2018 ACA and Compliance Updates. Trends and Employer Best PracticesCASBO Meeting - October 25, 2017

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1. 2018 ACA Employer Reporting

2. ACA & Compliance Reminders

3. Medical Trends and Employee Benefits Best Practices

Agenda

©2017. KeyCorp. 171011-304713

2018 ACA Employer Reporting

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Effective with the 2015 tax year, mid-size (50-99 FT and FTEs) and large employers (>100 FT and FTEs) were required to file annual reports with the IRS on the terms and conditions of their health care coverage for full-time employees during the prior year.

Entities that provide “minimum essential coverage” are required to file annual reports that provide information on each individual for whom they provide the coverage.

This requirement applies to all, applicable, mid-size and large employers including fully-insured/self-insured, grandfathered/non-grandfathered, government entity, etc.

The reporting requirements are categorized as Code Sections 6055 (Individual Mandate) and 6056 (Employer Mandate).

Employer Reporting to IRS and HHS

https://www.irs.gov/affordable-care-act

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ACA Provision Compliance

Employer Mandate

Employer/Plan Sponsor

1094-C

Affordability

Employer/Plan Sponsor

1095-C, Part II

Individual Mandate

Fully-insured Health Plan?

Insurer1095-B

Self-insured Health Plan?

Employer/Plan Sponsor

1095-C, Part III

ACA Provision

Reporting Responsibility

Form

https://www.irs.gov/affordable-care-act

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1095 Form Distribution to Plan Participants

For the 2016 calendar/tax year, the IRS had extended the 1095-C Form distribution date to plan participants from January 31, 2017 to March 2, 2017.

The expectation is that for the 2017 calendar/tax year, the 1095-C Form distribution date to plan to plan participants will remain as postmarked by January 31, 2018.

Employer Reporting to the IRSAn employer subject to the ACA’s Employer Mandate and Affordability provisions (>50 full-time & full-time equivalent employees), will need to report the following forms to the IRS by their corresponding deadline dates.

Employer ACA Reporting Deadline Dates

Form 2017 Calendar/Tax YearReporting Deadline

1094-C 3/31/2018

1095-CIf sending hard-copy: 2/28/2018

If electronic: 4/2/2018

https://www.irs.gov/affordable-care-act

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On July 28, 2017, the Internal Revenue Service (IRS) released new 1094-C and 1095-C Forms for employer/plan sponsor use in reporting health plan compliance with the Affordable Care Act’s (ACA) Employer Mandate and Affordability provisions in the 2017 calendar/tax year.

IRS Instructions for 2017 Reporting

Overall, the new 1094-C and 1095-C Forms for 2017 are unchanged from the 2016 versions with the one exception of the removal of any ACA Transition Relief.

For a copy of the 2017 version of each form, follow the links to:

https://www.irs.gov/pub/irs-dft/f1094c--dft.pdf

https://www.irs.gov/pub/irs-dft/f1095c--dft.pdf

For a copy of the IRS “2017 Instructions for Forms 1094-C and 1095-C” follow the link to:https://www.irs.gov/pub/irs-dft/i109495c--dft.pdf

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ACA Transition Relief

Two ACA Transition Relief Safe Harbors that an employer could claim on Line 22 of the 1094-C Form.

1. Qualifying Offer Method Transition Relief

2. Section 4980H Transition Relief.

Generally, ACA Large employers (100+ FT & FTE) with fiscal plan years, or, ACA Mid-size employers (50-99 FT & FTE) were able to claim one of the ACA Transition Relief Safe Harbors in 2015.

2016One ACA Transition Relief Safe Harbor

1. Section 4980H Transition Relief

Only ACA Mid-size employers (50-99 FT & FTE) with fiscal plan years could claim ACA transition relief and only for those months in 2016 prior to “the 1st Day of the 1st New Plan Year in 2016”.

2015ACA Transition Relief is

no longer available to any employer of any size.

2017

https://www.irs.gov/affordable-care-act

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1094 – C Form Revisions – 2017 Form

Only applied to ACA Mid-size Employers with fiscal health plan years and only to those month in 2016 that are part of a health plan year that

began in 2015.

No longer available.

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1095-C Form Revisions – 2017 Form

No change to the form, however, a new “Instructions for Recipient” section has been

added. This added section is for communications purposes only and does not change how the employer/plan sponsor completes the form.

ACA & Compliance Reminders

Medicare Part D, SBCs and Open Enrollment Compliance

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• Created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. (Program went into effect in 2006.)

• Allows Medicare Parts A & B enrollees to add prescription drug filled at a pharmacy to their benefit coverage.

What is Medicare Part D?

If a retiree does not elect Medicare Part D when first eligible, he will pay a penalty to join at a later date….

UNLESS….

the retiree provides a “Certificate of Creditable Coverage.”

https://www.cms.gov/

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“Creditable” coverage defined as benefits with an actuarial value at, or above, Medicare Part D benefits.

If coverage is NOT creditable, then employer sends a Certificate of non-Creditable Coverage.

Certificate must be provided by October 15th (the beginning date of the Medicare Part D Open Enrollment) to all Medicare-eligible participants in the employer-

sponsored group health plan.

Issued every October by employers sponsoring group health plans offering drug coverage to a Medicare Part D eligible individual.

Certificate of Creditable Coverage?

For a copy of the 2017 CMS Creditable Coverage Medicare Part D Letter, follow the link to:

https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters.html

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Some of the changes to the SBC template include:

• Reduced template from 8 pages to 5 pages;• Added a cost fracture example;• Updated claims/pricing data in the example

calculator;• New minimum essential coverage and

minimum value language; and• Update glossary.

