Gbrshrm ppaca presentation 7.20.13

PPACA(The Patient Protection and Affordable Care Act)

Presented by Jim Casadaban, MBA

HUB International Gulf SouthJuly 18, 2013

Greater Baton Rouge SHRM

Overview & Historical Look Back PPACA

(The Patient Protection and Affordable Care Act)

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Status of Federal Health Care Reform

Supreme Court Upheld the Law Except as to Medicaid expansion More court challenges but won’t delay

Political Landscape No changes to political makeup in

Washington Possibility of major change to the law is

slim Congress could work to de-fund some

provisions

Timing and Rollout Now Proceed Federal agencies now working to release

updated regulations (10,000+ pages)3

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PPACA Provisions Effective in 2011

Coverage of children to age 26 (regardless of marital or full-time student status)

No pre-existing condition exclusions for children under age 19

Removal of lifetime benefit limits

Annual limits phase out begins – complete in 2014

No rescission of coverage (retroactive termination of benefits)

No FSA reimbursement for over-the-counter medications

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PPACA Provisions Effective in 2011 – Cont.

Minimum Loss Ratio (MLR) requirements for insurance carriers’ on fully-insured medical plans- 80% for small market (<100 employees)

- 85% for large market segment

Small employer tax credit

Health carrier administrative changes (many plans already allowed)- Primary care provider designation, if required,

allowed for any contracted provider

- Access to any OB/GYN provider

- Access to pediatric specialists as child’s primary care provider

PPACA Provisions Effective in 2013

60 day prior notification of plan modifications

Summary of Benefits and Coverage distribution (SBCs)- Must be distributed to all eligible employees

- Carrier responsibility to prepare form for insured plans

Implement $2,500 limit on employee contributions to health flexible spending accounts (FSAs) for plan years beginning in 2013

Form W-2 reporting requirement- Starting with W-2 reports issued in January 2013

- Delay for employers that have not issued 250 W-2s (look back)

Requirement for employers to notify employees of the availability of health insurance Exchanges- Deadline was March 1st – delayed to October 1st deadline

(Wait – we expect modifications!)

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“Expected” 2014 PPACA Compliance

Taxes and fees – see handout

No waiting period over 90 days for group health plan coverage

No pre-existing condition exclusions

Preventive/wellness benefits

Variable hour/seasonal employee designations

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“Expected” 2014 PPACA Compliance – Cont.

HIPAA non-discrimination rules relaxed to promote more generous wellness plan safe harbor design

Plan design requirements (maximum OOP amounts, max deductible, clinical trial coverage, essential health benefits for small employers, minimum value)

Additional exchange notification

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PPACA Taxes and Fees

Comparative Effectiveness Research fees- $1 per covered life/year for first year, then

increases to $2/year

Reinsurance fees 2014 - 2016- $63 per covered life/year regardless of plan funding

Carrier Tax on fully insured plans- 3% beginning September 30, 2014

Cadillac Tax - 40% excise tax on amount over $10,200 for

individual and $27,500 for family

- Begins 2018

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The Employer & Individual Mandates

PPACA (The Patient Protection and Affordable Care Act)

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Mandates

Individual Mandate - effective January 1, 2014- All individuals must be covered by a group

plan or individual policy

- Failure to comply results in penalty when filing Federal taxes

Employer Mandate - effective 1st renewal on/following January 1, 2015 (Just delayed)

- Applies to all firms or control groups that regularly employ more than 50 FTE’s of labor

- Must offer coverage to all full-time employees (30 hours per week)

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Individual Mandate

Requires individuals hold health coverage or pay a penalty (limited exceptions)

- Fines (assessed as “taxes”) for failure to purchase at greater of:

$95 or 1.0% of adjusted income in 2014 $325 or 2.0% of adjusted income in 2015 $695 or 2.5% of adjusted income in 2016

Annual election for exchange

Individual subject to penalty unless he shows evidence of coverage for at least nine (9) months of the year

- Generous grace periods for Exchange premium payment

Employee can still waive employer coverage - No tax credits for employee or family:

If affordable coverage offered by employer or, If the person actually elects coverage

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Employer Mandate – Delayed to 2015

To comply, an employer must offer (key word is “offer” – employees can still waive coverage):- A minimum level of health plan

coverage to full-time employees and their dependents (children to age 26, not spouses) that is also

- Affordable for the employee – 9.5% (but not the family members)

No coverage offered results in $2,000 annual penalty per employee, minus 30

Failure to comply and employee purchases coverage through the Exchange with a Federal premium subsidy results in $3,000 penalty (per applicable employee)

Plans tested on “base” option only

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Play or Pay?

Penalties may seem lower than cost of coverage…

Lost tax advantage

Reporting burden’s remain

Recruitment and retention challenges

Counting employees can be complex

Cost of coverage can be adjusted

Other financial implications

Carriers will address plan designs

The Exchange – aka “Marketplace”


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Positioning for Reform: Exchanges (Marketplace)

Employers may face penalties because of what the government learns from Exchange-collected data

Individuals report on their annual income tax returns

Annual Employer Reporting Requirement (Jan. 2016 for 2015 data)- Report on health coverage of each eligible employee and family

members, broken out on a monthly basis – Reporting to IRS: Name/address/SSN All covered individuals (employees and dependents) Detail of coverage (month-by-month) Describe individual coverage and premiums

- Reporting rules still unclear

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Positioning for Reform: Exchanges (Marketplace)

Exchanges used for enforcement against individuals & employers:- Exchange will know individual’s

household income (IRS data check), whether employed (using IRS information), and whether employer coverage is affordable

- Law directs state exchanges to report to federal government

Enforcement will be after the fact

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States’ Positions on Exchanges

As of June 14, 2013…

Source: Center on Budget and Policy Priorities

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States’ Positions on Medicaid Expansion

As of June 24, 2013…

Source: Center on Budget and Policy Priorities

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The Healthcare Income Continuum

Coverage Gap

PPACA when fully enforced provides coverage and assistance for most Americans from 0 to 400% of Federal Poverty level Income

If Medicaid expansion is refused, Louisiana will have no insurance help for citizens between 11% and 138% of FPL

0-11% Existing Medicaid

11% to 138% New Medicaid Expansion

139% to 400% Exchange Subsidy Eligible

401% of FPL and above, you are on your own!

