association of washington cities 1 the current conversation on health care reform presented to:...

Association of Washington Cities 1

The Current Conversation The Current Conversation on Health Care Reformon Health Care Reform

Presented to: PSFOA MeetingJuly 11, 2012

By: Carol WilmesAWC Trust Program Manager


Today’s Conversation

Big picture developments W-2 reporting Claims & appeals Summary of benefits & coverage

(SBC) Planning for 2013 & 2014 Distant future - 2018 Excise tax on

high cost coverage


Big Picture

Year 3 of Health Care Reform• Original effective date: March 23, 2010

Supreme Court ruling on constitutionality of individual mandate

Potential for legislative action• 2012 election implications• Congressional reaction

Key elements of health reform for employers

2011 2012 20132010 2014

• Change in tax treatment for over-age dependent coverage

• Accounting impact of change in Medicare retiree drug subsidy tax treatment

• Early retiree medical reinsurance

• Medicare prescription drug “donut hole” beneficiary rebate

• Auto-enrollment of full-time employees (effective TBD)

• Break time/private room for nursing moms

• Employers must distribute uniform benefit summaries to participants

• Employers must provide 60-day advance notice of material modifications (TBD)

• Form W-2 reporting for 2011 health coverage

• $2,500 health FSA contribution cap (indexed)

• Medical device manufacturers’ fees start

• Higher Medicare payroll tax on wages exceeding $200,000/ individual; $250,000/couples

• New Medicare tax on net investment income for taxpayers with incomes exceeding $200,000/ individual; $250,000/couples

• Research fees begin

• Change in Medicare retiree drug subsidy tax treatment takes effect

• Health insurance exchanges

• Individual coverage mandate

• Financial assistance for exchange coverage of low-income individuals

• Medicaid expansion

• New health plan regulations

• HIPAA wellness limit increases

• Shared responsibility penalties

• Free-choice vouchersFree-choice vouchers

• Additional reporting and disclosure

• Dependent coverage to age 26 for any covered employee’s child**

• No annual dollar limits**

• No pre-existing condition limits**

• No waiting period over 90 days**

• Additional new standards for new or “non-grandfathered” health plans, including limited cost-sharing

• Health insurance industry fees begin

• Excise tax on “high cost” or Cadillac plans

* Applies to all plans, including “grandfathered” plans, effective for plan years beginning on or after Sept. 23, 2010 (Jan. 1, 2011, for calendar year plans). Collectively bargained plans may have a delayed effective date.

** Applies to all plans, including grandfathered plans, effective for plan years beginning on or after Jan. 1, 2014.

2018

• Dependent coverage to 26 (no other employer coverage available)*

• No lifetime dollar limits*• Restricted annual dollar limits*• No pre-existing condition

limitations for children up to age 19*

• No rescissions*• Additional standards for new or

“non-grandfathered” health plans, including non-discrimination provisions for insured plans and mandatory preventive care with no cost-sharing

• No health FSA/HRA/HSA reimbursement for non-prescribed drugs

• Increased penalties for non-qualified HSA distributions

• Voluntary long-term care Voluntary long-term care “CLASS” program slated to start“CLASS” program slated to start

• Pharmaceutical manufacturers’ fees start

• Medicare, Medicare Advantage benefit and payment reform

• Insurers subject to medical loss ratio rules*

Key Elements of Health Care Reform


Market changes and health reform are

converging

Consumers

Greater accountability for health status

More choices and financial consequences

Direct to consumer retail marketing

Providers

Consolidation, integration, and risk sharing

Community based care management

Insurers

Drive for retail market share

New products and services

Changing risk sharing and insurance models

Employers

Considering new strategies

Understand new public and private benefit markets

More employee responsibility and incentives

Government

Over 35 million more people get tax credits or Medicaid

Create exchanges and individual insurance markets

Political and implementation uncertainty


Is it Constitutional? Yes!

Constitutionality of individual mandate• Argued in March to U.S. Supreme Court• Historical discussion = compared to

Brown v. Board of Education of 1954• Decision issued June 28, 2012 – Yes!

What does the Campaign Trail & Elections have in store for us?


Supreme Court Bracketology – Individual Mandate

Anti-injunction act:individual mandate

No ruling until at2015, when tax is first assessed and paid; OR federal government authorized due to

compelling need

Supreme Court rules on constitutionality of individual mandate

Commerce clause: is individual mandate unconstitutional

Is the individual mandate severable from the rest of the law?

Health care reform implemented without individual mandate

Tax Tax or Penalty?

Health care reform moves forward

Health Care Reform

No

No

Yes

Yes/Partially

Issues

•Will exchanges be available?

