health reform after the election the big picture of obamacare james r. griffinjeffery p. drummond...
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Health Reform After the ElectionThe Big Picture of Obamacare
James R. Griffin Jeffery P. DrummondJackson Walker L.L.P.
901 Main Street, Suite 6000Dallas, Texas 75202
[email protected] [email protected] 214.953.5827 214-953-5781
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Conceptual Issues
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Jeffery P. Drummond• Focuses on healthcare transactional, regulatory, and
administrative matters. • Primarily represents physicians and physician groups,
hospitals and health systems, laboratories, and other primary and ancillary healthcare providers.
• Particular emphasis on Stark, Anti-Kickback, and other federal and state anti-referral statutes; HIPAA and medical record privacy and security issues; pharmacy and laboratory issues; tax exempt entities and tax exempt financing.
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The Supreme Court Decides:• National Federation of Independent Business v.
Sebelius• June 28, 2012• Chief Justice Roberts, joined by Justices
Ginsburg, Sotomayer, Breyer and Kagan• Constitutional issues considered
– Individual Mandate– Medicaid Expansion
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The Supreme Court Decides:• “We do not consider whether the Act embodies
sound policies. That judgment is entrusted to the Nation’s elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions.”
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The Supreme Court Decides:• “The Framers created a Federal Government of
limited powers, and assigned to this Court the duty of enforcing those limits. The Court does so today. But the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.”
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What’s Wrong with American Healthcare? (Why so expensive for such bad results?)
• Results aren’t all that bad– Cancer survival rates are exceptional– Different data standards (e.g., infant mortality)– Unhealthy population with bad habits
• Diet/obesity• Drugs and guns
• We have the best toys• We get the most care• We get care up to the last day (No LCP)
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Normal Commercial Transaction
Providers
(Sellers)
Patients
(Buyers)
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How Does the American Healthcare System Work?
• Three parties:– Provider, Patient, Payor
• Unlimited wants• No natural governor on costs• A “right,” or just an “expectation”?
– Charity hospitals/providers– Governmental “safety net” programs– EMTALA
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OPM: Other People’s Money
Payors
Limits Patients
Limits
ProvidersL i m i t s
Provider standardsNetworks
COB
CopaysDeductiblesPre-existing cond.Lifetime limits
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Conceptual Insurance Issues
• Is health insurance risk management (purchasing indemnification?)– Reimbursement to cover costs/expenses– Calculate whether to self-insure
• Is health insurance a warranty or customer service plan?– Pay more upfront for repair/replace defects– “All you can eat” buffet
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How Does Insurance Work?
• Generally provided through employment• Voluntary Participation• Sharing/pooling of Risk• Allocation based on risk profile?
– Higher risk activities, higher premiums– Risk reduction activities, lower premiums
• Premium = average cost + admin + profit• The “Free-Rider” Problem
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The Free-Rider Problem
• Can you buy fire insurance when your house is already burning?
• Pre-existing condition is limited fix
• What to do with those who don’t buy insurance?
• Refuse to provide care– Safety nets for poor and old– Possible “charity” for the rest– Non-”poor” poor, illegals,
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The Problem to be cured by Obamacare:The uninsured
• Large numbers of uninsured (not otherwise in safety net) “don’t get healthcare”– Not really true – EMTALA ensures ER coverage– charity, bad debt account for rest
• Cost-shifting impact– Insured get “in-network” pricing, so uninsured are
charged huge amounts (which they don’t pay)– Uninsured costs picked up by insured– Medicare/caid underpayments add to the shift
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Other problems to be cured by Obamacare:
• Greedy insurance companies drive up premiums, don’t pay doctors fairly, deny care and coverage
• MLR, end of pre-existing conditions and lifetime limits, essential health benefits
• Greedy doctors/hospitals charge too much, collect debts unfairly
• ACOs and MSSP, end physician-owned hospitals
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Potential Non-Obamacare Solutions
• Re-mutualization of insurance companies• Cross-border insurance sales• “Bare minimum” policies• Changes to tax treatment of insurance costs
– Health Savings Plans• High-deductible plans
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ObamaCare’s Solution: the Mandate(Increase the insured population)
• End the Free-Rider problem by outlawing free-riders.– “Liberty” issue– Too many exceptions– Too little enforcement
• Require businesses to provide insurance (Mass.)• insurers to provide essential benefits, limit profits• Establish additional markets to provide additional
avenues for insurance purchases– Basic economics work against this
• Increase Medicaid population
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Tangential Issues: Mandate
• What are “essential” health benefits?– The contraception kerfuffle
• How to apply burden to employers?– And how will employers evade it?
