health law -...
TRANSCRIPT
The New
Health Law September 25, 2013
Eric Johnson, ComedyCE.com
It’s that time again
Enrollment Season!!!
Lots of changes
• Plan design
• Rating rules
• Taxes
• Compliance requirements
Government works at a snail’s pace
We do have some answers
Still lots of questions
Exchange / Marketplace goes live
Just 5 days, 15 hours from now!
Ongoing process
Your advisors can help.
Today’s Agenda
1) Market Rules – large group vs.
small group
2) Employer Mandate
3) Individual Mandate and Subsidies
4) Strategies
5) Compliance Requirements
6) Q&A
Market Rules
Market Rules
Whether you participate in the small group or large group insurance markets
determines:
Services that must be covered
Cost sharing on those services
Insurance rating rules
Small employers feel the biggest impact
Small Business
What is a small group?
How is “Small Group” Defined?
• ACA Section 1304(b) 1-100
• State option 2014-15 1-50
• Texas decision 2-50
Texas Senate Bill 1332
So how are employees counted?
Four Possibilities
1. All employees (ATNE) like with the minimum Medical Loss
Ratio requirement
2. Full-Time employees – the ones large employers could pay
a penalty on
3. Eligible employees like we do now
4. Full-Time Equivalents like with the mandate or the small
group tax credit
Drum Roll….
HHS said:
“We’ll tell you later”
Waiting for “Future Guidance”
Comment: A few commenters asked for clarification about how
to determine whether a group policy should be treated as large
group or small group coverage for purposes of applying the
PHS Act requirements when employer group size fluctuates
between the definition of large employer and small employer.
Response: We intend to issue future guidance on counting
employees for determining market size of a group health plan.
Source: HHS Final Health Insurance Market Rules, February 27, 2013
In the meantime…
Carriers are interpreting the rule differently.
1. All employees (ATNE) like with the MLR
2. Full-Time employees – the ones large employers could pay
a penalty on
3. Eligible employees like we do now in TX
4. Full-Time Equivalents like with the mandate or the small
group tax credit
Example:
45 full-time and 10 part-time employees
Eligible Employees Average Total # EEs
Example:
55 full-time employees, 10 with other cvg.
Eligible Employees Average Total # EEs
What this means for small employers
Until insurance companies get some clarification on how
employees are counted for determining group size, employers
might get to choose whether they want to be a small group or a
large group by enrolling with carriers based on their
interpretation of the law.
Essential Benefits
How it works now
Lots of mandated benefits
Next year’s essential benefits requirements
Small Groups
• Must cover all essential benefits
• No annual or lifetime dollar limit
Large Groups
• Do not have to cover any
essential benefits other than
preventive care
• If covered, no annual or lifetime
dollar limits
Pediatric dental and vision to age 19
added to small group plans
Cost Sharing
How it works now
Deductible Coinsurance %
DR Rx Copays:
Max
OOP
Deductible Coinsurance %
OOP
Max ($6,250)
Traditional PPO Plans
HSA-compatible Plans
Next year’s cost-sharing limitations
Deductible Coinsurance % Co-
pays
OOP
Max ($6,350)
Deductible Coinsurance %
OOP
Max ($6,350)
Traditional PPO Plans
HSA-compatible Plans
Everything
in-network
counts
2x family limit
$2k/$4k deductible limit
(small group only)
And all plans will have 60%, 70%, 80%, or 90% AV requirements
Actuarial Values
Deductible limits
Higher deductibles permitted if the carrier cannot reasonably
design a plan that only has a $2,000 deductible and only has a
$6,350 out-of-pocket maximum and only pays 60% of the bill.
$2,000 Deductible $4,350 Coinsurance $6,350
OOP
68%
Deductible limits
Higher deductibles permitted if the carrier cannot reasonably
design a plan that only has a $2,000 deductible and only has a
$6,350 out-of-pocket maximum and only pays 60% of the bill.
$4,000 Deductible $4,350 Coinsurance $6,350
OOP
68% 60%
Cost Sharing Limits
Small Groups
• $2,000 / $4,000 deductible limit with exceptions in the bronze level
• $6,350 / $12,700 OOP max
• Actuarial values: bronze (60%), silver (70%), gold (80%), platinum (90%)
Large Groups
• No deductible limit
• $6,350 / $12,700 OOP max unless the plan has more than one benefit
administrator
• Actuarial values: bronze (60%), silver (70%, gold (80%), platinum (90%)
Rating Rules
Currently, small group rating is a two step process in Texas.
