Healthcare Reform: What’s Next?Danny MillerPartner, Conner & Winters, LLP

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Agenda

• Introduction of Danny Miller• Preventive Care Coverage• Exemption for Religious Employers• Additional Changes• Market Reforms• Q&A• About GuideStone

WebinarJanuary 31, 2013

Danny Miller© 2013 Conner & Winters, LLP1627 I Street NW, Suite 900Washington, D.C. 20006

Healthcare Reform:What’s Next?

PREVENTIVE CARE COVERAGE

PREVENTIVE CARE

• Effective for plan years beginning on or after 9/23/2010, plans must:– Provide coverage for designated preventive care

services– Cover such services without the imposition of any

cost-sharing requirements (such as a co-payment, co-insurance or deductible)

• Not applicable to grandfathered plans

COVERED PREVENTIVE CARE SERVICES

• Evidence-based items/services rated A or B in U.S. Task Force recommendations

• Immunizations for routine use• Preventive care and screenings for infants, children

and adolescents• Preventive care and screenings for women

For a complete list of covered services, see:

www.healthcare.gov/center/regulations/prevention.html

COVERAGE FOR CONTRACEPTIVES

• Effective for plan years beginning on or after August 1, 2012, preventive care services must be provided to women without imposition of cost-sharing include contraceptives.

• Regulations exempt certain “religious employers” from the requirement to provide contraceptives without cost-sharing.

EXEMPTION FOR RELIGIOUS EMPLOYERS

“Religious employer” for purposes of exemption must meet four requirements. The employer must meet all of the following:

• Have the inculcation of religious values as its purpose

• Primarily employ persons who share its religious tenets

• Primarily serve persons who share its religious tenets

• Be a church or integrated auxiliary of a church

Note: There is no explicit exemption for a church.

EXEMPTION FOR RELIGIOUS EMPLOYERS

Temporary Enforcement Safe Harbor

One year delay in effective date of rule for certain religious organizations not entitled to the exemption must:

• Be a non-profit entity

• From 2/10/2012 onward, not have provided some or all of the contraceptive coverage otherwise required at any time because of religious beliefs of organization

• Provide notice to participants

• Self-certify that it meets the above requirements

EXEMPTION FOR RELIGIOUS EMPLOYERS

Notice of Proposed Rulemaking:

• Expressed intent is to address objections of many religious organizations not otherwise covered under the religious employer exemption.

• Two primary goals: – Maintain provision of contraceptive coverage without

cost-sharing to individuals covered through religious organizations in simplest way possible

– Protect such religious organizations from having to contract, arrange, or pay for contraceptive coverage

EXEMPTION FOR RELIGIOUS EMPLOYERS

Notice of Proposed Rulemaking (cont’d)

• Seeking comments on proposals:– Insurance companies would cover

contraceptives free of charge if the religious organization chooses not to.

– In case of self-funded plan, TPA would provide contraceptive coverage at no cost to participants.

– Religious organizations will not be required to subsidize cost.

EXEMPTION FOR RELIGIOUS EMPLOYERS

• Congress is considering legislation to broaden religious conscience exemption:– Rubio-Blunt attempt to enact legislation allowing

all employers (not just church-related employers) to decline to cover medical services that are contrary to their religious beliefs was defeated in Senate.

– Churches and religious organizations are working with members of Congress to secure legislation to broaden the definition of religious employer.

• Numerous lawsuits have been filed challenging the religious conscience exemption.

ADDITIONAL CHANGES

NEAR-TERM PROVISIONS

1 These fees apply to both insured and self-insured plans.

Health FSAs Limited to $2,500 2013

Notice of Exchange Eligibility 2013

Comparative Effectiveness Fee1 2013

Quality of Care Reporting 2013

Risk Adjustment Fees1 for Exchanges 2014

ADDITIONAL COMING CHANGES

Exchanges, Subsidies and Market Reforms 2014

Large Employer (200+) Automatic Enrollment 2015

Exchanges for Large Employers (100+) 2017

Cadillac Plan Tax 2018

MARKET REFORMS

2014: FOUR COMPLEX MECHANISMS

• Individual Mandate– Individual Insurance Market Reforms

• Health Insurance Exchanges– Government Assistance for Modest Income

Premium Tax Credits (PTCs) (federal subsidies)• Employer Shared Responsibility (“pay or play” or

employer mandate)• Expanded Medicaid

HEALTH INSURANCE EXCHANGES

• Exchanges: Competitive, regulated marketplaces for individuals and small employers to obtain health insurance.– Exchange plan premiums subsidized with PTC for

individuals with household income less than 400% of federal poverty level (FPL). Household income = modified adjusted gross

income (MAGI). – Individuals with Medicare, Medicaid or “affordable”

employer coverage are excluded from these exchange subsidies.

