Healthcare Reform. Strategy & Decision-Making for 2014 and Beyond. Webinar Handout Part I Key PPACA Requirements & State Exchanges.

Transcription

1 Healthcare Reform Strategy & Decision-Making for 2014 and Beyond Webinar Handout Part I Key PPACA Requirements & State Exchanges Presented by HCR & Strategy Pt I LMC October 2012

2 Healthcare Reform Strategy & Decision-Making for 2014 and Beyond Webinar Handout Part I Key PPACA Requirements & State Exchanges 3600 American Blvd. West Suite 500 Bloomington, MN Gallagher Benefits Services, Inc. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is provided to seminar participants or sold with the understanding that the publisher is not engaged in rendering legal, accounting, tax, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Neither this manual/reference, nor any seminar presentation where it is used, should be construed as legal advice. If you need legal advice upon which you can rely, you must seek a written legal opinion from your attorney. Copyright law prohibits the reproduction or transmission in any form or by any means, whether mechanical, photographic or electronic, of any portion of this publication without the express written permission Gallagher Benefits Services, Inc. HCR & Strategy Pt I LMC October 2012 i

3 Healthcare Reform Strategy & Decision-Making for 2014 and Beyond Part I Table of Contents Chapter 1 The U.S. Supreme Court Decision...1 Chapter 2 Key PPACA Requirements...3 Chapter 3 Individual Responsibility & State Exchanges Chapter 4 Resources ii

4 The SCOTUS Decision Key PPACA Requirements Part I Individual Responsibility Resources iii

5 Healthcare Reform Strategy & Decision-Making Part I Notes Chapter 1 The U.S. Supreme Court Decision Individual Mandate The individual mandate violates the Commerce Clause and is unconstitutional. However, the money an individual must pay for failure to purchase health insurance is a tax that Congress can impose using its taxing power.... Congress [has] the power to impose the [penalty/tax] under the taxing power, and... [it] need not be read to do more than impose a tax. This is sufficient to sustain it. Those subject to the Individual Mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing that they may not lawfully do is not buy health insurance and not pay the resulting tax. The SCOTUS Decision Anti- Injunction Act The court determined that the Anti-Injunction Act does not apply. Had it applied, it would have delayed courts from ruling on the issues until the penalty/tax was actually collected

6 Notes Healthcare Reform Strategy & Decision-Making Part I Severability Because the Supreme Court upheld the individual mandate, it did not visit the issue of severability with regard to the other parts of the law. The SCOTUS Decision Medicaid Funding The federal government cannot withhold a state s Medicaid funding due to that state s failure to comply with the Medicaid eligibility expansion pursuant to PPACA. A state may lose new funding for refusing to comply with the expansion of Medicaid eligibility pursuant to PPACA, rather than all Medicaid funding

7 Healthcare Reform Strategy & Decision-Making Part I Notes Chapter 2 Key PPACA Requirements Essential Benefits Definition of essential benefits (see also page 13) In 2014, all plans offered in individual and small group markets must provide an essential health benefits package Large group and self-insured plans have a prohibition on lifetime limits and restriction of annual limits on essential benefits HHS has issued a bulletin indicating that it intends to propose that each state select a benchmark plan for 14 & 15 in the 3 rd qtr. of 2012 from one of four options Preventive Care Plans must provide preventive services without cost-sharing for Evidence-based items or services with an A or B rating recommended by the U.S. Preventive Services Task Force Certain immunizations Evidence-informed preventive care and screenings as indicated by the Health Resources and Services Administration, including preventive care for women as described in 8/01/2011 guidelines Nonprofit employers with religious objections that do not fit within the religious employer exemption will be able to delay compliance with covering contraceptive services (considered preventive care) without costsharing for one-year. Regulatory agencies are expected to require insurers & TPAs to cover these services free of charge and without cost sharing. It is unclear how TPAs of self-funded plans would pay for coverage without using plan sponsor funds. HRAs and Waivers New/Current PPACA Requirements Employers are prohibited from retaliating against an employee with respect to healthcare reform requirements (such as receiving a federal subsidy for coverage) Break Time for Nursing Mothers Employee Protections Annual limit waiver rules applied to HRAs Employers must provide unpaid break time CCIIO guidance: HRAs are exempt as a class Reasonable unpaid break time for employee to from annual limit restrictions without need express breast milk for her nursing child to apply for waiver or extension One year after child s birth Applies to HRAs in effect prior to Sept. 23, Must provide a place, other than a bathroom, that 2010 for plan years beginning before Jan. is shielded from view and free from intrusion from 1, 2014 coworkers and the public Must comply with record retention and Must provide as frequently as needed by the annual notice requirements for exemption mother to apply Employers are not required to provide breaks to Model language at exempt employees If employer already provides compensated breaks, t_waivers_technical_instructions_update_ pdf an employee who uses that break time to express Status unclear for HRAs without carryforward feature milk must be compensated as other employees are for the break time Status unclear beyond Jan. 1, 2014 Employers with fewer than 50 employees are 2012 exempt if the provision would impose an undue hardship 3

