How the Affordable Care Act Affects Colleges and Universities

Transcription

1 How the Affordable Care Act Affects Colleges and Universities Shannon Goff Kukulka Colbey Reagan Waller Lansden Dortch & Davis, LLP. All Rights Reserved.

2 Today s Presenters Shannon Goff Kukulka sgkukulka@wallerlaw.com Colbey Reagan colbey.reagan@wallerlaw.com 2

3 College Students and the Affordable Care Act Beginning in 2014, the Affordable Care Act (ACA) requires most U.S. citizens to maintain some form of health insurance or face a penalty. This is commonly known as the individual mandate and was upheld by the Supreme Court in The individual mandate makes no exception for college students. 3

4 How will students comply with the individual mandate? They simply won t. They will stay on their parents policy. They will purchase coverage through the healthcare exchanges. They will be covered by an employer. They will purchase coverage through a student health plan. (I would add Medicaid, but this is Tennessee). 4

5 No Coverage at All Since many students are relatively young and healthy, they may simply decide it is cheaper to pay the annual penalty than to pay for health insurance, even health insurance at a greatly reduced cost. This is a bad idea because: It throws off the economics of the whole system Young and healthy doesn t mean there s not a catastrophic brain injury waiting at every cross-walk. 5

6 Keeping it close to home. Effective at its inception, the ACA permits an adult child to stay on his or her parents health plan until the age of 26 even if they are: Married Not living with their parents Attending school Not financially dependent on their parents Eligible to enroll in their employer s plan 6

7 Healthcare Exchanges Some students may choose to satisfy the individual mandate by purchasing coverage through the exchanges (when the exchanges start working). However, many students may not be able to afford this option because they will likely need assistance in the form of federal tax credits to purchase the coverage. As long as the students are still being claimed as dependents by their parents, they may not qualify for the tax credits. 7

8 Coverage through an employer What can I say? This is a fantastic option for all college students whose employers offer them health insurance and I fully endorse it. * * These students may be few in number. 8

9 Student Health Insurance Plans Many students will choose to comply with the individual mandate by purchasing student health insurance through their college or university. 9

10 ACA and Student Health Insurance Plans Student Health Insurance Defined Student health insurance coverage is a type of individual health insurance coverage that is provided pursuant to a written agreement between an institution of higher education and a health insurance issuer, and provided to students enrolled in that institution of higher education and their dependents. 10

11 ACA and Student Health Insurance Plans The Student Health Insurance Final Rule did not give specific guidance on the definition of a student. The final regulations do not set a minimum threshold for determining student status under student health insurance plan coverage (i.e., requiring enrollment in a specific number of course hours each term or seeking a degree). These eligibility decisions are left to each college or university and the insurer. Logical to treat any student enrolled in courses as a student for purposes of the ACA, even on-line students. 11

12 ACA and Student Health Insurance Plans The Student Health Insurance Final Rule was released on March 21, Pursuant to the Final Rule, student health plans are subject to many of the same requirements as other health plans, including: Coverage of Essential Health Benefits Coverage of certain preventive health services Unlimited annual and lifetime dollar limits on Essential Health Benefits. 12

13 Essential Health Benefits Essential Health Benefits Include: Ambulatory Patient Services; Emergency Services; Hospitalization; Maternity and Newborn Care; Mental Health and Substance Abuse Treatment; Prescription Medications; Rehabilitative and Habilitative Services and 13

14 Essential Health Benefits Devices; Laboratory Services; Preventive and Wellness Services; and Pediatric Services, Including Oral and Vision Care. 14

15 Exceptions for Student Health Plans The Final Rule does treat student health plans differently than health plans offered through the exchanges in some respects. These exceptions are made in recognition of the somewhat unique challenges faced by universities in offering the plans and students in paying for the plans. 15

16 Exceptions for Student Health Plans The final regulations exempt student health insurance plans from the requirements that enrollees be able to renew or continue the coverage at their option. Student health insurance plans are not required to be available for nonstudents or to enrollees who have ceased to be students. However, some flexibility is provided to allow temporary continuation of coverage upon the loss of student status. The preamble to the final regulations provides that 90 days would be a reasonable amount of time to allow a graduating student to transition to other coverage. 16

17 Exceptions for Student Health Plans The Final Rules permit issuers of student health insurance plans to maintain a separate risk pool for student health insurance coverage rather than including them in the general individual market risk pool. Although student health insurance coverage is subject to the premium rating requirements of the ACA, the premium rate may be based on a school-specific group community rate if the issuer offers the coverage without rating for age or tobacco use. 17

