Health Care Reform February 14, 2014 Andrew Ky Haynes, Esq. Haynes Benefits PC 816-875-1919...

. . . Health Care Reform February 14, 2014

Andrew Ky Haynes, Esq.Haynes Benefits PC

816-875-1919haynes@haynesbenefits.com

Part 1: Market overview

Insurance market rules: 2014

No pre-ex for anyone No annual limits on EHB (“mini med” plans)Cost sharing limits

OOP not to exceed HSA limits (2014 = $6,350 for employee-only, $12,700 for family)Delayed where medical and Rx provided by different carriers

Wellness incentive limits increase 30% of cost of coverage50% for tobacco programs

Insurance market rules: 2014

Deductible limits ($2,000 single, $4,000 family)Applies only to small group market

Clinical trial coverageMust cover “routine patient costs”No guidance will be issued prior to effective date – use “good faith, reasonable interpretation”

Waiting period limitations (90 days or less)Coverage must begin on 91st day

Insurance market rules: 2014

Auto enrollment for large employers (>200 EEs)Not effective until guidance is issued – not expected by 2014Must provide notice, opportunity to opt out

Annual fee on health insurersApplies to carriersAlso applies to self funded MEWAsNot applicable to self funded GHPs

Insurance market rules: 2014

Fair health insurance premiumSmall groupAge, area, status, tobacco3 age bands: under 21, adults 21-63, and adults 64 and older

TransparencyFinancial statements publishedDelayed

Insurance market rules

Guaranteed availabilityAccept every employer and individual

Guaranteed renewabilityRenew every group

Single risk poolInside and outside exchange

Insurance market rules

ReinsuranceFunded by insurers and plans

Risk corridorsLimits on gains or losses

Risk adjustmentPayments to insurers in high risk markets

Notice 2013-54

Application of Market ReformHRA used to purchase individual coverage not

integratedFSA that is excepted not subject to market reformsStandalone HRA is minimum essential coverage, and

retiree will not be eligible for subsidyEAPs generally are excepted benefitsTwo methods of integration• Minimum value required• Minimum value not required

105(h) nondiscrimination testing

Rules previously applied to self-funded plansMany “discriminatory” plans choose fully insured

statusPPACA requires fully insured plans to satisfy rules

“similar to” §105(h)Effective date:

PPACA: Plan Years beginning after 9-23-10IRS: Not until guidance, likely in 2015

105(h) nondiscrimination testing

Problem industries:RestaurantsRetailHospitalityWorkforce

Will Regs look at choice?Beware interaction with pay or play strategies

Part 2: Exchanges

Employer exchange notice

All EEs must receive the noticeCurrent employees – by 10/1/13New hires after 10/1/13 – within 14 days of start date

Two model notices (ERs with and without group health plans)

DOL: No penalty

Enrollment

Initial: 10-1-13 to 3-31-14

Special

Annual: 11-15 to 12-17

Small employer SHOP exchanges

Small = 100 unless state says 50Employer disclosures to employees

All employers subject to FLSACurrent and new hiresConsequences of exchange vs. employer planFF-SHOP – no employee choice model in 2014

Employer only able to chose a single QHP to offer employees

Individual mandate

Not delayedPenalty tax for not purchasing coveragePenalty tax applies to:

Applicable individuals withoutMinimum essential coverageExceptions

Impact on cafeteria plans

Individual – noSHOP – yes (2014)Amendment allowed for non-calendar year

plans, transition relief from change event rules

Part 3: Pay or play

Delayed until 2015

Announced 7/2/13

Official Guidance – IRS Notice 2013-45 (7/9/13)

IRS encouraged employers expand coverage

Delays required information reporting as wellIRS requests voluntary compliance

Does not affect premium tax creditFor now we have IRS proposed rules and

public hearing testimony

Delayed until 2015

Reporting delayed

Penalties delayed

Mandate not delayed

Employer liability?

Delay good?

Federal and state agencies have more time to implement exchanges.

Agencies have more time to issue further guidance on pay or play penalties.

Employers have more time to develop pay or pay strategies.

Delay good?

Trend of employers dropping hours was becoming quite worrisome for employees and employee groups.

New deadline coordinates with the expanded SHOP options projected for 2015.

Delay bad?

Employers now have another year to procrastinate.

Employers with completed strategy now need to decide whether to implement the strategy, or in some cases even revoke the strategy.

Confusion because the mandate still exists; only reporting and penalties are delayed.

Delay bad?

Employers are left with only proposed regulations, which likely will change between now and 2015.

Reduced enrollment may create more adverse selection in the exchanges, which will raise premiums even further.

Where are we?

Large Employer Status: Are you subject to the penalties?

Who are your full-time employees?What are the applicable penalties?What are your strategies with respect to the

penalties?

Strategies for 2014?

Currently have no coverageOffer coverage, OR not offer coverage and

pay penaltyCoverage, but it is not affordable because

employee premium is greater than 9.5%Coverage, but it fails 60% minimum value testKeep full-time employee level below 50, OR keep

number of full-time employees as limited as possible (Caution!)

Strategies for 2014?

Some employers already in compliance

Others can do a “trial run”

Await guidance on specified employee classifications

Skinny plans – delay allows time for Regs.

Part 4: Sex

Coverage of contraceptives

First dollar basis; list of required coveragesExemption for religious employersHobby Lobby caseOther litigation

DOMA: U.S. vs. Windsor decision

5-4 decisionSupreme Court ruled that DOMA definition of

spouse and marriage are unconstitutional (deprivation of protections of Fifth Amendment)

Full faith and credit clause was not addressed (remains law)

DOMA: IRS Guidance 8-29-13

Recognizes all same sex marriages, even if not recognized in state of residence

Other relationships not recognizedRuling applies for all tax purposes, including

employee benefitsPermits individual and employer refunds on

taxes paid on value of coverageRequires retirement plans to recognize same sex

spouses as of 9-16-13

DOMA: Issues remaining

Must benefits be provided retroactively?Plan design and administration issuesImpact on HSAs, FSAs, HRAs and other account

balance plansImpact on COBRA, FMLA, and HIPAA special

enrollments

DOMA: Domicile vs. state of marriage

Only 12 states issue same-sex marriage licensesCT, DE, DC, IA, ME, MA, MN, NH, NY, RI, VT, WA

7 states and DC provide for spousal rights (short of marriage – ex. domestic partnership/civil union)CA, HI, IL, NJ, NV, OR, WA

Part 5: HIPAA

HIPAA/HITECH Final Rules

Duties extend to business associatesAttorneys are business associatesAbility to audit

New individual rightsSale or marketingBreach notification

HIPAA enforcement

Hired staff and contractorsHeavy penalties

$1.5M – failure to check server$1.7M – stolen USB drive$1.2M – failure to erase copier

Closing

Big year aheadStay on top of developmentsFocus on PPACAAlso on HIPAA