Federal Poverty Level Income0% 11% 138% 400%

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Sample Exchange Purchases

(Benchmark)

“Metal” Level Bronze Silver Gold Platinum

Typical Sample Annual Premium $10,908 $12,120 $13,332 $15,350

Family Income $35,000/year (149% of FPL)

Premium Tax Subsidy $10,734 $10,734 $10,734 $10,734

Family pays: $174 $1,386 $2,598 $4,616

Payment % of Income 0.4% 4.0% 7.4% 13.2%

Family Income $88,000/year (375% of FPL)

Premium Tax Subsidy $3,760 $3,760 $3,760 $3,760

Family pays: $7,148 $8,360 $9,572 $11,590

Payment % of Income 8.1% 9.5% 10.9% 13.2%

Expect Exchange coverage to be priced like group coverage (no plans/rates released yet). Family members offered coverage CANNOT use tax credits to access Exchange coverage – Even if affordable to employee only

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Example for a Family of 4 (ages 40, 36, 6, 4):

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Ineligible for Subsidies

Incarcerated

Income above 400% of FPL

Offered coverage at work that meets employer mandate criteria

Medicaid or CHIP eligible (income <138% FPL)

Claimed as a dependant on someone’s taxes

In the country unlawfully (but you do get 90 days of Medicaid coverage while your citizenship is being verified)

Unable to attest to residency in a single state

Once a subsidy is accepted, individual MUST file tax return for that year

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IRS Measurement Guidance


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Who is an Employee?

Down the rabbit hole…- Title I of the PPACA leads to

- Section 1551 of the PPACA which leads to

- Section 2791 of the Public Health Service Act which leads to

- Section 3(6) and 3(5) of the Employee Retirement Income Security Act (ERISA) which says an employee is

- “any individual employed by an employer”

The Supreme Court’s definition of a common law employee applies

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Full time employee: Expected to work on average at least 30 hours per week

Variable hour employee: If, based on the facts and circumstances at the start date, the employee is not reasonably expected to work on average at least 30 hours per week

Seasonal: Make a reasonable, good faith interpretation of facts- Can the job only be performed at certain times of the year?

- Educational employees are not “seasonal,” but sports coaches might be

- Summer camp counselors instructors are seasonal

- Golf course workers may or may not be (location?)

- Short term workers (duties tied to projects of short term duration) are not seasonal

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Tracking hours allows an employer to deny coverage to any employee who was not full-time when hours were being tracked

When hours are being tracked, employee may access federal tax credits

Transitional Initial Annual

Track hours to know who should be offered coverage in 2015

Track hours worked for new hires who will be variable hour or seasonal

Track hours each year for current employees who will be variable hour or seasonal

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High turnover employeesAn employer cannot simply assume the worker will not be there very long (for example, a substitute teacher, or a project worker, perhaps)

Rehires: After 26 weeks post-termination, a worker can be treated as a new hire- An employer can treat an employee with a short absence of at least 4

weeks as new hire if rehired, provided the employee’s period of non-employment is longer than the period of just-prior employment

- If a variable hour employee returns, credit with prior service if required under above rule

- If a full-time employee returns, then offer coverage as soon as possible, ideally on date of return to work

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Rules for Counting Hours

For variable hour & seasonal employees, count:- Actual hours of service

- Hours of paid time off such as vacation, sick leave, holiday pay, jury duty pay, military leave

- Credit for hours of federally-mandated leave (FMLA, etc.) using average hours method

- On-call or travel time that is paid under Federal law

What to Prepare for Now?


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Have a Strategic Plan

2013 2014 2015 2016

Understand your plan and demographics Know effective date (non-calendar year renewals) Know who your FT employees are Budgeting: Who will you offer coverage to? Begin measuring variable hour workers Wellness: Outcomes based penalties cap up to 30%

(50% for smokers) Exchange notices (October 2013) Preventive care rule and benefit mandates Health FSA limit: $2,500 Pre-existing conditions exclusions removed in 2014 Address possible stop loss issues vis-à-vis clinical trial

coverage

We are

here

Employer Mandate: Affordable minimum coverage to all FT EEs (more than 130 hours/mo)

- Minimum coverage to EE + Child(ren) with affordability

- Mandate does not require coverage to spouses or PT workers

Exchanges – Public and private coming online

- Consider spousal coverage, tax credits and exchange options

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Top Employer Strategies to Avoid Financial Impact of Reform

Increase dependent

coverage costs paid by EE

Review retiree coverage options

Increase deductibles or copayments to keepcosts below “Cadillac

tax” threshold

Increase employee

contributions

Offer basic plan along with “buy up”

option for executives and management

Cut other benefit offerings and steer

dollars to medical plan

Manage staff: a) Reduce # of FT EEsb) Reduce # of EEs below 50

(beware controlled groups)c) Use more variable hour EEs and

delay offering benefits

Manage plan design:a) Consider self-fundingb) Set EE premiums for plan

based on estimated W-2 for affordability

c) Offer Flex Credit approach

Leverage wellness

Thank you!Jim Casadaban, MBA

HUB International Gulf South

504.620.4473 | [email protected]

For more information, visit our website:www.hubhealthreform.com

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Gbrshrm ppaca presentation 7.20.13