How Does Obamacare Impact Your Business Planning?

How Does Obamacare Impact Your Business Planning?

July 17, 2012

Today’s Speakers

Impact of Reform on Employers, Employees, Insurers and Government

Kimberly Hollis, REBC Employee Benefit Consultant, Tilson

Break

How Reform Impacts Employer Provided Healthcare

Brent TilsonPresident, Tilson

Agenda

Our goal today is to review the requirements and provide you tools for planning your future budgets and business strategies.

Due to the size and scope of this new law we have not addressed all areas and complexities.

Disclaimer: This should be used for informational purposes only. Please seek professional guidance from your attorneys and CPAs.

Today

Part 1 Compliance

• Historical Update

• Upcoming Requirements

• Exchanges

• Employee Counts

Part 1

• CLASS Act will not be implemented • Cuts to Medicare Payments to Physicians

delayed• Increase in 1099 requirements repealed• Free Choice Vouchers repealed• Enforcement of non-discrimination rules

delayed• Auto enrollment for companies with more

than 200 employees delayed until after 2014 pending release of regulations

Changes since March 23, 2010

• Guaranteed coverage for uninsured with pre-existing conditions (after 6 months)

• Prohibition against lifetime limits and rescissions

• Patient Protections (appeals, emergency services)

• Guaranteed issue under age 19

• Dependent coverage to age 26

• Preventive care coverage required

• MLR (80% for individual and small group/85% for large group)

• Salary caps for carrier executives

Implemented since March 23, 2010

• Upheld constitutionality of PPACA and Individual Mandate

• Mandate not constitutional under commerce clause, but deemed a tax

• Taxes that encourage citizens or behaviors is deemed allowable

• Medicaid expansion…

Supreme Court Ruling

If you don’t offer coverage, you still have to meet most of the requirements outlined here.

Determining whether you will continue to offer group coverage will be addressed later.

Employer Requirements

2012 September (New Hires after 9/23) Summary of coverage required to all applicants and enrollees (not more than 4 pages front and back in 12 point font – template has been provided by HHS)

Submit annually to DHHS and to plan enrollees during the annual open enrollment period a report on whether the benefits under the plan or coverage include the specified components

W2 reporting of aggregate cost of employer sponsored health coverage for taxable years after 12/31/2012 for employers who issue more than 250 W2s.

If you offer coverage…

2013

Waiting periods not to exceed 90 days for employer sponsored health coverage

If you offer coverage…

2014

Whether you offer coverage or not…

January: Collect Employee Medicare payroll tax increase of 0.9% for earnings over $200,000 for individuals and $250,000 for joint filers

March: Provide notice to employees informing them of the existence of an Exchange, the availability of premium assistance if the actuarial value of the employer’s plan is below 60% in the upcoming plan year (2014)

(Date TBD) State required to offer premium assistance to Medicaid beneficiaries for employer sponsored coverage

Penalties for employers with 50+ full-time equivalent employees who have one or more employees receiving the tax credit

2013

2014

Coverage documentation (by employee) reported to both individuals and to the IRS, including the following:

– Whether the employer offers minimum essential coverage to full-time employees;

– Any waiting period for health coverage;– The monthly premium for the lowest cost option in each

enrollment category under the plan;– The employer’s share of the total allowed cost of

benefits provided under the plan;– The number of full-time employees during each month;– The name, address and taxpayer ID (SSN) of each full-

time employee, and the months each employee was covered under the employer’s plan, and;

– Other information to be determine by HHS Secretary in regulations.

2014

Whether you offer coverage or not…

Flexible Spending Account deferrals will be limited to $2,500 beginning in 2013.

Additional preventive care benefits, including birth control covered at 100% with no cost share.

Benefit Changes

2013

States must submit to HHS by November 16, 2012 if they wish to operate a state-based exchanges or a Partnership exchange. Currently Indiana is “studying options” according to kff.org.

Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income; waives the increase for individuals age 65 and older for tax years 2013 through 2016.

Imposes an excise tax of 2.3% on the sale of any taxable medical device.

