Affordable Care Act:

A Washington Insider’s Perspective

Sean M. McGuire

Principal

Objectives

• What are the key problems of the current system?

– Why some people feel reform is needed.

• How did the legislation evolve over time?

– The legislative version of “March Madness”

• What are the key provisions of the new law?

– How will it impact YOU?

– What is the implementation timeline?

Key Problems of the Current System

• Health care costs are too high.

• Too many people are uninsured or underinsured.

More spending does

NOT Guarantee Quality Care

� Nearly one-third of US health care spending is on administration of our complex system.

� Huge regional variation in spending:� Minneapolis: $3,341 per Medicare enrollee

� Miami: $8,414 per Medicare enrollee

� Average health outcomes do not vary by region.

�Actually a trend for more spending � worse outcome• From: Dartmouth Atlas of Health Care: http://www.dartmouthatlas.org

� U.S. ranks #19 in preventable mortality• From: Nolte E, McKee M.Health Affairs 2008;27:58-71

From: Brownlee S. Overtreated: Why too much medicine is making us sicker and poorer. 2007

The Cost of Insurance is

Skyrocketing

The Legislative Process

The Legislative Process(The Congressional Version of March Madness)

The ACA: The Bigfoot of American LawThe ACA: The Bigfoot of American LawThe ACA: The Bigfoot of American LawThe ACA: The Bigfoot of American Law

What’s Next for the States

•Lack of federal regulation challenges states &

law includes lack of forthcoming regulations

makes it a moving target.

•The federally run exchange may create

problems over government control.

•Exchanges are a clearing house for…

FIVE AGENCIES OF GOVERNMENT.

State Government Responsibilities

• Medicaid Expansion

• Insurance Exchanges

• High Risk Pools

• Insurance Regulation

Can We Afford it?

• The non-partisan Congressional Budget Office

says there will be a modest increase in health

care spending, but that the deficit will be

reduced over ten years.

• There is a lot of uncertainty in such long-range

forecasts and funding comes from reduced

Medicare growth and new taxes.

How Your Taxes Were Spent in 2009

With these added costs…

Expect to be paying your fair share…

• Rising insurance premiums, thus less take

home pay due to rising healthcare costs.

• Increased taxes for individuals and

businesses will face new requirements,

taxes and fees for non-compliance.

• Per person share of national debt is +/-

$52,000 and increasing.

New Taxes in 2013

• New Medicare Taxes

– Increased Medicare payroll tax for individuals

earning more than $200,000 and couples earning

more than $250,000 annually (1.45% => 2.35%).

– New Medicare tax on unearned income for those in

the above income brackets (3.8%).

• Flexible spending accounts will be limited to

$2500 annually.

Implementation Costs

• Unknown

• Added IRS Costs for non-compliance

• Hundreds of new Federal

Government employees to

implement 10,000 pages of

regulations and counting.

Expansion of the

Internal Revenue Service:

What Small Businesses Need to Know

• The cut off for major penalties is 50 FTEs, are

you going to be OK?

• Think long-term, what will your client’s business

look like in 3-5 years? If they plan on

expanding, knowledge of ACA is paramount.

What Small Businesses Need to Know

• Employees need to be aware of the Health

Insurance Exchanges and coverage options and

exchanges begin in October, 2013.

• Regulations contain critical details.

• Expect full-steam ahead with regulations and

compliance with existing laws could be enforced

aggressively across multiple departments.

Essential Benefits

•Section 1302 of the ACA lays out essential health benefits.

• Ambulatory patient services

• › Emergency services

• › Hospitalizations

• › Maternity and newborn care

• › Mental health and substance use disorder services, behavioral health

• › Prescription drugs

• › Rehabilitative and habilitative services and devices

• › Laboratory services

• › Preventive and wellness services and chronic disease management

• › Pediatric services, including oral and vision care

Employer Strategies

•The 49’r - This option is where an employer

purposefully trims their workforce to not be

qualified as a large employer . (50 is the magic

number, remember).

•The Roaring 20’s - Under this option, an employer

reduces employee hours to fewer than 30 (usually

28). Popular among restaurants, service industries,

and other employers with a lower wage and

younger workforce

Employer Strategies

•Empty Nester –Employer who does not have

group coverage and sends their employees out of

the nest and to the Marketplace to obtain coverage

•Cherry Picker - This is an employer that may have

an opportunity to establish a self-funded plan

•Old Faithful – Maintain coverage no matter what!

Employer Strategies

•Main Street – The employer establishes a Private

Marketplace where employees can choose from a

variety of health insurance options and services.

Look Back Period

• Use 130 hours of employment per month as the

basis for full-time employment status.

•

• “Look back” from 3 to 12 months to determine

full-time status. Thus, for PPACA purposes, an

employer may determine that an employee

needs to work at least 130 hours each and every

month for up to 12 months to qualify as full-

time.