18 Preventive Services/Student Health Fees The Final Rule also permits student health insurance plans to designate student health clinics (which are often funded by student health fees) as the primary in-network provider for preventive health procedures mandated as Essential Health Benefits. 18

19 Potential Issue The ACA prohibits the assessment of cost-sharing fees for preventive health services. Does this affect student health fees? No. 19

20 Student Health Fees The Final Rule also permits colleges and universities to continue to assess student administrative health fees. These are fees charged by the college or university on a periodic basis to students of the college or university to offset the cost of providing healthcare through health clinics regardless of whether the students utilize the health clinics or enroll in a student health insurance plan. The Final Rule does not count student health fees as costsharing fees. 20

21 Important Final Note All of these rules apply to student health insurance plans purchased through a carrier. The Final Rule on Student Health Insurance does not apply to self-insured student-health plans. 21

22 Healthcare Reform / Affordable Care Act Patient Protection and Affordable Care Act (PPACA) 3/23/10 Health Care and Education Reconciliation Act 3/30/10 INCREASE COVERAGE AND REDUCE COSTS Supreme Court case: Nat l Fed n of Indep. Bus. v. Sebelius 2012 Agencies issuing guidance: DOL HHS IRS 22

23 What s in a Name? 23

24 Backdrop for Benefits & Compensation Strategies Employment- Based Benefits System Culture of Spend and Borrow Increased Flight Risk Influence of Global Events Change is Now Constant 24

25 Who Must Be Covered? 25

26 Employer Mandate = Pay or Play Effective for employers with 50 FT Employees (30 hours or more + any full-time equivalents) Beginning in 2015, employer pays monthly penalty if: 1. Doesn t provide minimum essential coverage (excess of 30 employees) Penalty of $2,000 per employee 2. Provides minimum essential coverage but it is not affordable (employee premium share > 9.5% of income or plan s share of total allowed costs of benefits under plan is < 60% of those costs Penalty of up to $3,000 per employee AND employee receives premium tax credit or cost-sharing subsidy in an exchange 26

27 Employer Mandate = Pay or Play 27

28 Employer Mandate = Pay or Play Calculating FT employees for purposes of penalty Regulations use measurement/look-back periods and stability periods Requires employers to classify employees in categories: ongoing, new FT, new variable hour, new seasonal, PT (new or ongoing) Rules for determining possible penalties vary for each category of employee Look-Back Period -12 months -3 months Today 1/1/15 6/30/15 Stability Period 28

29 Employer Mandate = Pay or Play Ongoing Employee FT or PT, employed for at least one complete Standard Measurement Period (3-12 month look-back period chosen by employer to measure hours of service) Once measured, status as FT or PT is maintained for a Stability Period (greater of 6 months or length of SMP) New, Full-Time Employee Reasonably expected to be FT at start date ( 30 hrs/week) No penalty if coverage offered by end of employee s initial full 3 calendar months of employment 29

30 Employer Mandate = Pay or Play New, Variable Hour Employee Employer cannot determine, as of start date, if reasonably expected to work on average 30 hrs/week (facts and circumstances test) Subject to Initial Measurement Period of 3-12 months If FT during Initial Measurement Period, must be treated as FT during Stability Period the same length as Stability Period for ongoing employees If not FT, may be treated as not FT for special, limited Stability Period 30

31 How to Classify Adjunct Faculty and Assistant Coaches Q: How should hours of service be counted for adjunct faculty and assistant coaches? Most colleges and universities do not track hours of service of adjunct faculty; most compensate based on credit hours taught. A: Must use reasonable method for crediting hours of service, consistent with purposes of the employer mandate. Reasonable: method of crediting hours that takes into account all adjunct s hours of service, including classroom or other instruction time and other hours necessary to perform duties, such as class preparation time. Not reasonable: method takes into account only some hours of service with the effect of recharacterizing, as non-fulltime, an employee in a position that traditionally involves more than 30 hours of service per week. 31

32 Reasonable Methods for Counting Service Hours Factors to consider: Class preparation time Grading (note account class size) Participating in orientation sessions Participating in and preparing for departmental or other college meetings Keeping current in the field (e.g., attending conferences) Meeting with students or responding to student inquiries Mentoring students or advising extra-curricular activities or clubs Participating in accreditation reviews 32

33 What Must Be Covered? 33

34 Grandfathered Plan Status To keep grandfathered status, plans existing on 3/23/10 cannot be materially modified to: Make certain changes to annual limits Increase costsharing % Eliminate benefits to diagnose/ treat specific condition Decrease employer contribution rate > 5% Increase fixed-amount cost-sharing >15% above medical inflation 34