• How to deal with those who won’t play?• Medical Loss Ratios (could increase costs)• Problems with Health Insurance Exchanges• “Waiver” abuse (“rule of law” issues)
– Regulatory agencies taking legislative action
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The contraception coverage issue
• Broad range of contraceptives/abortifacients considered to be “essential health benefits.”
• Very limited exception initially offered for “religious institutions” (effectively only churches).
• Lawsuits ensued, with mixed results.• HHS proposed revised regulations last Friday;
separated “religious employers” (churches themselves) and “eligible organizations.”
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The new contraception coverage rule
• “Eligible Organization” is an entity that self-certifies that it meets the following:– Opposes providing specified contraceptive services on
account of religious objections– Operates as a nonprofit entity– Holds itself out as a religious organization
• Provides self-certification to insurer• Eligible Organization’s insurance plan then does not
have to include coverage for the specified contraceptive services.
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The new contraception coverage rule
• However, the insurer must automatically provide insurance for the specified contraceptive services through a separate insurance policy for each plan participant
• Insurer may not charge copays/deductibles to the patient for the separate insurance
• Insurer may not charge premium to the Eligible Organization for the coverage
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The new contraception coverage rule• Insurer must provide notice of availability of the separate insurance to
beneficiaries/participants• ““The organization that establishes and maintains, or arranges, your health
coverage has certified that your group health plan qualifies for an accommodation with respect to the federal requirement to cover all Food and Drug Administration-approved contraceptive services for women, as prescribed by a health care provider, without cost sharing. This means that your health coverage will not cover the following contraceptive services: [contraceptive services specified in self-certification]. Instead, these contraceptive services will be covered through a separate individual health insurance policy, which is not administered or funded by, or connected in any way to, your health coverage. You and any covered dependents will be enrolled in this separate individual health insurance policy at no additional cost to you. If you have any questions about this notice, contact [contact information for health insurance issuer].”
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The new contraception coverage rule
• Insurer may offset cost of providing the separate plan against user fees it may otherwise pay to participate in a federally-facilitated exchange.
• Student health insurance plans appear to be included in the “Eligible Organization” category if the sponsoring entity meets the definition.
• “Self-insured” plans are not yet included, but 3 proposed methods would use the TPA to place the contraceptive insurance with another insurer
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Non-Mandate Provisions• Health Insurance Exchanges (“HIX”)• ACOs and MSSP• Medicare Changes• Medicaid Expansion• New Requirements for Providers• Structural issues
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Health Insurance Exchanges
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Accountable Care Organizations• Providers can form ACOs and participate in the
Medicare Shared Savings Program– Shared savings only– Shared savings and losses
• Defining and measuring savings and losse• Structural Issues
– Stark, Anti-Kickback, etc.– Antitrust
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Medicare Changes• “Part C” (Medicare Advantage) changes
– Restructure payment levels– MA plans must pay back if MLR is too low
• “Part D” (prescription drug) changes– Changes in subsidies– Fill in the “donut hole”
• Experiment with bundled payments, value-based purchasing
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Medicaid Expansion• Increase pool of eligible individuals to anyone
earning less than 133% of FPL• Phase-in of state responsibility:
– Federal government pays 100% through 2016– 95% in 2017, 94% in 2018, 93% in 2019, 90%
thereafter
• Originally, once a state took the first new dollar, it could not later reduce eligibility
• States not required to participate; may drop out
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New Requirements for Providers• Required to implement an effective compliance
program (details not yet available)• Must disclose financial relationships with drug
companies and other referring providers• Non-profit hospitals must perform a “community
needs assessment” every 3 years, publish financial assistance policy, not “balance bill” if patients could get financial assistance
• “Whole Hospital” Stark exception ended.
