Benefits Administration Update

Tennessee Association of School Business Officials

November 14, 2013

Today’s Discussion

• Working for a Healthier Tennessee

• New 2014 Plan Option

• Health Care Reform Compliance

• Going Forward

• Questions & Answers

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Working for a Healthier Tennessee

Companion to the Governor’s wellness initiative, Healthier Tennessee

Focuses on improving health of our plan members

Three key areas:

• Physical activity

• Healthy eating

• Tobacco cessation

Have asked each school district to choose a Site Champion

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Working for a Healthier Tennessee

All but three School Systems have Site Champions

Site Champions: Participate in monthly Site Champion conference calls Promote wellness activities in your organization Serve as screening site coordinator (if applicable) for the Partnership

Promise

Site Champions on Social Media

Twitter: https://twitter.com/TNSiteChampions

Facebook: https://www.facebook.com/TNSiteChampions

Flickr: http://www.flickr.com/photos/tnsitechampions

YouTube: http://www.youtube.com/channel/UCan_1MPZchT047xI_Dqy6dQSchoolTube: http://www.schooltube.com/channel/tnsitechampions/

Weakley and Fentress County have set up their own “Working” websites4

LEA 2014 Affordable Coverage

2012 Affordability Survey

A small number also did not comply for instructional staff

Requests from Fiscal Directors and others at LEAs to offer a lower cost option

Limited PPO Option

Limited PPO priced ~64% of the Partnership PPO– $195/month less for employee-only

coverage in 2014

Lower cost plan option results in coverage being deemed affordable for more employees

To receive the insurance component of the BEP funding, LEAs can offer a lower cost option of the same or better value as the Limited PPO; however, must also offer plan option of same or better value as the Partnership PPO

Fewer than 2,000 LEA heads of contract enrolled in this option

Afford-able40%

Not Af-ford-

able60%

Support Staff

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Plan Actuarial Value Metal Level

Limited 76% Silver

Standard 79% Silver/Gold

Partnership 84% Gold

Affordable Care Act—Compliance Timeline

2011 Plan Year 2011 2012 2013 2014 2018 Lifetime dollar limits on

Essential Health Benefits (EHB)

prohibited

Preexisting Condition

Exclusions Prohibited for

Children under 19

Overly restrictive annual dollar

limits on EHB prohibited

Extension of Adult Child

Coverage to Age 26

Prohibition on Rescissions

No Cost Sharing and Coverage

for Certain In-Network

Preventive Health Services

Effective Appeals Process

Consumer/patient protections

Nondiscrimination requirements

on fully insured plans

(DELAYED)

Certain Retiree Medical Claims

Reimbursable (ERRP)

Retiree Drug Plan FAS Liability

Recognition

Over-the-Counter

Medicines Not

Reimbursable Under

Health FSA, HRAs, or from

HSAs Without a

Prescription, Except

Insulin

HSA Excise Tax Increase

Public Long-Term Care

Option (CLASS Act) –No

Longer Supported by HHS

Medicare Part D Discounts

for Certain Drugs in

“Donut Hole”

Distribution of Summary

of Benefits and Coverage

to Participants (Ongoing)

PCORI (Comparative

Effectiveness) Fee

Quality of Care Report

(delayed)

Medical Loss Ratio

rebates (insured plans

only)

Employer Reporting of

Health Coverage on Form

W-2 (due January 31, 2013)

Notice to Inform

Employees of Coverage

Options in Exchange

Limit of Health Care FSA

Contributions to $2,500

(Indexed)

Addition of women’s

preventive health

requirements to No Cost

Sharing and Coverage for

Certain In-Network

Preventive Health Services

Elimination of Deduction

for Expenses Allocable to

Retiree Drug Subsidy

(RDS)

Medicare Tax on High

Income

Individual Mandate to

Purchase Insurance or Pay

Penalty

State Insurance Exchanges

Employer Responsibility to

Provide Affordable Minimum

Essential Health

Coverage***(DELAYED)

Preexisting Conditions

Exclusions Prohibited

Annual Dollar Limits on EHB

Prohibited

Automatic Enrollment

(DELAYED)

Limit of 90-Day Waiting Period

for Coverage

Employer Reporting of Health

Insurance Information to

Government and Participants

Increased Cap on Rewards for

Participation in Wellness

Program

Cost-sharing limits for all

group health plans, not just

HDHPs/HSA (deductibles and

OOP maximum)

Coverage of routine patient

costs for participants in

approved clinical trials

Transitional reinsurance

contributions

Excise Tax on

High-Cost Coverage

*** Applies to full time employees (e.g., 30 hours per week) and will require coverage that is affordable and satisfies a certain actuarial value to avoid the penalty.