Look Back Period

•These proposed new methods of determining full-

time status could allow employers to define many

seasonal/high turnover employees as not full-time,

eliminating the related employer penalties.

•The Look-back period is currently in effect right

now. If you plan to drop coverage you should

explore this issue in depth and all should figure out

the best measurement for them.

Controlled Group

• Two or more corporations connected through

common control or stock ownership in any of the

following ways.

• A "parent-subsidiary" controlled group exists

wherever a parent organization owns 80% or

more of the equity in a subsidiary organization.

Controlled Group

• (For corporations, the 80% + test is based on

attaining that level of voting power or total value

based on all classes of stock; for partnerships,

the 80% + test is based on attaining that level of

profits, interest etc,).

• Same concept applies for brother-sister

controlled group. The key numbers are 80

percent of one or more than 50 percent of two.

2014 for the Individual

– Health insurance mandatory for everyone…• Except… Native Americans, religious

objectors, those with financial hardship• Those under 30 have option for

catastrophic-only coverage.• Expansion of Medicaid to 133% of poverty

level.• Need-based government subsidies to buy

insurance.• Penalties up to $2,085 per family phased in

through 2016

Recommended Strategies

• Determine if you will be impacted by

compliance and penalties immediately.

• Align yourself with visionary individuals who

think outside the box. (Two ideas: Defined

Benefit vs. Defined Contribution & Telehealth).

• Inform employees of their total compensation

and compare to other organizations.

Other Strategies

• Take the time to understand what your

employees want and educate them about their

health and the Affordable Care Act.

• Benefits are moving from a two prong approach

to a three prong. Consequently can you react in

time to new compliance beginning in 2013?

Access Concerns

• Wait time: less face time with your doctor due to additional administrative burdens.

• Quality: universal coverage does not guarantee quality care and workforce shortages will persist if not addressed.

• Choice of provider: may be limited by provider choice due to lower reimbursement rates.

National Obstacles

• Chronic disease management and changing health behavior.

• Medications result in new diagnoses.

– Example: a side effect of schizophrenia medications is diabetes and weight gain.

Recommendation: creative solutions for this problem and others at the State level are desirable and possible in 2017, maybe sooner.

Unknown Unknowns

• Authority given to executive branch to define

ambiguity and implement fines.

• The devil is in the details and hidden fines and

penalties will be detrimental to some companies.

Recommendation: make unknown unknowns

known by seeking professional advice and be

proactive not reactive with regulators.

How E.D. Bellis Helps Businesses

Preparing business owners and executives

with synthesized information on healthcare

reform and providing ongoing regulatory

management during the entire Affordable

Care Act implementation.

2018

– Tax on “Cadillac” employer-sponsored insurance

Plans.

• Affects plans costing more than $10,200 for individuals

and $27,500 for families.

– Increases threshold for deducting unreimbursed

medical expenses to 10% of adjusted gross income.

How to Contact Me

Sean M. McGuire

Principal

E.D. Bellis

Email: Sean.McGuire@HealthReformExplained.com

Blog: HealthReformExplained.com

Twitter @SeanMMcGuire, & @AmericasCanary

Useful Web Sites

• Up to date information on health reform in language you can understand.– http://HealthReformExplained.com

• Kaiser Family Foundation Summary:– http://www.kff.org/healthreform/upload/housesenatebill_final.pdf

• Washington Post Calculator:– http://www.washingtonpost.com/wp-srv/special/politics/what-health-bill-means-for-you

• Fact Checking Web sites:– http://www.politifact.com/

– http://www.factcheck.org/

Questions

On the Books: Year One, 2010

– Temporary insurance program for the uninsured.

– Insurers cannot deny coverage for children with pre-existing conditions.

– Dependents up to age 26 can keep parents’ insurance.

– Insurers cannot set lifetime coverage limits and cannot cancel insurance.

– Medicare prescription “Doughnut Hole” starts closing

• $250 rebate: about 48,000 Nebraskans may qualify.

– Tax credits for small businesses wanting to buy insurance.

– 10% Tax on indoor tanning salon services began.

On the Books: Year Two, 2011

– Medicare prescription drug “Doughnut Hole” closes

further:

• Cost of drugs in the “hole” reduced by 50%

Government payments to Medicare Advantage

insurance plans will be reduced.

• Affects about 13% of Nebraska Medicare beneficiaries.

On the Books: Year 3, 2012

– Insurance companies spending more than 15 or 20

percent on administrative costs will have to provide

refunds to consumers.

• Experts predict these costs to be passed along to the

consumer in the form of higher premiums, and firms are

seeing former employees, demand rebate check.

– Employers must provide a summary of Benefit

Coverage to employees regardless of size.

• Insurance companies do not have final regulations.