Health Care Reform. Presented by CohnReznick s Government Contracting Industry Practice

Transcription

1 Health Care Reform Presented by CohnReznick s Government Contracting Industry Practice Christine Williamson, Partner and Jody Buyalos, Partner, The Insurance Exchange

2 PLEASE READ This presentation has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. This presentation and its content are the property of CohnReznick LLP and are protected by applicable copyright laws. Any unauthorized use of the information herein will be considered a violation of CohnReznick LLP s intellectual property rights. Unless stated otherwise herein, no part of this presentation may be copied, distributed, or published, in whole or in part, without the prior written agreement of CohnReznick LLP. 1

3 AGENDA Future of the Health Care Reform Law Reporting, Compliance and Fees Exchanges and 2014 Coverage Requirements Penalties Employer and Employee On the Lookout How Will This Impact My Business in 2014 Resources Effective Strategies Going Forward 2

4 Future of the Health Care Reform Law

5 EFFECT OF THE ELECTION Election results: President Obama re-elected Senate: Democratic Party majority House: Republican Party majority Governor results: 30 Republicans 19 Democrats 1 Independent Implementation of health care reform continues as scheduled State implementation of Exchanges varies (see above) 4

6 WHAT IT MEANS FOR HEALTH CARE REFORM Parts of health care reform law could be on the bargaining table Premium subsidies? Expanded Medicaid eligibility? Implementation schedules? Tax benefits? Health Care Reform continues to be fluid 5

7 Reporting, Compliance and Fees

8 W-2 REPORTING Employers must report aggregate cost of group health plan coverage on each employee s Form W-2 Does not change the tax rules for health coverage coverage is still not taxable Mandatory for 2012 tax year BUT compliance delayed indefinitely for small employers (filed fewer than 250 W-2 Forms last year) Used to track costs for employee and family coverage for the 2018 excise tax 7

9 COVERAGE TO REPORT 8

10 INCREASED MEDICARE TAX Medicare tax rate to increase for high-earners 0.9 percent increase (from 1.45 percent to 2.35 percent) High-earner threshold Single: $200,000 Married : $250,000 Employer responsibilities Withhold additional amounts from wages in excess of $200,000 No requirement to match additional tax No requirement to notify employees 9

11 INCREASED MEDICARE TAX (CONT.) Medicare tax on investment income the Unearned Income Medicare Contribution New 3.8 percent increase on unearned income for tax years beginning after December 31, 2012 Imposed on lesser of net investment income or MAGI in excess of $200,000 ($250,000 for MFJ; $125,000 for MFS) Net investment income includes interest, dividends, annuities, royalties and rents, capital gains and gains on home sales in excess of current exclusions 10

12 AFFECT ON BUSINESS OWNERS SHARE OF REPORTABLE NET INCOME 11

13 OTHER TAX CHANGES For tax years beginning after December 31, 2012 Threshold to claim an itemized deduction for unreimbursed medical expenses increases from 7.5% of AGI to 10% AGI Individuals 65 and older are exempt from increased threshold 12

14 HEALTH FSA LIMITS Prior to 2013 No limit on salary reductions Many employers impose limit Beginning in 2013, limit is $2500/year Limit is indexed for CPI for later years Applies to plan years beginning on or after 1/1/13 This is a change from initial effective date Does not apply to dependent care FSAs 13

15 NEW HEALTH PLAN FEES FOR EMPLOYER SPONSORED PLANS Comparative Effectiveness Research Fees Fully Insured and self-funded plans sponsors PCOR/PCORI fees to fund research plan years 2012: $1 per covered life per year; 2013: $2 per covered life per year; beyond 2013: based on health expenditures Transitional Reinsurance Program Fees To help stabilize individual market premiums Effective Fully Insured and self-funded plan sponsors $63 per covered life per year ($5.25 per month) Health Insurance Tax (HIT) Effective in 2014 ACA imposes a HIT on the fully insured market Revenue projection; $8B 2014, $11.3B 2015 & 2016, $13.9B 2017, $14.3B HIT obligation divided amongst fully insured carries proportional on market share 14

16 EMPLOYER REPORTING Employers will have to report certain information about health coverage to the government and individuals Applies to: Applicable large employers Offering employers employers that provide coverage if employee cost exceeds 8% of income Applies to coverage offered after Jan. 1, 2014 First returns to be filed in