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Structural Issues• New Taxes: Pharma companies, Insurance
companies, medical devices, tanning salons• IPAB and “comparative effectiveness”• CLASS Act (already dead)• Physician-Owned Hospital changes• Quality initiatives• Demo projects
• In-home care• Bundled payments
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Ridiculous and Sublime
• Medicaid coverage for former foster children• Indian healthcare provisions• Chain restaurant menu nutrition information• Revenue provisions
– Tanning bed tax– Medical device tax
• The law of unintended consequences
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How Obamacare will/won’t work• It’s not a government takeover of the healthcare
industry; it’s a tax on industry participants to drive more people into insurance coverage– Make more employers provide coverage (Mass.)– Tax/subsidize individuals– Won’t cover everyone, no matter what
• If/when it doesn’t work, it WILL be a stepping stone in the drive toward a single-payor system
• Counter-reaction could push other factors– Re-mutualization of insurance– Tiers of coverage or service
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Practical Implications
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James R. Griffin• Focuses on employee benefits and executive compensation,
advising clients on issues arising under the Internal Revenue Code, ERISA and other laws.
• Addresses issues affecting 401(k) and pension plans, executive compensation plans, stock option plans, and other group benefit plans.
• Represents clients in controversy matters, including Internal Revenue Service (IRS) and Department of Labor (DOL) audits, investigations, examinations and voluntary compliance proceedings.
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Roadmap
• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Individual Mandate
• All citizens are required to have qualifying health coverage• Penalty (tax) greater of $695 individual/$2085 family or 2.5%
of household income, subject to phase in ($95 or 1% in 2014) through 2016, increasing by COLA thereafter
• Exemptions granted: Indians, prisoners, illegal immigrants, poor, those who would be covered by Medicaid in states that don’t opt in
• Premium credits available for those who purchase coverage and are below 400% FPL
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Roadmap
• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Employer Mandate
• Flowchart• Employer Penalties• Employer Penalty Questions• Exchanges• Premium Tax Credits• Cost Sharing Subsidies
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Employer Penalties
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Employer Play or Pay Penalty
• An employer that does not offer health coverage to its full-time employees and their dependents is subject to a nondeductible "play OR pay" penalty if any full-time employee enrolls for coverage through an Exchange and qualifies for the premium tax credit or cost-sharing reductions
• $2,000 for each full time employee over 30
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Employer Play and Pay Penalty
• Applies if a large employer offers its full-time employees (and their dependents) the opportunity to enroll in coverage but the coverage does not provide “minimum value” or is “unaffordable” and one or more full-time employees receive subsidized coverage through an Exchange
• Penalty is $3,000 for each full-time employee receiving subsidized coverage through an Exchange
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Employer Penalty Questions
1. What is a large employer?2. How are FTEs counted?3. What are variable hour employees counted?4. When is coverage affordable?
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What is a large employer?• An employer that employs an average of at least 50 full-time or
full-time equivalent (FTE) employees on business days during the preceding calendar year
• A full-time employee with respect to any month is an employee who is employed an average of at least 30 hours of service per week
• Affiliated entities and entities under common control (such as a parent corporation and wholly owned subsidiary corporations) are treated as a single entity for determining large employer status
• Successor employers are considered to be the same as predecessors
• Special rule for new employers
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How Are FTEs Counted?
• FTEs are determined by calculating for each month of the prior calendar year the aggregate number of hours of service (not exceeding 120 hours for any one employee) worked by all non-full-time employees (those not employed for an average of 30 hours per week), including seasonal employees, and dividing by 120, and then adding the number of monthly FTEs together and dividing by 12
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How are Variable HourEmployees Counted?
