the affordable care act what employers need to know

The Affordable Care Act What Employers Need to Know

Objectives

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Review the tenets of the Affordable Care Act (ACA)1

Identify elements of the ACA that affect employers2

Review small and large employer market reforms3

Understand requirement for wellness programs under the ACA4

Reform existing insurance laws1 Expand Coverage

Basic tenets of health care reform

References: 1. Centers for Medicare and Medicaid Services. http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Market-Reforms/. Accessed June 22, 2015. 2. Kaiser Family Foundation. http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/. Updated May 26, 2015. Accessed June 10, 2015. 3. America's Health Insurance Plans. Time for Affordability website. http://ahip.org/Issues/January-1-2014-Provisions.aspx. Updated June 25, 2014. Accessed June 22, 2015. 4. Kaiser Family Foundation. http://kff.org/health-reform/state-indicator/state-health-insurance-marketplace-types/. Accessed June 22, 2015.

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Essential health benefits

actuarial value

cost-sharing limitations

grandfathering rules

employer mandate MLR

rescission

internal/external reviews

Medicaid expansion2

30 states including DC3 states open debate

18 states not moving forward

Premium subsidies for low- and moderate-income Americans to buy health insurance3

14 states/DC state-based marketplace 7 states partnership marketplace

27 states with federal marketplaces4

Individual mandate3

•No determination of eligibility based on health status1

•No exclusions for pre-existing conditions1

•Dependent children covered up to age 261

•No annual dollar limits, no lifetime limits1

•No cost-sharing for certain preventive services1

•Must provide comprehensive coverage; eg, essential health benefits (fully insured), metal tiers, cost-sharing limitations1

•90-day maximum waiting period1

Key provisions of the ACA

Reference: 1. Patient Protection and Affordable Care Act. US Government Publishing Office website. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 22, 2015.

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ACA

•Reporting cost of coverage on Form W-21

• Applies to employers that filed more than 250 W-2s in the prior year

•Summary of Benefits and Coverage (SBCs)2

•Exchange notice• Employers must have furnished by October 1, 20133 •  Also, must furnish to new employees within 14 days

of start date (no DoL penalty for failure to provide notice)3,4

• Reporting health coverage to the IRS5

Notice and disclosure requirements

References: 1. Internal Revenue Service. 2013. http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage. Updated December 22, 2014. Accessed June 22, 2015. 2. Federal Register. http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=25818. Published February 14, 2012. Accessed June 22, 2015. 3. US Department of Labor. http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html. Accessed June 22, 2015. 4. US Department of Labor. http://www.dol.gov/ebsa/newsroom/tr13-02.html. Accessed June 22, 2015. 5. Schreiber SP. http://www.journalofaccountancy.com/News/20149733.htm. Published March 5, 2014. Accessed June 22, 2015.

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Taxes and fees

References: 1. Mojiri-Azad RL. http://www.irs.gov/pub/irs-drop/n-14-56.pdf. Accessed June 22, 2015. 2. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-03-11/pdf/2014-05052.pdf. Published March 11, 2014. Accessed June 22, 2015. 3. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-03-04/pdf/2013-04836.pdf. Published March 4, 2013. Accessed June 22, 2015.

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Fully insured plans only

• Insurer excise tax: based on carrier market share3 • Adds estimated aggregate

fee of $3.3B in 20163

• Likely increase 2016 through 20193

Fully and self-insured plans

• PCORI excise tax:$2.08/covered life in 20151 • Indexed to annual CPI (ends

with 2019 plan year)1

• Reinsurance fee: $44/covered life in 20152

"Cadillac tax" effective 2018

Reference: 1. Excise tax on high cost employer-sponsored health coverage, 26 USC §4980I (2010).

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High-risk professions include1:• Qualified retirees •  Electrical/telecommunications repair

workers • Law enforcement/fire protection workers• Out-of-hospital emergency medical

providers • Longshore workers •  Construction, mining, agriculture,

forestry, and fishing workers

Higher threshold for high-risk professions1:

$11,850/single  $30,950/family

Fully and self-insured plans

$10,200/single  $27,500/family

40% excise tax on plan value in excess of1:

It doesn't stop there…

References: 1. Internal Revenue Service. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax. Updated March 5, 2015. Accessed June 23, 2015. 2. American Institute of CPAs. http://www.aicpa.org/interestareas/tax/resources/trustestateandgift/toolsandaids/pages/estateandtrustimpactof38medicaresurtax.aspx. Accessed June 23, 2015. 3. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-08-30/pdf/2013-21157.pdf. PublishedAugust 30, 2013. Accessed June 23, 2015.

