain annual or lifetime limits

• Documentation requirements if grandfathered (notices)

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• Can make some changes without losing grandfather status:

• To comply with state or federal law

• To voluntarily comply with a PPACA change

• Changes in TPAs

• Changes in premiums

• Benefit improvements

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• Costs of maintaining grandfather plan

• Limited benefit changes/innovations

• Cost of maintaining customized plan

• Benefits of maintaining grandfather plan

• Avoid some coverage mandates

• Avoid non-discrimination rule

• Neutral

• Don’t avoid pay-or-play penalty

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Regence and Grandfathering

• 1-99 groups: grandfathered status not maintained

• 100+ groups on Facets products (Regence Preferred (PPO), Innova®, Engage®, ActivateSM or HSA Healthplan 2.0SM): grandfather discussions will take place during the renewal negotiation process

• 100+ groups not on Facets: grandfathered status not maintained (exception basis)

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Benefit ChangesBenefit Changes

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Benefit Changes – “Immediate”

• Immediate = renewal date (or first date of new policy)

• All Plans (even grandfathered)• No pre-ex for children <19

• Interpreted as guarantee issue for <19

• Coverage of adult children through age 25• Exception for group plans, if child has other group coverage

• No lifetime maximum dollar limits on essential benefits

• Limited annual maximums on essential benefits (until 2014)• What are “essential benefits”? No information yet.• Ambulatory patient services, emergency services, hospitalization,

maternity and newborn care, mental health and substance use disorder, prescription drugs, rehabilitative and habilitative services and devices, lab services, preventive and wellness and chronic disease management, pediatric services including oral and vision care

• Rescissions/cancelations limited to fraud

September 2010September 2010

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Benefit – “Immediate” (cont.)

• Non-grandfathered plans, in addition to above:

• No cost-sharing for preventive services

• Appeal rights (including external appeal)

• Big change for self-funded groups

• Out-of-network ER

• Pediatrician as PCP for child

• Relevant only if you have HMO-type coverage

• Access to OB/GYN w/out referrals for women

• Relevant only if you have HMO-type coverage


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Benefits – 2012 and beyond

• 2012: quality of care reporting to HHS – no details yet

• 2013: uniform summaries of benefits – 4 pages; 12-point

• 2014:

• Clinical trial coverage

• Coverage of essential benefits

• No annual limits on essential benefits

• Guaranteed issue – extends to individual plans

• Cost-sharing limits (deductible maximums)

• No pre-existing condition waiting periods

• Rating limits (3:1)

2012-20142012-2014

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Non-Benefit Changes Non-Benefit Changes

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Non-discrimination

The administration has announced a delay in applicability of the new nondiscrimination rules for insured plans and related excise taxes until plan years beginning after the IRS issues regulations in this area.

•PPACA extended Internal Revenue Code 105(h) to insured plans• Before this, applied only to self-funded plans

• Rarely enforced, but many large plans conduct “discrimination testing”

•Requirement applies to the group health plan, not insurer

•Compliance testing is a series of mathematical tests• Take into account employee salaries, stock ownership, part-time/seasonal

employees, length of service, percentage of premiums paid by employer, etc.

• Insurers will not be able to determine a plan’s compliance

•Penalty: $100 per day excise tax• Employers with 50 or fewer employees generally exempt

• Less burdensome than penalty for self-funded plans

•What to do? Check with your tax or legal professional


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Small Employer Tax Credit

• PHASE I – 2010-2013

• Pre-requisites• No more than 25 full-time equivalent employees

• Annual average wages ≤ $50k

• Pay at least 50% of cost of premiums

• Credit amount• 35% of employer-paid premium or state average premium

• 25% for tax-exempt orgs

• Phase out for >10 employees

• Business expense deduction for health insurance reduced by amount of credit

• Claim the credit on your annual tax return

• Carry back one year; carry forward 20 years

2010-20132010-2013

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Small Employer Tax Credit (cont.)

• PHASE II – 2014

• Available only for two tax years

• Must offer qualified health plans through Exchange

• Note: cannot get tax credit after 2014 while on a grandfathered plan because not in Exchange

• Credit amount

• 50% of employer-paid premium or state average premium

• 35% for tax-exempt orgs

20142014

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W2 Reporting

• The IRS has deferred the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan. Reporting by employers is optional in 2011. The IRS will be publishing guidance on the new requirement later this year.

