Frankfort Educational Networking Symposium

Health Care Reform ExplainedMay 15, 2013

presented by:

Aaron Ruswick Whitney Schmidt

presented by:

Steve HoganBrian J. Stumm

Welcome

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PresentersStumm Insurance, LLC

Steve Hogan steve@stumm.com 773.862.7761 x109Brian Stumm brian@stumm.com 773.862.7761 x102

Huck Bouma PCWhitney Schmidt wschmidt@huckbouma.com 630.221.1755 x1193Aaron Ruswick aruswick@huckbouma.com 630.221.1755 x 1254

ObjectiveTo understand the past and future impact the Affordable Care Act will have on the American public, including both individuals and employers.

Synonyms for TodayHealth Care ReformObamacarePatient Protection and Affordable Care Act (PPACA) Affordable Care Act (ACA)

Agenda

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Timeline of Events20102011-12201320142017-18

Closer LooksSubsidy (Tax Credit) ExamplesMarketplaceLarge Employer CalculationLarge Employer RoadmapBottom Line

Question & Answer SessionCollect Question Cards

2010

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Lifetime MaximumsInsurance plans prohibited from imposing lifetime benefit limits and restricted annual limits.

Dependent Age LimitInsurance plans required to carry dependents up to the age of 26.

Preventative ServicesInsurance plans required to cover preventive services without cost sharing.

Pre-Existing Exclusions for ChildrenInsurance plans prohibited from denying coverage to individuals under the age of 19 based on pre-existing conditions.

High Risk PoolsTemporary (until 2014) high risk pools established for individuals (older than 19) who are denied coverage based on pre-existing conditions.

RenewabilityInsurance plans prohibited from rescinding coverage except in cases of fraud or lack of payment.

State Carrier ReviewsStates begin reviewing premium trends and companies must justify increases over certain thresholds. There is no new power to block rate increases but plans may be excluded from exchanges.

Small Business Tax Credit (Phase I)Small businesses with less than 25 employees and average annual wages of less than $50,000 are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium. Employers must subsidize at least 50% of their employees’ premiums in order to be eligible for the tax credit. Available through 2013 only.

Co-Ops CreatedCreate the Consumer Operated and Oriented Plan (Co-Op) program to foster the creation of non-profit, member-run health insurance companies in all 50 states. $6 billion is appropriated to finance the program and award loans and grants to establish Co-Ops by July 1, 2013. Illinois creating Co-Op named Land of Lincoln.

2011

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Medical Loss RatioInsurance plans required to comply with new medical loss ratios (MLR):

80% - Individual Plans80% - Small Groups85% - Large Groups

Companies required to provide rebates to consumers if they fail to comply with the MLRs.

Exchange FundingFunding available for states to begin establishing Exchanges until January 1, 2015.

Part D AssistanceMedicare Part D beneficiaries that fall into the “donut hole” will receive a 50% discount on covered brand-name prescriptions. This will grow to a 75% discount by 2020.

OTC MedicationsOver-the-counter drugs not prescribed by a doctor may not be reimbursed through an FSA or HRA, nor on a tax free basis through an Archer MSA or HSA.

W2 ReportingEmployers with 250+ employees are required to report cost of employer sponsored group health coverage on employee W2s for 2012 tax year. This value is not taxable.

SBCs Summary of Benefits and Coverages: Beginning with renewals after September 23, 2012, health plans must provide a standardized and easy to understand summary of benefits and coverages as well as a glossary of commonly used insurance terms developed by HHS.

2012

2013

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Medicare Tax IncreaseIncrease in the Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers ($250,000 for joint filers).

Investment Income Tax Increase3.8% tax increase on investment income for taxpayers making $200,000 per year ($250,000 for joint filers); however in real estate transactions there is an exemption in current law for $250,000 on the sale of a principal residence ($500,000 for joint filers).

National Long Term Care**A national long term care assistance/disability insurance plan (CLASS) is established. The benefit is tied to one’s inability to perform two or three Activities of Daily Living (ADLs) and the benefit amount is varied based on the “scale of functional ability” with a $50-7/day cash benefit. All working adults will be automatically enrolled in the program unless they choose to opt-out.

**Implementation of this program halted indefinitely by Department of Health & Human Services

FSA LimitsPre-tax contributions to FSAs limited to $2,500 per year.

Marketplace NoticesEmployers required to provide notice to employees of marketplace availability by October 1, 2013.