• Variable hour employees work 30 or more hours in some weeks and fewer in other weeks
• Optional Look Back Measurement Method– Measuring Period– Administrative Period– Stability Period
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Variable Hour Employees—Initial
Initial Measurement Period Initial Administrative Period Initial Stability Period
The initial measurement period must start no later than the first day of the month after the employees start date and must be:
no shorter than 3 months, and
no longer than 12 months
The initial administrative period starts immediately after the last day of the initial measurement period and must be:
no longer than 90 days
The initial stability period starts immediately after the last day of the initial administrative period and must be:
the same length as the standard stability period
for employees who were determined to be full time, no shorter than the longer of:
- 6 calendar months, or
- the initial measurement period, and
for employees determined to be part time, no longer than the shorter of:
- The initial measurement period plus 1 month, or
- the remainder of the standard stability period in which the initial measurement period ended.
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Variable Hour Employees—Standard
Standard Measurement Period
Standard Administrative Period
Standard Stability Period
The standard measurement period must be:
• no shorter than 3 months, and
• no longer than 12 months
The standard administrative period starts immediately after the last day of the standard measurement period and must be:
• no longer than 90 days
The standard stability period starts immediately after the last day of the standard administrative period and must be:
• for employees who were determined to be full time, no shorter than the longer of:
- 6 calendar months, or
- the standard measurement period, and
• for employees who were determined to be part time, no longer than the standard measurement period
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When is Coverage Affordable?• Coverage is affordable if the employee’s premium obligation for
self-only coverage does not exceed 9.5 percent of the employee’s household’s modified adjusted gross income
• Employer Safe Harbors– W-2– Lowest cost employer coverage– 9.5% of FPL
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Exchanges• Regulated public marketplace to provide eligible individuals and
small businesses with access to quality, affordable health care coverage under Qualified Health Plans
• Open enrollment scheduled to begin in October 2013• Challenges
– Getting the state and Federal exchanges built– Getting the exchanges ready to accept a flood of applications– Informing and educating the uninsured– Federally facilitated exchanges (FFEs)
• “SHOPS” to be provided, but there is little guidance available
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Exchanges—State and Federal
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Exchanges—Notices
• Employers are required to provide their employees with written notice about the Exchanges by March 1, 2013. On January 24, 2013, the Department of Labor officially announced a delay until Summer or Fall of 2013.
• Content of Exchange Notice– Information about the existence of the Exchange, including a description
of the Exchange services and how an employee may contact the Exchange– If the employer's share of the cost of coverage is less than 60 percent, a
statement that the employee may be eligible for premium tax credits and cost-sharing reductions if purchasing coverage through the Exchange
– If the employee purchases coverage through the Exchange, a statement that the employee will lose the employer contributions and that employer contributions are excludable from income tax
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Individual Premium Tax Credits (“PTC”)
• Purpose is to reduce the cost of health coverage obtained through an Exchange
• Citizens and legal residents (and not in jail)• Incomes between 100% and 400% of the Federal
poverty level• Credit is refundable and advanceable• Paid monthly to lower the premium that is required for
Exchange coverage
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PTC—2013 Federal Poverty Level
One Person Family of Four
100% $11,490 $23,550
400% $45,960 $94,200
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PTC—Employer Health Plan Exception• PTCs are not available to an employee who is
offered employer health coverage unless:– The plan does not have an actuarial value of at
least 60%, or– the employee’s share of the premium for SELF
ONLY employer plan coverage exceeds 9.5% of income
– Premium tax credits not available for those enrolling in catastrophic plans
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PTC--Amount
• PTC amount is based on the premium for the second lowest cost silver plan in the Exchange and area where the person is eligible to purchase coverage
• A silver plan is a plan that provides the essential benefits and has an actuarial value of 70%
• The amount of the tax credit is variable so that the premium a person would have to pay for the Silver Plan would not exceed the specified percentage of income, adjusted for family size
