Decoding the Affordable Care Act An Employer’s Translation By: Al Holifield Holifield & Associates, PLLC 11907 Kingston Pike Suite 201 Knoxville, TN 379234

Decoding the Affordable Care Act An Employers Translation By: Al Holifield Holifield & Associates, PLLC 11907 Kingston Pike Suite 201 Knoxville, TN 379234 [email protected] Phone: (865) 566-0115 Fax: (865) 566-0119

Exchanges Essential Health Benefits (EHB) to include: 1.Ambulatory patient services; 2.Emergency services; 3.Hospitalization; 4.Maternity and newborn care; 5.Mental health and substance use disorder services, including behavioral health treatment; 6.Prescription drugs; 7.Rehabilitative and habilitative services and devices; 8.Laboratory services; 9.Preventive and wellness services and chronic disease management; and 10.Pediatric services, including oral and vision care

Exchanges Prior to 2016, small employers are employers with 100 or less employees but states may limit to 50 employees or less Prior to 2017, only small employers (100 employees or fewer) can participate Starting in 2017 and thereafter, states may allow all employers to participate

Exchanges Initial open enrollment period for the 2014 benefit year: October 1, 2013 through March 31, 2014 For benefit years in 2015 or later, the annual open enrollment period will be from October 15th through December 7th of the prior year Special enrollment provisions will be included

The Metals Exchanges to Offer Four Levels of Coverage: Bronze (60%) Silver (70%) Gold (80%) Platinum (90%) And: a catastrophic plan for individuals under 30 Insurers may offer separate health plan products outside of an Exchange, but they are prohibited from offering rates for those health plan products that are lower than those offered within the Exchange Exchanges

Employers must issue notices to new employees with information about the Exchanges within 14 days of hire What employers are included? Any employer covered by the FLSA Hospitals, schools, and institutions of higher learning Governmental employers at the federal, state, and local level Who receives notice? All full time and part time employees Dependents do not receive a notice Notice to Employees

The existence of the Exchange; Contact information and description of services offered on the Exchange; A statement that the individual may be eligible for a premium tax credit if the employee purchases a qualified plan on the Exchange A statement that if the employee purchases a qualified plan on the Exchange, the employee may lose the employer contribution to any health benefit plan offered by the employer and all or a portion of employer contributions may be excluded from federal income What Must Be Included in the Notice?

Becomes effective on the first day of the plan year on or after January 1, 2015 unless employer meets new IRS transition relief requirements to delay mandate until January 1, 2016 See E-Alert IRS Issues Transitional Relief that Delays Employer Mandate Again. Guidance released August 31, 2012 is effective through 2014 90 days means 90 days within the first day they are eligible If employees can elect within 90 days but fail to elect within 90 days it is not a violation Employer may use a reasonable period to determine eligibility if (a) period is not designed to avoid the 90 day period limitation, (b) individual becomes eligible within 90 days of being assessed eligible or, if earlier, within 13 months of start date (plus the days to the first day of the next calendar month if the employees start date is the middle of the month) Pay-or-Play Mandates: 90-Day Waiting Period Requirement

In 2015, the pay-or-play mandate requires employers of 50 full time employees or more that do not meet the new transition relief requirements delaying the mandate to 2016 to offer quality, affordable health insurance coverage to full time employees and their dependents (no spouses) Full time employees: those employees working on average 30 hours or more per week Failure to offer such coverage may subject the employer to a penalty for a given month if a full time employee receives a federal premium tax credit or cost-sharing reduction and is enrolled in coverage through a health insurance exchange Employer Pay-or-Play Mandate

Nationwide Mutual Insurance Company v. Darden 503 U.S. 318, 112 S.Ct. 1344 (1992) Who is an Employee?

Anyone who is not an Employee. Who is an Independent Contractor?

For these purposes only, full time employees are determined by taking the sum of the employers full time employees (using a 30 hour per week standard) and the number determined by dividing the hours of service of employees who are not full time employees by 120 (full-time equivalents). When is an Employer Subject to Pay-or-Play?

Examples: Employer employs 40 full time employees and 20 part- time employees who each work 60 hours per month. 50 FTE: 40 + (20 60 120) = 50 Employer employs 35 full time employees and 20 part- time employees who each work 96 hours per month 51 FTE: 35 + (20 96 120) = 51 When is an Employer Subject to Pay-or-Play?

Seasonal Employees Special rule for seasonal employees Seasonal workers are those who perform labor or services on a seasonal basis as defined by the DOL and retail workers employed exclusively during holiday seasons When is an Employer Subject to Pay-or-Play?

