broad overview impacts on employees employers and insurers tools to get involved tina shozen...

Heath Care Reform 2009Monday August 24, 2009

•Broad Overview•Impacts on Employees Employers and Insurers

•Tools to Get InvolvedTina Shozen In-House Counsel & Compliance Officer

Flex-Plan Services © 2009

Presidents Principles of Health Care Reform

•Reduce long-term growth of health care costs for businesses and government •Protect families from bankruptcy or debt because of health care costs •Guarantee choice of doctors and health plans •Invest in prevention and wellness (recent newsletter)•Improve patient safety and quality of care •Assure affordable, quality health coverage for all Americans •Maintain coverage when you change or lose your job •End barriers to coverage for people with pre-existing medical conditions•http://www.whitehouse.gov/issues/health_care/

How a Bill Becomes Law

Current Timeline

Comparison of Major Health Care Reform Proposals

House Tri-Committee America’s Affordable Health Choices Act of 2009 (HB 3200)

INDIVIDUAL MANDATE

•“Acceptable health coverage” or penalty of 2.5% AGI•Up to cost of AVG national premium under the “Exchange”

•Exceptions for dependent, religious objections, and financial hardship

House Tri-Committee America’s Affordable Health Choices Act of 2009 (HB 3200)

EMPLOYER REQUIREMENTS

•Pay at least 72.5% for single coverage & 65% for family.•Or pay 8% of “payroll” into Exchange Trust Fund

•E&L amendment provides hardship exemptions for employers negatively affected by job losses

•Small Employer exceptions:•Annual payroll <$500K exempt•Annual payroll $500K-$585K pay 2% of payroll•Annual payroll $586-$670 pay 4% of payroll•Annual payroll $670-750 pay 6% of payroll

•Also require auto enrollment for all employees

House Tri-Committee America’s Affordable Health Choices Act of 2009 (HB 3200)

Expansion of Public Programs

•Expand Medicaid to all individuals with incomes up to 133% FPL•Medicaid for all newborns•Low income HIV-Infected individuals•CHIP enrollees to obtain coverage through the Exchange

Premium Subsidies to Individuals & Employers

Individuals •Credits to individuals and families up to 400% FPL•Coverage purchased through the Exchange•Credit provided on a sliding scaleEmployers•Provide employers with <25 employees w/ average wages <40K • 50% premium costs for <10 employees & average wage <20K•Not permitted for employees earning >80K

Tri Committee’s Financing PlanSurcharge on families earning >$350K and individuals earning >280K

•1% on $350K-$500K•1.5% on $500-$1MIL•5.4% on >$1MIL

Senate HELP CommitteeINDIVIDUAL MANDATE

•Everyone must have insurance or pay tax up to $750/yr•Exceptions

•Individuals in states without a “Gateway”•Indian tribes•Those who affordable coverage is not available•Those without coverage for <90 days

Senate HELP CommitteeEmployer Requirements

•Employers must offer coverage and •Pay 60% of the cost or $750/year for each employee not

covered.Expand Public Plan

•To all with incomes 150% of the FPL•CHIP enrollees option to enroll in Gateway

Premium Subsidies to Individuals and Employers

INDIVIDUALS

•Provide premium credits on sliding scale for individuals up to 400% FPL to the Gateway.

EMPLOYERS

•Credits to small employer (<50 employees) with <$50K income.•Employer must pay 60% of the premium•Employers can’t receive >3 years in a row

Senate Finance CommittePapers have been released but no formal proposal

•Requires all individuals to have health insurance•Create health insurance Exchange•Subsidies to individuals and families wit incomes between 100-400% of the FPL•Impose new regulations on non-group and small group markets•Expand Medicaid and CHIP•Offer temporary Medicare buy-in for pre-Medicare population

Senate Finance Committee Financing Options

No formal proposal but prior papers revealed the following:

•May 2009 Financing options•Tax on sugary drinks•Tax on alcohol•Tax on employee benefits

•SFC went back to the drawing board and yet to release

What we may see from the SFCA cap on all employee benefits and a separate cap on FSAs

•OVERALL CAP OF $8K for individuals•OVERALL CAP $21K for families (we could see 18K )•A SEPARATE CAP of $2000 for account based plans (FSAs and HRAs)•For an individual that means $666/month for benefits•For a family that means $1750/month for benefits

•Includes group medical, dental, vision, cancer, disability, FSAs, HRAs, HSAs, EAP, and any other benefit.