LEA Responsibility noted in RED above

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Compliance to Date (2011-2013)

• Plan updates:• Women’s preventive

services• Extension of adult child

coverage to age 26• 100% coverage for

preventive services• Elimination of pre-ex for

children• Mental health parity

• Summary of Benefits & Coverage

• Final appeals with Independent Review Organizations

• Patient Centered Outcomes Research Institute (PCORI) fee

Benefits Administration Responsibility

• Marketplace exchange notification

• Notify all employees about Exchanges by 10/1/13

• Beginning 10/1/13, notify new hires within 14 days of start date

• Sample letter provided to LEA’s

• W2 reporting of the value of coverage

Local Education

Agency Responsibility

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Compliance for 2014—Group Market Insurance Reforms

• No annual dollar limits on essential health benefits

• Preexisting condition exclusions prohibited

• Transitional Reinsurance Fee; $63 PMPY; Included in premium

• Limit of 90-Day Waiting Period for Coverage

• Increased Cap on Rewards for Participation in Wellness Program

• Cost-sharing limits for all group health plans (deductibles and OOP maximum)

Benefits Administration Responsibility

• Maximum 90-day waiting period for coverage

• Increased Cap on Rewards for Participation in Wellness ProgramLocal

Education Agency

Responsibility

9Individual Mandate

Individuals must buy health insurance or pay shared responsibility tax

Delayed Items or Awaiting Additional Guidance

• Quality of Care reporting

• Employer reporting of Health Insurance Information

• 2018 – Cadillac TaxBenefits Administration Responsibility

• Employer Mandate:

• Employers with 50 or more “full time employees” must offer “affordable health coverage” that provides a “minimum actuarial value” and “minimum essential coverage” to at least 95% of their full-time employees and their eligible dependents, or else face a penalty

• Automatic enrollment of new full-time employees for employers with more than 200 employees

• Employer Reporting of Health Insurance Information

Local Education

Agency Responsibility

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“No Coverage Penalty”– For each month on and after January 1, 2015:

1. Employer does not offer coverage to at least 95% of its full-time employees (FTEs) and eligible dependents and

2. At least one full-time employee enrolls in Exchange and receives Federal subsidy– Penalty = $2,000 per year multiplied by all FTEs of the employer (minus the first 30)

OR “Inadequate Coverage Penalty”

– For each month on and after January 1, 2015:

1. Employer offers coverage to at least 95% of its FTEs (and eligible dependents) but coverage is either:

a. “Unaffordable” or

b. Does not provide “minimum actuarial value”– Penalty = lesser of $3,000 for each full-time employee who enrolls in the Exchange

and receives a premium tax credit or cost-sharing reduction, or $2,000 for each full-time employee, excluding the first 30 full-time employees.$3,000 per year per for each FTE who enrolls in an Exchange and receives a Federal subsidy

Local Education Agencies are potentially liable for either

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Employer Mandate and Eligibility for Exchange Subsidies

Individual is not eligible for a subsidy from an Exchange if individual has been offered affordable health care coverage of minimum value from an employer– Employer must offer dependent coverage (but not spousal coverage) to avoid

penalty

What happens if an employed individual is offered “affordable” employee-only coverage, but family coverage is “unaffordable”?– Employee and family will not be eligible for subsidy in the exchange

• If spousal coverage is not offered, spouse can purchase coverage in exchange and receive subsidy

• If spouse is offered coverage, even if spousal coverage is not affordable, spouse is not entitled to subsidy in Exchange, as long as employee-only coverage is affordable and minimum value

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Hours of Service

Determining an employee’s hours of service– An employee’s hours of service include:

• Each hour for which employee is paid, or entitled to payment, for the performance of duties for employer; and

• Each hour for which employee is paid, entitled to payment by employer even if no work is performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence

• Workers’ compensation—Employer should discuss with legal counsel before making a final determination on whether or not to credit an employee with hours of service for workers’ compensation time Under the proposed rules, if an employee is being paid from the employer’s workers’

compensation plan maintained pursuant to state law on account of a period of time during which the employee performed no duties for the employer, the employer may not be required to credit the employee with any hours of service 

• All periods of paid leave (e.g., maternity or paternity leave) are considered hours of service Where a traditional academic year break (e.g., winter, spring, or summer break)

is a period of paid leave, employees will be required to be credited with hours of service

• All hours of service performed for all entities treated as a single employer under the controlled group and affiliated service group rules of the Internal Revenue Code

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Variable Hour and Seasonal Employees

