10568079
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Transcript of 10568079
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© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
Impact of the Affordable Care Act
Nashville Association for Financial ProfessionalsFebruary 14, 2013
James B. [email protected]
10568079
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© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.| 2
Employee Health Benefits –New Business Decisions For Employers
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Health Law Status Before PPACA
Employer-driven based on tax incentives ERISA – “settlor” discretion on plan design ERISA – fiduciary claims administration Medicare and FAS 106 EMTALA – patient anti-dumping, charity care Universal Coverage? Cost?
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Employer Obligations
Federal/state mandates – ERISA preemption HIPAA –pre-existing condition exclusions
– Maximum exclusion is 12 months– No exclusion if coverage break is 63 days
Non-discrimination testing for self-funded plans Summary description of plan, notice of changes
within six months – judicial exceptions
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Popular Changes - Talking Points
Employer Plans Grandfathered Dependent care through age 26 No pre-existing exclusions – up to age 19;
universal in 2014 Community Rating – “affordable”
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Supreme Court Decision
“It’s a Tax Stupid”– No expansion of interstate commerce
Medicaid unconstitutional – Medicaid funding cannot be withheld for states that opt out
How much tax is ok under equal protection?
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Mandated Health Coverage – Pay or Play
Effective January 1, 2014 Employer Mandate
– Focused on “Large” employers
– Most larger employers are “self-funded”
– Employer as “Settlor” and “Fiduciary”
Individual Mandate Federal and State Exchanges
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Employer Mandate - Play or Pay
Large employers - 50+ FTEs– Headcount/30 hours
Must provide “minimum essential coverage”– Workers at 30+ hours
Employer must provide financial support– employee premium share cannot exceed
9.5% of income– plan’s share of benefit cost at least 60%
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Employer Mandate – Tax Enforcement
Per employee tax if plan is not “affordable” $2,000 per employee tax if no “minimum
essential coverage” $3,000 tax for each employee enrolling in
exchange or receiving premium credit Exclude first 30 employees in calculating tax
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Individual Mandate
Must obtain “minimum essential coverage”– Through employer or exchange
Tax subsidies assist purchase, based on income– Employer “pay or play” tax covers subsidies
– Provider reports– W-2 for employer plan
Expands Medicaid – although states can opt out
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Individual Mandate
Tax penalty to enforce individual mandate – Minimum of $95, phased increases to $695 in 2016 –
based on income, up to 3x
– Percentage of income test, 1% phased increases up to 2.5%
– Assistance and exceptions for lower income families
No Time Limit– EMTALA, Pre-existing ok, Community rating
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Cost Containment
Comparative Effectiveness Research– Patient-Centered Outcome Research Institute (PCORI)
– Non-profit created by government, funded by taxes
– Compares clinical effectiveness of medical treatment options, communications, healthcare disparity
– Designed to “pry savings” from healthcare
Preventive Care – Wellness Managed Care?
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Grandfathered Plan Status
Plans in existence on March 23, 2010 grandfathered from most requirements
Status is lost if materially modified– Changes to cost sharing
– Changes to employer share of premiums
Employers will have continual decisions on maintaining grandfather
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New Employer Obligations to Employees
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Employer Obligations
Standardized summary of plan benefits and coverage– Template available on DOL website – 4 pages
– Can be part of summary plan description (SPD)
– Applies now
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Employer Obligations
Form W-2 report aggregate cost of coverage for self-funded plans– Used to determine tax credits and tax penalties– Dept. of Labor valuation methods
• HHS MV Calculator• Safe-harbor Checklist• Actuarial Checklist
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Employer Obligations
Submit to HHS and state insurance commissioner policies, practices, medical loss ratio, etc.
Additional IRS reporting requirements for covered employers in 2014
60-day prior notice of material modifications to plan
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Employer Obligations
Accommodations for nursing mothers– Employers must provide reasonable, unpaid break
time for one year after birth
– Location shielded from view
– Similar to many existing state laws
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Employee Status
Many requirements do not apply to smaller employers – See over 50, over 30 mandates and penalties
– Full-time equivalent calculations – divide hours worked by 2,080, etc.
Worker classification?– Compare independent contractor vs. employee to
retain small employer status
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Employer Obligations
“Whistleblower” Employee Protections– Cannot retaliate against employee for reporting,
testifying about, or objecting to a reasonably believed violation of PPACA
– Complaints investigated by OSHA
– Similar to Sarbanes-Oxley procedures
– New source of employment litigation?
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Mandates for Employer Plans
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Plan Design and Requirements
Healthcare reform imposes many rules for employer plans including:– Coverage of dependents to age 26
– New hire waiting period 90 days or less
– Universal preexisting condition coverage
Medical Loss Ratio– Spend 85% of premium (80% small plan) or refund
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Plan Design and Requirements
No lifetime limits on “essential health benefits” Cannot rescind health benefits other than for
fraud/intentional misrepresentation Limits on annual cost sharing
– Total $5,950 for individual, $11,500 for family
– Annual deductible $2,000 for single, $4,000 for spouse and family coverage
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Plan Design and Requirements
Automatic health plan enrollment required for employers with 200 or more employees– Auto for new employees, renewal for current
employees
– Employees may opt out
– Logistical issues – effective after DOL regulations
• Payroll programming, notices, etc.
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Wellness Incentives – Cost Savings
Many wellness incentives – similar to current practices
Premium discounts for wellness ok if– Made available to all similarly situated employees– Up to 30% discount on employee-paid cost (50% if
regulation)– Must be reasonably designed to promote health– Individuals may qualify at least annually
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Wellness Incentives
Health plans must cover without cost sharing– Immunizations– Preventive care, screenings for children until
adolescent– Screenings, preventive care for women
(mammogram, cervical cancer, genetic counseling)– Evidence-based items or services (blood pressure,
diabetes, cholesterol test, wellness counseling, etc.) More under development
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Key PPACA Tax Changes
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Tax Credits
Small Employer Tax Credit (temporary)– 25 or fewer full-time equivalents– Plan covers at least 50% of premium cost– Average annual wages less than $50,000
Based on average employer or small group premium 35% premium credit, 50% in 2014
– 25%/35% for tax-exempts– Not available after 2016– Phased out based on employees/wages
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Cadillac Tax
Beginning in 2018 for High Cost Plan– 40% excise tax on “excess benefit”
• Premiums above $27,500 family, $10,200 single
• Includes contributions to FSA, HRA, employer HSA
– Does not apply to dental, vision, long-term care, after-tax indemnity
– Employer calculates and reports tax, must notify HHS and providers
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Revenue Enhancements
Flexible spending accounts limited to $2,500 Over-the-counter ineligible for HRA, FSA and
HSA – 2011 Penalty for ineligible HSA payments increased
from 10% to 20% – 2011
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Medicare Tax Increase - 2013
Additional 0.9% - $200,000/250,000 – 2.35% or 3.8% if self-employed
3.8% on investment income $200,000/250,000– Capital gains/dividends 20% @$400/450,000
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Other Tax Highlights
Medical Device Tax– 2.3% excise tax on gross sales (not profits)– Items under $100 exempt
Tanning Salon Tax – 10% Medical Expense Deduction
– Must exceed 10% of AGI – currently 7.5%
Insurance Executive Deduction Limit– $500,000, no commission or performance exception