2014

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New RulesInsurance plans required to abide by guaranteed issue, minimum benefit standards, revised rate bands (age-based and community-rated) for individual and small group market (2-100 employees).

Individual MandateIndividuals required to purchase health insurance or face a tax penalty:

2014 – up to $95 per year (or 1.0% of income, whichever is greater)

2015 - $325 per adult (or 2.0%)

2016 - $695/year (or of 2.5%)2017 and beyond - indexed to

inflation.

Subsidies for IndividualsPremium tax credits (subsidies for purchase of health insurance) available via exchanges for individuals/families with incomes between 100% and 400% of federal poverty level, who do not receive employer based coverage.

Marketplaces (Exchanges)Exchanges are created and open to individuals and small businesses (2-50 employees). Exchanges will include four tiers of private plans:

Platinum – 90% actuarial valueGold – 80%Silver – 70% Bronze - 60% (and Catastrophic coverage).

Federal Poverty Guidelines*

Family Size

100% 200% 300% 400%

1 $11,490 $22,980 $34,470 $45,960

2 $15,510 $31,020 $46,530 $62,040

3 $19,530 $39,060 $58,590 $78,120

4 $23,550 $47,100 $70,650 $94,200

5 $27,570 $55,140 $82,710$110,28

0

6 $31,590 $63,180 $94,770$126,36

0

7 $35,610 $71,220$106,83

0$142,44

0

8 $39,630 $79,260$118,89

0$158,52

0

9… $43,650 $87,300$130,95

0$174,60

0

* These figures are approximate

Subsidy (Tax Credit) Examples

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Individual Family Status

Income Percentage of income that may be spent on health insurance

Estimated value of the employee’s annual tax credit in 2014

30 year-old with qualified employer coverage

Any $35,000

9.5% of household income

$0 - No one in the family qualified to buy coverage in the exchange or get a subsidy

30 year-old with no employer coverage

Single $35,000

9.5% of household income

$155 (based on Kaiser Family Foundation’s projection of a $3440 annual single premium in 2014)Individual’s annual premium costs would be $3325

30 year-old with no employer coverage

Married, 2 children

$35,000

3.97% of household income

$8,720 (based on Kaiser Family Foundation’s projection of a $10,108 annual family premium in 2014)Family’s annual premium costs would be $1,388

45 year-old with qualified employer coverage

Any $55,000

9.5% of household income

$0 - No one in the family is qualified to buy coverage in the exchange or get a subsidy

45 year-old with no employer coverage

Single $55,000

N/A $0 – Individual may buy coverage in the exchange but would not qualify for subsidyIndividual’s annual premium payments would be $5,609 based on Kaiser Family Foundation’s projection of 2014 single premium

45 year-old with no employer coverage

Married, 2 children

$55,000

7.52% of household income

$10, 100 (based on Kaiser Family Foundation’s projection of a $14, 250 annual family premium in 2014) Family’s annual premium costs would be $4,135

Marketplace (Exchange)

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PlatformGovernment-created platform for the sale of health insurance, intended to bring all “qualified” plans into one forum by establishing common rules regarding the offering and pricing of insurance, and providing information to consumers.

ProductsPrivate carriers, State co-ops and government programs such as Medicaid and Children’s Health Insurance Program (CHIP).

Pricing**Community-rated based on age, geography and tobacco status. Qualified consumers (up to 400% of the poverty level) will receive government assistance to purchase private insurance through the use of premium tax credits.

Congressional Budget Office (CBO) makes clear average premiums could be 27-30% higher because the law demands greater insurance coverage.

**Products and pricing are to be available for viewing in July-August 2013, but coverage is not effective until January 1, 2014.

2014 cont.

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Large Employer Mandate (Pay or Play)Employers with more than 50 full-time equivalent employees who do not offer their employees health insurance will be subject to a $2,000 tax penalty/full-time employee/year (first 30 employees exempted from calculation) OR they must offer “affordable” insurance coverage meeting minimum coverage requirements.

Waiting PeriodsWaiting periods for coverage cannot exceed 90 days.

Health Insurance TaxNew tax is levied on insurance companies based on net premiums written on fully-insured plans. This tax will raise an estimated $8 billion in 2014, reaching $14.3 billion by 2018. The tax does not sunset and is indexed thereafter. Expected to be ~2.3% of premium.

Reinsurance TaxNew tax is levied on all policies for the next 3 years. Expected to be ~$5.25 per month of premium for every individual/employee.