Changes still to be implemented

2012

2013

Create state-based Exchanges and SHOPs through which individuals and small businesses can purchase qualified coverage

Creates a temporary reinsurance program to collect payments from health insurers in the individual and group markets to provide payments to plans in the individual market that cover high-risk individuals

Limit deductibles for health plans in small group market to:

– $2,000 for individuals– $4,000 for families

(unless contributions are offered that offset the deductible amounts above these limits)

Changes still to be implemented

2014

Applies to all individual health insurance policies, all fully insured group policies 100 lives and under, and all plans offered through Exchanges

Premium variations only allowed for:– Age 3:1– Tobacco Use 1.5:1– Family Composition– Geographic Region (defined by state)

Experience rating will be prohibited

Wellness discounts are allowed under specific circumstances

Modified Community Rating Requirements

2014

Applies to insurers in all markets

85% for large group plans

80% for individual and small group plans (100 and below)

Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements

In Indiana, small groups for Anthem will receive rebates this year. No markets for United Healthcare will receive rebates. Average rebate from Anthem: $86/participating employee. Will be sent to employer to either return to employees or offset future premium costs.

Minimum Loss Ratio Requirements

2011

August 2012

Note: Individuals are required to increase their tax withholdings to pay for increased Medicare Tax

Individuals with earnings over $200,000 (or $250,000 for joint filers) will pay an additional $0.9% Medicare Hospital Insurance Tax (HI)

Same individuals will pay an additional 3.8% HI tax on unearned income

Itemized deduction for unreimbursed medical expenses increased from 7.5% of AGI to 10% of AGI for regular tax purpose; increase waived for individuals age 65 and older for t.ax year 2013 through 2016.

Employee Requirements

2013

TBD: Medicaid eligibility increased to 133% of FPL Premium assistance for employer-sponsored coverage

for Medicaid beneficiaries All American citizens and legal residents required to

purchase qualified health insurance coverage Exceptions:

– religious objectors– individuals not lawfully present – incarcerated individuals– taxpayers with income under 100 percent of poverty, and

those who have a hardship waiver– members of Indian tribes– those who were not covered for a period of less than three

months during the year

– People with no income tax liability

Employee Requirements

2014

Each state will be

allowed to determine

next steps on eligibility for

Medicaid

Indiana: TBD

Under the Affordable Care Act Beginning 2014

Requirements to Buy Coverage





Key Facts:

•Premiums for health insurance bought through Exchanges would vary by age. The Congressional Budget Office estimates that the national average annual premium in an Exchange in 2016 would be $4,500-$5,000 for an individual and $12,000-$12,500 for a family for Bronze coverage (the lowest of the four tiers of coverage that will be available.•In 2010 employees paid $899 on average towards the cost of individual coverage in an employer plan and $3,997 for a family of four.•A Kaiser Family Foundation subsidy calculator illustrating premiums and tax credits for people in different circumstances is available at:

http://healthreform.kff.org/subsidycalculator.aspx

http://healthreform.kff.org/subsidycalculator.aspx

Benefit Tiers

Bronze plan

represents minimum creditable coverage

Exchange

Out-of-pocket

limits (For Silver Plan

Only)

Scale for incomes up to 400% of

FPL:

Exchange

Exchanges must offer:– At least 2 multi-state plans– At least one plan must be offered by a non-profit

entity– At least one plan must not provide coverage for

abortions beyond those permitted by federal law

Allow states to merge the individual and small group markets

Exchange

2014

Employer Flowchart

Employer Flowchart (continued)

FTE =

Full-time Equivalent

Per the PPACA

Some provisions are based on employer size.

The number of “full-time” employees you have is based upon the following Full-Time Equivalent (FTE) formula:

Employees working at least 30 or more hours per week (averaged monthly) = 1 FTE

Full-time Seasonal employees working less than 120 days during the year are excluded.

Part-time employees: Total hours for 4 weeks/120 = # FTE

How do you count employees?

