healthcare reform – are you ready? a discussion of readiness strategies

Healthcare Reform – Are you

Ready? A Discussion of

Readiness Strategies

Southeast Employee Benefit Conference April 23, 2013

2©2012 Gallagher Benefit Services, Inc. 2©2013 Gallagher Benefit Services, Inc.

Discussion Content

• Overview of 2013 and 2014 preparations• Who Must be Offered Coverage and Why?

– Definitions– Timelines and Measurement Periods– Transitional Relief– Additional Rules

• Employer Shared Responsibility• Cost Effective Strategies• Critical Success Factors


PPACA…..Are We Ready for 2014?

Hopefully, we have all stopped crying by now!

4©2012 Gallagher Benefit Services, Inc.

2011 20132010 2014

• Change in tax treatment for over-age dependent coverage

• Change Medicare retiree drug subsidy tax treatment

• Early retiree medical reinsurance• Medicare prescription drug “donut hole”

beneficiary rebate• Break time/private room for nursing moms

• Employers must distribute uniform benefit summaries to participants (SBC)

• Employers must provide 60-day advance notice of material modifications (ex: AE)

• Voluntary Form W-2 reporting for 2011 health coverage

• Auto-enrollment of full-time employees (awaiting guidance)

• Health FSA maximum limited to $2,500 (indexed)

• Exchange Notice due to EE: Deferred• Increased Medicare payroll tax on wages

exceeding $200,000/ individual; $250,000/couples, 0.9%

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

• Research fees due 7/1/2013 for 2012• Change in Medicare retiree drug subsidy

tax treatment takes effect• Mandatory Form W-2 reporting for 2012

health coverage

• Health insurance exchanges• Individual coverage mandate• Financial assistance for exchange

coverage of low-income individuals• Medicaid expansion (not all states) • New health plan regulations • HIPAA wellness limit increases• Shared responsibility penalties• Additional reporting and disclosure• Reporting for FTE/Affordability req.

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

• No annual dollar limits**• No pre-existing condition limits**• Waiting periods limited to 90 days• Additional new standards for new

or “non-grandfathered” health plans, including limited cost-sharing, WPC&S

• Health insurance industry fees begin (reinsurance pool)

• 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)*

• Lifetime dollar limits prohibited and annual dollar limits restricted*

• No pre-existing condition limitations for children up to age 19*

• Rescissions prohibited*• 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 OTC drugs

• Penalties increased to 20% for non-qualified HSA distributions

• Voluntary Form W-2 reporting for 2011 health coverage

• Pharmaceutical manufacturers’ fees start

• Medicare, Medicare Advantage benefit and payment reform

• Insurers subject to medical loss ratio rules (MLR)*

2012

Timeline: Key Changes for Employers(Defined as Employers who employed at least 50 FTE’s during the previous calendar year)

4


2013 and 2014 Overview

Things you should have already done, or have a plan to complete soon» 2013 deliverables

• W-2 reporting for 2012 tax year• Distribution of Uniform Summary of Coverage (SBC)

– Anniversary dates & enrollment effective 9/23/2012 and thereafter

• Flexible Spending Account cap ($2,500)• Comparative Research Tax (2012 due July 2013)• Women’s preventive care & screening


2013 and 2014 Overview

Things you should be making plans to do now!» Final guidance on many items is forthcoming or

proposed• Automatic Enrollment• Transitional Reinsurance Fees • Notices to employees about Exchanges and coverage subsidies

(Delayed)• FTE determination and tracking methodology


When Must Coverage Be Offered

• Generally based on hours worked or amount of hours reasonably expected to work as of hire date» Employee reasonably expected to work full-time» Employee reasonably expected to work part-time

(less than 30 hours) » Variable hour and seasonal employees not

reasonably expected to work full-time


Tracking FTE’s for Eligibility

• Full Time Employee = at least 30 hours or more per week• Initial Measurement Period (IMP)• Standard Measurement Period (SMP)• Stability Period (SP)• Considerations for determining and

administrating Safe Harbor FTE eligibility tracking


Treatment of Variable Hour Employees

• Variable hour employee » An employee working 30 hours/week during a measurement period

is “full-time” for purposes of subsequent “stability period,” regardless of hours of service during stability period.