Employers who opt out of providing benefits Employers who do not provide health coverage to all full time employees (and their dependents (no spouses)) are penalized If at least one full time employee (30+ hrs/wk or 130+ hrs/mo) is eligible for, or receives, a tax credit and enrolls in exchange coverage, the employer is subject to an annual penalty of $2,000 all full time employees (except for the first 30) Penalty is assessed monthly (i.e., $167.67 per full time employee per month) What are the Pay-or-Play Penalties?

Example 1: No full time employee receives a tax credit No penalty assessed Example 2: One or more full time employees receive a tax credit The annual penalty is calculated by taking the number of full time employees minus 30, multiplied by $2,000 If there are 50 full time employees, the penalty would not vary if only one employee or all 50 employees received the credit; the employers annual penalty would be (50-30) $2,000 = $40,000 What are the Pay-or-Play Penalties?

Employers who provide unaffordable coverage Coverage is affordable only if the premium for single coverage under the employers lowest cost plan with at least a 60% actuarial value does not exceed 9.5% of household income (or W-2 wages) Annual penalty is the lesser of $3,000 for each full time employee who receives a tax credit and enrolls in exchange coverage, or $2,000 multiplied by all full time employees (subtracting first 30) Penalty is assessed monthly (i.e., $250 per subsidy- receiving full time employee per month) What are the Pay-or-Play Penalties?

Example 1: No full time employee receives a tax credit No penalty assessed Example 2: One or more full time employees receive a tax credit For an employer with 50 full time employees, annual penalty is the lesser of: The number of full time employees minus 30, multiplied by $2,000, or The number of full time employees who receive tax credits multiplied by $3,000 Assuming 10 full time employees received tax credits, the potential annual penalty on the employer would be $30,000 However, if the employer had 30 full time employees who received tax credits, then the potential annual penalty on the employer would be capped at $40,000 (20 employees $2,000) rather than $90,000 as calculated (30 employees $3,000) What are the Pay-or-Play Penalties?

Notice of Proposed Rulemaking (IRS), 78 Fed. Reg. 217 (01/02/13) Shared Responsibility for Employers Regarding Health Coverage Notice of Proposed Rulemaking (IRS), 78 Fed. Reg. 7314 (02/01/13) - Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage Proposed Rules (HHS/CMS), 78 Fed. Reg. 7348 (02/01/13) Exchange Functions; Eligibility for Exemptions (shared responsibility payment); Miscellaneous Minimum Essential Coverage Provisions Proposed Rules (IRS), 78 Fed. Reg. 16445 (03/15/13) Shared Responsibility for Employers Regarding Health Coverage; Correction Notice 2011-36 Definitions of employee, employer, hours of service Notice 2011-72 - Affordability of coverage Notice 2012-17 Determining full time employee Notice 2012-58 Interim guidance Determining Full Time Employee Status for Purposes of the Pay-or-Play Tax

An employer elects to use a 6-month measurement period and a 6-month stability period for purposes of determining its full time employees The first measurement period runs from January 1, 2014 through June 30, 2014 and the associated stability period runs from July 1, 2014 through December 31, 2014 Example of Full Time Employee Status

A Variable Hour Employee (new employees only) On start date, it cannot be determined whether employee is expected to work on average at least 30 hours per week Initial Measurement Period of between 3 and 12 months Assess average during Initial Measurement Period Assessment is then used for stability period that is the same as for ongoing employees Use of Administrative Period Can use an administrative period but total of initial measurement period and administrative period cannot exceed 13 months (plus the remainder of the month if anniversary falls in middle of month) Variable Hour Employees & Full Time Employee Status

An employer will not be subject to a penalty for the first 3 months following an employees date of hire This coordinates with 90-day limit on waiting period Coordination with 90-Day Waiting Period Limit

DOL, IRS, and HHS audits will increase Already seeing audits of grandfathered status by DOL under the Act DOL efforts focus on increasing employer compliance rather than assessing penalties in early years Worker misclassification The ACA Litigation Minefield

Employee Claims under the Act Workforce Realignment IROs Claims to Mandated Benefits Whistleblower Actions The ACA Litigation Minefield

Final regulations were issued jointly by Department of Treasury, DOL, and HHS on June 3, 2013 Final regulations apply to plan years beginning on or after January 1, 2014 Types of Wellness Programs: Participatory Wellness Programs Health-Contingent Wellness Programs Activity-Only Wellness Programs Outcome-Based Wellness Programs Wellness Programs

A wellness program is a program of health promotion or disease prevention 1996: HIPAA added provisions to the IRC, ERISA, and PHS Act prohibiting group health plans and group health insurers from discriminating against individual participants and beneficiaries in eligibility, benefits, or premiums based on a health fact Exception: Premium discounts or rebates or modification to otherwise applicable cost sharing (including copayments, deductibles, or coinsurance) in return for adherence to certain programs Wellness Programs

