New Jersey State Policemen’s Benevolent Association March 6, 2013
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New Jersey State Policemen’s Benevolent Association March 6, 2013 Health Reform: What Does it All Mean and What Changes Are Ahead? Jessica Waltman, National Association of Health Underwriters
New Jersey State Policemen’s Benevolent Association March 6, 2013
Health Reform: What Does it All Mean and What Changes Are Ahead? Jessica Waltman, National Association of Health Underwriters. New Jersey State Policemen’s Benevolent Association March 6, 2013. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals - PowerPoint PPT Presentation
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The 2010 Election CycleMarch 6, 2013
What Does it All Mean and What Changes Are Ahead?
Jessica Waltman,
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Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Recap on Health Reform
President Obama signed Patient Protection and Affordable Care Act
(PPACA) on March 23, 2010
Makes significant statutory changes affecting the regulation of and
payment for many types of private health insurance – many insurance
market reforms
Will require almost all private sector employers to evaluate the
health benefits they currently offer and consider whether they are
compliant
For those without access to employer coverage, new individual
mandate to purchase and maintain minimum coverage
Focuses on insurance market reforms and subsidies – does not really
address the true cost of health care
Bulk of the reforms take effect in 2014, but there are still many
aspects of the law employers need to be cognizant of between now
and then
Supreme Court Outcome
The Supreme Court upheld the constitutionality of PPACA and the
individual mandate
Although the mandate was deemed not constitutional under the
Commerce Clause, it was deemed to be an appropriate use of the
Congressional power of taxation
Bottom line: Congress can’t force Americans to obtain broccoli, but
they can tax or penalize Americans who don’t
The court also ruled 7-2 to allow PPACA’s expansion of the Medicaid
program, but it struck down the portion of the law that would have
penalized states that chose not to expand their Medicaid programs
by taking their existing federal Medicaid funds away. This part of
the ruling gives states significant leverage, as it will create a
coverage hole in states that choose not to expand their programs
for financial reasons.
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Individual mandate
Exchange notification requirements for all employers
Employer responsibility/ minimum value requirements for 50+
groups
Automatic expansion of state small group markets to 100
employees
Sept. 23rd reforms- all plans Dependent coverage to 26 No pre-ex
for children Restrictions on rescissions and annual/lifetime
limits
Employee FSA contributions capped at $2,500
Health insurance exchanges, private coverage subsidies and Medicaid
expansion in willing states
States can let large group join exchanges, triggering market
reforms for all fully-insured large groups
Sept. 23rd reforms for non-grandfathered plans Preventive care 105h
nondiscrimination rules (enforcement delayed) New coverage appeals
process
Comparative effectiveness research funding tax impacts all
plans
Insurance market reforms and new coverage standards for
individual/small group market plans
The “Cadillac” 40% excise tax goes into effect for all high-value
group plans, including self-insured plans
Medical loss ratio requirements
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Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New
Years for the world’s worst group of procrastinators.
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Compromise is extraordinarily difficult--moderates are unable to
move
House actions are tempered by conservative pressure and tight
Democratic majority in the Senate and President Obama
Policy Innovative State
Preparing for the Big Year Ahead!
2014 is going to bring great changes to the world of employee
benefits
The kinds of coverage available will change, as will the
requirements and options for employers and employees
?
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New
Years for the world’s worst group of procrastinators.
11
Grandfathered Plans
To keep a grandfathered plan, insurers and employers have to meet
strict standards.
Plan design essentially needs to stay static. Exceptions for
collective bargaining agreements and improved benefits.
Cost-sharing and employer contributions changes are capped.
Grandfathered plans are only exempt from certain
requirements.
It’s very hard to maintain a grandfathered plan for any length of
time.
In 2012, 48 percent of those who get coverage through their jobs
were enrolled in a grandfathered health plan, down from 56 percent
in 2011. Employers can offer grandfathered and non-grandfathered
plans.
If you are in a grandfathered plan your employer is required to
provide a notice.
Grandfathered plans may not have all of the same benefits but
non-grandfathered may have higher cost
“If you like your health care plan, you can keep your health care
plan.”
