Healthcare Reform Essentials Steve Love, Senior Benefit Consultant, REBC, RHU, GBDS.

Healthcare Reform Essentials

Steve Love, Senior Benefit Consultant, REBC, RHU, GBDS

What we will cover in this session:

Healthcare Reform Overview

Current Events Update

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• How many people think that Healthcare Reform is no longer in force?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• How many people think that Healthcare Reform is no longer in force?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 UpdateEarly 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 Services9/23/2010: 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


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.



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 obstetrician-gynecologists.

• 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



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 self-funded medical plans [IRS § 105(h)].



FSA, HRA, HSA• 1/1/2011: Amend Plan documents.

– Health FSA, Health Reimbursement Arrangement, Health Savings Accounts no longer reimburse for non-prescription over-the-counter 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


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



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


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



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



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+


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



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



Simple Exchange Grid

OR

OR

No Coverage

• $2,000 Per Employee less 30 Employees

Unaffordable Coverage

• Employee Opts Out• Lesser of $3,000 Per Opt Out or $750 X FT

Employees

Employer Offers

Exchange Premium Tax Credit Applies To Unaffordable Coverage Only

Affordable or Unaffordable Coverage

• Employer Pays to Exchange the contribution equal to most expensive plan offered

Free Choice Voucher Applies To Both Unaffordable and Affordable Coverage• Employee Qualifies to Opt Out

Affordable Coverage• No Penalty

Employer Offers

Employer Offers

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+


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



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



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



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



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

• 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….

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 Recommended ApproachApproach

Build Action PlanBuild Action Plan

Perform a Workforce EvaluationPerform a Workforce Evaluation

Forecast Effect of Mandated Plan ChangesForecast Effect of Mandated Plan Changes

Physician - Preventive services

The tool will also calculate The tool will also calculate “actuarial value”, or the portion “actuarial value”, or the portion of cost reimbursed by the planof cost reimbursed by the plan

Model Potential Impact of MandatesModel Potential Impact of Mandates

Employee Communication: Start ConversationsEmployee Communication: Start Conversations

User-friendly communications User-friendly communications helping employees understand helping employees understand the impact of reform on them the impact of reform on them

personallypersonally

Surveys to help better define Surveys to help better define your employees’ needs and your employees’ needs and

priorities priorities

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, GBDSSenior Benefit Consultant

[email protected]

www.GBShealthcarereform.com

Healthcare Reform Essentials Steve Love, Senior Benefit Consultant, REBC, RHU, GBDS.

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Transcript of Healthcare Reform Essentials Steve Love, Senior Benefit Consultant, REBC, RHU, GBDS.