17 INFORMATION EMPLOYER IS REQUIRED TO REPORT Employer identifying information Whether employer offers health coverage to FT employees and dependents Number of FT employees for each month Length of any waiting period Monthly premium for lowest-cost option in each enrollment category Employer s share of cost of benefits Names and contact info of employees and months covered by employer s health plan 16

18 Exchanges and 2014 Coverage Requirements

19 INSURANCE POSSIBILITIES 18

20 HEALTH INSURANCE EXCHANGES States Have 3 Options: Establish State Exchange (Ex: MD, DC, CA) Establish Partnership Exchange with HHS Do nothing - HHS will set up Federally-facilitated Exchange (Ex: VA, TX) Deadlines Intention and blueprint due: 12/14/12 Determine whether will be operational: 1/1/13 Open enrollment: 10/1/13 Fully operational: 1/1/14 19

21 HEALTH INSURANCE EXCHANGES Individuals and small employers can purchase coverage through an Exchange Small employers = up to 100 employees until 2017 Before 2016, states can define small employers as having up to 50 employees In 2017, states can allow employers of any size to purchase coverage through Exchange Individuals can be eligible for tax credits (subsidized coverage) only if purchase coverage on public Exchanges 20

22 EXCHANGE QUALIFIED HEALTH PLANS Must offer Essential Health Benefits package Provide 10 essential benefits Limit cost-sharing of deductibles and out of pocket maximums Provides 4 metal plans: Bronze, Silver, Gold or Platinum coverage or catastrophic plan Metal levels Bronze Plan: covers 60% of the actuarial value of covered benefits Silver Plan: covers 70% of the actuarial value of covered benefits Gold Plan: covers 80% of the actuarial value of covered benefits Platinum Plan: covers 90% of the actuarial value of covered benefits This allows consumers to more easily compare plans but now fewer options 21

23 INSURANCE REFORMS Insurance premium rating restrictions Individual and small group only Higher rates based on health status/gender/other factors prohibited Rates can be based only on age, geography, family size and tobacco use Guaranteed issue and renewability Individual and group market (small and large) Issuers must accept every employer and individual that applies for coverage and renew coverage at option of policyholder 22

24 NOTICE OF EXCHANGE All Employers must notify new and current employees of Exchange information Effective March 1, 2013 (delayed until Summer/Fall 2013) More guidance and model notice to be issued Notice must include information about 2014 changes: Existence of health benefit exchange and services provided Employee potential eligibility for subsidy under exchange Risk of losing employer contribution if employee buys coverage through an exchange 23

25 Penalties Employer and Employee

26 INDIVIDUAL MANDATE Jan. 1, 2014: Individuals must enroll in coverage or pay a penalty Penalty amount: Greater of $ amount or a % of income 2014 = $95 or 1% 2015 = $325 or 2% 2016 = $695 or 2.5% Employer Impact Current waivers may join your plan 25

27 WILL THE EMPLOYER PAY A PENALTY? 26

28 EMPLOYER SHARED RESPONSIBILITY PENALTIES Large employers subject to Pay or Play rule Offer coverage of a certain Minimum Value or possibly pay a penalty Applies to employers with 50 or more full-time equivalent employees in prior calendar year FT employee: employed for an average of at least 30 hours of service per week Penalties apply if: Employer does not provide coverage to all FT employees and any FT employee gets subsidized coverage through Exchange OR Employer does provide coverage and any FT employee still gets subsidized coverage through exchange because either not affordable or does not meet Minimum Value actuarial standard. 27

29 APPLICABLE LARGE EMPLOYERS 28

30 EMPLOYER PENALTY AMOUNTS Employers that do not offer coverage to all full-time employees: $2,000 per full-time employee Excludes first 30 employees Employers that offer coverage: $3,000 for each employee that receives subsidized coverage through an exchange Capped at $2,000 per full-time employee (excluding first 30 employees) 29

31 PENALTY POTENTIAL 30

32 On The Lookout

33 2014 PLAN ELIGIBILITY RULES No excessive waiting periods Waiting periods limited to 90 days Must offer health plan coverage to employees working at least 30 hours per week Other Benefits Plans (dental, vision, life, etc.) can still maintain higher per week hour requirements 32

34 NONDISCRIMINATION RULES COMING FOR FULLY-INSURED PLANS Will apply to non-grandfathered plans Discriminating in favor of highly-compensated employees (HCEs) will be prohibited Eligibility test Benefits test HCEs 5 highest paid officers More than 10% shareholder Highest paid 25% of all employees Effective date delayed for regulations 33