President Obama, August 2009
Non-Grandfathered Plans
Preventive Care
Rescission Restrictions
105h Nondiscrimination (enforcement delayed)
Small Business Tax Credits
Federal Premium Rate Oversight
HSA distribution tax increase
Medical Loss Ratio requirements/rebates
Summary of Benefits and Coverage
W2 Reporting begins (requirement is optional for employers who
issue less than 250 W2s until further notice)
What’s Already Done
Federal High Risk Pool
Federal Retirement Reinsurance Program
Small Business Wellness Grants
Co-OP (no additional money—Co-OPs already with grants continue to
exist)
Annual limit waivers
State MLR waivers
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Incarcerated
Medicaid, Medicare, CHIP
Pay more than 8% of take-home pay for employer coverage
Someone who fall sinto a Medicaid expansion coverage hole
So low-income you don’t pay federal income taxes
Grandfathered plan
2014—Greater of 1% family income or $95 adult/$285 family
maximum
2015—Greater of 2% family income or $325 adult/$975 family
maximum
2016—Greater of 2.4% family income or $695 adult/$2085 family
maximum
Some other hardship exemption
As envisioned, “streamlined, easy to use, consumer friendly,
neutral online marketplace for health insurance”
One-stop shopping for Medicaid, CHIP, subsidized coverage and other
individual coverage
Subsidized coverage will only available for individuals purchasing
through an exchange, not those in an employer group
People with adequate and affordable group coverage cannot leave
group plan for subsidized individual exchange coverage
Obama Administration is attempting to rebrand Exchanges as
“Marketplaces”
Three Governance Options:
State-Owned and Operated
State-Federal Partnership Model
Federal Fallback Exchange
First Open Enrollment 10/1/2013-3/31/2014
NJ Will Expand Medicaid
NJ already has one of the most generous Medicaid programs in the
country .
Approximately 7% state residents have Medicaid coverage now.
Expansion expected to extend coverage to 300,000 NJ
uninsured.
Most of the beneficiaries will be low income adults.
Pre-health reform NJ adults without children were not eligible
unless they applied for welfare and earned no more than $140 a
month.
Individual Coverage Subsidies
Premium tax credit (subsidies) only are available to qualified
individuals purchasing individual coverage through health insurance
exchanges after January 1, 2014.
Individuals with family incomes between 100-400% of the federal
poverty level are eligible for a premium tax credit. Individuals
with family incomes at or below 250% of the FPL also qualify for
reduced cost-sharing.
Individuals and their dependents who have been offered coverage
through an employer that meets an affordability and minimum value
test are not eligible to purchase coverage through an exchange and
get a subsidy.
The premium subsidy will come in the form of a refundable and
advanceable tax credit paid directly to the individual’s
insurer.
The amount of the refundable premium tax credit received is based
on the premium for the second lowest cost qualified health plan in
the exchange (the silver plan) and in the rating area where the
individual is eligible to purchase coverage.
If you get a subsidy inappropriately, there will be tax
consequences.
The Congressional Budget Office’s Take on the Subsidies
This nonpartisan analysis makes it very clear that many people will
not be eligible for the subsidies, and that individual coverage
will overall be much more expensive than group moving forward. This
may be an incentive for employers considering dropping coverage.
Since management carve outs are essentially prohibited by the law,
if an employer drops coverage, everyone needs to go the
exchange.
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The CBO says “[new health care law market reforms will] have a much
greater effect on premiums in the nongroup [individual] market than
in the small group market, and they would have no measurable effect
on premiums in the large group market.”
The Congressional Budget Office estimates that individual market
premiums are going to be between 27-30% higher in 2014.