•Measurement period: 3 - 12 consecutive months

•Stability period

» If “full-time” during measurement period: stability period must be at least 6 consecutive calendar months following measurement period and no shorter than the measurement period

» If not “full-time” during measurement period, stability must be no longer than the measurement period

•Transition relief for 2014 only


Ongoing Employee

3

2013 2014 2015 2016

3

3

11/1/2012 – 10/31/2013measurement period



11/1 – 12/31/2013admin. period

1/1/2014 – 12/31/2014stability period



1

1

1

11/1 – 12/31/2014Admin period

2

2

2

11/1 – 12/31/2015Admin period

12 month measurement period2 month administration period


New Variable Hour & Seasonal Employee

2014 2015 2016

Initial Measurement Period 3/15/14 – 3/14/15

Initial Stability Period 5/1/2015 -4/30/2016

Initial12 month measurement period1+ month administration period

1 + Monthadministration period (AP

begins the day following the end of the IMP through the

next calendar month – May 1)

Employee 3/15/2014 DOH



2014 2015 2016

Initial Measurement Period 3/15/14 – 3/14/15

Initial Stability Period 5/1/2015 -4/30/2016

12 month measurement period1+ month administration period

1 + Monthadministration period


Standard Stability Period 1/1/2016 – 12/31/2016

2 Monthadministration period

Standard Measurement Period11/1/2014 – 10/31/2015

Minimum Coverage Period Even if employee determined NOT to be 30+ hours during

first standard measurement period

Initial


Standard



2014 2015 2016

Initial Measurement 3/15/14 – 3/14/15

Initial Stability 5/1/2015 -4/30/2016

1 + Monthadministration period


Stability Period 1/1 – 12/31/2016

2 Month admin period

SMP 11/1/2014 –10/31/2015

Minimum Coverage Period Even if employee determined NOT to be 30+ hours during

first standard measurement period

2017 2018


SMP 11/1/2015 – 10/31/2016


SMP 11/1/2016 – 10/31/2017

12 month measurement period1+ month administration period

Initial


Standard


No penalty applies!

Lesser of:• $3,000 per FT employee

receiving tax credit*

Or• $2,000 per FT employee

(minus first 30)

$2,000 penalty per FT employee (minus first 30) if

at least one FT employee receives the tax credit

No penalty applies!

YES

Is coverage affordable?

YES

Plan provides minimum required value?

YES

Offer Coverage?

YES

* Only applies to FTEs with household incomes of 400% of FPL or less

Employer Shared Responsibility

Have at least 50 FTEs? NO

NO

NO

NO


Cost Effective Strategies

• Fully Insured vs. Self Insured• Technology and Reporting

» Outsource vs. Insource» Tool assessment» Benefit Administration

• Actuarial value of current and future plans» Re-allocating compensation

• Wellness and health risk improvement strategies» Outcome based» On-site clinics


Cost Effective Strategies

• Communication strategies must be re-defined• Salary banding of payroll contributions• Actuarial value of current and future plans

» Defined Contribution with a base HDHP » buy-up options for better plan choices» Re-allocating compensation

• Re-define dependent contributions» Dependent Verification» Eliminate spouses eligible for insurance elsewhere» Charge for each family member that participates in the plan


Transitional Relief

Can you defer compliance?• Transitional Relief for Plans whose Fiscal Year fall

other than on a calendar year basis• In English – if your plan year begins other than

January 1, you may be able to defer compliance with PPACA until the policy year start.


Critical Success Factors#1 – Senior management involvement early and often

#2 – Re-invent your employee communication process

#3 - Run an actuary-supported financial impact study of the available options

#4 - Assess, and if necessary amend your hiring practices and use of full & part-time workforce

#5 - Amend your business model to reflect incremental costs

#6 - Take action sooner rather than later

Healthcare Reform – Are you Ready?

Questions?

healthcare reform – are you ready? a discussion of readiness strategies

Documents

grandfathered plans

nongrandfathered health

new medicare tax

cadillac plans

bargained plans

gallagher benefit services

calendar year plans

health coverageautoenrollment