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• Medicare surtax• 0.9% on wages (individuals with $200,000+ MAGI

or joint filers with $250,000+ MAGI)1 • 3.8% on non-wage income2

(+half for a child) or 1% of the family income3

2014

$95/person

(+half for a child) or 2% of the family income3

2015

$325/person

(+half for a child) up to $2,085/family or 2.5%

of family income over filing limit3

2016

$695/person • Individual

responsibility tax3

•2016: small employers defined as 1-100 employees1

•All fully insured, small group plans must cover the 10 essential health benefits2

•”Metal levels” meet an actuarial value ±2%2,3

Small group market reforms

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Bronze 60% AV

Silver70% AV

Gold80% AV

Platinum 90% AV

References: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-10-30/pdf/2013-25326.pdf. Published October 30, 2013. Accessed June 23, 2015. 2. Patient Protection and Affordable Care Act. US Government Publishing Office website. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 23, 2015. 3. US Department of Health and Human Services. https://www.cms.gov/CCIIO/Resources/Files/Downloads/av-calculator-methodology.pdf. Accessed June 23, 2015.

• All employees treated as a single risk pool regardless of where coverage is obtained1

Risk pooling

Small group market reforms (cont’d)

Reference: 1. Patient Protection and Affordable Care Act. http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.pdf. Published March 23, 2010. Accessed June 23, 2015.

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• Premium rate may only vary by:1 • Age (3:1 ratio) •  Tobacco use (1.5:1 ratio) • Single or family coverage •  Rating area (geography)

Insurance companies prohibited from setting premiums based on health status1

2015 maximum out-of-pocket (MOOP) now $6,600 for single, $13,200 for family coverage (same as small groups)1

• Delayed for most group plans to plan years beginning January 1, 2015 or later2

2015 high-deductible health plan (HDHP) MOOP limits are now $6,450 for single, $12,900 for family coverage3

Large group market reforms

References: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-03-11/pdf/2014-05052.pdf. Published March 11, 2014. Accessed June 23, 2015. 2. US Department of Labor. http://www.dol.gov/ebsa/faqs/faq-aca18.html. Published January 9, 2014. Accessed June 23, 2015. 3. Ruane B. Internal Revenue Service website. https://www.irs.gov/pub/irs-drop/rp-14-30.pdf. Accessed June 23, 2015.

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•Limits on deductible and out-of-pocket maximums1

•Nondiscrimination for insured plans determined under IRC 105(h)2

• Internal and external appeals process rules1 •Coverage of in-network preventive services without cost sharing1 •Special rules on choosing a primary care provider1 •  No prior authorization (PA) for OB-GYN visits1 •Coverage of out-of-network emergency services using

in-network cost sharing and no PA requirement1 •Coverage of treatment for those in clinical trials1

Mandates for non-grandfathered plans only

References: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013. 2. Dvoretzky J. http://www.irs.gov/pub/irs-drop/n-11-01.pdf. Accessed June 23, 2015.

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Employers are subject to a tax penalty if1:

•  Health coverage is not offered to at least 95% of FTEs (70% for 2015) and dependent children age <26

• Employer offers coverage, but it’s unaffordable or does not provide "minimum value"

• Employee purchases health insurance through the exchange and gets a premium subsidy

Employer mandate (shared responsibility)

Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2014-02-12/pdf/2014-03082.pdf. Published February 12, 2014. Accessed June 23, 2015.

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Applies to employers with ≥50 FTEs

employers with 50-99 employees

get transitional relief in 20151

•  If multiple coverage options are offered, the affordability test applies to the lowest-cost option that also meets the minimum value requirement1

•Employers are prohibited from using incentives offered through wellness programs to calculate affordability or minimum value1

• Tobacco cessation programs excepted1

Employer mandate: a few caveats

Reference: 1. http://www.gpo.gov/fdsys/pkg/FR-2013-05-03/pdf/2013-10463.pdf. Published May 3, 2013. Accessed June 23, 2015.