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PTC—Premium Based on Income Level
Household Income (as percentage of Federal Poverty Line (FPL)
Premium as a Percent of Household Income
Up to 133% 2% of income
133-150% 3 – 4% of income
150-200% 4 – 6.3% of income
200-250% 6.3 – 8.05% of income
250-300% 8.05 – 9.5% of income
300-400% 9.5% of income
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PTC—Example
• Pat is 45 years old and has an income in 2014 that is 250% of poverty (about $28,735)
• The cost of the Silver plan in the Exchange in Pat’s area is projected to be about $5,733
• Pat would not be required to pay more than 8.05% of income, or $2,313, to enroll in the silver plan
• The tax credit available to Pat would be $3,420 ($5,733 premium minus the $2,313 limit on what Pat must pay)
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Cost-Sharing Reductions
• Protect lower income people with health insurance from high out-of-pocket (“OOP”) costs at the point of service– Limit the plan’s maximum OOP costs– Reduce cost sharing amounts (i.e., deductibles,
coinsurance or copayments)• Reduced cost-sharing is available for families with
incomes at or below 250% of the FPL so that they may enroll in plans with higher actuarial values
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CSS—Reduced OOP and Average Value
Household Income Reduction in Maximum OOP Limit
Plan AV Requirement
100-150% of FPL 2/3 94%
150-200% of FPL 2/3 87%
200-250% of FPL 1/2 73%
250-300% of FPL 1/2 70%
300-400% of FPL 1/3 70%
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Question and Answer Break
Roadmap:• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Essential Health Benefits
• Listed Services and State Benchmark Plan• Applicability• Out of Pocket and Deductible Limits• Actuarial Value
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EHB—Listed Services• Ambulatory patient services• Emergency services• Hospitalization• Maternity and newborn care• Mental health and substance use disorder services, including
behavioral health treatment• Prescription drugs• Rehabilitative and habilitative services and devices• Laboratory services• Preventive and wellness services and chronic
disease management• Pediatric services, including oral and vision care
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EHB—Benchmark Plan
• EHB must be covered at least to the extent they they are covered by the state’s benchmark plan
• Proposed Texas EHB Benchmark Plan– Blue Cross Blue Shield of Texas– BestChoice PPO, RS 26
• The largest enrollment plan of any product in the state’s small group market
• No coverage for adult dental or vision, cosmetic orthodontia or long-term care
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EHB—Applicability
• Applies to Individual and small group markets• Applies to non-grandfathered Plans• EHBs do not apply to self-insured or large
group plans
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Out of Pocket Limits• No group plan—including self-insured and large group
plans—can require OOP payments that exceed the HSA limits
• For 2013:– $6,250 for an individual– $12,500 for a family
• Cost sharing for care received out of network in network plans does not count toward the cost sharing limits
• Emergency care must be provided out of network without increased cost sharing
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Deductible Limits
• Deductible limit on small group plans– $2,000 for single coverage– $4,000 for family coverage
• Subject to inflation adjustments and to variances that are necessary to reach the actuarial value of a specific “metal” level plan
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Actuarial ValueMetal Plans
Bronze 60%
Silver 70%
Gold 80%
Platinum 90%
• Actuarial value is defined as the percentage that is paid by a health plan for the total allowed costs of benefits for a standardized population
• It is a measure both of the value of services covered by the plan and of the cost-sharing that a plan member must cover
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Actuarial Value—HRAs and HSAs
• HRA and HSA contributions can count toward medical spending if they are expected to be spent in a benefit year
• Proposed regulations do not address counting employer contributions to HRAs that are used to pay insurance premiums
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Roadmap
• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Market Reforms
• Applies to individual and small group markets– 1 to 100 employees
• Applies to non-grandfathered plans• Insurers are required to sell insurance coverage
to any applicant• No exclusions for pre-existing conditions
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Market Reforms—Permitted Factors
• Permitted factors in premium rates:– Age with a maximum 3 to 1 ratio
• 1 year bands– Tobacco Use with a 1.5 to 1 ratio– Geographic location– Household composition and size
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Market Reforms—Prohibited Factors• Prohibited factors in setting premium rates:
– Individual or family status– Rating area– Age, except as stated above– Tobacco use, except as