8 Notes Healthcare Reform Strategy & Decision-Making Part I W-2 Reporting Requirements & guidance Box 12, code DD Reporting not required if employer required to file fewer than 250 W-2s for preceding year Three permissible methods for calculating cost generally the COBRA premium less the 2% administrative fee Guidance provided on determining premium for tax year if plan is non-calendar year Cost changes or coverage changes mid-year must be reflected Cost of wellness programs, on-site clinics & EAPs need not be reported if employer does not charge a premium for them under COBRA HFSA coverage funded solely through employee salary reduction elections need not be reported Cost of hospital or fixed indemnity insurance need not be reported if noncoordinated and includible in employee s income Cost for dental or vision plans qualifying as an excepted benefit need not be reported Summary of Benefits & Coverage Key 2012 PPACA Requirements SBC must be provided to participants and beneficiaries Four-page summary, which agencies have interpreted as four double-sided pages Applicability date delayed to first open enrollment period beginning on or after September 23, 2012 and first plan year beginning on or after that date Template for coverage beginning before 2014 available on DOL & HHS websites Stand-alone HFSAs and HRAs that are not excepted benefits and are not integrated with major medical must satisfy the requirement independently Cost of coverage information not required Must be provided to participant/beneficiary no later than first day of eligibility to enroll by plan administrators (self-insured plans) and insurers (insured plans) Must be provided within 7 days of a special enrollment opportunity and within 7 days of a request Must be provided with open enrollment materials A notice of material modification must be provided no later than 60 days prior to the date on which the change will become effective, if it is not reflected in the most recent SBC provided and occurs other than in connection with a renewal Electronic distribution rules different for those currently enrolled (DOL electronic disclosure requirements) versus those not enrolled (format must be readily accessible and free paper copy provided upon request) Must be provided in a culturally and linguistically appropriate manner following the rules for appeals notices Group health plan s obligation to provide is satisfied if an insurer provides the summary coordination with insurers (and TPAs for self-insured plans) will be required May be provided in combination with an SPD if certain requirements met

9 Healthcare Reform Strategy & Decision-Making Part I Notes 213(d) Deductibility HFSA Limit Threshold for itemized deductions for unreimbursed medical expenses increases to 10% (from 7.5%) of adjusted gross income Taxable years beginning after Dec.31, 2012 Increase temporarily waived in if taxpayer or taxpayer s spouse has attained 65 before the end of the year Unreimbursed medical expenses will need to be much larger relative to income to realize deduction (an additional $1,250 for an income of $50,000), making health FSAs an even more important benefit Limit is $2,500 on annual salary reduction contributions Limit is a taxable-year limit that applies beginning January 1, 2013 According to IRS guidance, the limit applies on a plan year basis and is effective for cafeteria plan years beginning after Dec. 31, 2012 The limit applies to health FSA salary reduction contributions. Nonelective employer contributions to a health FSA (matching or seed contributions, or flex credits) generally do not count toward the limit. However, if employees may elect to receive the employer contributions in cash or as a taxable benefit, then the contributions will be treated as salary reductions and will count toward the limit if contributed to the health FSA Cafeteria plan documents must be amended by December 31, 2014 Key 2013 PPACA Requirements Exchange Notice Applicable beginning March 1, 2013 Applicability (employers) appears very broad Regulations expected from DOL Must be provided to new hires and current employees Employees hired after effective date must be provided the notice at the time of hire Must be written