2006 Final regulations were issued implementing HIPAA nondiscrimination and wellness provisions 2010 ACA amended the PHS Act (but not ERISA or IRC) Added nondiscrimination and wellness provisions which largely reflected the 2006 regulations and extended HIPAA nondiscrimination protections to the individual market Wellness program exception to prohibition on discrimination applies with respect to group health plans (and any health insurance coverage offered in connection with such plans) but does not apply to coverage in the individual market Wellness Programs

Programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based on an individual satisfying a standard that is related to a health factor No changes under final regulations Still must be made available to all similarly situated individuals regardless of health status Examples: Filling out a health risk assessment or having a diagnostic test performed Attending a monthly, no-cost health education seminar Program that reimburses employees for all or part of the cost of membership in a fitness center Participatory Wellness Programs

A program that requires an individual to satisfy a standard related to a health factor to obtain a reward (or requires an individual to undertake more than a similarly situated individual based on a health factor in order to obtain the same reward) Two types: Activity-only wellness programs Outcomes-based wellness programs Five requirements for health-contingent wellness programs Opportunity to Qualify Size of Reward Reasonable Design Uniform Availability Notice of Alternative Standard Health-Contingent Wellness Program

A type of health-contingent wellness program that requires an individual to perform or complete an activity related to a health factor in order to obtain a reward but does not require the individual to attain or maintain a specific health outcome Examples: Walking Diet Exercise programs Activity-Only Wellness Program

A type of health-contingent wellness program that requires an individual to attain or maintain a specific health outcome in order to obtain a reward Examples Not smoking Attaining certain results on biometric screenings Outcomes-Based Wellness Program

Health-contingent wellness programs must provide individuals who are eligible for the program with an opportunity to qualify for the reward at least once per year Opportunity to Qualify

The total amount of the reward for health-contingent wellness programs with respect to a plan, whether offered alone or coupled with the reward for other health- contingent wellness programs is limited to 30% of the total cost of employee-only coverage under the plan Cost of coverage = employer and employee contributions towards the cost of coverage for the benefit package under which the employee is (or the employee and any dependents are) receiving coverage The 30% limit increases to 50% where the additional 20% is in connection with a program designed to prevent or reduce tobacco use Plans and issuers have flexibility to determine apportionment of the reward among family members, as long as the method is reasonable Size of Reward

Health-contingent wellness programs must be reasonably designed to promote health or prevent disease Health-contingent wellness programs are reasonably designed if it: Has a reasonable chance of improving the health of, or preventing disease in, participating individuals, and Is not overly burdensome, Is not a subterfuge for discrimination based on a health factor, and Is not highly suspect in the method chosen to promote health or prevent disease Reasonable Design

Outcomes-Based Wellness Programs Must provide a reasonable alternative standard to qualify for the reward, for all individuals who do not meet the initial standard that is related to a health factor, in order to be reasonably designed Reasonable Design

The full reward under a health-contingent wellness program must be available to all similarly situated individuals The same full reward must be available to individuals who qualify by satisfying a reasonable alternative standard as is provided to individuals who qualify by satisfying the programs otherwise applicable standard In lieu of providing a reasonable alternative standard, a plan or issuer may always waive the otherwise applicable standard and provide the reward Uniform Availability & Reasonable Alternative Standards

All facts and circumstances are considered in determining whether an alternative standard is reasonable Some factors considered: Completion of educational program plan or issuer must make the educational program available or assist employee in finding such a program and may not require individual to pay for the cost of the program Time commitment required must be reasonable Diet program plan or issuer must pay any membership or participation fee, but not required to pay for cost of food Uniform Availability & Reasonable Alternative Standards

Second Reasonable Alternative Standard If an individuals personal physician states that the reasonable alternative standard is not medically appropriate for that individual, the plan must provide a second reasonable alternative standard that accommodates the recommendations of the individuals personal physician with regard to medical appropriateness Normal cost sharing can be imposed for medical items and services furnished pursuant to the physicians recommendations Uniform Availability & Reasonable Alternative Standards

Activity-only wellness program Must allow a reasonable alternative standard (or a waiver thereof) for obtaining the reward for any individual for whom, for that period, it is either unreasonably difficult due to a medical condition to meet the otherwise applicable standard, or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard. A plan or issuer may seek verification, such as a statement from the individuals personal physician, that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, an otherwise applicable standard if reasonable under the circumstances Uniform Availability & Reasonable Alternative Standards