1. Actuaries rate based on case characteristics
– Group size (20% variation allowed)
– Industry (15% variation allowed)
– Age mix of group
– Gender mix of group
– Location
2. Underwriters rate based on risk characteristics
– Medical conditions
– Claims experience
– “Rate up” of 67% allowed year one and 15% at renewal time
Note: These rules do not currently apply to the individual market in Texas.
How are small group plans currently rated?
Carriers good at predicting costs
Medical Loss Ratio – Rebates
2011
• $1.1 billion nationwide
• Average rebate per
household: $151
• Average premium per
household: $15,073
• Carriers missed by: 1%
2012
• $500 million nationwide
• Average rebate per
household: $100
• Average premium per
household: $16,351
• Carriers missed by: <1%
New Rating Rules
Small Groups
• 3 to 1 age bands
• No gender rating
• No medical underwriting
• No industry rating
• No group size rating
• Wellness discounts permitted (up to 30%, 50% with tobacco cessation)
Large Groups
• No restrictions on age, gender industry, or group size rating
• No restrictions on medical underwriting
• Wellness discounts permitted (up to 30%, 50% with tobacco cessation)
Premium Taxes
Premium Tax
Small Groups
• Applies to small groups
Large Groups
• Applies to large groups
In Summary
Impact on Premiums
Small Groups
Pediatric dental and vision
+ $2k deductible max
+ modified adjusted community rating
= wild rate fluctuations and higher rates for many groups
Large Groups
Less impact on plan design
+ rating rules unchanged
= less fluctuation and less rate impact
Employer Mandate
Renewal date for most large groups
January 1st
Employer mandate delayed until 2015
Stay of execution
Before you know it, it’ll be
January 1,
2015
The Employer Mandate – Summarized
Does NOT offer coverage
• $2,000 penalty per full-time employee with first 30 excluded
• Not tax deductible
DOES offer coverage
• $3,000 penalty per full-time employee that gets a tax credit
• Not tax deductible
Can someone eligible for group coverage
qualify for a subsidy?
The group coverage does
not provide minimum value
(60% bronze level)
The group coverage is unaffordable
(EO premium vs. household
income)
Only
if:
Part time
Full time
Mandate applies to:
Companies with 50+ full-time
equivalent employees (FTEs)
• 30 hour work week
• Part-time employees count
as a percentage of a full-
time employee
• Owners, family members,
and seasonal employees do
count
Still waiting on a number of answers
Common Ownership
Carve Outs Staffing Companies
Seasonal Employees
Variable Hour
Employees
Individual Mandate
& Subsidies
Guaranteed Issue, Individual Mandate
Guaranteed Issue, No Pre-Ex
Beginning in 2014, coverage must
be offered on a guarantee issue
basis in all markets and be
guarantee renewable.
Exclusions based on preexisting
conditions will be prohibited in all
markets.
Individual Mandate
Beginning in 2014, most American citizens and legal residents
must purchase qualified health insurance coverage or pay a
penalty.
Not that big of deal
Most People Have Insurance
• The vast majority of Americans already have insurance.
• According to the CBO, 80% of the 272 million non-elderly
people in 2014 would be insured even in the absence of the
ACA and would already fulfill the mandate’s requirement.
Source: Cynthia Cox and Larry Levitt (http://healthreform.kff.org/en/notes-on-health-insurance-and-reform/2012/march/the-individual-mandate-how-
sweeping.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NotesOnHL+%28Notes+on+Health+Insurance+and+Reform+%28Headlines%2
9+-+Kaiser%27s+Health+Reform+Source%29)
• People below tax filing
threshold
• People for whom health
insurance is unaffordable
Lots of Exemptions
• Religious Objectors
• Illegal Aliens
• Prisoners
• Members of Indian Tribes
Source: Cynthia Cox and Larry Levitt (http://healthreform.kff.org/en/notes-on-health-insurance-and-reform/2012/march/the-individual-mandate-how-
sweeping.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NotesOnHL+%28Notes+on+Health+Insurance+and+Reform+%28Headlines%2
9+-+Kaiser%27s+Health+Reform+Source%29)
Some say it’s not strong enough
Some even suggest that the exemptions are too broad and the
penalties too low for it to be effective:
Source: http://healthreform.kff.org/~/media/Files/KHS/Flowcharts/requirement_flowchart_2.pdf
Financial Assistance for People <400% FPL
Premium
Tax Credits
Cost Sharing
Subsidies Total
Exposure
Tax Credits and Subsidies
Income Level Premium as a Percent of Income
Up to 133% FPL 2%
133 – 150% FPL 3 – 4%
150 – 200% FPL 4 – 6.3%
200 – 250% FPL 6.3 – 8.05%
250 – 300% FPL 8.05 – 9.5%
300 – 400% FPL 9.5%
Income Level Reduction in OOP Liability
100 – 200% FPL Reduced by two-thirds
200 – 250% FPL Reduced by 20%
Income Level Actuarial Value
100 – 150% FPL 94%
150 – 200% 87%
200 – 250% FPL 73%
2013 Federal Poverty Guidelines
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040
3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120
4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200
5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280
6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360
7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440
8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520
Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080
48 Contiguous States and DC
Source: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html
Can someone eligible for group coverage
qualify for a subsidy?