How does the cap work?Assume employee receives >23K of benefits

•Employer is assessed an excise tax of 35% on the overage for self-insured plans (self-insured medical plans, & FSAs/HRAs)• Each insurer is assessed an excise tax of 35% on the overage for their respective benefit.

ExampleEmployer will need to calculate the total benefits received by each employee

•Under the employers plan•Under a spouses plan•Under any state plan•Under a previous employers plan•Etc.

$23K

Example cont.•Employee receives $23,000 in benefits•That’s $2,000 over the cap•Calculate the Excise tax .35 x $2000 = $700•Calculate the % of each benefit to assess the excise tax•E.g. dental of $100/month divided by $23,000 = .052

•% Dental•% Vision•% FSA•% Group medical•% Cancer•% Accident

.052%.018%

.087%.79%

.031%.02%

Example Cont.For each benefit multiply the % of the total by the overage

• Dental .052 x $700 = $36.4• Vision .018 x $700 = $12.6• FSA .087 x $700 = $60.9• Group medical .79 x $700 = $553• Cancer .031 x $700 = $21.7• Accident .02 x $70 0= $14

The employer will somehow have to report these amounts to the individual insurers for each employee.

The employer will pay the excise tax on the FSA (self-Insured)The insurer will pay a 35% tax on the insured plans

Effects of an Overall Cap on Employee Benefits

•Administrative burden on employers•Gathering data on all employees, spouses, dependents•Calculating & reporting overage to assess excise tax•Costs of providing FSAs and HRAs will increase

•Employers will ratchet back benefits•Less administrative burden (less to calculate)•First to go will be FSAs/HRAs, self-insured plans (tax applies to employers)•Inconsistent with increased “choice” intent of reform

•Cost to insurers?•Definitely, these costs will increase all premiums • Also inconsistent with “lowered costs” intent of reform

Effects of Capping FSAs•Currently

•Employers choose their maximum based on their needs•Capping FSAs will constrain employers ability to tailor

benefits• Increased taxes on the employer

•Employer pays FICA and FUTA on amounts over $2K•Example: Employee would have set aside $3K but can’t—now employer pays FICA and FUTA on $1000

Effects of Capping FSAs on Employees•Reduced choice•Reduced ability to tailor their own benefits•Cap will disproportionally affect families and the chronically ill

•Families have higher medical costs•Child birth can cost up to $5,000 OOP•Chronic ill Americans always have high OOP cost

•Even under a reformed health care system there will be OOP costs.•OOP expose the patient to the realities/costs of health care and can drive down utilization. FSAs help to shoulder those costs (pre-funded)•FSAs increase patients’ awareness to costs & encourage smart choices•Capping FSAs is a tax on middle class paid for by chronically ill and families•Increased taxes on all employees who would have set aside >$2K

What are we asking for?

•No cap on employee benefits•No cap on FSAs/HRAs•Don’t take away OTC tax benefits

How do you get your voice heard?•Target the Senate Finance Committee

•They have not release their plan

•Call or Email Senate Finance Committee Members•Ask for:

•No overall cap on health care benefits•No cap on FSAs

• Talking points or body of letter/email

•Also visit http://www.savemyflexplan.org/ to write/call/email members of congress

What else can we do?GET INVOLVED1. Request a meeting with your Senators and Representatives in their State/District

offices.2. Attend town hall meetings (schedule).3. Invite your Senator and Representative to visit your offices.4. Encourage your clients to contact their Senators and Representatives (

sample letter).5. Write a letter to the editor/opinion piece for your local newspapers.6. Contact television and radio stations to inform them of the issue.

STAY INFORMED• http://www.kff.org/healthreform/sidebyside.cfm• http://www.flex-plan.com/news.aspx• http://www.ecfc.org/legislative/effective-lobbying/member-provided-resources/

Thanks for attending•Finally

•Support over all principles•Pay-fors need some attention•Need to look at unintended consequences•Need to protect those mechanisms in the current system that promote the overall principles

•Questions?