HEALTH INSURANCE EXCHANGES

• State-based (or regional) single risk pool.– Many states not ready; Federal exchange will step in.

• Only “insurance companies” may offer coverage through Qualified Health Plans (QHPs)

• Premium rate variation limits: Age (3:1 limit), tobacco use (1.5:1), family size and geography

• Platinum (90%), gold (80%), silver (70%) and bronze (60%) plans

QUALIFIED HEALTH PLANS

• Must be issued by licensed provider.• Must provide an “essential health benefits

package”• “Essential health benefits package” refers to

coverage that:– Provides essential health benefits– Does not exceed specified out-of-pocket and

deductible limits– Does not impose a deductible on preventive

health services

STATUS OF STATE EXCHANGES

WHO CAN ACCESS EXCHANGES?

• U.S. Citizens and Legal Residents not incarcerated

• Small employers (<100 employees)– Large employers (100+ employees) after 2017

(at State discretion)

EXCHANGE SUBSIDIES

• Premium paid by individual/household limited from 2% to 9.5% of household income (this applies regardless of actual total premium for exchange plan coverage)

• Federal “subsidies” are a Premium Tax Credit (PTC)• Claimed on individual’s tax return (April following the

applicable tax year)– Refundable (can exceed federal income taxes)

Timing/cash flow issue for those needing the assistance

– Can be advanced (during the tax year (up to 16 months before return is filed))

– Assignable (payable directly to health insurance company (exchange plan))

EXCHANGE PTCS

Individuals (households)* with MAGI between 100% FPL and 400% FPL receive PTC to purchase exchange coverage.

* PTCs are not available to employees of plan sponsors adopting exchange plans as employers.

FPL 2014 (est.) Individual Family of 4

100% $11,850 $24,450

400% $47,400 $97,800

WHO QUALIFIES FOR PTCS?

Individuals purchasing a Qualified Health Plan (QHP) on an exchange who are not:

• Covered by Medicare or Medicaid• Covered by other government coverage, e.g., CHIP,

TRICARE, VA, etc.• Offered an affordable employer plan that covers

minimum value • Enrolled in an employer plan (even if not

affordable)

MINIMUM VALUE

• Minimum value: Employer plan must pay 60% of total costs of plan (actuarial determination).– Employees whose employer plan does not cover

minimum value can opt-out and seek PTCs for exchange coverage.

• It may be difficult for consumer-driven or high deductible plans to satisfy this requirement.

“AFFORDABLE” COVERAGE

• Employee’s required contribution (share of premium) for participant-only (single) coverage under employer plan cannot exceed 9.5% of household income* (MAGI).

• Safe Harbor (proposed): Employers may use employee’s W-2 compensation.

• It appears that an employer could charge more for dependent coverage and not create an affordability issue — however, this is still not clear.

*Employers often have little information about employees’ household income.

Start: Employee Eligibility for ACA

Subsidy – Premium Tax Credit (PTC)

Is Employee’s Household Income (MAGI) less than 400% of Federal Poverty Limit?

Is Employee eligible for minimum essential

coverage (MEC) under Employer

Plan?

Does employer plan provide minimum

value?

Is the employer plan affordable (Employee-only

premium less than 9.5% of

MAGI)?

STOP: Employee is NOT eligible for

PTC.

Stop: Employee is eligible for PTC.