The group coverage does
not provide minimum value
(60% bronze level)
The group coverage is unaffordable
(EO premium vs. household
income)
Only
if:
What about dependents?
“an eligible employer-sponsored plan is affordable for
related individuals if the portion of the annual premium
the employee must pay for self-only coverage (the
required contribution percentage) does not exceed
9.5% of the taxpayer’s household income.”
Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view
Household
Income
$45,000
$45,000
x 9.5%
= $4,275
$4,275
/ 12 months
= $356.25
If an employee’s household income is $45,000 per year, he and his family members can
only access a subsidy if his share of the single premium is more than $356.25 per month.
Different than affordability exemption
“for purposes of applying the affordability exemption
from the shared responsibility payment in the case of
related individuals, the required contribution is based
on the premium the employee would pay for employer-
sponsored family coverage.”
Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view
Household
Income
$45,000
$45,000
x 8%
= $3,600
$3,600
/ 12 months
= $300
If an employee’s household income is $45,000 per year, he and his family members are
exempt from the penalty if their share of the family premium is more than $300 per month.
Strategies
What should you do?
Large Employers to Avoid Mandate
Shift employees to part-time
BE CAREFUL!
• This may be a violation of
ERISA sections 502 and 510
• While there are legitimate
reasons to shift employees to
part-time, if your sole
motivation is to avoid offering
them health insurance, this is a
violation
• Could result in fines and in
lawsuits While part-timers and seasonal
employees are counted in determining
full-time equivalents, there is no
requirement to offer them coverage and
no penalties if you don’t. NO
Reclassify employees as 1099
NO
Signs your 1099 worker should probably be W-2:
• You control an employee’s work hours
• The employee works full-time, primarily for you
• You provide the employee with tools
Offer a skinny plan
• Must cover preventive care
• No requirement to cover essential benefits
• Any essential benefits that are covered cannot
have an annual or lifetime dollar limit but can have
a limit on the number of visits
• Would not block employees from getting premium
tax credit
• Would move employer from across-the-board Cap
A penalty to the Cap B penalty
Maybe
Price plans unaffordably
• With a large required employee
contribution, lower-paid
employees would be discouraged
from enrolling in the employer
plan.
• Benefit to lower-paid employees:
their families would likely be
exempt from the individual
mandate penalty.
• Benefit to higher-paid employees:
• Employer contribution
• Lower premiums in group market
than individual
• Pre-tax employee contributions
Maybe
Small Employers to Keep Plan
Affordable
Stay Grandfathered
YES
Delays the impact of essential benefits, cost-sharing limitations, and rating rules.
Move to 12/1
• Delays effect of many provisions for 11 months
• Only a strategy for small employers
• May work for groups with 51-100 employees next year
• Added bonus: no individual mandate penalty for employees
or family members, even if they waive coverage, until 12/1/14
YES
December 1st
Self-Insure
• Self-insured options will be available to smaller
groups than in the past
• Self-insured plans play by the large group, not
small group rules
• Help small employers avoid essential benefits
requirements, deductible maximum, and modified
adjusted community rating
YES
Consider an HSA
• HSAs will become more attractive from a pricing
standpoint
• Because HSAs will likely be the lowest-priced
qualified plan, it’s the best way for a large employer
to avoid a penalty (buy-up options can still be
offered)
YES
Take a look at Wellness Programs
• Bigger discounts than in the past
• Available to smaller groups than before
• New rules also apply to large employers
YES
All Employers to Help Employees
Drop group coverage, pay for individual
Put “defined contribution” in an HRA or cafeteria plan
so employees can get reimbursed with tax-free
dollars for coverage purchased in the individual
market.