35 AUTOMATIC ENROLLMENT RULES Will apply to large employers that offer health benefits Applies to GF and non-gf plans Large employer = more than 200 employees Must automatically enroll new employees and re-enroll current participants Adequate notice and opt-out option required DOL: Regulations will not be ready to take effect by 2014 Employers not required to comply until regulations issued and applicable 34

36 MORE COSTS Jan. 1, 2014: Due to Individual Mandate, individuals must enroll in coverage or pay a penalty and this plus Auto-Enroll and other provisions will potentially drive employees currently waiving coverage to enroll in employer health plan Result: additional cost burden to employer Employers currently offer one composite rate/payroll deduction to employees but Exchanges will offer individuals Age Banded premiums Real danger here is that your young single healthy males leave employer plan for the state Health Benefit Exchanges Leaves employer with older less healthy population Creates a death spiral towards higher & higher costs each renewal 35

37 NEW CHALLENGES IN 2014 Exchanges vary by state. To be competitive Employer will now need to keep track of Exchange plans in each state. Need to have an analysis done to see if your employer sponsored plans meet the new Minimum Value actuarial standard. 36

38 FUTURE COSTS? Employer penalty tax is low at $2,000 per - could increase in future years to pay for cost of Health Care Reform 2018 Excise Tax on High Cost Coverages (Cadillac Tax): 40% excise tax imposed on the value of health insurance benefits exceeding a certain threshold: $10,200 for individual coverage $27,500 for family coverage Applies to both fully insured and self-funded employer plans. Tax is more likely for rich plans in high cost areas of U.S. 37

39 WHY IS THE CADILLAC TAX AN ISSUE? 38

40 How Will This Impact My Business in 2014?

41 REAL WORLD EXAMPLE 40

42 REAL WORLD EXAMPLE 41

43 REAL WORLD EXAMPLE 42

44 REAL WORLD EXAMPLE 43

45 REAL WORLD EXAMPLE 44

46 45

47 Resources

48 THE INSURANCE EXCHANGE RESOURCES Legislative Briefs: HCR: Form W-2 Reporting Requirements HCR: IRS Q&As on Form W-2 Reporting HCR: Types of Coverage Subject to Form W-2 Reporting HCR: W-2 Reporting Requirements (video) 47

49 THE INSURANCE EXCHANGE RESOURCES Preventive Care for Women HCR: Preventive Care Coverage Guidelines HCR: Preventive Care Guidelines for Women HCR: Compromise on Contraceptive Coverage for Religious Employers Federal Courts Temporarily Block Contraceptive Mandate Medicare Tax Proposed Rules on the Additional Medicare Tax Questions and Answers on Additional Medicare Tax Health FSA Limits HCR: Changes to Health Accounts HCR: IRS Provides Guidance on $2500 Health FSA Limit 48

50 THE INSURANCE EXCHANGE RESOURCES Legislative Briefs: Health Care Reform: Comparative Effectiveness Research Fees Standards for Reinsurance, Risk Corridors and Risk Adjustment More to come 49

51 THE INSURANCE EXCHANGE RESOURCES Health Care Reform Timeline Temporary Guidance Issued on 90-day Waiting Period Limit Interim Final Rules on Patient's Bill of Rights - Lifetime and Annual Limits Proposed Rule on Essential Health Benefits, Actuarial Value and Accreditation Standards Interim Final Rules on Patient's Bill of Rights - Pre-existing Condition Exclusions HCR: Proposed Rules on Workplace Wellness Programs Insurance Market Nondiscrimination Reforms for

52 THE INSURANCE EXCHANGE RESOURCES HCR: Health Insurance Exchanges HCR: Potential Penalties for Employers Under the "Pay or Play" Rules HCR: Will the Employer Pay a Penalty? (chart) HCR: IRS Guidance on Minimum Value and Reporting Requirements IRS Issues Guidance on Employer Penalties - Full-time Status and Using W-2 Wages Health Care Reform Pay or Play Calculator 51

53 QUESTIONS/COMMENTS 52

54 RESOURCES Christine Williamson, Partner (703) Jody Buyalos, Partner (301) GovCon360 keeps you abreast of the ever-changing regulatory environment that is Government contracting. From reference materials, like searchable pdf copies of the FAR and DCAM, to our past Lunch and Learn seminar slide decks and thought pieces on industry matters, we ve got it covered. Subscribe to our RSS feed to receive short alerts on recent industry changes. It s always been our job to help our clients maintain a competitive advantage by staying ahead of the curve. This website is an extension of the services we ve been providing for over 35 years by putting useful resources and up-to-date information at your fingertips. 53