10 Notes Waiting Period Healthcare Reform Strategy & Decision-Making Part I Pre-existing Condition Limit Prohibition IRS Notice , issued Aug. 31, 2012 Employers may rely on guidance at least through end of 2014 Maximum waiting period will be 90 days Waiting period = period of time that must pass before coverage for an otherwise eligible employee or dependent can become effective. WP limit applies only to eligibility conditions based solely on the lapse of time Employers may use initial measurement and administrative periods for variablehour employees to determine FTE status see page 16 Coverage must be effective no later than 13 months from employee s start date, plus, if applicable, time remaining until the first day of the next calendar month Key 2014 PPACA Requirements Complete prohibition against applying pre-existing condition exclusions Effective plan years beginning on or after January 1, 2014 Also a prohibition against restriction on plan entry based on a pre-existing condition Cost-Sharing Limitation Other Provisions Deductible requirement is applicable in the fully-insured smallgroup and individual markets. May also be applicable in largegroup market; awaiting further guidance on this issue. Out-of-pocket maximum and annual deductible limitations for plan years beginning in 2014 Maximum out-of-pocket expenses cannot exceed HSA-compatible HDHP limits for any plan, including self-funded plans Deductible cannot exceed $2,000 for single plans and $4,000 for family plans For later plan years, limits adjusted by a premium adjustment percentage Grandfathered group health plans are not required to comply Guaranteed access and renewability Prohibition on annual limits Wellness program reward increases to 30%-50%. Rating restrictions plans offered through a state exchange may only vary rate based on individual/family, rating area, age (3:1) and tobacco use (1.5:1) Plans cannot drop coverage or prohibit routine care coverage because individual is enrolled in clinical trial Insured individual and small-group plans must provide essential benefits package

11 Healthcare Reform Strategy & Decision-Making Part I Notes Automatic Enrollment Must automatically enroll new full-time employees and continue enrollment of others Applies to employers with 200+ FTEs Compliance not required until regulations issued, which is not expected in time for 2014 plan year Notice required Opt-out opportunity required Remaining questions o Definition of full time for this purpose not clear o Which plan? o Employer subsidy as for other employees? o Timing of notice and opt-out opportunity? o Cafeteria plan implications? Key PPACA Requirements (Date Unclear) Insured Plan Nondiscrimination Comments received by IRS raised fundamental concerns about the ability to comply without regulatory guidance especially how rules for insured plans would differ from those for selfinsured plans Insured plans prohibited from discriminating in favor of highlycompensated individuals Insured plans established after March 23, 2010, and non-grandfathered plans would be subject to rule Limited-scope dental and vision benefits provided under a separate policy would be excluded Two nondiscrimination tests eligibility test and benefits test Compliance will not be required until agencies have issued regulations; sanctions for failure to comply will not apply until regulations issued Self-insured plans must still comply with Code 105(h) rules Highly compensated individual would include o Five highest-paid officers o Shareholders owning more than 10% of stock o The highest-paid 25% of all employees Failure to comply subjects plan to civil action to provide nondiscriminatory benefits, and up to $100 per day per individual discriminated against different from self-insured plan penalties! Examples of likely impermissible plan designs: o Insured plans covering only executives o Severance arrangements providing more favorable arrangements The Code 105(h) definition of highlycompensated individual is different from the definition used for Code 125 testing and the definition under Code 414(q) that is used for some benefit plan testing

12 Notes Healthcare Reform Strategy & Decision-Making Part I Patient-Cent. Outcome Research Fees Fee is $2 times the average number of covered lives under the policy or plan ($1 for plan years ending before Oct. 1, 2013) Fee is due for plan years ending after Sept. 30, 2012, but ceases for plan years ending after Sept. 30, 2019 Payable by insurers of insured plans and sponsors of self-insured plans Three alternative methods of determining average number of covered lives is available for self-insured plans: actual count, snapshot, or Form 5500 methods Sponsors of HRAs and HFSAs may integrated for this purpose if all have the same plan year Excepted benefits not subject to fee Most EAPs, disease-management and wellness programs exempt PPACA Tax & Financial Requirements Individual & Industry Taxes Transitional Reinsurance Program Reinsurance to reduce insurer uncertainty on state Exchanges All health insurers and TPAs on behalf of self-insured group health plans must make contributions to support reinsurance payments Program to operate Quarterly payments will be based on national per capita contribution rate HHS expected to announce Oct HHS to collect from self-insured plans; HHS or states may collect from insured plans Cadillac Plan Tax 40% tax on value of plan in excess of high cost health plan limits in 2018 $27,500/year family ($2,292/mo.) $10,200/year individual ($850/mo.) Plans included are those subject to COBRA, plus governmental plans, certain church plans, and small-employer plans. See page 29 A number of new individual and industry taxes will take effect in 2013 and 2014 Elimination of tax deduction for employers receiving Medicare Part D subsidies Medical device manufacturers pay a 2.9% tax on sales Individuals earning in excess of $250,000 (joint filers) or $200,000 (all others) pay an additional payroll tax of 0.9% for wages in excess of these thresholds, and 3.8% on investment income No deduction for compensation in excess of $500,000 for employees of health insurers Health insurance companies and pharmaceutical manufacturers pay additional taxes based on market share, starting with $8 billion in 2014 and indexed in later years

