The Affordable Care Act (ACA) What are the Financial Impacts to your Business? Presented For: Dallas CPA Society May 8 th, 2013

Transcription

1 The Affordable Care Act (ACA) What are the Financial Impacts to your Business? Presented For: Dallas CPA Society May 8 th, 2013

2 Employer Questions Is the transitional reinsurance fee tax deductible? What should my look back period be for determining full time status? What am I supposed to submit to HHC to verify that I am offering coverage to employees? Agenda How do employees know if they are eligible for a federal subsidy and how do they apply for that subsidy? Do I have to auto enroll all full time employees?

3 Agenda What do we know today? What are the key decisions Employers need to make? How does ACA change the way you need to think about your business and your overall strategy? Private Insurance Exchanges Pros and Cons

4 ACA What do we know today? 2013 will be a transitional year portfolio changes, renewal packages and carrier quoting systems are undergoing development work now to be ready for January 2014 Many of the 2014 provisions take effect on a group s first renewal or new business effective date on or after 1/1/14 (e.g., adjusted community rating, product rules) Insurance companies are restricted in the factors they can use to determine rates and underwriting for Individual and Small groups (under 50 employees) Those factors that can not be used are: Gender; Health status; Claims history; Medical underwriting and group size or industry

5 ACA What do we know today? Many of the ACA regulations have not been written by Health and Human Services (HHS) yet. This has created delays in the implementation of some of the provisions of ACA. The next 90 days will be critical to a successful 1/1/14 implementation Only 17 states plus DC have agreed to set up their own Insurance Exchanges with the Federal Government having to set up Exchanges in all other states (some are pursuing Federal/State Partnerships; 17 have opted out (Texas and Oklahoma) and many may still consider Federal/State Partnerships but have yet to do so to date The individual mandate tax is set: for 2014-$95 per adult or up to 1% of family income; for 2015-$325 per adult or up to 2% and for $695 per adult or up to 2.5%

6 ACA What do we know today? Individual Exchange subsidies are available only if no other available coverage is affordable or meets the minimum value requirement and the employees salary are within 133% -400% of the poverty line. If eligible, will employees apply for the exchange subsidies? Will people who buy insurance through the Federal Exchanges be able to find doctors to see? Indications from Insurance Companies are that they will have to only offer restricted networks to get to the price point required by HHS Wellness incentives and tobacco incentives have been increased to 30% and 50% respectively. Is your employer sponsored plan taking advantage of these incentives?

7 ACA What do we know today? ACA is not Healthcare Reform and will not reduce costs either in the short or long term. Fees, taxes, benefit requirements and rating will affect the cost of health care for employers during the next several years What will the cost of insurance be for the Federal Health Insurance Exchanges? Initial estimates by the Kaiser Foundation indicate that the cost for family coverage will be $20,000 annually ($1,667 per month) Initial Projections for the cost of Healthcare in 2014 are that costs are going up by the following size groups: Individual: +25% to +200%; Small Group: -5% to +50% and Large Group: +15% to +25% If employers do not opt out and decide to Play will fully insured plans be affordable or will partially self funded plans be the only cost effective option? Will captives become more popular with small employers looking to self funded with less risk?

8 Your New Federal Healthcare Program

9 What are the Key Decisions Employers Need to Make? Road Map of Healthcare Reform What is the impact of ACA on your business Pay or Play Determine your overall BUSINESS strategy Implement strategy and new plans if any; educate shareholders

10 2013 Health Care Reform Roadmap Exchange Notice to employees (Delayed-Released 1/2013). 3/23/2013 Patient Centered Outcomes Research Trust Fund (PCOR) Fees are due by July 31 of each year 1st due July 2013 New Medicare and passive income tax on high-income individuals earning >$200k and $250k as jointly filed.9% Medicare tax 3.8% Passive Income tax 7/31/2013 1/1/2013 $1 per enrollee $2 per enrollee Fee eliminated in 2020 Final Released 12/2012 Medical expense deduction increase to 10% AGI 1/1/ Health Coverage on W2 SBC Notice and Uniform Glossary FSA Limit to $2,500 Women s Preventive Services (1/1/2014 GF - Additional Regulations Issued in 2013)

11 2014 and Beyond Health Care Reform Roadmap Individual Mandate Applies Penalties for employees who do not have coverage (refer to backup page for Dollar Amount) Full-time employees have been defined as 30 hours per week or 130 hours per month 1/1/ /1/2014 1/1/2014 Employers must be prepared to report minimum essential coverage (Form 1099-HC) and qualifying affordable coverage (Additional guidance expected 60% actuarial test on plans and 9.5% test on contributions) Increased maximum incentive for wellness programs up to 30% and up to 50% for tobacco use Automatic Enrollment for eligible employees for employers with more than 200 full-time employees (Delayed until 2015 Released 2/2012) 1/1/2014 1/1/2014 Required Plan Amendments (First day of the plan year) Essential Health Benefits Final 2/2013 Eliminate waiting periods greater than 90 days Allow all dependents to age 26 Eliminate Pre-existing for all participants Limit OOP max for HSA-compatible limits Provide coverage for certain clinical trials

12 2014 and Beyond Health Care Reform Roadmap Cadillac Tax: Transitional Reinsurance Fee (Self-funded Groups) (Final released in March 2013, Fees are Tax Deductible) 2014 proposed fee is $5.25 PMPM ($63 PMPY) 2015 proposed fee is $3.50 PMPM ($42 PMPY) 2016 proposed fee is $2.17 PMPM ($26 PMPY) 1/1/ /1/2014 Beginning in 2018, a 40% excise tax will be imposed on the value of health insurance benefits exceeding: $10,800 for individual coverage $27,500 for family coverage 1/1/2014 Insurance Exchanges become available either through the state or federal government