stated above– Health status– Claims experience
– Gender– Industry– Occupation– Duration of coverage– Eligibility for tax credits– Prior source of coverage– Credit worthiness
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Roadmap
• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Benefit Plan Provisions
• Reduced Limit on FSA Balances• Summary of Benefits and Coverage• Wellness• Contraception Coverage• Medical Loss Ratio Rebates
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Reduced Limit On Flexible Spending Account (FSA) Balances
• Health FSA contributions by employees will be limited to $2,500 per year starting in the 2013 plan year
• Not applicable to dependent care assistance (day care) benefits
• Grace period amounts that remain after the 2012 plan year for up to 2-1/2 months are not affected
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Summary of Benefits and Coverage (SBC)
• Effective September 23, 2012• Provide improved information to:
– better understand the coverage they have, and– allow them to compare their coverage options
across different types of plans and insurance products
• Fully insured and self insured plans• Grandfathered and non-grandfathered plans
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Wellness• ACA promotes the implementation and expansion
of employer wellness programs to:– Improve health, and– Help control health care spending
• Wellness programs are authorized under the ACA as an exception to the general prohibition on health status underwriting by plans, which takes effect on Jan. 1, 2014
• Applies to grandfathered and non-grandfathered plans• Effective for plan years that begin on or after Jan. 1, 2014
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Wellness—Participatory
• Generally available without regard to an individual’s health status
• Examples include programs that: – Reimburse for the cost of a fitness center
membership – Provide a reward to employees for attending a
monthly, no-cost health education seminar– Provides a reward to employees who complete a
health risk assessment without requiring them to take further action
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Wellness—Health Contingent
• Generally require individuals to meet a specific standard related to their health to obtain a reward
• Examples include programs that:– Provide a reward to those who do not use, or
decrease their use of, tobacco– Provide a reward to those who achieve a specified
cholesterol level or weight as well as to those who fail to meet that biometric target but take certain additional required actions
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Wellness
• 30% of cost of coverage discount or surcharge/50% for participation in a smoking cessation program
• May be structured as rewards or as surcharges
There are a number of ways to structure your wellness program. To explore your options, contact [email protected] or
call (866) 227-2099
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Contraception Coverage
• ACA requires employer-provided health care plans to provide all FDA approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity, without cost
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Contraception Coverage
• Effective for plan years that begin on or after August 2012
• Exemptions for:– Churches and houses of worship– Nonprofit religious employers whose employees
primarily share its religious tenets and who primarily serve persons who share its religious tenets. (1 year delay only)
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Contraception Coverage
• Penalty is $100 per day per individual for each day the plan does not comply
• More than 40 lawsuits have been filed• 7th Circuit temporarily barred enforcement of the
contraception mandate against an Illinois contruction firm (12/28/12). 8th Circuit—same; 10th Circuit opposite
• United States Supreme Court denied Hobby Lobby’s emergency appeal to suspend the fines during the time that it appealed its challenge to the ACA in the court of appeals
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Medical Loss Ratio Rebates• Insurers must spend a minimum percentage of premium
dollars on medical services and activities designed to improve health care quality– 80% for Individual and Small Group markets– 85% for Large Group markets
• Aggregated market data in each state• Not specific to a particular group health plan’s experience• Fully insured policies/not self-funded plans• Paid to policyholder of ERISA plans by August 1• Notices to subscribers
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Roadmap
• Individual Mandate• Employer Mandate• Essential Health Benefits and Minimum Value• Market Reforms• Benefits Provisions• Other Tax and Fee Increases
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Other Tax and Fee Increases
• W-2 Reporting• Non “Fiscal Cliff” Tax Increases• Fees
– Patient Centered Outcomes Research Institute (“PCORI”)
– Reinsurance Program• Cadillac Tax (2018)
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W-2 Reporting
• Applies to employers that were required to file 250 or more W-2 forms in the preceding year