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•2015 transitional relief for employers with 100+ FTEs1

• Penalty calculated after subtracting employer’s allocable share of 80 full-time employees—instead of 30

Penalty for failure to offer coverage


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$2,000 x (#FTEs - 30) x 1/12 = $ penaltyAssessed only if FTE receives a premium subsidy1

•The penalty for any calendar month is capped at the penalty the employer would have paid had it not offered coverage1

•MV calculator is available at www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html

Penalty for unaffordable or less than minimum value coverage


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$3,000 x #FTEs x 1/12 = $ penaltyfor each month health coverage is not affordable1

http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html



•To determine "applicable large employers" status, add together1:• FTEs who work 30+ hours/week during a calendar

month; or at least 130 hours/month • Aggregated part-time employees (add up all the

hours worked and divide by 120) • Include hours actually worked plus paid time for

sick leave, holiday, vacation, military duty, etc

Penalties for employers with 50 or more employees


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Penalties are not tax deductible1

Seasonal workers• Seasonal workers who work 120 or

fewer calendar days may be excluded from this calculation1

What about…?


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• Individuals are not eligible for subsidies offered through the Exchange if eligible for employer-sponsored coverage1

BUT… • If employer-sponsored coverage is either

unaffordable or does not provide minimum value, employees may1: • Opt out of employer coverage • Go to the Exchange for coverage • Depending on income, access subsidies

General rule regarding subsidies

Reference: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013.

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An individual is eligible if1:

Who is eligible for a premium subsidy?

Reference: 1. Furrow B, et al. Health Law: Cases, Materials and Problems. 7th ed. St. Paul, MN: West Publishing; 2013.

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Household income is 133% to 400% of the federal poverty level

Not enrolled in an employer group health plan

Plan premium is >9.5% of household incomeOrPlan share of covered health expenses is less than 60%

• ACA stated that subsidies will be provided to individuals who purchase insurance on an exchange "established by the state"1,2

• IRS regulations allowed the government to provide subsidies regardless of whether the insurance was purchased on a state-based or federally facilitated exchange1,2

Legal challenge: King v. Burwell

References: 1. Eligibility for premium tax credit, 26 CFR §1.36B-2 (2013). 2. Premium tax credit definitions, 26 CFR §1.36B-1 (2015). 3. King v Burwell, 759 F3d 358 (4th Cir 2014). 4. Families USA website. Victory for the ACA at the Supreme Court. http://familiesusa.org/initiatives/king-v-burwell. Accessed July 24, 2015.

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• Whether the federal government may provide subsidies to individuals who purchase insurance on federally facilitated exchanges3

• Plaintiff claimed that the IRS misinterpreted the ACA provision3 • Plaintiff argued that subsidies should only be available for insurance purchased on an exchange

"established by the state"3

The situation

The issue before the Supreme Court

 The arguments

• Case decided on June 25, 2015, in favor of ACA4

• The government may continue to provide subsidies to individuals who purchase insurance on federal exchanges4

The verdict

• ACA requires employers with more than 200 FTEs that offer health coverage to automatically enroll new FTEs in a coverage option1

• Existing elections for current FTEs must also automatically continue on a yearly basis1

• Employers are not required to comply until regulations are issued1

Automatic enrollment

Reference: 1. US Department of Labor. http://www.dol.gov/ebsa/newsroom/tr12-01.html. Published February 9, 2012. Accessed June 23, 2015.

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Estimated release date of regulation is uncertain

• Reward not based on health factor (eg, obesity)

• HIPAA rule not applicable • Other rules may apply

(eg, ERISA, ADA, GINA)

Wellness programs and the ACA

Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/2013-12916.pdf. Published June 3, 2013. Accessed June 23, 2015.

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• Reward based on health factor

• HIPAA rules applicable • 2 categories:

• Activity-only: must complete activity related to health factor to get reward, but not required to attain specific health outcome

• Outcomes-based: must attain or maintain specific health outcome to get reward

Participatory1 Health-contingent1

Wellness programs and the ACA1

Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/2013-12916.pdf. Published June 3, 2013. Accessed June 23, 2015.