Outcome-based wellness program Program must allow a reasonable alternative standard (or waiver thereof) for obtaining the reward for any individual who does not meet the initial standard based on a measurement, test, or screening Thus allows plans and issuers to conduct screenings and employ measurement techniques to target wellness programs effectively Plans and issuers cannot require verification by the individuals physician that a health factor makes it unreasonably difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard as a condition of providing a reasonable alternative to the initial standard Uniform Availability & Reasonable Alternative Standards

Plans and issuers must disclose the availability of a reasonable alternative standard to qualify for the reward (and, if applicable, the possibility of waiver of the otherwise applicable standard) in all plan materials describing the terms of a health-contingent wellness program Outcome-based wellness programs must also include this notice in any disclosure that an individual did not satisfy an initial outcome-based test What must be included: Contact information for obtaining the alternative Statement that recommendations of an individuals personal physician will be accommodated Notice of Availability of Reasonable Alternative Standard

Activity-Only Wellness Programs Outcomes-Based Wellness Programs Opportunity to QualifyAt least once per year Size of the RewardLimited to 30% of the cost of coverage Limited to 30% of the cost of coverage, plus an additional 20% for non-tobacco use Reasonable Design Must not be overly burdensome or subterfuge for discrimination based on health status Must not be overly burdensome or a subterfuge for discrimination based on health status. Must offer a reasonable alternative standard to qualify for the reward to every individual who does not meet the initial standard Health Contingent Wellness Program Requirements

Activity-Only Wellness Programs Outcomes-Based Wellness Programs Uniform AvailabilityAn alternative to qualify for the full reward (or waiver of standard) must be offered if activity would be medically inadvisable or unreasonable due to a medical condition. An alternative to qualify for the full reward (or waiver of the standard) must be offered to individuals who do not meet the initial standard. Notice of Alternative Standard Must provide notice of availability of alternative standard in all materials describing the program. Notice must include contact info and statement that recommendations from the individuals physician will be accommodated. Must provide notice of availability of alternative standard in all materials describing the program and in disclosures that individual did not satisfy the initial outcomes- based standard. Notice must include contact info and statement that recommendations from the individuals physician will be accommodated. Health Contingent Wellness Program Requirements

ACA addresses two types of claims procedures Internal claims and appeals External reviews ACA general rule Comply with all the requirements applicable to group health plans under 29 CFR 2560.503-1, except as modified by ACA regulations Meet the additional standards of the PPACA regulations Only non-grandfathered health plans must comply with these new procedures Internal Claims and Appeals and External Review

New procedures create significant compliance obligations Change existing internal claims and appeals Add external reviews Effective dates Plan years beginning on or after September 23, 2010 Certain provisions have later effective dates Internal Claims and Appeals and External Review

Types of plans affected Insured Self-insured Responsible parties Insured plans = insurer Self-insured plans = plan administrator Plan sponsors affected Private sector Public plans must comply with the original DOL Claims Procedures in place for ERISA-covered plans since 2002 Public sector (nonfederal governmental) Multiemployer Internal Claims and Appeals and External Review

ACA changes and additions: 1) Effective for plan years on or after Sept. 23, 2010 Rescission (retroactive termination of coverage) can be appealed Claimant is entitled, free of charge, to additional evidence considered, or any new or additional rationale Claims administrator must avoid conflicts of interest 2) Effective for plan years on or after July 1, 2011 Denial notices must be updated to include additional content Model notices at www.dol.govwww.dol.gov Internal Claims and Appeals

3) Effective for plan years on or after January 1, 2012 Urgent care claims must be decided within 72 hours, and the plan must defer to attending provider regarding whether claim is urgent Denial notices must be provided in culturally and linguistically appropriate manner Denial notices must inform claimants of their right to request the applicable diagnosis and treatment codes, and their corresponding meanings Strict adherence standard applies, but there is a very limited de minimis exception Internal Claims and Appeals

Culturally and linguistically appropriate denials Applicable non-English language For any address in a U.S. county where a notice is sent, a non- English language statement is required if 10% or more of the population residing in the county is literate only in the same non-English language Spanish, Tagalog, Chinese, Navajo DOL guidance at: http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocI d=25131 Include statement of how to access language services Oral language services in any applicable non-English language Provide, upon request, notice in any applicable non-English language Internal Claims and Appeals

Self-Insured Plan Confirm that the plan is complying with the original DOL claims procedures Revise the plan documents and SPDs to include the ACA updates Prepare and update denial notices (initial and final) to account for the ACA updates Determine whether any of the claimants reside in counties that would require culturally and linguistically appropriate notices, and if so, prepare to meet that requirement Determine which functions or obligations will be delegated to a TPA Internal Claims and Appeals Action Items