13 Healthcare Reform Strategy & Decision-Making Part I Notes Medical Loss Ratio Rebates Rebates to insured employer-sponsored group health plans if minimum MLR not met MLR requirement is 85% in large-group market, and 80% in small-group market Insurers must provide rebates to policyholder typically the sponsoring employer ERISA plans must follow fiduciary and plan asset rules and choose allocation method that considers costs to the plan and the ultimate plan benefit as well as various competing interests, and is reasonable, fair and objective Non-federal government plans must use the portion of rebates attributable to the amount of premium paid by subscribers for their benefit PPACA Tax & Financial Requirements Small Business Tax Credits Small Bus. Wellness Grants Credits to help small employers afford to sponsor health coverage for employees Available for employers with fewer than 25 employees and average annual wages of less than $50,000 Employer must contribute (subsidize) a uniform percentage of at least 50% of the cost of the premium Tax credit is up to 35% of nonelective contributions Form 8941 used by small employers to calculate credit; form has been simplified Small businesses will be eligible for grants to provide wellness programs $200 million has been appropriated for 2011 through 2015 Eligible employers: less than 100 employees who work 25 hours or more per week and no wellness program in place as of March 23, 2010 HHS is required to develop specific program criteria Components that must be included: o Health awareness initiatives o Efforts to maximize employee engagement o Initiatives to change unhealthy behaviors and lifestyle choices o Supportive environment efforts

14 Notes Healthcare Reform Strategy & Decision-Making Part I Some notices are required of employers.* Others are required of insurers. Others are required of either or both. Some that are required of insurers will require coordination with employer Notice Notice describes... Timing Dependent coverage Transition opportunity for eligible children to By first day of FPYBOA for adult children enroll Patient protections Choice of primary care provider/pediatrician By first day of FPYBOA and OB/GYN care without referral; applicable to non-grandfathered plans Appeals process Appeals and external review process; applicable to non-grandfathered plans Enforcement grace period extended to for calendar year plans Grandfather plan Belief that plan is grandfathered, GF plans Presumably FPYBOA status only Rescission Advance notice of retroactive cancellation When coverage cancelled retroactively prohibition Lifetime limit prohibition Reinstatement of individuals who previously exhausted lifetime limit By first day of FPYBOA for affected individuals Early retiree reinsurance program participation* Participation in program, and use of reimbursements Reasonable time after plan sponsor receives first reimbursement Annual limit restriction Plan does not meet annual limit requirements; applicable to plans receiving waivers (such as mini-med plans & HRAs) W-2 reporting* Aggregate cost of applicable employersponsored coverage Summary of benefits Summary of benefits and coverage (four-page) No later than for plans that received waivers for plan years before ; no specific deadline for later waivers 2012 tax year (optional for 2011) First open enrollment period beginning on or after September 23, 2012 and first plan year beginning on or after that date Exchange* Exchange coverage availability, etc. March 1, 2013 Automatic enrollment* Opportunity to opt out of coverage Upon issuance of regulations not expected in time for 2014 plan year Quality of care Report to HHS regarding reimbursement structures Originally required FPYBOA that improve quality of care, including wellness HHS to provide regulations by March 23, and health promotion activities; applicable to nongrandfathered 2012 plans Transparency in coverage Large employer & offering employer report* Minimum essential coverage report* PPACA Notice & Disclosure Requirements Report to HHS, exchanges and state insurance commissioner on claims payments, enrollment, denied claims, rating practices, etc.; applicable to non-grandfathered plans Report to IRS on whether employer offers minimum essential coverage, monthly premiums, number of FTEs during each month and months covered by plan Report to IRS on portion of premium required to be paid by employee and other information if coverage is offered through an exchange Originally required FPYBOA enforcement unlikely before exchanges operational and guidance issued January 1, 2014 January 1,

15 Healthcare Reform Strategy & Decision-Making Part I Notes Chapter 3 Individual Responsibility & State Exchanges Individual Responsibility & Exchanges Penalty/Tax Failure of individuals to maintain minimum essential coverage for themselves and dependents for the entire year will result in a penalty/tax. Monthly penalty/tax is 1/12 th of the greater of: Beyond 2016, these amounts indexed For 2014: For 2015: For 2016: $95 per uninsured adult in the household, plus one-half of this amount for individuals under age 18 $325 per uninsured adult in the household, plus one-half of this amount for individuals under age 18 $695 per uninsured adult in the household, plus one-half of this amount for individuals under age 18 or or or 1% of household income less the taxpayer s exemption (or exemptions for a married couple) and standard deductions 2% of household income less the taxpayer s exemption (or exemptions for a married couple) and standard deductions 2.5% of household income less the taxpayer s exemption (or exemptions for a married couple) and standard deductions Family Total household penalty/tax may not exceed: 300% of the per adult penalty/tax or National average annual premium for bronze level health coverage offered through the Exchange