NO
Drop group coverage, let gov’t help employees
Three problems:
1) Your higher-paid, more valued employees won’t qualify for a
premium tax credit, so you’ll be forcing them to purchase more
expensive individual policies for themselves and their families with no
assistance from you and no ability to pay with pre-tax dollars.
2) You don’t know your employees’ incomes. 1 in 6 people who makes less
than $20k per year lives in a household that makes more than 400% of
the FPL and wouldn’t qualify for a subsidy.
3) Your employees may have a working spouse with group coverage
available who’s already blocking the family from getting a tax credit.
In other words, you may not actually be helping your employees by
dropping your offering coverage.
NO
Ditch the spouse
• To avoid a penalty, large
employers must offer coverage to
employees and dependents
• “Dependents” are defined as
children up to age 26, not
spouses
• If spouses aren’t offered
coverage, they’re not blocked
from a premium tax credit
• However, they would still pay the
family premium (capped at a
percentage of household income
for families below 400% of the
FPL)
Maybe
Communicate, communicate, communicate
• Explain the law to employees
• If you don’t, they’ll blame you for
changes they don’t like
• Throw the government under the
bus
• Explain why your plan is still
beneficial to them
YES
Sell the value
• Group premiums are lower than individual
• Exempts most employees and family members from individual
mandate penalty (even if dependents aren’t enrolled)
• Employer contribution
• Ability to pay employee portion pre-tax
YES
Longer Enrollment Meetings
• “Drive-by” enrollment meetings are no longer sufficient;
employees need more detailed information in order to make a
plan decision and in order to access their benefits correctly.
• Typically, this information cannot be provided all at once;
ongoing education is necessary.
• Follow-up education should occur throughout the year and
can come in a number of formats
Strategy: explain CHIP at enrollment meetings
CHIP eligibility allows for
higher income levels than
Medicaid – a lot of people
will qualify
CHIP eligibility criteria
Source: http://www.chipmedicaid.org/en/Can-I-Get-It
2013 Federal Poverty Guidelines
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040
3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120
4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200
5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280
6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360
7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440
8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520
Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080
48 Contiguous States and DC Source: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html
How Much?
Remember the Part-Timers
• Many of them will qualify for a
subsidy
• Giving them access to a licensed
agent who is certified to enroll
individuals in subsidized plans is
an employee benefit
• Helps your employees avoid the
government marketplace
• Helps your employees avoid
scam artists who are taking
advantage of this opportunity to
steal people’s identities
YES
Will the Public Exchange Be a Train Wreck?
Baucus warns of 'huge train wreck' enacting
ObamaCare provisions
By Sam Baker - 04/17/13 12:33 PM ET
Sen. Max Baucus (D-Mont.) said Wednesday he
fears a "train wreck" as the Obama
administration implements its signature
healthcare law.
Baucus, the chairman of the chamber's powerful
Finance Committee and a key architect of the
healthcare reform law, said he fears people do
not understand how the law will work.
"I just see a huge train wreck coming down," he
told Health and Human Services Secretary
Kathleen Sebelius at a Wednesday hearing.
"You and I have discussed this many times, and
I don't see any results yet."
Questions & Answers
Compliance
A few requirements
• COBRA – for groups that employed 20+ workers on 50% or
more of the typical working days in the preceding calendar
year
• State Continuation – similar to but not exactly the same as
COBRA; for fully-insured groups in Texas
• Medicare Notice – by Oct. 15 each year, all employers must
notify Medicare-eligible employees and dependents if the
group Rx plan is creditable. They must also notify CMS.
New requirements
• W-2 Reporting – for now, just applies to employers issuing
250+ W-2s. Must report the value of employee benefits on
the employees’ W-2s.
• Mandate Reporting Requirements – the IRS has issued
proposed rules for new reporting requirements for the
employer mandate. We should know more soon.
• Auto Enrollment – for groups with 200+ employees.
Delayed until 2015.
New requirements
• Summary of Benefits and Coverage – must be provided to
employees at renewal time and when new employees join the
plan.
• Exchange Notice – all employers, whether they offer
coverage or not, must notify employees about the new
government marketplace by October 1st. However, there are
no penalties for failure to do so.
New concerns
• ERISA
• Employers sponsoring an employee benefits plan must
provide employees with a Summary Plan Description among
other things.
• This has been the law since 1974, but it hasn’t been strictly
enforced and many employers are out of compliance.
