HEALTH CARE REFORM PREPAREDNESS 102:An Employer’s Pocket Guide

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Observations

• Healthcare Reform is emotionally-charged andeveryone has an opinion. Neither evil nor savior.

• Final guidance on a number of provisions must beprovided and will almost certainly include amendments

and/or “safe harbors”.

• HOWEVER:– Employers have requirements to meet

– Employees deserve fact-based, real-time answers

– Strategic planning is professionally expected AND it is yourfiduciary responsibility

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Cost Trends

• Healthcare Spending– $1.4 Trillion in 2001 vs. $3.1 T for 2012

– 17.7% of our GDP projected for 2012

• 2012 average annual premiums

were 3-4% higher than in 2011– Single: $5,615

– Family: $15,745

• 2013 SEGAL Trend Survey Projected at 8.7%– First single digit trend in 11 years– Even at this rate, healthcare costs double every 8 years– 8x higher than the Consumer Price Index (CPI)– and 5x higher than the average annual increase in earnings

Healthcare/GDP

Health

care

Other

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More Cost Trends

4

98%

160%

93%

168%

24%

50%

21%

38%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Health Insurance Premiums

Workers' Contribution to Premiums

Workers' Earnings

Overall Inflation

Source: Kaiser/HRET Survey , 1999-2011.

Trend Ingredients

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Source: AON Hewitt 2011 Health Insurance Trend Driver Survey

Immediate Changes (90 Days)

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Small Small Small Small Employer Tax Employer Tax Employer Tax Employer Tax CreditsCreditsCreditsCredits

When?When?When?When? Started with the 2010 tax yearWho?Who?Who?Who? Employers with less than 25 employees and average wages under$50,000What?What?What?What? Full details next slide

Grand Grand Grand Grand ----fatheringfatheringfatheringfathering

Available for existing plan(s) already in place on 3/23/2010. If planchanges were kept within the required limitations, documented andcommunicated properly, then the plan(s) maintained the ability to foregocertain PPACA requirements.

HighHighHighHigh----Risk PoolRisk PoolRisk PoolRisk Pool Those who could not obtain coverage due to pre-existing conditionsgained access to a high-risk pool (created by June 23, 2010) whichguaranteed them coverage (GettingUsCovered).

Changes for Changes for Changes for Changes for Employers Employers Employers Employers with Retiree with Retiree with Retiree with Retiree CoverageCoverageCoverageCoverage

A temporary reinsurance program was established for employersproviding coverage to early retirees over age 55 who are not eligible forMedicare. The tax deductibility of the Part D subsidy tax credit foremployers with post-65 retiree benefits was eliminated.

Small Employer Tax Credit

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ELIGIBLE EMPLOYER

Contribute 50% or more of EE only prem? Yes

Fewer than 25 FTEs? Yes

Avg. annual wages <50,000? Yes

Includes Common Ownership, Controlled

Corporations, Affiliated Service Groups, Etc.

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• Kick out owners, partners, shareholders, (within specified limits) and family members

2

• Kick out seasonal EEs (120 days/yr. or less)and leased EEs

3

• Divide total hours worked by remaining EEs into 2080. Round down. Done!

Figure total wages paid to FTEs

Divide by number of FTEs. Round Down. Done!

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

Grandfather Status

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• Grandfathered plans are NOT required to:– Give up their management carve-outs or discriminatory

contribution structures (if fully insured);– Cover certain clinical trials;– Implement a specific appeals process, including an external review

process;– Implement various health management activities and reporting to

the Health and Human Services Department;– Or allow a pediatrician or OB to serve as a PCP.

• Status LOST if you change:– Elimination of Benefits– Co-insurance– Co-payments– Deductibles and Out-of-Pocket Maximums– Employer Contribution– Fully-Insured Carriers (Amended, but March - Nov. 2010 notretro)

Next Renewal On or After 10/1/10

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Benefit LimitationsBenefit LimitationsBenefit LimitationsBenefit Limitations Plans may not impose lifetime limits on the dollar value of essential benefits.Emergency room claims must be paid the same regardless of network status.

Coverage for Adult Coverage for Adult Coverage for Adult Coverage for Adult ChildrenChildrenChildrenChildren

Children may stay on their parents’ policies until age 26 if coverage isn’tavailable through their work. Employer contributions are tax-deductible forthe employer and not taxable income for the member.