Part 2 How the Reform Impacts Employer Provided Healthcare

• Step 1 – Prepare employee census and cost analysis

• Step 2 – Identify future coverage options• Step 3 – Calculate and project estimated

cost from each option• Step 4 – Analyze the cost of offering

healthcare or not• Step 5 – Conduct analysis of workforce • Step 6 – Compare cost analysis against

workforce dynamics• Step 7 – Make decision

7 Step Process

• Prepare a spreadsheet with the following details:– Employee– Status (full time, part time, seasonal)– Age– Compensation– Health Coverage – Cost support

Step 1 – Current Cost Support

Step 2 – Identify Coverage Options

Commercial Carriers Exchanges Self-Funded

Assoc Health Plans PEO

Private Exchange

Today <50 EEs N/A >100 EEs Small GroupsSmall

GroupsN/A

FutureSmall Groups

<100 EEsSmall Groups

<50 <100Large Groups

>25Small Groups

Small Groups

New

Pricing ControlsCommunity Pricing 3:1

Community Pricing 3:1

No – actual claims

Expected to be Community

Pricing 3:1

Depends on plan

type

??Community Pricing 3:1

Pre-Tax YesGroup: Yes

Individual: NoYes Yes Yes Yes

Advantages

Older/High Risk Groups –

Pricing Should Decrease

Older/High Risk Groups –

Pricing Should Decrease

Only pay Actual Claims – Appeal to

young/healthy groups

Negotiate Lower rates as maybe

able to decrease

MLR

Negotiate lower MLR

Self-funded?

Negotiate Lower rates as MLR may

be lower

DisadvantagesYoung/HealthyPrices Increase

Young/HealthyPrices Increase

Higher $ RiskAdverse Selection

Large group W-2 reporting

Unknown

Government Subsidy for 133%-400%

NoGroup: No

Individual : YesNo No No No

Minimum Essential Benefits

Yes Yes Not required Yes/No Yes/No Yes

Price controls today for small group that allow for 5:1 but now it will move to 3:1 plus removing health conditions will amplify changes

Price Controls – Community Rating

• Initially this will require both math and creativity

• As 2014 nears your numbers will become more accurate

• Today you will need to use some of the variables to guess impact your future rates– average age, health conditions, impact of

price controls

Step 3 – Calculate and Project Costs

• Using the employee census • Calculate for both offering coverage

and not offering coverage• Offering coverage:

– Estimate costs for each current employee based upon coverage options (commercial carrier, self-funded)

– Calculate your total cost support– Economic value of pre-tax deductions

Step 4 - Analyze Cost to Offer or Not

• Not offering coverage:– Calculate compensation increase to

adjust for economic equality– Calculate ER penalties if applicable– Based upon compensation calculate

government subsidies per employee (this is problematic to know family income)

– Economic disadvantage of post-tax

• Determine total with our without

Step 4 - Continued

• Size of your company• Growth plans• Average wage• Sophistication• Culture• Competition for employees• Retention• Competition

Step 5 – Workforce Analysis

• Will you need to increase pay to retain employees?

• Will competition for employees force you to keep employees?

• Are your insurance costs so high and workforce demographics encourage dropping coverage?

• Can you find a more competitive and affordable solution?

Step 6 – Weigh Costs vs. Workforce

• This should provide you with the major components to make an informed decision….

• The challenge is now employees will be also viewing their employment opportunities differently….

Step 7 – Make the Decision

• Age• Wage• Family health• Geographic location (states)• Employer provided health or

compensation subsidized

Lets Discuss the Employee’s Perspective

• Regulatory and reporting challenges

• Coverage options

• Alignment of workforce and economics

• Decisions, decisions, decisions

In Summary

2014

Contributions will increase based upon the excess of the premium growth over the rate of income

growth for 2014-2018. Beginning in 2019 further adjustment to

reflect excess of premium growth

over CPI if aggregate

premiums & cost sharing subsidies exceed .54% of

GDP

Available on a sliding scale to eligible individuals and families with incomes between 133-400% FPL to purchase insurance through the Exchanges. Credit will be tied to the second lowest cost silver plan in the area and will be set on a sliding scale such that the premium contributions are limited to the following percentages of income for specified income levels:

Premium Assistance Credit

Income Premium Contribution

Up to 133% FPL 2% of Income

133-150% FPL 3-4% of Income

150-200% FPL 4-6.3% of Income

200-250% FPL 6.3-8.05%of Income

250-300% FPL 8.05-9.5% of Income

300-400% FPL 9.5% of Income

THANK YOU