Affordable Care Act: The Wave To The Future Is Here!

Transcription

1 ACWA/Joint Powers Insurance Authority 2013 Fall Conference Affordable Care Act: The Wave To The Future Is Here! Presented by: Tom Sher, Alliant Insurance Services, Inc. December 3, 2013 JW Marriott LA Live Los Angeles, California

2 Affordable Care Act Update December 3, 2013 Presented by Tom Sher, Senior Vice President Alliant Employee Benefits AGENDA Affordable Care Act (ACA) Basics Individual id Mandate Exchanges Employer Mandate ACA Implications Future Considerations 2 1

3 ACA BASICS HOW DOES THE LAW WORK? Guaranteed Issue, pre existing Individual Mandate conditions 2014 excluded 2014 Market Reforms Premium Support for Mandated Coverage 2014 Taxes for Premium Support 2013 and beyond 3 ACA TIMELINE: WHAT IS CHANGING Pending Issues Automatic enrollment Non-discrimination testing 2010 Grandfathered plans Dependent coverage through h age 25 Preventive coverage No rescission New appeals process/external review Any available Primary Care Provider/Pediatrician Essential health benefits Coverage of emergency services Access to OB/GYN care Limits on preexisting condition exclusions Medical loss ratio Over-the-counter drugs Summary of benefits and coverage Patient centered outcomes research fee W-2 reporting Women s Health Amendment Flexible spending accounts Notice of exchange 2014 & Beyond Individual mandate Exchanges Employer Mandate Essential Health Benefits Out-of-Pocket & Deductible Maximums Reinsurance fees Benefits begin by 91 th day No preexisting conditions for all ages Coverage for clinical trials Wellness incentives Pay or Play Proof of coverage Cadillac Tax 4 2

4 ACA - BASICS Who is Impacted? Employers with more than 50 Full Time Equivalents (FTEs) who do not offer affordable coverage that t covers essential health benefits and at least 60% of expenses Offer coverage or pay penalty in 2015 Employers who do offer coverage Taxes built into premiums, calculations for who is eligible, notices, plan design changes in 2014 Employers who offer Cadillac plans Pay a penalty in 2018 Uninsured Individuals and Underinsured Individuals Enroll in coverage or pay penalty in 2014 Medicaid, Medicare, Health Plans, Hospitals, Providers Reimbursements impacted and more 5 INDIVIDUAL MANDATE Effective January 1, 2014 All legal residents of the U.S. must have coverage Individuals must enroll in coverage or pay a penalty 2014 = $95 or 1% of income 2015 = $325 or 2% 2016 = $695 or 2.5% Family penalty capped at 300% of the adult flat dollar penalty or bronze level premium 6 3

5 THE EXCHANGE: COVERED CALIFORNIA California s Exchange is called Covered California and will open October 1 st, 2013 for January 1, 2014 coverage Who can use Covered California to purchase insurance? Legal residents of California There will be four plan levels to chose from: Platinum 90% Actuarial Value Gold 80% actuarial value Silver 70% actuarial value Bronze 60% actuarial value What kind of help is available to help lower the cost of insurance? Tax credits available at enrollment Cost-sharing subsidies to reduce the amount of out-of-pocket health care expenses MediCal assistance Source: Covered California, THE EXCHANGE: COVERED CALIFORNIA Exchange Eligible Population by Region 3 Service Centers statewide County eligibly populations are a subset of the total population in a region. Source: Covered California; March 7, ,500-2,000 Employees now Expected Enrollment Individual - 2,600,000 SHOP 1,000,000 Enrollment Begins: October 1,

6 THE EXCHANGE: COVERED CALIFORNIA Who Gets Help Paying the Premium? Employees not offered affordable Minimum Essential Coverage (MEC) by their employer may qualify for premium assistance (tax credit) If employer coverage is affordable for the employee based on the premium for least cost single coverage, neither the employee or their dependents are eligible for premium assistance Funded through multiple sources, including Insurer Tax and Reinsurance Tax which are already built into 2014 premiums. Individual Mandate penalties and Excise Tax will also contribute to the Federal Subsidies. 9 THE EXCHANGE: WHO IS ELIGIBLE FOR SUBSIDIES? In order for an employee to be eligible for subsidized Exchange coverage: their earnings must be between 100% ($11,490) and 400% ($45,960) of the federal poverty level, AND the employee s contribution for employee only coverage in their employer plan must be more than 9.5% of income Dollar amounts reflect 2013 federal poverty level. 9.5% maximum Employee s monthly annual W 2 contribution for income single coverage $11,500 $90.97 $15,000 $ $20,000 $ $25,000 $ $30,000 $ $35,000 $ $40,000 $ $45,000 $