• Applies to 2012 W-2s that are distributed to employees starting in 2013
• Report total cost of group health benefit plan coverage
• Box 12, Code DD• Informational only/Reported cost is not taxable• Employee coverage only is reported
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W-2 Reporting
• Total cost includes– Employer portion– Employee portion
• Pre-tax• After-tax
• Cost of coverage– Any reasonable method that is applied consistently
for all employees who terminate employment during the year
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W-2 Reporting
• Does not apply to– “excepted benefits”, such as accident, disability
income, supplemental liability and workers compensation insurance
– Stand-alone dental and vision plans– HRA, HSA and Health FSA amounts– Employee assistance plans, wellness programs and
on-site medical clinics if the employer does not charge a premium
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Non-Fiscal Cliff Tax Rate Increases
• Additional Medicare Tax– Starts in 2013– Rate is 0.9%– Applies to Married Filing Jointly filers with
combined wages, other compensation and self-employment income of more than $250,000
– Employer withholding begins, per employee, on wages in excess of $200,000 in a calendar year
– Employer is not required to notify affected employees
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Non-Fiscal Cliff Tax Rate Increases
• Investment Income Surtax– Starts in 2013– Medicare contribution tax– Rate is 3.8%– Applies to lesser of
• Net investment income• Excess of modified adjusted gross income
over $250,000 for married filing jointly
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Non-Fiscal Cliff Tax Rate Increases
• Reduced Medical Itemized Deductions– Taxpayers under age 65 can deduct unreimbursed
medical expenses that are more than 10% of adjusted gross income
– If taxpayer or spouse is 65 before December 31, 2012, 7.5% floor continues to apply through 2016
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PCORI
• Fee to fund research to evaluate and compare the health outcomes and clinical effectiveness, risks and benefits of:– Medical treatments– Services– Procedures– Drugs
• Applies to:– Insured plan—Issuer liable– Self-insured plan—Plan sponsor liable
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PCORI
• Plan and policy years ending after Sep. 30, 2012• Does not apply in policy years ending after
Sep. 30, 2019• $1 for the first year (and $2 for later years)
times the average number of lives covered under the plan (including dependents)
• Due July 31, 2013• IRS Form 720
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PCORI
• Counting Covered Lives– Actual count method—count the number of covered
lives covered on each day in the plan year and divide that result by the number of days in the year
– Snapshot method—quarterly average• Actual count for dependents, or• 2.35X for dependents
– Form 5500 method—may only be used if the 5500 is timely filed without regard to extensions
• July 31 for calendar year plans
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PCORI
• Covered Plans– Accident and health plans– Health reimbursement arrangements
• Excluding an HRA that is integrated with a self-insured group health plan or health insurance coverage
– Retiree only medical plans
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PCORI
• Exemptions– Stand-alone dental and vision plans– Health flexible spending accounts– Health Savings Accounts– Employee assistance programs, wellness programs
and disease management programs that do not provide significant benefits
– Plans designed specifically to cover primarily employees working and residing outside the US
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Transitional Reinsurance Program
• Established by ACA to fund state non-profit reinsurance entities for the purpose of establishing a high-risk pool for the individual market
• Applies to– Health insurance issuers– Third party administrators on behalf of self-insured
group health plans
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Transitional Reinsurance Program• Annual contribution rate for 2014 is estimated to be
$63 per covered life• Methods for counting covered lives are similar but
not identical to PCORI• Counting will be done during the first 9 months of
2014, 2015 and 2016Enrollment count provided to
HHS before November 15
HHS issues bill by December 15
Payment required in 30 days
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Where do we go from here?
• Review forms and notices to confirm compliance• Determine if you are a large employer• Determine whether additional planning is needed for
variable hour employees• PLAN for 2014 renewals to understand the big picture
Frost Insurance can help you structure employee benefits solutions that work, and navigate the
complex regulatory system resulting from the reform
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Health Reform After the ElectionThe Big Picture of Obamacare
James R. Griffin Jeffery P. DrummondJackson Walker L.L.P.
901 Main Street, Suite 6000Dallas, Texas 75202
[email protected] [email protected] 214.953.5827 214-953-5781