On average, Exchange subsidies will only cover approximately 2/3 of
premiums
Fifty-six percent of Individual Exchange Consumers Will Get A
Subsidy
Percentage of Individual Exchange Consumers Who Will Get A Subsidy
Subsidized Consumers Unsubsidized Consumers 0.56999999999999995
0.43000000000000038
Premium Tax Credit’s Varying Impact Source: Kaiser Family
Foundation’s Subsidy Calculator
Individual
Percentage of income that may be spent on health insurance
Estimated value of the employee’s annual tax credit in 2014
30 year old with qualified employer coverage
Married, two children
9.5% of household income
No one in the family qualified to buy subsidized exchange
coverage
30 year old with no employer coverage
Single
$35,000
9.5% of household income
$155 (based on Kaiser Family Foundation’s projection of a $3440
annual single premium in 2014) Individual’s annual premium costs
would be $3325
30 year old with no employer coverage
Married, two children
3.97% of household income
$8,720 (based on Kaiser Family Foundation’s projection of a $10,108
annual family premium in 2014) Family’s annual premium costs would
be $1,388
45 Year old with qualified employer coverage
Married, three children
9.5% of household income
$0 --No one in the family qualified to buy subsidized exchange
coverage
45 year old with no employer coverage
Single
$55,000
N/A
$0 – Individual may buy coverage in the exchange but would not
qualify for subsidy Individual’s annual premium payments would be
$5,609 based on Kaiser Family Foundation’s projection of 2014
single premium
45 year old with no employer coverage
Married, two children
7.52% of household income
$10, 100 (based on Kaiser Family Foundation’s projection of a $14,
250 annual family premium in 2014) Family’s annual premium costs
would be $4,135
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Price and Design of Small Group and Individual Market Plans
Pricing Changes
Community rating that limits rate variability to age, family
status, smoker status and geographic area with an overall variation
of 3 to 1 meaning that the highest rate offered for a product may
be no more than three times the lowest rate.
Plan Design Changes
Essential health benefit requirements
New Jersey already has similar rules in place, so this change will
not impact prices as much as in other states
Qualified individual and small group plans will have to meet:
Actuarial value requirements
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Basic Coverage Rules for Large Employers
Large employers may be subject to an excise tax if at least one
full-time employee whose household income is between 100-400% of
FPL level receives a premium tax credit for Exchange coverage and
the employer either:
Offers coverage to full-time employees that does not meet the law’s
affordability or minimum value standards
Fails to offer coverage to full-time employees and their
dependents
Summary of Potential Employer Penalties under PPACA, Congressional
Research Service, May 14, 2010
Large Employer Coverage Tests
Minimum Value
Employee’s share of the premium cannot exceed 9.5% of household
income.
Affordability test is based on the cheapest minimum value plan the
employer offers.
Test is also based on the employee-only rate, regardless of whether
or not the employee selects family or dependent coverage
Lowest tier plan must be at least a 60% actuarial value
Actuarial value is based on cost-sharing and out-of pocket
expenses, not premiums
Employer contributions to account-based plans will factor into
actuarial value
Administration has a calculator and there are other safe harbors
employer can use
Administration estimates that more than 90% of large employer plans
meet this standard now.
Who has to be offered coverage?
Full Time Employees (30 hours or more a week)
Dependents who are defined as employee’s children under age 26 (IRC
§152(f)(1))
Employers will not face tax penalties for electing not to offer
coverage to spouses.
If a spouse has no other source of affordable employer-sponsored
coverage, he/she could get an exchange subsidy.
Other Key Points About Coverage Offers
A large employer will be considered as offering coverage to
full-time employees if they offer coverage to 95% of their
full-time employees and dependents(or, if greater, to 5 employees).
Note: if any of the 5% of full-time employees who are not offered
coverage receive premium tax credits from an Exchange, the employer
will be required to pay an annual penalty of $3,000 for each of
those employees.
Many Employers May Try To Be 49ers and 29ers
Employers are only subject to the employer mandate requirements if
they have 50 or more Full-Time Equivalent employees.
Employers only have to offer coverage to employees who work an
average of 30 hours or more per week
Determining Full-Time Employee Status
Generally, an employee who was employed on average at least 30
hours of service per week or 130 hours of service per month is
considered full-time.
When calculating hours of service, the following rules apply:
The common law definition of employee is used.
All hours of service an employee performs for members of the
controlled group are counted.
