Healthcare Reform Webinar Discussion for BenefitMall Brokers

Thursday, September 13, 2012 10:00 a.m. EST

Listen to the audio portion of the webinar here.

Meet the PanelRob SchlossbergExecutive Director of Sales

Randy MadryBenefitMall Consultant

Garry Carneal, JD, MABenefitMall Consultant

Moderators

Speaker Speaker

Meet The PanelAri Friedman

Executive Director of Sales

Webinar Overview

Attendees will learn about

Part I: PPACA Background

Part II: Key points of Supreme

Court’s ruling on PPACA

Part III: How will brokers and their

clients be impacted and

what can employers do to prepare for the

future?

Part IV: PPACA Reflection Points

Part I:PPACA Background

PPACA Background

• The Patient Protection and Affordable Care Act (PPACA) was signed into law by President Obama on March 23, 2010

• Technical amendments were made through the Health Care and Education Reconciliation Act of 2010, signed March 30, 2010

• Various portions of the law began being implemented in 2010 and will continue until 2018. Many key changes will occur in 2014.

• Federal and state governments are largely implementing these provisions

• Several federal agencies are assuming pivotal roles• U.S. Department of Health and Human Services • U.S. Department of Labor• U.S Department of Treasury

National Health Expenditure Projections by Payer, 2010-2019

PPACA Goals

Covering uninsured and underinsured populations

Improving the transparency and ease of purchasing health insurance

Increasing health plan/insurer accountability

Creating national standards

Standardizing benefit packages

Reducing medical and insurance costs

But how successful will PPACA be in achieving these goals?

Individual Mandate

Picture Credit: Texas Enterprise ; Univ of Texas at Austin

With a few exceptions,

everyone must participate in

the new health care reform

system

Most employers also must

participate, either through

offering coverage or by

paying a penalty

The Individual Mandate is an integral part of

PPACA to ensure full

participation by all U.S. citizens, unless they are

exempted.

In theory, this will help spread

the risk and make sure everyone is

participating in the insurance

system.

Effective January 1, 2014

Exceptions to the Individual Mandate

Applies to everyone except the following:

• Who already have minimum essential coverage through an employer-

sponsored plan

• Who have individual qualified coverage

• Who are enrolled in a Medicaid or Medicare program

• Who are covered by a military plan

• Who are dependents of active military enrolled in a TriCare plan

• Who are permanently incarcerated

Additional Exceptions to the Individual Mandate

Other exceptions include persons:

• Who are members of Indian tribes

• Who express religious objection

• Who are without coverage for less than three months

• Who would be contributing more than eight percent of their household

income as a “required contribution,”

• Whom the Secretary of HHS determines that obtaining coverage would

constitute an extreme hardship

Repeal Efforts Not Successful To Date

Most recent effort occurred in the US House of Representatives

on July 11th

The vote followed party lines with 244

members voting to repeal PPACA

in its entirety

There have been 32 efforts to

repeal or defund various portions of PPACA to date

Some programs associated with PPACA are not funded and will

need an affirmative action by Congress

Part II: Key points of Supreme Court’s ruling on PPACA

U.S. Supreme Court - PPACA Legal Issues

• The Question of Legal Standing and the Applicability of the Anti-

Injunction Act• The Constitutionality of the

Individual Mandate• The Missing Severability Clause

• The Medicaid Expansion Provisions

Four Key Legal Issues

Supreme Court Ruling

The Court found that jurisdiction and timing was proper, and rejected the argument that the Anti-Injunction Act prohibited the case from being heard

The Court found that the Commerce Clause does not grant Congress the authority to regulate inactivity, but that the Individual Mandate is constitutional under Congress’s ability to levy and collect taxes.

Court noted that the missing Severability Clause was not relevant to this case.

The Court upheld most of the Medicaid Expansion Provisions but narrowed the financial obligations of the state

Part III: How will brokers and

their clients be impacted and what can

employers do to prepare for the future?

What should brokers and their clients do to prepare for the future?