•Will Congress enact legislation to incent healthy individuals to buy coverage?

•Court could determine which components stay and which go


Supreme Court Bracketology – Medicaid

ExpansionMedicaid expansion

“coercive”?

Medicaid status quo Proceed as enacted

States receive federal funds for expanding Medicaid coverage

Yes No

Will individuals be eligible for premium tax credit or cost-sharing subsidy to

purchase coverage in the Exchange?


W-2 Reporting

Cost of health coverage must be reported in Box 12, Code DD on the W-2

Effective for 2012 W-2 end-of-year forms (issued in early 2013)

Applies to employers filing more than 250 W-2s

Employers with less than 250 W-2s have an indefinite reprieve


W-2 Reporting (cont.)

What to report?• Aggregate cost of all plans in which the

employee participates Pre-tax & after-tax COBRA Premium (active coverage premium) Must reflect mid-year cost changes

• Both employee & employer contributions• Dependent coverage• Vision/dental if bundled• Employer contributions to FSA


W-2 Reporting (cont.)

What NOT to report:• Employee contributions to FSA• HSA or HRA contributions• Specific disease policies (i.e., cancer)• Unbundled vision/dental policies

Separate election for coverage Separate premium for coverage

• Retiree or COBRA participants• EAPs, wellness programs and on-site

medical clinics


Claims & Appeals

Rules apply to non-grandfathered plans, including non-ERISA group health plans (local government)

Specified response time & method:• Urgent care claims – 72 hours• Diagnosis & treatment codes do not

have to be in claim notices


Claims & Appeals (cont.)

• Denial notices must be provided in non-English languages in counties where 10% of the county is literate in the same non-English language (4 languages specified):

Spanish Mandarin

Self-funded plans:• Only for medical judgment or rescission• Contract with 2 (instead of 3) external

reviewers until 7-1-12


Summary of Benefits and Coverage (“SBC”)

Group Health Plan Facts

Deductibles

$500/Individual • $1,000/Family

Out-of-Pocket Maximums

$2,000/Individual • $4,000/Family

PPO Network? Yes

Services Not Covered

Cosmetic, Bariatric Surgery

Dental, Infertility

Co-Payments, In-Network $35

Co-Insurance, In-Network 20%

Co-Insurance, Out-of-Network 40%

Preventive Care Costs $0

Your Coverage Costs*

Having a baby $1,500

Managing diabetes $3,500

*Numbers based on average costs. Your costs may be different and are likely to exceed these numbers.


SBC (cont.)

Final regulations issued in Feb. 2012 (FAQs issued in March)

SBC required as of 1st open enrollment after 9-22-12

Highlights:• Responsible entities to report• Timing• Method• Content & Appearance


Planning for 2013

Health FSA limited to $2,500 (indexed) for calendar year plans

Employer notice to employees about State Health Care Exchanges• March 2013 (assuming no regulatory

delays)


Planning for 2013 (cont.)

Non-grandfathered plans must cover expanded preventive care for women at 100%• Contraceptive coverage, STD screening

and counseling, breastfeeding supplies• Watch Rx coverage: NO COPAYS


Planning for 2014

Grandfathers will now be non-grandfathers• No pre-ex exclusions for anyone• No annual limits for Essential Health

Benefits• Maximum 90-day waiting periods• Dependent children to age 26

Cost-sharing limits to level of HSA-eligible HDHP• Not exceed $2,000/ee & $4,000/family ded.


Planning for 2014: Individual Mandate

Individuals must pay tax if they, their spouses, or their tax dependents do not have “minimum essential coverage”

Minimum essential coverage includes:• Any employer-sponsored plan• Any government-sponsored plan• Plans in the individual market• State Health Care Exchanges


Planning for 2014: Individual Mandate (cont.)

Exemptions for:• Religious conscience• Health care sharing ministry participants• Taxpayers with income below filing

threshold• Individuals who cannot afford coverage

(when required contribution is more than 8% of income)

• Members of Indian tribes


Planning for 2014: Employer Pay or Play

Apply to employers with >50 full-time employees

Full-time employee (awaiting regulations)• Current definition 30+ hours/week• Hint in recent FAQs in another section

(90-day look with 90-day grace) Penalties kick in when an employee

receives a premium tax credit


Planning for 2014: Employer Pay or Play

(cont.) Employers who do not offer coverage

and have an employee who receives a premium tax credit:• Must pay $2,000 per FTE (after subtracting

the 1st 30 FTEs) Employers who offer coverage and

have an employee who receives a premium tax credit:• Must pay $2,000 per FTE OR $3,000 per