13 Pay or Play Penalties for Employers Not Offering Affordable Coverage Under the Affordable Care Act Beginning in 2014 Start Here Yes Does the employer offer coverage to its workers? No Yes Does the insurance pay for at least 60% of covered health care expenses for a typical population? No Yes Do any employees have to pay more than 9.5% of family income for the employer coverage? No Yes There is no penalty required of the employer as it offers affordable coverage. Does the employer have at least 50 full-time equivalent employees? Did at least one employee receive a premium tax credit or cost sharing subsidy in an Exchange? Employees can choose to buy coverage in an Exchange and receive a premium tax credit. Employees can choose to buy coverage in an Exchange and receive a premium tax credit. No No No No Penalties do not apply to small employers. The employer must pay a penalty for not offering coverage. The employer must pay a penalty for not offering affordable coverage. If the employer has 25 or fewer employees and average wage up to $50,000, it may be eligible for a health insurance tax credit. The penalty is $2,000 annually times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums. The penalty is $3,000 annually for each full-time employee receiving a tax credit, up to a maximum of $2,000 times the number of full-time employees minus 30. The penalty is increased each year by the growth in insurance premiums.

14 Affordability & Minimum Value Tests Under the proposed regulation, a health care plan may determine Minimum Value under one of three methods: Minimum Value Calculator; Safe Harbor Checklist; or Actuarial Certification Minimum Value Calculator based on continuance tables and a standard population reflecting claims data of typical self-insured employer plans Safe Harbor Checklist each checklist will describe the cost-sharing attributes of a plan applicable to four core categories of benefits: physician and mid-level practitioner care; hospital and emergency room services; pharmacy benefits; and laboratory and imaging services Actuarial Certification if an employer-sponsored plan contains non-standard features that aren t suitable for the use of the calculator and do not fit the safe harbor checklists, the proposed rule will permit minimum value to be determined by actuarial certification. HHS intends to issue applicable guidance regarding the actuarial analysis Affordability Cost for Employee only coverage can be no more than 9.5% of the lowest paid full time (30 hours per week) W-2 income for the lowest benefit plan

15 ACA Impact to Your Business - Mandated Changes 1/1/14 Plan/Health Care Reform Costs Projected Annual Savings Low High % of Total Gross Spend Notes 2014 Health Care Reform Costs Cover generic contraceptives with no copay Patient Centered Outcome Research Fees - $1 PMPY Transitional Reinsurance Fees - $63 PMPY Reduce Waiting Period to first of the month following 60 days Dependents to age 26 regardless of employment status Eliminate Pre-Existing for all participants Determine Look Back Provision for Part Time Employees Maintain Grandfather Status Additional Cost $0 $0 0.00% 2015 Health Care Reform Costs Patient Centered Outcome Research Fees - $2 PMPY Transitional Reinsurance Fees - $42 PMPY 2016 Additional Cost $0 $0 0.00% Health Care Reform Costs Patient Centered Outcome Research Fees - $3 PMPY(Est) Transitional Reinsurance Fees - $26 PMPY Additional Cost $0 $0 0.00% #REF! Note: % of Total Gross Spend was based on 2012 year end gross cost

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17 What Is Your Overall HR Business Strategy?

18 Health Insurance Plan Strategy What is my overall objectives and strategy for recruiting and retention of employees? You Need to structure your ACA strategy around your overall business strategy and also consider a multi-year strategy (3 years). If you as an employer offer an employer sponsored health insurance plan, then your insurance funding options are: Fully Insured Program Pay one price per month based on enrolled employees limited to no risk Can not win based on good claims experience Partially Self Funded Program Pay fixed costs monthly based on enrolled employees Fund actual claims as incurred Purchase stop loss to limit risk Captive Program (Partially Self Funded)

19 Private Insurance Exchanges Pros of Private Exchanges: 1. Cost certainty if defined contribution and costs remain flat 2. The looming excise tax on high cost coverage (the so-called Cadillac tax ) under PPACA 3. The potential for reduced administrative costs 4. Higher employee satisfaction if employer is not doing a good job communicating with employees 5. Outsource enrollment process 6. For small employers, group or bundled pricing which could reduce costs in the short term 7. Multiple options for employees to choose from 8. Becomes an individual decision by the employee

20 Private Insurance Exchanges Cons of Private Exchanges: 1. Plan design choices 2. Typically fully insured plan are offered on most private exchanges 3. Implications of adverse selection and cost increases if moving from a self -funded plan to a fully insured program 4. Setting the level of fixed contribution 5. The amount of plan choice too many choices will confuse employees 6. Geographic cost variation (if fully insured private exchange) 7. Worker preference of, and satisfaction with, employment-based coverage 8. Industry and competitive environment can you still recruit and retain key employees? 9. The role of employer as advocate in coverage disputes, delivery innovation and health care quality, and health literacy issues 10. Outsource enrollment process

21 Q & A Questions?

22 This presentation is for informational purposes only. The information contained in this presentation does not constitute actuarial or legal advice. Participants should consult their own actuaries, attorneys and tax advisers for guidance. For Additional Information please contact Bill blacey@plexusgroupe.com or call us at