Yes

No

Yes

No

YesYes

NoNo

ILLUSTRATIVE EXCHANGE PREMIUMS

Maximum Monthly Contribution (Share of Premium)

% FPL Single Family of 4 % of MAGI Single Family of 4138% $16,353 $33,746 3.00% $41 $84150% $17,775 $36,681 4.00% $59 $122200% $23,701 $48,907 6.30% $124 $257250% $29,626 $61,134 8.05% $199 $410300% $35,551 $73,361 9.50% $281 $581400% $47,401 $97,815 9.50% $375 $774

MAGI

INDIVIDUAL MANDATE

Beginning 2014, penalty (tax) applies to individuals:• Who have income above threshold level ($9,350 –

single; $18,700 – married filing jointly); and

• Who do not enroll for healthcare coverage.

Penalty =• 2014: Greater of $95 or 1% of income

• 2015: Greater of $395 or 2% of income

• 2016: Greater of $695 or 2.5% of income

For family, penalty capped at 300% of individual rate

EMPLOYER MANDATE

• Effective 2014, there are penalties for large employers that offer no coverage or provide inadequate/ unaffordable coverage.

• A “Large employer” is one with 50 or more full-time equivalent employees.

– Who is an FTE? Employees who work 30 or more hours/week Full-time equivalent employees (total, aggregate

monthly part-time hours / 120)• Penalties apply only if at least one full-time employee

participates in and receives subsidies from an exchange.

EMPLOYER MANDATE

• Penalties for large employers that fail to offer “minimum essential coverage”:

– Must pay excise tax for each FTE (after subtracting first 30 FTEs)

– Excise tax = 1/12 of $2,000 for each month in which at least one FTE receives subsidies from exchange

• “Minimum essential coverage” includes coverage under an “eligible employer-sponsored plan.”

• Preamble to proposed subsidy regulations indicates self-insured plans can be “eligible employer-sponsored plans.”

EMPLOYER MANDATE

• There are penalties for large employers that offer “inadequate” or “unaffordable” coverage.

• Excise tax = lesser of:– $3,000 for each FTE receiving subsidy; or – $2,000 for each FTE (not including first 30

FTEs).Note: Part-time employees are not included in penalty calculation even though they are counted for purposes of determining if employer meets the 50 FTEE threshold.

Yes

NoPenalt

yDo you have more than

30 FT employees?

Pay monthly penalty, lesser of:

1/12 x $2,000 x (number of FT employees – 30)

1/12 x $3,000 x (number of FT employees receiving credits for exchange coverage)

No

No

Yes

Yes

Are any of your FT employees receiving premium credit for exchange coverage?

Pay monthly penalty 1/12 x

$2,000 x (number of FT employees –

30)

No

No

Do you provide health insurance?

Are you a large employer?(at least 50 FT equivalent workers)

Including FT (30+ hours/week) and PT workers (prorated)Excluding seasonal workers (up to 120 days per year)

Yes

QUESTIONS?

• How will the following types of employees be counted for purposes of the “pay or play” penalties?– Full-time or part-time faculty (where FT/PT status is

determined based on credit hours)– Adjunct faculty– Student workers and/or student spouse employees

• Does affordable medical coverage of full-time employees include coverage for spouses and children?

• What constitutes “acceptable coverage” in PPACA?

QUESTIONS?

• What “access” to affordable healthcare do employers in Texas have to provide their employees?

• Will either FT or PT student workers be exempted from eligibility for employer health insurance when employed by the college at which they are enrolled? Will the eligibility standards be the same as for FICA and FUTA?

• What policies should colleges implement for summer, seasonal workers to avoid incurring the cost of these workers becoming eligible for employer-provided health coverage?

QUESTIONS?

• How does an employer decide whether it is better to just pay the penalty as opposed to providing coverage?

• Is there any precedent as to whether an employer, who elects to pay the penalty in the beginning and then finds the penalty increasing above the probable cost of obtaining insurance, will be able to return to offering insurance?

• How does the law affect HRAs? Will schools that offer just an HRA be subject to a fine for not providing healthcare coverage?

QUESTIONS?

• In states that do not offer state-run exchanges, how can employers get information on the rules for federal-run exchanges? Will employers with under 100 employees be eligible?

• How will this impact group student plans?

• Will Christian communities be asked to compromise any foundational Biblical principles with the new reforms?

• Where does the health reform act stand on the abortion/birth-control issue?

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GuideStone and healthcare reform• Next steps:

• Full Implementation

• Impact to churches/institutions and GuideStone coverage

• Stay informed!

• Healthcare reform education:

www.GuideStone.org/HealthReform

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