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Activity-Only Outcomes-Based

Opportunity to qualify • At least 1x/year • Same

Size of reward • Max 30% of cost of coverage • Max 30% of the cost of coverage • Max 50% for programs to limit tobacco use

Design • Must have reasonable chance of improving health or preventing disease

• Must not be overly burdensome or discriminate based on health status

Same

Availability and alternative standards

• Alternative or waiver must be available to those for whom it is medically unreasonably difficult or inadvisable to attempt to participate

• Plan is permitted to require physician verification

• Alternative must be available to every individual who does not meet the standard or seeks an alternative

• Plan is not permitted to seek physician verification

Notice of alternative standards

• Plan must provide notice of alternative standard • Notice must include contact information, and state that

physician recommendations will be accommodated

• Plan must provide notice of availability of an alternative standard in all program materials and in disclosures informing individuals that they did not satisfy the original standard. Notice must include contact information, and state that physician recommendations will be accommodated

Heart disease prevention

ACA-recognized wellness programs1

Reference: 1. Federal Register. http://www.gpo.gov/fdsys/pkg/FR-2013-06-03/pdf/. Published June 3, 2013. Accessed June 23, 2015.

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Wellness and prevention efforts

Diabetes prevention

Smoking cessation

Weight management

Physical fitness

Health coaching

Health education seminars

Post-ACA wellness litigation

• Participatory program. Employees were required to complete: • Biometric testing • Health risk assessment (HRA)

• Plaintiff was unable to participate due to medical leave and hospital treatment

• Upon returning from medical leave, plaintiff’s attempt to participate was rejected and his benefits were terminated

•  Plaintiff was told that his medical insurance was cancelled because he had not completed Flambeau’s requirements

• Plaintiff was informed that he could apply for medical insurance at the COBRA premium rate• If plaintiff participated in the wellness program, Flambeau

would have paid ~75% of his premium • Plaintiff was unable to pay the COBRA premiums

EEOC v. Flambeau, 20141

Reference: 1. EEOC v Flambeau, 3:14-cv-00638 (WD Wisc 2014).

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• EEOC claims the program is not voluntary biometric testing • Plaintiff's health insurance was

terminated and he was penalized by having to pay COBRA premium for reinstatement, thus violating ADA

• Plaintiff was told that participation was "mandatory" to be on the company's health plan• Employees were told that they

would be subject to disciplinary action for failing to participate

• New employees were not offered health coverage unless they participated

Allegations

• Participatory, activity-only program. Employees had to:• Complete a health risk assessment (HRA)• Undergo blood work• Use a range of motion machine in the company's physical

fitness room

•  Plaintiff objected to participation• Questioned whether voluntary (ADA); questioned confidentiality

of the information • Plaintiff was told by personnel director and plaintiff's supervisor

not to express any opinion of the program to coworkers • Employer paid 100% of premium if the employee participated

• Non-participants were responsible for the entire premium ($4,961.16/year + $50/month penalty)

• Plaintiff alleged that she was terminated for not participating

EEOC v. Orion Energy Systems, 20141

Reference: 1. EEOC v Orion, 1:14-cv-1019 (ED Wisc 2014).

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• Employer inquiries were not job-related or consistent with business necessity, as required under the ADA • Program was not voluntary• Plaintiff received a financial penalty

and was terminated

• Employer retaliated against plaintiff for her good-faith objections

• Employer interfered, coerced and intimidated plaintiff for exercising her rights under the ADA*

*ADA, American with Disability Act.

Allegations

• Participatory, outcomes-based.1 Employees and spouses participating in the HDHP are eligible to participate in the optional program

• Biometric screening provided by company or personal physician: blood pressure, cholesterol, glucose, height, weight, BMI, and nicotine or cotinine

• Data sent directly to an independent health management company; Honeywell receives only aggregate data

• Ill or pregnant employees may obtain a waiver

•  Financial incentives/penalties.1 HSA contributions: Participants qualify for HSA contributions from Honeywell up to $1,500 depending on employee’s annual base wage and the selected coverage. No company contributions if they do not participate

• Premium surcharge: $500 surcharge for non-participants applied to 2015 plan costs

• Tobacco surcharge: $1,000/year for employee, $1,000/year for spouse. Avoid surcharges by providing biometric screening report proving no tobacco use, enrolling in tobacco cessation program, Health Advocate confirmation of non-use

EEOC v. Honeywell International, 2014

References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. EEOC v Honeywell, 14-4517ADm/TNL, WL 5795481 (D Minn 2014).

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• Biometric testing is in violation of the ADA

• Spousal testing requirement violates GINA Title II

• Motion for temporary restraining order and preliminary injunction denied2

• No decision on EEOC's* ADA and GINA* claims

*EEOC, Equal Employment Opportunity Commission. GINA, Genetic Information Nondiscrimination Act.