“Look-back” Measurement Period Period over which employer tracks employee’s hours of service Cannot be less than three months or more than twelve months in duration

– Initial measurement period for new employees – based on each employee’s hire date• But does not have to begin on employee’s hire date

– Standard measurement period for ongoing employees – uniform period set by employer

Administrative Period Calculations, communications, enrollment Optional (up to 90 days in duration)

– Begins immediately after end of standard measurement period– Ends immediately before associated stability period

Stability Period– Period for which employer must offer health care coverage to Full-Time Employee to

avoid No Coverage Penalty or Inadequate Coverage Penalty – Stability period must be at least as long as measurement period, but not less than six

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Defining Full-Time Employee Status of Ongoing Employees

Measurement Period (MP)

Administrative Period (AP)

Stability Period (SP)

3–12 months Up to 90 daysAt least 6 months but no

shorter than MP

Determines offer of health care coverage for stability period

Average hours worked Determine whether an

ongoing employee is a Full-Time Employee

Buffer between MP and SP Allows for measuring and

enrolling full-timers

Eligibility period for employees averaging 30 hours or more during MP

Measurement PeriodConsiderations

Longer period may reduce number of FTEs due to turnover

Stability PeriodConsiderations

Shorter period reduces coverage commitment but creates administrative complexity

Longer period that aligns with calendar years is most practical administratively

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Determining Full-Time Employees Under ACA

New Non-Variable Hour Employee– If employee is reasonably expected to be a Full-Time Employee upon hire, the

employer must offer group health plan coverage before the expiration of the employee’s initial three (3) full calendar months of employment or will be at risk for a shared responsibility payment

New Employees

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Determining Full-Time Employees Under ACA

Is a New Hire a Variable-Hour Employee at Start Date? – Look at the “facts and circumstances” at the employee’s start date– A new employee is a variable-hour employee if

• It cannot be determined that the employee is reasonably expected to work on average at least 30 hours of service/week or

• Initial period of 30 hours/week employment is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work on average at least 30 hours/week over the initial measurement period; e.g.: Part-time worker hired for 20 hours per week but who could work more Substitute teacher whose hours may vary greatly from week to week, but

may average over 30 hours per week. Is a New Hire a Seasonal Employee?

– Reasonable, good faith interpretation of the term “seasonal employee” through at least 2014

New Variable-Hour and New Seasonal Employees

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Look-Back Measurement Method

Other Special Issues and Rules – Employees Rehired After Termination of Employment or Resuming Service After Other

Absence • Employment Break Periods of Educational Organizations—when calculating hours of

service for continuing employees (not employees treated as terminated and rehired) during a measurement period that includes an Employment Break Period, educational organizations can use one of two methods for averaging hours: Employment Break Period (EBP): a period of at least four (4) consecutive weeks

(disregarding special unpaid leave) during which an employee of an educational organization is not credited with hours of service

Option 1—determine the average hours of service per week for the employee during the measurement period excluding the EBP and use that average as the average for the entire measurement period; or

Option 2—treat employees as credited with hours of service for EBPs at a rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not an EBP

• These methods of averaging hours for EBPs apply only to employees treated as continuing employees and NOT to employees treated as terminated and rehired

• Educational organizations are not required to exclude (Option 1) or credit (Option 2) an employee in any calendar year with more than 501 hours of service for any EBP (although the 501-hour limit does not apply to, or take into account, hours of service required to be credited for Special Unpaid Leave)

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Preparing for the Future

Continue to evolve the Partnership Promise and Wellness Program effectiveness

– Track clinical improvement over time

Next steps in Value Based Insurance Design

– Focus on quality, evidence based care

Increased price/quality transparency

– Provide members tools to be better consumers

Payment reform initiative

Questions?

Appendix

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The ACA Penalties—Definitions Who is an “applicable large employer”?

– Employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year

Who is an “employee”?– IRS will define employee based on IRS’s “common law” test

Who is a “full-time employee”? – Employed on average at least 30 hours of service per week, measured monthly – 130 hours of service in a calendar month is treated as monthly equivalent of 30 hours of service

per week– Special rule for schools – any employee expected to work 30 hours or more for 9 months

during the school year should be considered a full-time employee. What is “minimum essential coverage”?

– An employer group health plan qualifies as minimum essential coverage for purposes of the shared responsibility payment. Note “minimum essential coverage” is different than “essential health benefits.”

What is “unaffordable coverage?”– FTE’s required contribution exceeds 9.5% of taxpayer’s household income for the taxable year– Affordability is based on cost of self-only coverage, even if employee elects family coverage

What is “minimum actuarial value?”– Plan must pay at least 60% of covered expenses– State plans exceed this threshold

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