FTE receiving tax credit, whichever is less


Planning for 2014: Premium Tax Credit

Employee not eligible for premium tax if employee has access to minimum essential coverage

Employer-provided coverage is minimum essential if:• Coverage provides 60% of total allowed

costs• Affordable coverage: employee only

coverage of lowest plan option does not exceed 9.5% of household income


Shared Responsibility 2014 Affordability mandate –

income segments

Income Segments Under Health Reform

<133% FPL

133-400% FPL

>400% FPL

0%

100%

200%

300%

400%

500%

600%

Household Incomeas % of FPL

% F

PL

Shared responsibility penalties may apply

Single individual Family of Four

% of FPL Annual Household Income

Household income in excess of 400% of

Federal Poverty Level

Not eligible for subsidy through Exchange

400% $48,784* $99,296*

300% $36,588* $74,472*

200% $24,392* $49,648*

150% $18,294* $37,326*

133% $16,220* $33,016*

* Note: Number based on Mercer forecasts for 2014 based on current contributions; illustrative only


2014: Projected contributions at Medicaid thresholds

Provisions – Shared Responsibility

If employee premiums for at least one plan are less than or equal to approximately $133 (“Employer Contribution Affordability Threshold” at the 138% or Medicaid level), then the shared responsibility penalties would not apply

Employers may pursue a strategy of keeping “employee-only” contribution rates low, while increasing other coverage tiers (employee + one and employee + family)


Planning for 2014: State Exchanges

Exchanges initially only open to individuals and small employers

States may choose to expand to larger employers later

Will vary by state – Core plan of “metal tiers” – bronze, silver, gold, platinum

State Exchanges must be approved by Jan. 1 2013 for Jan. 1 2014 operation (first open enrollment is Oct. 1 2013)


Washington Healthcare Reform: Overview

Narrowed focus down to 3 goals:• Increase access to affordable health

plans• Organize a transparent & accountable

insurance market – to facilitate consumer choice

• Provide an efficient, accurate & customer-friendly eligibility determination process


Health Insurance Exchange• E2SHB 2319 passed both houses on

March 8 & delivered to Governor• Establishes Exchange Board as final

rule maker of Exchange structure• Submit recommendations to

Legislature by 12-1-12• If no 2013 Legislative agreement, then

Board proceeds with implementation

Washington Healthcare Reform: Exchange


Washington Healthcare Reform: Exchange

Health Insurance Exchange (contd.)• “Market” rules outside of the Exchange

• Concerning language that all health plans offered outside Exchange must conform to “precious metals” structure

• Concerning language regarding association plans

• Centralized administration as your risk and/or income level changes

• Extremely aggressive timeline for 3-1-12 education deadline


Washington Healthcare Reform:

AWC Trust Response Long Range Strategic Planning Retreat 2011

• Trust has continued role• Educate membership – Be a leader• Bend the trend

Monitor Exchange plan design & cost for comparable offerings

Retain legislative advocate to address pooling laws and rolling cities into PEBB

Federal voice – staying connected with NLC• i.e., definition of full-time employee (30-hr

work wk) Watchful waitingWatchful waiting


Health care reform issues -Finally in 2018 – Excise tax on

high cost plansIssue Patient Protection and Affordable Care Act, as amended

40% excise tax on “high cost” employer coverage

■ 40% excise tax on “high cost” coverage, including medical, employee and employer health FSA contributions, onsite medical clinics, and employer (but not employee) contributions to HSAs (but not insured stand-alone dental and vision coverage)

■ Employers to determine aggregate cost, report to insurers and TPAs who must pay the tax

Thresholds for excise tax(Indexed to CPI + 1% in 2019, CPI thereafter)

Self-only Any other tier

General $ 10,200 $ 27, 500

High-risk professions

$ 11,850

$ 30,950

Retiree aged 55 through 64

Multiemployer plan

$ 27,500 $ 27,500


Added Slide from Live Presentation - Understanding the Cost Impact Sample

Output

Excise Tax Provision Results vary significantly based on assumed trend applied to employer costs (below assumes 9%/year) Average employer of 100 with varied enrollment Preferred Plan with $500 deductible

PPO High

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Employee Only PEPY Employee + Family PEPY Single Threshold Family Threshold

Employer Excise Tax (in $ ,000s)

Year 2018 2019 2020 2021 2022 2023 2024 2025

Tax $0 $0 $248 $726 $1,261 $1,830 $2,694 $3,701


Questions?

Source of Materials & Graphs: Mercer Health & Benefits; and Stoel Rives

association of washington cities 1 the current conversation on health care reform presented to:...

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