8/7/2013 INSURANCE MADE SIMPLE. 1

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1 Presented by: Mark E. Baker Vice President Employee Benefits INSURANCE MADE SIMPLE. 1 Health Care Reform provisions in effect Large Employer Defined Pay or Play Mandate and Penalties Small Employer Defined Individual Mandate Health Insurance Exchanges Metal Tiers and Products How the Exchanges Work Requirements for 2014 Questions 2 1

2 The Patient Protection and Affordable Care Act (PPACA), also know as the Affordable Care Act or ACA, is the landmark health reform legislation passed by the 111 th Congress and signed into law by President Barack Obama in March The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to be rolled out over the next five years. Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions. The goal is to have most Americans purchase health insurance or pay a penalty for non-coverage. Dependent coverage up to age 26 No lifetime limits/restrictions on annual limits No pre-existing condition exclusions for children Medical loss ratio rules Form W-2 reporting Uniform Summary of Benefits and Coverage (SBC) requirement Preventive care services are covered in full Health FSA contribution capped at $2,500 per employee 2

3 For Large Group Plans Only: Requirement to offer minimum essential coverage to at least 95% of full-time employees Need to offer affordable coverage to full-time employees Need to offer coverage that provides minimum value (60%) Requirement that 30 hours/week is full-time for health benefits Need to track hours of variable hour employees to determine if they are full-time and eligible for benefits Need to track data for reporting requirements Limits on out-of-pocket maximums ($6,350/$12,700) (apply to all size and type of plans) Taxes and fees: PCORI Fee, Transitional Reinsurance Fee, Health Insurance Industry Tax Maximum 90-day waiting period (maximum 60 days in CA) No pre-tax limits, no annual dollar limits on essential health benefits New Wellness program rules Requirement that small insured plans (both inside and outside the Marketplace/Exchange) must cover essential health benefits, met one of four metals levels of actuarial values (60%, 70%, 80% or 90% within two percentage points), modified community rating, guaranteed issue and renewal Medical loss ration (MLR) requirements, and rebates if MRL requirements are not met (apply only to insured plans) 3

4 Required distribution of Summaries of Benefits and Coverage (SBCs) Required distribution of Exchange Notices by October 1, 2013 W-2 reporting of health care costs (applies only to employers who issues at least 250 W-2s for the prior reporting year. Taxes on individuals who do not have minimum essential coverage Subsidies for qualifying individuals who buy health insurance in the individual Marketplaces For Small Group Plans Only: Limits on deductibles or small insured plans ($2,000/$4,000). 4

5 LARGE GROUP EMPLOYER Large Group Any employer with 50 or more full time and full-time equivalent employees. FT employee (for healthcare reform): any employee working an average of at least 30 hours of service per week Full-time equivalent employees include Part-time, Variable, Union and seasonal employees. Employers must add the total number of monthly hours for each employee and divide by 120. Seasonal Employee are defined as employees who works less than 120 days in a calendar year 9 COUNTING SEASONAL EMPLOYEES If, during the prior calendar year, an employer s full-time employee workforce (including FTEs) exceeded 50 employees on only 120 or fewer days, and seasonal workers were the only reason the 50-employee threshold was exceeded during this period, the employer is not considered a large employer. The days or months need not be consecutive. This exception may also be applied on the basis of 4 or fewer calendar months. 10 5

6 Effective January 1, 2015 The Pay or Play rules apply to employers with 50 or more full-time and full-time equivalent employees in the prior calendar year Only affects employees who worked an average of 30 hours or more per week in the prior calendar year. Penalties may apply if the employer: Fails to offer minimum essential coverage to all FT employees OR Offers coverage that is not affordable or does not provide minimum value, more than 9.5% of income Two Types of Penalties: I. Employer Does Not Offer Coverage Penalty = $2,000/full time employee or 1/12 th of $2,000/month. Penalty is not imposed on fulltime equivalents. First 30 employees not included in assessed penalty. Penalty imposed if only one full time employee enrolls in the State Exchange and receives a tax credit II. Coverage is Unaffordable or is not of minimum value Penalty = $3,000 per full-time employee who receives a tax credit or the no coverage penalty, whichever is less. Unaffordable - premium contribution for self only coverage exceeds 9.5% of household income. Minimum value must pay a least 60% of the cost of the services. Employer will pay 12 6

7 Employs less than 50 employees and FTEs Is not subject to penalties for not providing coverage or not providing coverage that is minimum value Has more flexibility than a large group employer Has available small group plan through carriers May use NYS Small Business Health Options Program (SHOP_) Exchange Changes to 100 employees in

8 Effective Jan. 1, 2014: Individuals must enroll in health coverage or pay a penalty Penalty amount: Greater of a flat dollar amount or a percent of income 2014 = $95 or 1% 2015 = $325 or 2% 2016 = $695 or 2.5% Family penalty capped at 300% of the adult flat dollar penalty or bronze level Exchange premium Some exceptions apply There are exceptions to the requirement for all Americans to purchase health insurance or be penalized. The exceptions are: Members of a religion opposed to acceptance of benefits from a health insurance policy Undocumented immigrants Incarcerated individuals Members of an Indian Tribe Persons whose family income is below the threshold for filing a tax return ($10,000 for an individual and $20.00 for a family in 2013). Persons who pay more than 8% of their income for health insurance after taking into account any employer contributions or tax credits. 8