With the PPACA moving forward including the individual mandate, brokers should help their clients prepare for future changes to the health care system. To make an informed choices, six key elements will be discussed:

• Exchange concept (both state-based and federally-facilitated)

• Qualified Health Plans and other insurance arrangements

• Essential Health Benefits (EHB)

• Summary of Benefit and Coverage

• Medical Loss Ratio (MLR) impact

• Tax implications and penalties

Exchange Functions

• Purchasing cooperative that promotes transparency

• Qualified health plan certification• Standardizing benefit offerings (including

essential health benefit requirements and gold/silver/bronze levels)

•Consumer website/On-line enrollment portal• Operate or supervise electronic enrollment

process• Vehicle for premium subsidies - Who is

eligible and how much is it worth?

Primary Function

s

Exchange Overview

Exchange Configurations• State standalone Exchange(s) (Individual and/or SHOP)

• State & Federal Partnership Exchange• Default to Federally-run Exchange

State-Based Exchanges

• Individual/Non-Group• Small Business Health Options Program

(SHOP)• As of October 1, 2013, Small group employers with fewer than

101 employees will be able to access health insurance through the SHOP exchange.   

• The SHOP exchange is designed to attempt to arrange employee health insurance for small employers on terms similar to those that large employers enjoy.

• The SHOP exchange will only sell benefit plans that conform to a consistent format

• On January 1, 2014, state health insurance SHOP exchanges may be able to expand eligibility to large employers with more than 100 FTEs.

• Blended model• State Exchanges must be certified and operational by October

1, 2013

State Exchange Updates

• Implementing a State-Based Exchange: 16 States that are

moving forward with Exchanges are California, Colorado, Connecticut,

Hawaii, Indiana, Kentucky, Maryland, Massachusetts, New York,

Nevada, Oregon, Rhode Island, Vermont, Utah, West Virginia,

Washington (and the District of Columbia)

• State-Based Exchange Legislation Pending: 2 States with

pending Exchange legislation include Illinois, and Pennsylvania.

• Not Implementing a State-Based Exchange: 10 States not

moving forward with Exchanges are Alaska, Florida, Louisiana, Maine,

Michigan, New Hampshire, Ohio, South Carolina Texas, Wisconsin

• Leaning Towards/Not Moving Forward: 22 other states are

leaning toward opting out of broad health care reform or waiting for a

federal exchange.

Federally-Facilitated Exchanges

• PPACA establishes a federal exchange system along with the

state exchanges

• Should a state fail to implement a state-based Exchange,

even if by choice, the federal government will implement a

federally-facilitated Exchange

• The State can maintain some control over this type of

Exchange

• Funding for this type of Exchange is still lacking

• How many states are likely default to the federal exchanges?

Exchange Challenges

PPACA timeframe - only about one year

to become operational

Setting up the governance and

operational infrastructure, including

the IT platforms

Promoting efficiency and flexibility while keeping costs for participants down (e.g., for small

businesses and individuals)

Avoiding adverse selection by pooling a mix of the healthy and the unhealthy

Becoming financially self-

sustaining

Complying with PPACA standards for public

accountability, transparency, and

reporting

Qualified Health Plans

• Both Brokers and Employers must understand PPACA authorized health plan offerings

• A “qualified health plan” is a health plan that:

• Is certified by each Exchange through which it is offered

• Provides the essential benefits package

• Is offered by an issuer that is:

• Licensed and in good standing in each state in which it is offered

• Agrees to offer at least one silver plan and one gold plan

• Agrees to charge the same premium whether the plan is sold through the Exchange or outside the Exchange

• Complies with other requirements of the Secretary of HHS and the Exchange

Source: NAIC

Other Health Plans

• Grandfathered Health Plans

• Allows existing benefit designs and participation rules to be maintained for a period of time

• Self-funded Health Plans and Union Plans have some exemptions under PPACA. They are not required to:

• provide coverage with minimum essential benefits• participate in a risk-adjustment system• comply with the MLR requirements and review of premium increases

• Accountable Care Organization (ACO)

• Providing coordinated high quality care to Medicare patients• Agree to take responsibility for the care of patients in exchange for the

opportunity to share in the total savings - $940 million over 4 years

Essential Health Benefits

Beginning in 2014, PPACA requires health insurance plans offered to individuals and small businesses to include health benefit services in each of ten categories, called essential health benefits (EHBs).