• Value of benefits not subject to federal income tax

• Includes costs for separate plans (medical, dental, vision)

• HSA amounts are excluded (already reported on W2)

• Health FSA contributions excluded

• Cost calculation will be similar to rules for determining COBRA premiums

20112011

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FSA, HSA, HRA Changes

• Effective January 1, 2011

• OTC meds no longer reimbursable, unless prescribed

• HSA nonqualified distributions penalty increased to 20%

• Effective January 1, 2013

• $2,500 cap on FSA employee contributions (+ COL adj)

• No limit on amounts contributed by employers

2011; 20132011; 2013

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Reinsurance for Early Retirees

• Matters to you if you have:

• Retiree health coverage

• Retirees 55 or older but not yet Medicare-eligible

• Can be reimbursed for 80% of claims between $15k and $90k

• Subsidy not included in employer’s gross income

• Must have provisions in plan to mitigate costs for chronic/high cost conditions; must be certified by HHS; must use the funds to lower costs of the program

• $5 billion available – likely to be depleted quickly

• Available June 23 – application and guidance from HHS still to come

• Similar to Retiree Drug Subsidy

June 2010June 2010

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Retiree Drug Subsidy

• Retiree drug subsidy tax change

• Today: Employers with retiree drug plans who receive the retiree drug subsidy exclude the subsidy from gross income, but still deduct income costs covered by the subsidy

• Beginning January 1, 2013, subsidy amount no longer deductible

• Still excluded from income

• May make sense to terminate retiree drug program

• Especially as “donut hole” in Part D programs are eliminated

20112011

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Individual “Mandate”

• Beginning in 2014, U.S. citizens or legal residents will be required to buy health insurance

• “Penalties” (phased in)

• $93.50 or 1% per person based on household income (2014 tax filing)

• Increasing to $695 or 2.5% per person based on household income (2016 tax filing)

• Penalties are 50% of the above amounts if under the age of 18

• Individual exemptions:

• Can’t find affordable coverage (as defined by the government)

• Income does not meet the federal tax-filing threshold

• 2010 thresholds for taxpayers under age 65 was $9,350 and couples was $18,700

20142014

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Exchanges

• States will establish benefits Exchanges

• Think “Expedia” or “Orbitz,” with uber-regulations

• Small employers and individuals may purchase coverage through the exchange

• States may allow large employers to purchase beginning in 2017

• Benefit plans in exchange will cover “essential benefits”

• Platinum, gold, silver, bronze levels – “metal” plans

• Subsidies available in Exchange only

• Based on income

20142014

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Employer “Pay or Play” Penalties

• Pay-or-play penalties apply if 50+ employees at 30+ hrs a week

• Free rider penalty

• No coverage offered

• At least one employee receives Exchange subsidy

• $2,000 penalty x (total # employees – 30)

• Unaffordable coverage penalty

• Coverage is offered, but employee’s cost is > 9.5% of household income or employer pays less than 60% of total cost

• $3,000 penalty only for each employee who receives Exchange subsidy

• Penalty does not apply if employee receives Free Choice Voucher

• Grandfathered plans not exempt from penalties

20142014

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Cadillac Plan Tax

• 40% tax on high cost plans beginning in 2018:

• $10,200/$27,500 (individual/family)

• Retirees and high-risk professions: $11,850/$30,950 (indiv/fam)

• Adjustments based on age/gender of employees

• Includes both employer and employee contributions to medical, health FSAs, HRAs, HSAs

• Does not include stand-alone dental or vision, or accident, disability, LTC

• Tax imposed on excess over threshold amounts

• Insured plans – insurer pays tax

• Self-funded plans – group pays tax

20182018

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A Few More Impacts

• Nursing mother breaks (immediately)(immediately)

• Dedicated space for nursing mothers to pump (not a restroom)

• Breaks may be unpaid

• If ≤ 50 employee, potential hardship exception

• Adoption assistance (2010)(2010)

• Increases pre-tax dollar limit $1,000 to $13,170

• Part D “donut hole” (2010)(2010)

• $250 rebate for Part D enrollees who reach the donut hole

• Donut hole gradually closed by 2020

• Matters to you if you’re providing supplemental coverage to employees

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A Few More Impacts

• Comparative effectiveness fee (2012)(2012)

• $1/participant; $2/participant in 2013

• Increased Medicare tax on high income taxpayers (2013)(2013)

• Additional .9% tax on wages above $200k/$250 (ind/joint)

• Employer has to withhold, but can disregard spouse wages in calculating

• Employer portion remains unchanged

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For More Information on Reform Issues

• Regence.comhttp://www.regence.com

• Federal information

http://www.healthreform.gov/

• State information

WA: http://www.insurance.wa.gov/consumers/reform/national_health_care_reform.shtml

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Thank you!Thank you!

1 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Health...

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