On April 6, 2016, the Department of Labor (DOL) updated the ACA Summary of Benefits Coverage (SBC) template intended for use as of April 1, 2017.

ReminderThe SBC must be included in any new hire enrollment material as well as the annual open enrollment materials for all employees.

You can access a copy of the new SBC template at:http://www.dol.gov/ebsa/healthreform/regulations/summaryofbenefits.html

SBC Template Updated

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Open Enrollment Compliance

The ACA Summary of Benefits Coverage is not the only employee benefits compliance document that needs to be included in a plan sponsor’s open enrollment materials. Other ACA & compliance documents include:

● HIPAA Notice of Privacy Practices/Special Enrollment Rights/Pre-existing Condition Exclusion

● CHIPRA Employee Notification of State Premium Assistance

● Wellness Program Disclosure

● Women’s Health and Cancer Rights Act (WHCRA)

● Newborns’ and Mothers’ Health Protection Act (NMHPA)

● Genetic Information Non-Discrimination Act (GINA)

● Opt-out Mental Health Parity and Addiction Equity Act Notice (if applicable)

● Notice Regarding Employer Contribution to Health Savings Account (if applicable)

For many plan sponsors, these compliance documents should already be included in the plan’s ERISA-compliant Summary Plan Description (SPD).

For plan sponsors not subject to ERISA, they are still responsible for providing these documents to the plan participants.

https://www.healthcare.gov/health-care-law-protections/summary-of-benefits-and-coverage/

Medical Trends and Employer Best PracticesWhat’s Next. . . . . .

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Economic Drivers Income: Higher incomes are associated with relatively higher health spending so, as

incomes are rising on average, healthcare spending is increasing.

Demographics: The American workforce has been aging as the Baby Boomer generation reaches retirement. An older workforce typically comes with increased health needs which results in higher healthcare expenditures. A recent HRI analysis showed that aging will account for 0.4% of annual employer medical spending increases in the decade from 2012 to 2022.

Lifestyle: Obesity, smoking, substance abuse, poor nutrition and physical inactivity intensifies utilization of of health care services. Over 70 percent of Americans are considered overweight and abuse of opioids such as heroin and prescription pain relievers is increasing. These growing risks drive healthcare costs upward. However, focus on workplace wellness initiatives that target these risks could help stem the tide of increasing costs.

Medical Cost Trend Drivers

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Healthcare Drivers Technology and Treatment Innovation: Pharmacy, Life Science and Medical Device

industries are funding research and development and launching new products each year. An increasing number of procedures can now be performed at lower cost on an outpatient basis based on technology advances and new technology such as virtual visits and telehealth can create a more efficient and convenient way to receive traditional medical care.

Consolidation: Providers, Payers and Pharmaceutical companies have engaged in a surge of merger and acquisition activity which allows for great market share that comes with negotiating power and the ability to drive up prices.

Payment Models: The shift from fee-for-service models, which tended to create incentives for increasing the volume of services, is being replaced with a focus on pay-for-value instead of volume. While value based models remain relatively scarce, early findings are demonstrating savings through making transparency, quality and strong care management a greater priority.

Medical Cost Trend Drivers

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Pharmacy and Outpatient costs will take up a larger portion of Employer spend in 2018 than in the past:

Outpatient and Pharmacy Spend Trend

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Retail Clinics and Urgent Care Centers have led to higher utilization and incrementally higher medical cost trend (an estimated annual increase of 21% in medical costs for low-risk conditions), but are a much cheaper alternative to care through a Hospital Emergency Room.Employers will need to continually review cost sharing alternatives for these services so that employees pay a larger percentage of the costs for this added “convenience”.

Medical Cost and Pricing Trends

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The mental health share of employee benefits costs is increasing and behavioral health is often closely connected to overall health, with 68% of people with mental nervous conditions having chronic health conditions such as diabetes and heart disease. The Opioid crisis is also affecting mental health and substance abuse trend substantially, with the rate of adult hospital inpatient stays increasing 64.1% and opioid related ER visits increasing by 99.4% over the last decade.

Medical Cost and Pricing Trends

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Examine Health Benefits as part of a Total Rewards and Total Compensation strategy by evaluating program design and subsidy levels

Understand your Group Population Health by targeting worksite health promotion programs to the right people; seeking opportunities to measure and analyze your health care data in ways critical to forming the right health care strategies and selecting programs that will support your overall goals

Take action to curb the cost of Pharmacy Benefits through focus on price, utilization manufacturer rebate strategies and delivery/site of care

Improve employee engagement and consumerism by reviewing program structure and incentive strategy

Consider care extenders, such as telemedicine and retail clinic promotion, to enhance employee access, productivity and convenience in a cost-effective manner for both medical and behavioral health conditions

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Best Practice Next Steps

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Place greater emphasis on value-based arrangements through plan designs that encourage employees to utilize high-value networks and services (quality and cost effectiveness) to maximize the value employees receive from their health care benefit and explore the potential for direct contracting with providers for high-cost or high-risk procedures

Improve employee behavioral health through enhanced navigation support, integrating behavioral health with medical and disability conditions and effective support for complex behavioral health issues

Put employees at the center of the health care strategy• Enhance the member experience through more choice with decision support• Expand well-being programs to address financial wellness issues alongside the

physical, emotional and social aspects of the existing strategy• Adapt the workplace environment to encourage good health habits

Evaluate Employee Engagement Across Generations through a commitment to understand the generational differences that exist among employees. Focusing on generations at work leads to enhanced recruiting, retention, engagement, productivity, satisfaction, retention and culture of caring

Best Practice Next Steps

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Questions and Thank You!