Insured Plan Confirm that the insurer is complying with the original DOL claims procedures Check insurance contract for ACA updates Review plan document and SPD for ACA updates Internal Claims and Appeals Action Items

Overview Participant may request review by an external independent review organization (IRO) after exhausting internal appeals IROs decision is final and binding on the plan Insured plans may already be subject to a State-required external review Self-insured plans may use the safe harbor (3 IRO process) until the federal government establishes an external review procedure for self-insured plans External Reviews

Available ACA external review processes Two Federal Processes One State Process 1.Private Accredited Independent Review Organization (IRO) Process (3 IRO Process) This is the safe harbor for self-insured plans. 2.HHS-Administered Process 3.State External Review Process State processes only compliant if minimum consumer protection standards included HHS determines compliance External Reviews

Self-insured ERISA covered plans (private sector or multiemployer) Self-insured public sector plans Fully insured plans (private or public sector, or multiemployer) 3 IRO processHHS-approved State process, if applicable HHS-approved State process HHS-approved State process, if State opens its process and plan opts to participate Otherwise, elect a Federal process and notify HHS of election If State does not have one, elect a Federal process and notify HHS of election External Reviews

IRO Contracting Process Contract with at least 3 IROs Rotate assignments among the IROs, or incorporate other independent, unbiased methods for IRO selection, such as random selection IROs must not be eligible for financial incentives based on likelihood to support a benefit denial Safe Harbor Contract with at least two IROs by January 1, 2012, and with at least three IROs by July 1, 2012 External Reviews

Eligible under Federal processes Claims that involve medical judgment as determined by the external reviewer (IRO) Claims that involve a rescission of coverage Federal agencies could expand the scope of claims that are eligible for review beyond those noted above Ineligible under Federal processes Claims based on whether the claimant meets the eligibility requirements under the plans terms, such as worker classification Claims that do not involve medical judgment or rescission External Reviews

State External Review Process States determine what claims are eligible for review under their External Review Processes External Reviews

Standard Review Claimant has 4 months to file Preliminary review and notice by plan Plan assigns to IRO, and submits documents and information to IRO IRO notifies claimant, and may accept additional information from claimant IRO provides additional information to plan for reconsideration (if applicable) IRO reviews claim de novo IRO reviews plan document/SPD to assure the IRO decision is not contrary to plan terms IRO issues written decision within 45 days If IRO reverses the plans denial, coverage must be provided immediately Expedited Review Generally available if standard time frame for completing an expedited internal appeal or a standard external review would seriously jeopardize the life or health of the claimant or the claimants ability to regain maximum function IRO and plan must follow standard process on expedited basis IRO must make its determination as quickly as possible, but within no more than 72 hours External Reviews

About IROs Utilization Review Accreditation Commission (URAC) 51 URAC accredited IROs National Association of Independent Review Organizations (NAIRO) formed by the majority of URAC-accredited IROs External Reviews

Issues to consider when choosing an IRO Years of experience as IRO Number of external reviews conducted Implementation of new ACA standards Credentials of reviewers How fees are charged Compliance with HIPAA and HITECH External Reviews

Implications of external reviews Loss of control over claims decision making process Fiduciary issues Administrative costs and burdens Possible increase in need for stop loss insurance External Reviews

Select external review process the plan will follow If using 3 IRO Process: Determine whether plan will delegate the external review process to a TPA or administer it in-house Prepare and distribute RFIs for IROs Evaluate responses and select IROs as appropriate Review plan documents, SPDs, etc. to ensure that they are written as clearly as possible, especially key plan terms and definitions Incorporate required changes in plan documents, SPDs, notices, announcements, etc. External Reviews Action Items

As of January 1, 2014, individuals may elect coverage under COBRA or from an Exchange Exchange vs COBRA Exchange offers premium subsidies for individuals with household income up to 400% of the federal poverty level Cost of exchange correlates directly to individuals age Cost of employer coverage, and thus COBRA, reflects a broader range of ages Exchange does not cover dental, vision, medical flexible spending accounts, health reimbursement accounts, and employee assistance plans, which are subject to COBRA Impact on COBRA Coverage

Does not affect Medicare payments More employers incentivized to get rid of early retirement plans Some large employers have already begun to remove retirees from company health plans to private exchanges: IBM Caterpillar Time Warner General Electric Wal-Mart Impact on Retiree Health Coverage

Documents

Decoding the Affordable Care Act An Employer’s Translation By: Al Holifield Holifield & Associates, PLLC 11907 Kingston Pike Suite 201 Knoxville, TN 379234