• HHS has established a rule that allows state regulators several options to define their state’s EHBs. State regulators may choose any of the following:

• One of the three largest small group plans in the state by enrollment • One of the three largest state employee health plans by enrollment

• One of the three largest federal employee health plan options by enrollment, or • The largest health maintenance organization (HMO) plan offered.

Policy Goal: "It is important to find a successful balance between providing affordable coverage while establishing a reasonable level of benefit protection. If we continue to increase the cost by mandating a comprehensive set of essential benefits, we place further unwanted burdens on the business owner and their employees."

Sec. 1302. Essential Health Benefits Requirements

• (A) Ambulatory patient services.• (B) Emergency services.

• (C) Hospitalization.• (D) Maternity and newborn care.

• (E) Mental health and substance use disorder services, including behavioral health

treatment.• (F) Prescription drugs.

• (G) Rehabilitative and Rehabilitative services and devices.

• (H) Laboratory services.• (I) Preventive and Wellness services and

Chronic Disease Management.• (J) Pediatric services, including oral and vision

care

PPACA Sec. 1302(b)(1) services covered

include:

EHB Issues that Employers and Brokers Should Thinking About

Embracing state flexibility especially for multi-state employers

Customizing EHB standard packages for each state

Keeping EHB levels affordable

Addressing variability in mandated benefits at state level

Understanding additional variations in benefit designs

Defining Medical Necessity when interpreting applicability of EHBs

How will EHBs be addressed in Federally-Facilitated Exchanges

Summary of Benefits and Coverage

Effective September 23, 2012, insurers and group benefit plans

must issue a standardized Summary of Benefits and Coverage

(SBC)

SBC should detail “in plain language, simple and consistent information about health plan

benefits and coverage that…will help consumers better understand the coverage

they have, and, for the first time, allow them to easily compare different coverage options.”

NAIC provided recommendations that were adopted by the federal government

Summary of Benefits and CoverageShould include

coverage examples

that illustrate benefits provided under the

plan or coverage, detail out-of-pocket

costs, provide

examples of

coverage for a

simple delivery

and a Type II diabetic care, and explain

any coverage exclusions

for common benefits

Person requesting

an SBC must be provided with the

document within

seven (7) business

days

Upon renewal, must be provided to both

participants and

beneficiaries as part

of any written

enrollment applicatio

n materials

Experts differ as to

when updated

SBCs need to be

issued – after

September 23 or

after new policy

year (?)

MLR in a Nutshell

• Beginning in 2011, insurers had to spend and track MLR ratios• Large Group (defined as 100 or more Employees)

• 85% clinical services and qualified quality programs• 15% administrative

• Small Group (defined as 2 to 100 Employees) and nongroup • 80% clinical services and qualified quality programs (NY 82%)• 20% administrative (NY 18%)

• Calculations are based by legal entity, state and line of business• MLR reports filed to HHS June 1st each year• Rebate checks for 2011 have been issued in 2012• If a health plan or insurer meets or exceeds the MLR, notices will be issued

with the first plan document after July 1, 2012• If 80/85% percentage not achieved, notices and rebate checks must be

distributed by August 1st the following year• Three month requirement from August 1 to take action on the MLR rebate

options

Employer MLR Distribution Rebate OptionsDOL Technical 2011-04 Release

• Distribute rebates to current (and, if desired, former) participants

• Enhance benefits provided to plan participants by additional benefits or

wellness programs• Pay reasonable plan expenses

•Reduce future premiums for current plan participants

• Note: For the purposes of MLR rebate checks, COBRA plan participants are

considered plan participants.

Based upon already

established ERISA

principles, the DOL guidance

provides employers with four options. An employer

may:

MLR Impact: Kaiser Foundation Study

Refund: MLR rebate checks this year estimated $1.3 billion Non-Group Market: Rebates are expected to go to almost

one-third (31%) of consumers in the individual market. The share of consumers in the individual insurance market

expected to receive rebates ranges from near zero in several states to as high as 86% in Oklahoma and 92% in Texas

Group Market: About one-quarter (28%) of the small group market and 19% of the large group market is projected to receive rebates.