7 THE EXCHANGE: COVERED CALIFORNIA How much will the tax credit help those who enroll? The amount of the tax credit depends on household income and family size of eligible individuals. Below are some examples of potential costs to families in California. Household Size Annual Income Yearly Cost of Health Insurance (without subsidy) Yearly Federal Government Subsidy New, Lower Cost of Health Insurance 4 $31,900 $12,300 $11,100 $1,200 ($100/mo) 4 $88,800 $12,300 $3,900 $8,400 ($700/mo) 1 $27,000 $4,548 $2,460 $2,100 ($175/mo) Source: Covered California, THE EXCHANGE: COVERED CALIFORNIA Can your full-time employees opt out of employer coverage and go to the Exchange? They may not be eligible for a federal subsidy They may be paying more for their coverage than through their employer The plans may not be as rich as employer plans The Networks may be more limited than plans through employers with full provider networks Non-Medicare retirees and part-time employees may qualify for subsidies 12 6

8 THE EXCHANGE: HEALTHCARE.GOV.This system requires coordination of over 288 policy options (an average of eight insurers are competing for business in 36 states), each with three or more levels of coverage, while simultaneously calculating beneficiary income, tax credit eligibility, subsidy levels, deductibles, not to mention protecting applicant privacy, insuring web security and managing a host of other data points....congress took on the task of creating a set of information technologies that has to interconnect with the I.R.S.; the Departments of Labor, Treasury, Veterans Affairs and Homeland Security; the Social Security administration; state governments; insurers; employers; hospitals; and practitioners in the private sector Thomas B. Edsall, New York Times, November 19, EMPLOYER SHARED RESPONSIBILITY MANDATE DELAYED UNTIL 2015: Pay or Play What Who How When Employers must offer Minimum Essential Coverage (MEC) that is Affordable and provides Minimum Value (60% actuarial) Large employers (50 or more full-time employees (FTEs) Provide coverage to substantially all (95%) full-time employees (130+ hrs/mo) and their dependents. January 1, 2015 (transition relief may be granted; awaiting regulations) 14 7

9 EMPLOYER MANDATE Large Employer Penalties Effective January 1, 2015 (was 2014) Employers with 50 or more Full Time Equivalents Employees (FTEs) Trigger: FT employee purchases subsidized coverage in the Exchange Penalty A: Employer does not offer minimum essential coverage to substantially all (95%) FT employees & dependents $2,000 x (# full-time employees - 30) OR Penalty B: Coverage is not affordable or doesn t provide minimum value $3,000 per employee that enrolls in subsidized exchange coverage 15 EMPLOYER MANDATE: PENALTIES Employer does NOT offer MEC The no offer Penalty A Employer offers MEC, but it is not Affordable The Unaffordable Penalty B 1 FT EE gets subsidized coverage 1 FT EE gets subsidized coverage $2,000 per each full time employee ( 30) $3,000 per each subsidized employee 16 8

10 EMPLOYER MANDATE- AFFORDABILITY Affordable Coverage Coverage must be Affordable for those with household incomes of % of Federal Poverty level Safe Harbor? Penalty Federal Poverty Level Annual single coverage costs 9.5% of Federal Poverty Level for single household Employer uses same base contribution for all employees Rate of Pay Method Monthly single coverage costs 9.5% of hourly wage x 130 W-2 Method Annual single coverage costs 9.5% of year end W-2 (box1) = $3,000 per employee that enrolls in subsidized exchange coverage if coverage is not Affordable 17 EMPLOYER MANDATE- AFFORDABILITY Applying Safe Harbor Tests to Ensure Compliance Basic Rule for All Tests All are based on cost of single coverage for the least cost plan offered regardless of the plan elected by the employee Does not include Dental or Vision premiums Tests by Degree of Complexity Easiest: Federal Poverty Line Moderate: Rate of Pay Complex: W-2 Must You Use the Same Test for All Employees? No. You may apply different tests to different categories of employees: represented/un represented, hourly/salaried, different bargaining units, employed in different states 18 9