• The Department of Labor has increased ERISA audits for all
size groups and is levying fines for those who are out of
compliance.
• A number of administrators are now offering ERISA
compliance services for an annual fee.
But you don’t have to do it yourself
Compliance Requirements
Your advisors can help.
Benefit Planning
Strategies
All Employers
What am I?
All Employers
Required Exchange Notice By October 1, 2013
• All Active Employees
• COBRA participants
• Employees on temporary leave
• New Hires after October 1, 2014
Required Exchange Notice
DOL Model Notice: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf
All Employers
How to communicate required exchange notice
All Employers
All Employers
All Employers
PPO vs. EPO
– Preferred Provider Network (PPO)
• Large Network
• Coverage in & out
– Exclusive Provider Network (EPO)
• Typically same network for major carriers
• No out-of-network coverage
All Employers
Things to think about (EPO):
• Current out of network utilization
• Employee Demographics
• Disruption
All Employers
All Employers
Health Savings Account (HSA)
• ACA limits Out Of Pocket (OOP) expenses for
all plans
• $6350 individual
• $12,700 family
All Employers
Traditional PPO
= OOP ≠ OOP
All Employers
ACA Mandated OOP
= ACA Mandated
OOP limits
All Employers
ACA OOP Current PPO
Premium Rates
All Employers
Why consider HSA?
• Consumerism
• Tax preferred accumulation of funds
• High likelihood HSAs will provide affordable plan
option
All Employers
Wellness
• ACA allows:
• Premium increase up to 50% for smokers
• Other employee contribution changes or
incentives may be:
• Prohibited
• Apply to affordability calculation
• Healthy workforce
All Employers
COBRA
DOL model notice has been amended to include information about the
government exchange
All Employers
New Taxes in or out of Premium
• ACA mandated new additional premium taxes
• Applies to premiums paid after 1/1/2014
• Know if your current or proposed rate quotes for effective
dates prior to 2014 include these taxes
Small Group
Move renewal date to 4th quarter
• Potential opportunity to defer cost increases
• Allow time for yet unknown delays, rules, and
products
• Opportunity to maintain existing management
carve-outs
Small Group
• Evaluate the new self-funded opportunities.
• How does the insurance company size you up?
• Average # of employees or
• Number of eligible employees
• Small Group – Modified Community Rating
• Large Group – Traditional Rating Methodology
• Evaluate defined contribution strategy.
Small Group
To Summarize
• Required Exchange Notice By October 1, 2013
• Don’t forget about EPO, HSA’s and the Taxes
• Move renewal date to 4th quarter
• Evaluate the new self funded opportunities
• Know how the insurance company sizes you up?
• Evaluate defined contribution strategies
Large Group
• Know who you have to offer benefits to and what
you have to offer at renewal in 2014
• Managerial strategies:
• Analyze workforce
• Develop HR & Management Strategies
• Create and Implement HR & Management Policies
• Evaluate HRIS/ Payroll system capabilities
Large Group
Skinny Plan
• You will hear about them
• Low cost plans
• Meet individual mandate
• Provide required minimum essential coverage
• By themselves will not meet minimum value (60%
actuarial)
• Can provide affordable option for those who do not want
employer or exchange provided coverage
Large Group
To Summarize
• Required Exchange Notice By October 1, 2013
• HSA
• EPO vs. PPO
• Taxes
• Managerial Strategies
• HRIS/Payroll system capabilities
Managerial Strategies
• 2015 report for Calendar year 2014
• Large Employers (ACA 50 or more FTE’s)
• 6056 Reporting • Employer
• Calendar year report
• Number of FTE’s by month
• Certify offered coverage to at least 95%
• Identity of employees enrolled
• Employers share of premium by month
Managerial Strategies
• 2015 report for Calendar year 2014
• By Insurer or Employer if Self-Insured
• 6055 Reporting
• Identity of employee and dependents on plan
• The months they had coverage
• Name of the employer sponsoring plan
• State whether is coverage obtained through exchange
Questions & Answers
Now you saw what
happened to healthcare…
Retirement could be next
Pending Proposals
PROPOSALS SPONSOR
20/20 plan National Commission on Fiscal
Responsibility and Reform (bi-partisan
committee formed by Obama
Administration in 2010)
Secure Annuities for Employee (SAFE) Orrin Hatch (R-UT)
Blank Slate Orrin Hatch (R-UT) and
Max Baucus (D-MT)
Administration Budget Wish List Obama Administration
Thank You!!!