Medicaid Expansion**States must expand Medicaid to 133% of federal poverty level. States will receive 100% federal financing from 2014-2016, 95% financing in 2017, 94% financing in 2018, 93% financing in 2019, and 90% financing in 2020 and beyond.

**The Supreme Court struck down the ability of the federal government to withhold their portion of current Medicaid funds to force states to comply with this expansion.**

Women’s HealthInsured plans required to expand benefits for Women’s Preventive Health Services

Mandatory EnrollmentEmployers with more than 200 employees would be required to automatically enroll employees into health insurance plans offered by employer (employees may opt-out).

Small Business Tax Credit (Phase II)Credit extended for two years, but only available in the SHOP.

Large Employer Calculation

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Large Employer Roadmap

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StartDoes the employer

have at least 50 full-time equivalent employees?

Does the employer offer coverage to all

full-time employees?

A Penalty AppliesThe penalty is $2,000

annually times the number of full-time

employees minus 30.

Marketplace SubsidyDo any employees

purchase coverage in a Marketplace and receive a premium tax credit or cost-sharing subsidy?

Affordability Test

Is the employee’s required premium contribution for single coverage

for the employer’s

lowest cost plan 9.5% or less of the employee’s

gross annual income?

Did at least one full-time employee receive a premium tax credit or

cost-sharing subsidy through a Marketplace?

A Penalty AppliesThe penalty is the

lesser of $3,000 times the number of full-time employees receiving premium tax credits, or $2,000 times the number of full-time

employees minus 30.

Minimum Value TestDoes the employer

sponsored plan provide minimum value?

No Penalty Applies

No Penalty Applies

No

Yes

Yes

NoYes

No

No

No

No

YesYes

Yes

Small vs. Large Employers

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Plan Consideration Small Employer (under 50) Large Employer (over 50)

Eligibility Hours Requirement

(depends on carrier) 30+

Eligibility (depends on carrier) 95% of employees and dependent children

Waivers n/a Required (or auto-enroll for over 200)

90-Day Waiting Period Applies Applies

Rates Age-rated, community-rated Company specific, based on actuarial factors

Minimum Deductible $2,000 No restriction?

Plan Design (depends on carrier) Bronze Minimum (60% actuarial value)

Affordability No limit Can not exceed 9.5% of gross wages

SHOP 2014 – only one carrier to choose from2015 – all carriers

50-100 – not until 2015?100+ - n/a

Tax Credit Available in SHOP only Not available

Participation Requirement

(depends on carrier) – Gone?? No change

2017

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SHOP ExpansionStates are permitted to allow businesses with more than 100 employees to purchase coverage in SHOP Marketplaces.

Cadillac TaxA 40% excise tax is levied on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual and $27,500 for family. The tax is applied to the amounts that exceed the threshold and it will be indexed for inflation.

2018

Bottom Line

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Employer ConsiderationsDoes my plan meet minimum requirements?Is my plan grand-fathered?Is my plan affordable?What are my net costs today?Is the penalty cheaper?How will employees react?Will my employees be eligible for subsidies?What are the tax advantages to my business?Are benefits important for talent acquisition?How are we managing plan costs?

Employee ConsiderationsIs coverage cheaper on Marketplace?Is cost of insurance tax deductible?Does my spouse have access to insurance?Am I prepared to pay a penalty?How important is my doctor?

What should I do if…

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I am a non-working individual?Go to healthcare.gov or seek advice from a Navigator.

I am a full-time employee?Contact your HR Representative to help you understand and evaluate your options at work.

I am a part-time employee?Contact your HR Representative to help you understand where the eligibility cut-off is for benefits, go to healthcare.gov or seek advice from a Navigator.

I am a business owner?Consult with your professional team (attorney, accountant and insurance broker) to ensure you are properly positioned for the changes ahead. Compliance will be paramount; make certain your documents are in order (i.e. Ownership documents, ERISA, Business Associates Agreement, Employee Manual, etc.).

I am a Human Resources Professional?Consult with your insurance professional to help stay informed of changes and understand compliance requirements for your business.

Questions and Answers

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Thank You

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Stumm Insurance, LLCSteve Hogan steve@stumm.com 773.862.7761 x109Brian Stumm brian@stumm.com 773.862.7761 x102

Huck Bouma PCWhitney Schmidt wschmidt@huckbouma.com 630.221.1755 x1193Aaron Ruswick aruswick@huckbouma.com 630.221.1755 x 1254