11 EMPLOYER MANDATE- AFFORDABILITY Employee only coverage for least cost plan must be below 9.5% of income based on 1 of 3 calculation methods: Federal Poverty Level Safe Harbor In 2013, $11,490* x 9.5% = $1,091.55/year or $90.96/month Most favorable to employees; easiest test to apply *Calculations based on 2013 Federal Poverty Levels for Continental U.S. Rate of Pay Safe Harbor Based on employee s hourly wage x 130 (monthly) Each employee evaluated separately Employee earning $8.50/hr, $8.50 x 130 = $1,105 x 9.5% = $104.97/month W 2 Safe Harbor Based on employee s W 2 earnings (box 1) Each employee evaluated separately Employee that earned $20,000/yr, $20,000 x 9.5% = $1,900 or $158.33/month WARNING! W 2 income is final at end of year, but no retroactive changes 19 CADILLAC TAX What Who 40% tax on the premium above $10,200/individual and $27,500/ family Insurers and TPAs (assume costs passed on to employers) When 2018 How Yet to be determined Penalty Tax = [(Individual premium premium cap) x 40%] x # singles enrolled + [(Family premium premium cap) x 40%] x # families enrolled 20 10

12 CADILLAC TAX: FUTURE CONCERNS Cadillac Tax Strategies Many plans are likely to be subject to the tax Employers are considering lower benefit, lower cost plans New plans may not be discriminatory, i.e. may not favor highly compensated employees Planning ahead makes sense 21 CADILLAC TAX ILLUSTRATION CalPERS (State Rates) Single Family Monthly 2014 Kaiser HMO $ $1, PERSChoice PPO $ $1, Health Plans will be subject to Cadillac tax in 2018; immediate attention needed Annual 2014 Kaiser HMO $7, $20, PERSChoice PPO $7, $20, Annual 9%/year increase Kaiser HMO $11, $29, PERSChoice PPO $10, $28, Current Cadillac Tax Threshhold (2018) $10, $27, Taxable Amount Kaiser HMO $1, $1, PERSChoice PPO $ $ Tax at 40% Kaiser HMO $ $ PERSChoice PPO $ $

13 ACA IMPLICATIONS Employers have some work to do Ask the JPIA, your Broker or Carrier for guidance Review Plan Design for Compliance Offer essential benefits, preventive care, remove maximums Ensure Communication requirements are met SBCs, Notice of Exchange Ensure Administration requirements are met Count hours using chosen Measurement period, Admin. Period, Stability Period 23 ACA - IMPLICATIONS Employers have some work to do 2015: Employer Mandate: Ensure plans meet minimum value, affordability criteria Evaluate workforce, eligibility, contributions and employment practices Understand potential tax liabilities and additional costs; make changes as necessary Be ready to prove coverage was offered to those who were eligible Get ready in 2015 to report to the IRS in 2016 IRC Section 6055/6056 Note: Those who issue less then 250 W-2 s W-2s remain exempt from reporting the cost of benefits on W-2 s Update Employee Handbook or MOU with ACA definitions for hours and eligibility Prepare for negotiations if plan selections or contributions may change 24 12

14 QUESTIONS Questions? Participants in the ACWA / Joint Powers Insurance Authority health plans may contact the JPIA at (800) for ongoing support. 25 DISCLAIMER The Affordable Care Act ( ACA ) is an extraordinarily complex law that will impact all areas of medical insurance in the U.S. Both federal and state agencies have been and will continue to issue temporary and final regulations that materially impact compliance requirements and necessitate new or modified compliance actions. This document and the related resources are intended to support a best practice approach to ACA compliance based on known regulations and practical responses to an evolving landscape. ACA compliance will be an ongoing process that will require regular updates to an employer s strategy based on new regulations and marketplace developments. This document provides general information regarding the mandates under the Affordable Care Act (ACA). It does not provide a review of, or ensure compliance with, ih ACA mandates. Alliant Insurance Services, Inc. does not provide legal advice or legal opinions. Please consult counsel if a formal legal opinion is desired