Allegations1

EEOC ADA allegations1 • Biometric screening is an unlawful medical examination

• Not intended to determine whether the employees can perform the essential job functions or pose a direct threat to the health or safety of themselves or others

•  Not job-related or consistent with business necessity •  Penalty imposed on individuals who do not participate, therefore not voluntary

 Honeywell response • ADA's ”bona fide benefit plan" safe harbor "exempts certain insurance plans from the ADA's general

prohibitions, including the prohibition on 'required' medical examinations and disability-related inquires"2

• The wellness program was part of bona fide benefit plan2 • The wellness program is a term of the group health plan; information is used for risk assessment purposes • Identify and manage risks, lower claims cost, information sent to actuarial firm for underwriting purposes

• Voluntary wellness program3

• Financial incentives appear consistent with ACA guidelines: 30%-50% of the total cost of coverage depending on the program type

•  EEOC cannot rely on enforcement guidance that conflicts with Congress's express approval of surcharges in conjunction with wellness programs under the ACA

EEOC v. Honeywell International - ADA

References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. Seff v Broward, 691 F3d 1221 (11th Circ 2012). 3. EEOC v Honeywell, 14-4517ADm/TNL, WL 5795481 (D Minn 2014).

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EEOC GINA allegations1 • Employer is offering inducement to receive employee genetic information

• Genetic information from a family member (including spouse) cannot be requested

• Requesting spousal health information for spouse participation results in unlawful request of genetic information as it relates to the employee

• No exception for a spouse who is also a plan participant

 Honeywell response2 • Title I (group health plans and issuers) should apply because it is part

of a bona fide group health plan • EEOC can only enforce claims related to Title II of GINA (Title II applies to employers; eg,

adverse employment action)

• Even if the EEOC can bring action under Title II, Honeywell may request this information as part of a voluntary wellness program

•  Honeywell argues it should be allowed to request spousal information when the spouse is a plan participant

EEOC v. Honeywell International - GINA

References: 1. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). 2. EEOC v Honeywell, 0:14-cv-04517-ADM-TNL (D Minn 2014). Memorandum.

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Motion for temporary restraining order and preliminary injunction DENIED2

Court decision:

A hypothetical example

• Susan Ross, the corporate benefits manager at Acme Inc., would like to give employees a substantial discount on their health insurance premium if they participate in the program

• In particular, Susan has proposed wellness opportunities that employees undertake during the initial pilot year

Designing a corporate wellness program

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ACME

Acme Inc.'s proposed wellness program

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Smoking cessation programDiscount available to employees

who do not smoke or who participate in all cessation program activities.

”Appropriate body weight" programDiscount available to employees who maintain

appropriate weight or who make substantial progress toward achieving appropriate weight.

Immunization program

Discount available to employees who have received every immunization recommended for their age group.

Basic care program

Discount available to employees who visit a primary care provider at

least once during the year.

 Basic safety programDiscount available to employees who agree not to own/ride on a motorcycle, bicycle, Ski-Doo®,

Sea-Doo® or engage in any dangerous sport (eg, skiing and diving).

 Additional 5% discount On the premium if for 6 months the

employee does not use medical care covered by the health plan.

Questions:

Acme Inc. wellness program resolution

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Can Susan Ross institute these wellness programs and give premium discounts (assuming she has authorization from the VP of Human Resources and Legal)?

1How would you structure these programs to make them consistent with the limitations of the ACA?

2

The proposed program was leaked before management and legal had a chance to review it. Several employees complained

An overweight employee has a letter from a website from which he purchased a genetic test stating his obesity is at least partly due to genetic factors

Some object to the immunization program because they have decided to forgo immunizations for religious, medical, or philosophical reasons

 A Christian Scientist objects to the requirement that he see a primary care provider once a year to obtain the discount

An employee who just bought a time share in a ski resort argues that it would be unfair to create the basic safety program

A pregnant employee argues that she will be excluded from some potential rewards because of her pregnancy

Issues will arise

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1

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• The ACA delivers important benefits to both working and retired employees

• ACA clearly defines the elements that affect employers• Wellness programs—a high-interest, high-value employee

benefit—must be developed within current ACA, HIPAA, GINA, ADA, and EEOC requirements and carefully vetted utilizing EEOC guidance

• Market reforms are manageable, and will continue to evolve

In closing…

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The ACA represents an important opportunity for employers

Questions, answers, and closing comments

the affordable care act what employers need to know

Documents

insurance oversight

kaiser family foundation

new affordable care

states partnership marketplace

medicaid services

unique market

employer mandates

medicaid expansion decision