PrePrePrePre----Ex ConditionsEx ConditionsEx ConditionsEx Conditions Plans may no longer impose pre-existing conditions exclusions for childrenunder 19.

Preventive ServicesPreventive ServicesPreventive ServicesPreventive Services New policies may not assess any cost-sharing for a broad range of preventivecare. This includes recommendations by the U.S. Preventive Services TaskForce; recommended immunizations, preventive care for infants, children andadolescents.

Nondiscrimination Nondiscrimination Nondiscrimination Nondiscrimination RulesRulesRulesRules

ALL plans now subject to Section 105(h) (already applied to self-fundedplans). Note: This does NOT apply to grandfathered fully-insured plans orthose with SIMPLE cafeteria plans. Further, on 12/22/10 the IRS, DOL andHHS jointly announced a delay for this requirement, pending further issuingguidance.

Changes Effective 1/1/2011

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Health Savings Health Savings Health Savings Health Savings Account PenaltyAccount PenaltyAccount PenaltyAccount Penalty

Increases tax for non-qualified HSA withdrawals from 10% to 20%.

No PreNo PreNo PreNo Pre----Tax Tax Tax Tax OTC DrugsOTC DrugsOTC DrugsOTC Drugs

HSAs, HRAs and FSAs may no longer be used to purchase over-the-counter drugs,unless prescribed by a doctor.

Note: Debit cards may still be used.

Small Employer Small Employer Small Employer Small Employer Wellness GrantsWellness GrantsWellness GrantsWellness Grants

Provides grants for up to five years for small employers that establish wellnessprograms.

Note:Applications and Awards DELAYED

Changes in 2012 - 2013

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Reporting on 2012 Reporting on 2012 Reporting on 2012 Reporting on 2012

WWWW----2222

Companies who issue more than 250 W-2’s must report the value of employersponsored health insurance on the 2012 W-2 (distributed in 2013).

2012 Summary of 2012 Summary of 2012 Summary of 2012 Summary of Benefits and CoverageBenefits and CoverageBenefits and CoverageBenefits and Coverage

To enable easier comparisons of plans across different employers and carriers, auninform description of benefit plans is now required. These SBCs must be provided inconjunction with your next renewal after September 23rd, 2012.

2012 Preventative 2012 Preventative 2012 Preventative 2012 Preventative Services for WomenServices for WomenServices for WomenServices for Women

Additional preventative services for women such as contraception, sterilization, and well-woman exams are now required to be covered without any cost sharing. Takes effectwith the next renewal on or after 8/1/12.

2013 Increased 2013 Increased 2013 Increased 2013 Increased Medicare TaxesMedicare TaxesMedicare TaxesMedicare Taxes

Medicare tax rate on individuals goes from 1.45% to 2.35% for individuals with morethan $200,000 in earnings and couples with more than $250,000. Those above the samethresholds will also pay a 3.8% Medicare tax on investment income.

2013 FSA 2013 FSA 2013 FSA 2013 FSA ContributionsContributionsContributionsContributions

Contributions to flexible spending accounts are limited to $2,500 a year, indexedannually for inflation. (Note:“tax year” defined as “plan year”.)

2013 Additional Fees2013 Additional Fees2013 Additional Fees2013 Additional Fees PCORIPCORIPCORIPCORI:::: A new fee is imposed on group health plans to fund comparative effectivenessresearch ($1 per participant through 2013; $2 indexed for inflation through 2019, thenthe fee phases out)))).... MedicalMedicalMedicalMedical DeviceDeviceDeviceDevice FeeFeeFeeFee: Added tax of 2.3%.

2014 Market Changes

PrePrePrePre----Existing Existing Existing Existing ConditionsConditionsConditionsConditions

Group health plans can no longer impose pre-existing conditionsexclusions for any person of any age.

Note: 10/1/2010 and beyond this was established for children under 19.

Guaranteed IssueGuaranteed IssueGuaranteed IssueGuaranteed Issue Health insurers must accept every employer and individual who applies.