Amount: Checks could range from an average of $72 for those with insurance through a large employer to an average of $127 for those who bought individual policies

Individual Mandate: What are the tax penalties for non-compliance?

The applicable flat dollar amount for 2014 for a tax filer with no dependents will be $95 and the amount for 2015 will increase to $325. This amount will increase over the years, rising to $695 in 2016, and will be further revised in 2017 according to the changes in cost-of-living.  

Each adult will pay the rate of an individual, and then you need to add the dependent at the 50% rate. For example, in 2016 a couple with one child under 18 would be assessed a flat dollar penalty of $1,737.50 (two adults x $695 plus one child at $347.50 -- one half of adult penalty).

A family of four (one couple with two children over 18) would only be required to pay the 300% cap in 2016. Three hundred percent of the $695 flat amount for 2016 is equal to $2,085. This amount is less than the flat amount that could be charged if the cap were not in place (two adults + two children over 18 = $695 x 4 = $2,780).

Small Employer Tax Credits

Under PPACA, small employers offering health insurance

coverage to employees enjoy several benefits, including a new

income tax credit

Eligible small employers are defined as those

employing 25 or fewer full-time equivalent

employees with average annual wages of less than $50,000 and contributing to employees’ qualified health care coverage a uniform percentage, no less than 50%, of the

premium cost

Large Employer Tax Penalties

Under PPACA, a premium subsidy program is NOT established for a

large employer. In fact, a tax penalty may be assessed against a large

employer

Large employers MUST offer medical coverage to its full-

time employees beginning in 2014. If a large employer fails to offer appropriate

coverage, that employer may be

liable for a tax penalty.

How is the Tax Penalty Triggered?

• If the employer does not offer coverage, and at least one of its full-time employees claims the premium

tax assistance tax credit, or• The employer does offer coverage,

but the coverage fails to meet the minimum essential coverage

threshold and one full-time employee is certified to claim the premium tax

credit

The tax penalty can be

triggered in one of

two ways:

Which Employers Will Face these Penalties?

• Employers with at least 50 Employees will face penalties if one or more of their full-time

employees obtains a premium credit through an Exchange.

• How does the law define 50 Employees?

• PPACA refers to “full-time equivalents”

• A subsequent rule expanded on this definition to include both full and part time

workers

• Guidance issued by DOL expanded the definition to include employees of a

“controlled group” of corporations, employees, partnerships, proprietorships, etc.,

that are under common control

How can an Employer determine if it is a “Large Employer”?

• Both full and part time employees are included in the calculation

• Full time employees: work 30 or more hours per week

• Seasonal employees who work for fewer than 120 days per year are not

considered to be full time employees

• Part time employees: include hours worked by taking the total number of hours

worked by individuals who work less than 30 hours per week and dividing the total by

120

• If an employer has more than 50 employees for 120 days or less in the preceding

year, the employer will NOT be considered a large employer

Employee Calculations: an Example

• A firm has 35 full time employees who work at least 30 hours a week.

• In addition, the firm has 10 part time employees who all work 24 hours per

week (for a total of 96 hours per month)

10 employees x 96 hours = 960 total hours

960 hours / 120 = 8

The part time employees would be counted as 8 full time employees

• 35 full time employees + 8 =

• 43 “Employees”

Who can potentially obtain a premium credit?

• Individuals can obtain a premium assistance credit if:

• They are not eligible for Medicare, Medicaid, or other similar programs

• They are not offered employer-sponsored health benefit coverage

• Their income is between 138% and 400% of the federal poverty level

If an individual is offered employer sponsored health benefits, but these

health benefits are unaffordable, that individual can obtain a premium

assistance credit.

• Benefits are unaffordable if:

• The individual’s required contribution toward the plan premium for self-

only coverage exceeds 9.5% of their household income, OR

• The plan pays for less than 60%, on average, of covered health care

expenses.

What are the tax penalties for large employers who do not offer coverage?