Each hour for which an employee is paid, or entitled to payment,
for performance of duties for the employer is counted including
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence
For union/multi-employer plans, an employer won’t be penalized
if:
The employer is required to make a contribution to a multiemployer
plan with respect to a full-time employee pursuant to a collective
bargaining agreement or appropriate related participation
agreement
Coverage under the multiemployer plan is offered to the full-time
employee (and the employee’s dependents)
The coverage offered to the full-time employee meets the law’s
affordability and minimum value standards
SHOP Exchanges
SHOP Exchanges will be a new purchasing environment for small
employers
Only place an employer can receive the small business tax credit
post-2014
States can allow large groups entry in 2017 if they choose
All small groups, including those who purchase SHOP coverage for
employees will be subject to new market rules and plan design
changes in 2014
Is SHOP Coverage Subsidized?
Subsidized coverage will only be available for individuals
purchasing individual coverage through an exchange
Low-income individuals who are part of an employer group that buys
coverage through a SHOP exchange are not eligible for a personal
premium tax credit
Only subsidies that will be distributed through the SHOP exchanges
are the small business tax credits
People with “adequate” and “affordable” group coverage cannot leave
group plan and buy subsidized coverage through the individual
exchange, even if they are low-income
Other Employer Requirements
Waiting periods
W2 Reporting
Employers will have to report the complete value of you health
benefit plan on your W2 statement for tax years 2012 on
forward
Requirement currently optional for employers that issue less than
250 W2s
Requirement is currently for “informational” purposes, not the
taxation of benefits
Auto Enrollment
Employers with more than 200 employees will have to begin
auto-enrolling new employees in benefit plans
Still need regulations on how opting out will work, coverage
waivers, waiting periods, etc.
Effective date is unclear—not until 2015 at least
Coverage Verification
Employers will have to report income and plan data to IRS and HHS
for the employer mandate and individual mandate and subsidy
verification
Limited to 90 days
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New
Years for the world’s worst group of procrastinators.
34
Originally projected to cost the federal government approximately
$1 trillion over 10 years.
Now projected to cost $1.3 trillion over 10 years.
Vast majority of the cost of the law to the federal government is
paying for the Medicaid expansion and the coverage subsidies for
Americans without affordable employer coverage who earn between
100-400% of the federal poverty level.
While the law does provide for some savings through increased
efficiencies, it also contains a significant amount of revenue
enhancements too.
New Direct Tax Changes for Individuals and Employers
New Medicare taxes on unearned income and higher income employees
and self-employed
Individual mandate tax penalty
FSA cap of $2500
HSA Penalty Distribution Increase
Individual medical cost deduction threshold increased from 7.5% AGI
to 10% AGI
Employer mandate tax penalty
Only on fully-insured plans.
The fee would equal $8 billion for 2014, $11.3 billion for 2015 and
2016, $13.9 billion for 2017, and $14.3 billion for 2018. For years
after 2018, the fee is adjusted for inflation.
Average cost per family in 2014 will be $500
National Comparative Effectiveness Tax (PCORI)
$2 per covered individual
New National Reinsurance Fee
Phases out in three years but may be reauthorized
New Taxes That Will Increase Costs of Goods/Services
Pharmaceutical Industry
New taxes $4.8 billion over 10 years will be passed on to
consumers
Medical Device Tax
2.3% of the price for which the medical device is sold. The tax
will not apply to eyeglasses, contact lenses, hearing aids, and any
other device deemed by the Secretary to be of the type available
for regular retail purposes
Tanning Tax
10% excise tax paid by the provider but leveied on the
consumer
Cadillac Tax
40% Excise Tax on high-cast health plans that begins in 2018
High-cost health plan is defined as costing more than $10,200 for
an individual or $27,500 for a family, including worker and
employer contributions to flexible spending or health savings
accounts.
Vision and dental values are not included.
The tax would be paid by the insurer, but would be passed on
directly to the employer.
The threshold may be adjusted based on the age and gender of
workers covered by the plan. Plans covering workers in high risk
professions and retirees will also have their thresholds increased
by: $1,650 for single plans and $3,450 for family plans
For the first three years of the tax, the cost threshold in the 17
states with the highest health care costs would be higher than in
the rest of the country
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New
Years for the world’s worst group of procrastinators.
40
National Association of Health Underwriters