9 17 Health insurance Exchanges will be established in each state (by the state or the federal government) State action: 17 (and D.C.) declared state-based Exchange 7 planning Partnership Exchange 26 default to federal Exchange Deadlines Employers must provide employees with Exchange Information letters by 10/1/2013 Open enrollment: 10/1/13 03/31/2014 Fully operational: 1/1/14 9

10 HEALTH INSURANCE EXCHANGES Individuals will also be able to enroll in the exchange during a special enrollment period when there is a qualifying event. Qualifying events include: Losing job-based insurance Losing Medicaid coverage because of an increase in income Marriage Divorce Birth or adoption of a child 19 10

11 Online portal for individuals and small businesses to shop for, compare, and obtain health insurance. Open enrollment launch October 1, 2013 The Exchange will make eligibility determinations for Medicaid, CHPs, and subsidies for individuals buying insurance It will rate health plans on quality and provide a cost comparison tool for the products being offered. Standard and Non-standard plans will be offered: Bronze 60% +/-2% Silver 70% +/-2% Gold 80% +/-2% Platinum 90% +/-2% 21 AV Plan Type INN Ded Single INN Ded Family OV SP INN HOSP INN Max Single INN Max Family RX Bronze 62% HDEPO (HASqualified) $3,000 $6,000 50% 50% 50% $6,350 $12,700 $10/$35/$70 Silver 70.70% EPO Copayment $2,000 $4,000 $30 $50 $1,500 $5,500 $11,000 $10/$35/$70 Gold 79% EPO Copayment $600 $1,200 $25 $40 $1,000 $4,000 $8,000 $10/$35/$70 Platinum 88.10% EPO Copayment $0 $0 $15 $35 $500 $2,000 $4,000 $10/$30/$

12 I. Standard Products 1 standard product at every metal level 1 standard child only policy (every metal level) 1 standard catastrophic product may be optional Could be either HMO or insurance Follows EHBs with exceptions (Wellness, Rehab) II. Non-Standard 3 options at each metal level Additional benefits Different network will be considered a separate option Variations on cost sharing 23 Each carrier will be required to offer a standard plan at each metal level The standard plans will be identical from one carrier to the other in terms of benefits and cost share; they can differ in terms of network and price The non-standard plans (up to three per metal level) can differ in terms of cost share, network, benefits and price as long as they meet the actuarial value corridor IMPORTANT POINT ALL plans offered on the Exchange MUST ALSO BE OFFERED OFF THE EXCHANGE

13 The NYS Health Benefit Exchange Individual Exchange HNY/Sole Proprietors Uninsured Direct Pay Cast-offs from insured business Child Health Plus and Medicaid SHOP Exchange Small group (HNY will be offered a standard plan at gold level) 25 State Exchange is moving ahead rapidly: It is well-funded, well-staffed, and inspired from the Governor on down to be operational by Oct. 1, 2013 Timeline: 4/15 plans submitted proposals to NYS 4/30 plans submitted networks to the NYS 4/30 plans submitted products and pricing 7/17 notification of certification from NYS Individual and SHOP Rates Released 10/1 Exchange is online 1/1/14 effective date for exchange coverage 26 13

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15 Annual limits eliminated Prohibited on essential health benefits with 2014 plan year Essential health benefits to be determined according to state benchmark plan Preexisting condition exclusions prohibited Currently prohibited for children under age 19 Prohibited for everyone beginning with 2014 plan year Small group and individual policies (non-gf plans) Must provide essential health benefits package Premium rating restrictions apply Transitional reinsurance fee between Fees imposed on health insurance issuers and self-funded plan sponsors of major medical plans (with some exceptions) Fees based on annual national contribution rate 2014 proposed rate: $5.25/month ($63/year) x average number of covered lives Payment of fees Issuers to submit annual enrollment count to HHS by Nov. 15 HHS to notify issuer or sponsor of amount due within 15 days or by Dec

16 Apply to plan years ending on or after Oct. 1, 2012 End with the 2018 plan year do not apply for plan years ending on or after Oct. 1, 2019 Paid annually on Form 720 by July 31 each year Amount of fees 2012 plan year: $1 x average number of covered lives 2013 plan year: $2 x average number of covered lives 2014 and beyond: increase based on National Health Expenditures Who pays? Insurance carriers and self-funded plan sponsors Special rule for HRAs Employers must notify employees of Exchange information New employees beginning Oct. 1, 2013 (within 2 weeks) Current employees no later than Oct. 1, 2013 Notice must include information about: Existence of health benefit Exchange and services provided Potential eligibility for subsidy under Exchange Risk of losing employer contribution if employee buys coverage through an Exchange Model notice available (will need some customization) Notice can be provided by mail or electronically (if DOL requirements met) 16

17 A waiting period is the period of time that must pass before coverage for an employee or dependent who is eligible to enroll becomes effective. The ACA states that group health plans may no not apply a waiting period that exceeds 90 days. Many employers that enroll employees on the first day of the month after 90 days of employment will need to change their enrollment period. An employee or dependent becomes eligible when he or she meets the plan s eligibility conditions: Example: If an employee s continued employment depends on successful completion of courses or obtaining licenses, the waiting period can start from the day they are issued the license or complete courses. This should be outlined in the Plan Document 90 DAY WAITING PERIOD Other Eligibility Conditions Variable Hour Employees Employer unable to determine eligibility because of variable hours Is eligible on the first day of the first month after the measurement period ends, up to 13 months from date of hire Cumulative Service Requirement Cannot exceed 1,200 hours 34 17

18 This presentation is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Please contact legal counsel for legal advice on specific situations. This presentation may not be duplicated or redistributed without permission Zywave, Inc. All rights reserved. 18