The monthly penalty a large employer is obligated to pay for not offering any

coverage is equal to $2,000 divided by 12, multiplied by the difference of the

number of full-time employees employed during the applicable month minus

the first 30 full-time employees. Only full-time employees (not full-time

equivalents) are counted for purposes of determining the penalty.

(Number of Full-Time Employees) – 30 x (2,000/12)

For example, a firm with 51 employees would be subject to:

51-30 x (2,000/12) = total monthly penalty

$3,500 per month

What are the tax penalties for large employers who offer coverage that is not affordable?

A large employer who offers coverage that does not satisfy the minimum

value threshold or minimum affordability threshold is assessed a monthly

penalty of $3,000 divided by 12 times the number of employees that qualify

for the tax credit.

For example, a firm with 51 employees of whom 5 qualify for the tax credit

would be subject to a penalty of:

5 x (3,000/12) = $1,250

Employer W2 Reporting Requirements

• Applicable to all employers that provide group health plans, including federal, state, and local governments,

and religious organizations.

Employers need to report the cost of employer-sponsored health care

coverage on employees’ W-2 forms for all tax years starting on or after January

1, 2011.

• The employer was required to file fewer than 250 W-2 Forms for the preceding calendar

year, or •The employer is a federally recognized Indian

tribal government

An employer need not report

if:

Excise Tax on “Cadillac” Health Plans

In an effort to penalize employers who offer excessively rich health benefit plans, PPACA includes a new excise tax on high-cost health plans, called “Cadillac” health arrangements.

This is a new non-deductible 40% excise tax that some experts have estimated will affect more than half of large employers’ active health plans by 2018.

Medicare Tax Increase

• PPACA includes a provision that will create a new tax for certain Americans.

• Specifically, section 1411 of PPACA imposes an additional tax of 3.8% if certain conditions are met as described below.

• Currently, individuals pay a Medicare tax of 2.9% of their wages. The new tax is in addition to the current Medicare taxes, and expands the definition of income subject to Medicare taxes. The tax also applies to trusts and estates.

• The tax applies to taxable years beginning after December 31, 2012

• The tax will apply to single taxpayers with a modified adjusted gross income of $200,000 or higher and married taxpayers with a modified adjusted gross income of $250,000 or over. The tax also will apply to a married person filing separately whose modified gross adjusted income exceeds $125,000

Part IV: PPACA Reflection Points

PPACA’s Impact: Positive

Opened a national dialogue on insurance

coverage

Federal funding for uninsured and underinsured

Fundamental insurance reform

Leveraging NAIC expertise

Expansion of care management, wellness

programs, medical home, etc.

More patients are insured with first dollar

coverage

Move to electronic medical records

PPACA Impact: Challenges

Adopted by a slim majority in Congress

Not supported by the majority of Americans

Regulatory Concerns• PPACA law is 2,700 pages and regulations are over 9,000 pages.

• More regulations and guidance to come. • Federalism: State losing ground

• Over-reliance on “interim final rules”

PPACA Impact: Challenges

• Additional cost burdens (e.g., expansion of mandated benefits, appeal rights, etc.)

• CBO now estimates that PPACA will cost over $1.76 trillion

• States cannot afford to build, support and maintain many of PPACA’s requirements

• Significant compliance costs for health plans and others

• Budget concerns including Congress’s sequestration rule

Health care spending is over 17% of the U.S. GDP

MLR premium rebates are an administrative burden

Young subsidize the old, and males subsidizes the females

Premium increases

How will PPACA Impact Employers?

As highlighted earlier in the presentation, PPACA will affect employers differently, depending upon their size and whether they currently offer health insurance.

• Small employers (less than 50 workers) will face no new requirements but will have new insurance options made available to them through the new health insurance exchanges.

• Medium-size employers (50 to 100 workers) will have access to these new coverage options as well, but may face some financial penalties

•The vast majority of large employers (more than 100 workers) will be impacted significantly including penalties, automatic enrollment requirements, etc.

Lots of Government Oversight

The Elections & Financial Impact

Disclaimer

  Disclaimer: This webinar is for informational purposes only.

Questions & Answers

For additional health care Reform updates, please monitor:

• www.benefitmall.com• www.health careexchange.com