16 Notes Healthcare Reform Strategy & Decision-Making Part I Exceptions Preamble to IRS regulations on Health Insurance Premium Tax Credit (F.R. Vol. 76, No. 159, 50935) (emphasis added):... future proposed regulations under section 5000A are expected to provide that the affordability test for purposes of applying the individual responsibility requirement to related individuals is based on the employee s required contribution for employersponsored family coverage. Individuals for whom a required contribution for coverage would exceed 8% of household income Individuals whose household income does not exceed the threshold for filing a federal income tax return Those who have received a hardship waiver Those who were not covered for a period of less than three months during the year Religious exemptions Native Americans Incarcerated individuals Individuals not lawfully present in the U.S. Individual Responsibility & Exchanges Permissible Coverage Sources Eligible employer-sponsored coverage (including grandfathered health plans) Individual health plans Medicare Part A Medicaid CHIP State risk pools TRICARE VA coverage Other coverage designated by HHS

17 Healthcare Reform Strategy & Decision-Making Part I Notes American Health Benefit Exchanges Federally-supervised marketplace (likely web-based) where health insurance policies meeting eligibility and benefit requirements are available for qualifying individuals and employer groups. Each state must establish an Exchange An Exchange must be a governmental agency or nonprofit entity. HHS must certify Exchanges by January 1, Individual Responsibility & Exchanges Exchange Eligibility Lawful residents may obtain coverage in an Exchange Exchange Enrollment Periods An Exchange must have an initial open enrollment period, annual open enrollment period, and certain special enrollment periods Essential Health Benefits Essential benefits categories to include: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services Prescription drugs Rehabilitative and habilitative services & devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral & vision care See also page 3 for regulatory guidance on essential health benefits

18 Notes Healthcare Reform Strategy & Decision-Making Part I Qualified Health Plans in Exchanges Exchanges will be required to make qualified health plans available to qualified individuals and qualified employers A qualified health plan is an Exchange-certified health plan that offers an essential health benefits package (see prior page) A qualified health plan is one that is offered by an insurer that: is licensed and in good standing in the state agrees to offer at least one silver plan and at least one gold plan agrees to charge the same premium rate whether offered through an Exchange or outside of the Exchange through an agent Individual Responsibility & Exchanges Exchange Plan Categories Small Business Health Option Five categories of plans: Platinum 90% of essential benefit costs of the plan, with HSA out-of-pocket limit Gold 80% of essential benefit costs of the plan, with HSA out-of-pocket limit Silver 70% of essential benefit costs of the plan, with HSA out-of-pocket limit Bronze 60% of essential benefit costs of the plan, with HSA out-of-pocket limit Catastrophic Coverage set at current HSA highdeductible health plan levels, with preventive care and three primary care visits exempt from deductible (available to individuals up to 30, or those exempt 14 from individual mandate) 2012 Each state must create a Small Business Health Options Program (SHOP) to assist small employers in enrolling their employees in qualified health plans offered in the small group market Before 2016, states may define small employers as either those with 100 or fewer, or those with 50 or fewer employees In 2016, small employers will be those with 100 or fewer employees Beginning in 2017, Exchanges may allow employers with more than 100 employees to use an Exchange

19 Healthcare Reform Strategy & Decision-Making Part I Notes Chapter 4 Resources Government Resources DOL link Patient Protection and Affordable Care Act HHS link Health Reform White House link Health Reform in Action U.S. Department of Justice Defending the Affordable Care Act Resources Gallagher Resources GBS Internet website link

20 Notes Healthcare Reform Strategy & Decision-Making Part I Resources Informational Resources Healthcare Reform Health Care Reform Interest in Private Insurance Exchanges, Defined Contribution Plans Likely To Increase Due To Health Reform Federal health care reform legislation and the desire of employers to limit their health insurance costs are likely to fuel interest in "defined contribution" (DC) health benefits and private health insurance exchanges, according to a new report

21 Healthcare Reform Strategy & Decision-Making Part I Notes Workforce Evaluation Resources

22 Notes Healthcare Reform Strategy & Decision-Making Part I Wellness Consulting Resources Compliance Consulting

23 Healthcare Reform Strategy & Decision-Making Part I Notes Healthcare Reform Planner Resources

24 Notes Healthcare Reform Strategy & Decision-Making Part I Resources Financial Outlook Tool Frequency of Simulated Percent Impact