Community RatingCommunity RatingCommunity RatingCommunity Rating All employers under 100 will pay the same for health insurance, regardlessof health status, with only limited rate differences by age (3 to 1),geography, family composition and smoking status (1.5 to 1)

ExchangesExchangesExchangesExchanges State and federal health insurance exchanges starting 1/1/2014 for smallbusinesses and individuals. Plans must meet specified “metallic levels.”

Essential BenefitsEssential BenefitsEssential BenefitsEssential Benefits 10 essential benefits at designated levels must be included in plans offeredin the exchange, as well as in the individual and small group markets outsidethe exchange. Annual limits on essential health benefits are prohibited.

New Taxes / FeesNew Taxes / FeesNew Taxes / FeesNew Taxes / Fees Temporary Reinsurance program ($5.25 PEPM) and the Insurer Tax of 2.3%will add costs to your renewal, and are pro-rated on 2013 renewals too.

MandatesMandatesMandatesMandates Individual and Employer Mandates.

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Employer Mandates

Employer Employer Employer Employer MandateMandateMandateMandate

Beginning in 2014, employers with 50 FTEs are required to provide “minimum essential coverage” or potentially pay an assessment if:1. they do not offer coverage or2. if they offer coverage that isn’t affordable.

Definition of Full Definition of Full Definition of Full Definition of Full Time EquivalentTime EquivalentTime EquivalentTime Equivalent

Full-time employees are those working 30 hours/week or more. Part-timeemployees total hours worked divided by 120 is then added to the number offull-timers for a FTE count. Seasonal workers (120 days/year or less) may beexcluded from the final FTE count.

NonNonNonNon----Compliance Compliance Compliance Compliance PenaltyPenaltyPenaltyPenalty

NONONONO CoverageCoverageCoverageCoverage::::• Penalties apply ifififif one of your employees gets a tax subsidy to buy

insurance under an exchange• $2,000 for each employee overoveroverover the first 30 employees (ie 1

st30 are

“free”)

CoverageCoverageCoverageCoverage isisisis notnotnotnot “minimum“minimum“minimum“minimum essentialessentialessentialessential affordable”affordable”affordable”affordable”::::Penalty is the lesser of:• $3,000 for each employee receiving a premium credit, or• $2,000 for each full-time employee.

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2014 Employer Plan Changes

Waiting PeriodsWaiting PeriodsWaiting PeriodsWaiting Periods Waiting periods cannot exceed 90 days. (New guidance released Jan. 2013.)

CostCostCostCost----Sharing LimitsSharing LimitsSharing LimitsSharing Limits The maximum annual “Out of Pocket” limit imposed under group health plansis limited to current Health Savings Account amounts. Cost-sharing includesdeductibles, coinsurance, copays, etc.

SmallSmallSmallSmall groupsgroupsgroupsgroups underunderunderunder 50505050 employeesemployeesemployeesemployees willwillwillwill alsoalsoalsoalso facefacefaceface aaaa deductibledeductibledeductibledeductible limitlimitlimitlimit ofofofof $$$$2222,,,,000000000000singlesinglesinglesingle //// $$$$4444,,,,000000000000 family,family,family,family, butbutbutbut ERsERsERsERs cancancancan useuseuseuse HSA/HRA/FSAHSA/HRA/FSAHSA/HRA/FSAHSA/HRA/FSA totototo helphelphelphelp complycomplycomplycomply....

Note:This does not apply to grandfathered plans.

Wellness IncentivesWellness IncentivesWellness IncentivesWellness Incentives Allowed expansion up to 30% of total coverage costs (up to 50% for theprevention or reduction of tobacco use).

AutoAutoAutoAuto----EnrollmentEnrollmentEnrollmentEnrollment Groups of 200+ must auto-enroll newly eligible employees in the leastexpensive plan; employees may opt out.

Cadillac Tax (2018)Cadillac Tax (2018)Cadillac Tax (2018)Cadillac Tax (2018) A new excise tax goes into effect for high-value health plans:

40404040%%%% for amounts over $$$$10101010,,,,200200200200 (single) and $$$$27272727,,,,500500500500 (family).

Thank You!

Questions?

Kristen Russell(303) 369-3200kristen@fallriver

benefits.com

Eden Ripingill(303) 306-2561Eden.M.Ripingill

@kp.org