35 Plan Requirements Rules for employer plans include: Coverage of dependents to age 26 New hire waiting period 90 days or less (effective 1/1/14) No preexisting condition exclusions 2011: for enrollees under age : for all others 35

36 Plan Requirements Rules for employer plans include: No annual or lifetime limits on essential health benefits 2013: Annual limit $2 million 2014: No annual or lifetime limits No rescission except in case of fraud/intentional misrepresentation Annual cost-sharing expenses (including deductible) may not exceed certain limits 2013: OOP max is $6,250 for individual coverage and $12,500 for family coverage 36

37 Plan Requirements Auto-enrollment required for employers with > 200 FT employees Must automatically enroll new FT employees and continue enrollment of current employees Adequate notice and an opportunity to opt-out Effective date delayed until final regulations issued (initially set to be effective 1/1/14) 37

38 Plan Requirements - Appeals Process Must implement effective appeals process for claim determinations (if not grandfathered) Internal Appeals Process External Appeals Process Similar to ERISA claims procedures State procedures (NAIC standard) OR HHS minimum standards 38

39 Research & Design Elements 39

40 Patient-Centered Outcomes Research Trust Fund Patient-Centered Outcome Research Fee Annual fee Applies to health insurance issuers and self-insured group health plans Fee is $1 x average number of covered lives under plan for plan years ending after 9/30/2012 (increases to $2 x average number of covered lives for subsequent years) First payment was due 7/31/2013 Fee ends in 2019 for calendar year plans 40

41 Transitional Reinsurance Fee Transitional Reinsurance Fee Annual fee for Applies to health insurance issuers and self-insured plans (paid by TPA or, if self-administered, by plan) Estimated to be $63 per covered life in 2014, less in future years First payment due on/before January 14, 2015 Fees paid are tax deductible by plan sponsors 41

42 Wellness and Preventive Care 42

43 Wellness Incentives Nondiscrimination Requirements Reasonably designed to promote health Available to similarly situated employees Annual opportunity to qualify Amount of reward/penalty up to 20% cost of coverage 30% in % with tobacco component in 2014 Reasonable alternative standards 43

44 Wellness and Preventive Care Non-grandfathered health plans must provide coverage and not impose cost sharing for: Preventive Care/ Screenings for Infants and Children Items/Services with A or B Rating Immunizations Preventive Care/ Screenings for Women 44

45 Employer Notice and Reporting Obligations 45

46 Employer Notice Obligations Standardized summary of benefits and coverage (SBC) DOL template available 4 double-sided pages; 12-point font Coverage examples that illustrate benefits Can be part of SPD Current participants: applies to open enrollment period that begins on or after 9/23/2012 Newly eligible: applies on first day of first plan year beginning on or after 9/23/

47 Employer Notice Obligations Notice of private healthcare exchanges Templates available on DOL website All employers subject to FLSA Written notice to all active employees, even if not enrolled in health plan Current employees: must be provided by 10/1/2013 New employees hired on or after 10/1/2013: within 14 days of hire 47

48 Employer Reporting Obligations Key reporting obligations Form W-2 report aggregate cost of coverage for selffunded plans Used to determine tax credit for low-income worker and penalty for failure to provide minimum value plan 2012 small employer exception (under 250) Proposed valuation methods similar to COBRA 48

49 Tax Changes 49

50 Tax Changes Over-the-counter ineligible for HRA, FSA and HSA without a prescription 2011 Penalty for ineligible HSA payments increased from 10% to 20% 2011 Flexible spending accounts limited to $2,500/year 2013 Cadillac Tax: 40% excise tax on employer-paid premiums for Cadillac plans that typically are fully or largely paid by employers /26/13: Supreme Court decided case of U.S. v. Windsor, ruling 5-4 that married same-sex couples entitled to federal benefits and declaring part of the Defense of Marriage Act (DOMA) unconstitutional 50

51 Tax Changes Medicare tax 0.9% increase (employee share) on earned income above $200,000 ($250,000 joint) % Medicare tax on unearned or investment income if modified AGI over $200,000 ($250,000 joint)

52 Healthcare Reform: Compliance Tips Assess where you are plan, then execute Monitor developments Track guidance, deadlines, changes and updates Understand impacts of key requirements Put them in perspective for your specific situation Be flexible Maintain good records 52

53 Today s Presenters Shannon Goff Kukulka sgkukulka@wallerlaw.com Colbey Reagan colbey.reagan@wallerlaw.com 53