A Guide to Healthcare Reform:

Transcription

1 A Guide to Healthcare Reform: Prepare NOW or Regret Later Presented to: County Commissioners Association of Ohio December 9, 2013 MARC A. FISHEL Partner ATTORNEYS AT LAW Leaders in Employment Law and Beyond FISHELHASS.COM 400 S. Fifth Street, Suite 200 P (614) F (614) This material is intended solely for informational and presentation purposes only and in no way should be construed as offering or providing legal advice.

2 ( FHKA ) is a mid-sized Columbus, Ohio, based law firm. FHKA s purpose is to provide high-quality, affordable legal services to public and private sector clients. Today, FHKA represents well over two hundred public sector clients throughout the State of Ohio. We represent municipalities, boards, commissions, agencies, and office-holders in over sixty-five of Ohio s eighty-eight counties. Our client base varies from large metropolitan cities to villages and from rural areas to the suburbs along with large and small counties. Additionally, the firm provides services that promote the development of systems and human resource management in the private sector. Our strength and continuous growth is reflected in our ability to remain on the cutting edge of our traditional areas of practice, while expanding our services to encompass the ever-changing areas of the law impacting our clients. FHKA began with a pro-management philosophy; that same philosophy has carried forward to the present. The firm s strength and diversity stems from, and is maintained by, the strength and diversity of our staff. Our attorneys hail from a wide variety of backgrounds, from rural farm communities to large cities. Our perspectives and ideology are similarly varied. This diversity is perhaps best reflected in FHKA s community involvement. Our attorneys serve leadership roles in, and are active members of, their churches and temples. They volunteer in a wide variety of community activities including public and private school programs, Children s Hospital, assisted living communities, numerous youth activities, humane societies, museums, art galleries, and community centers. This diversity allows us to successfully interact with a wide range of individuals as well as to analyze and address legal issues and problems from many perspectives. FHKA was recognized as one of the 2013 U.S. News-Best Lawyers in areas of Employment Law-Management, Labor Law-Management and Litigation-Labor & Employment. Additionally, several attorneys in the firm have been recognized by their peers as Super Lawyers and Best Lawyers for their outstanding work in areas of Employment and Labor Law and Litigation. 400 S. Fifth Street, Suite 200 ii (614) Facsimile

3 Marc A. Fishel is a partner in the law firm of Fishel Hass Kim Albrecht LLP. He received his J.D. from Ohio State University and a Bachelor of Arts degree in political science from Cleveland State University. Mr. Fishel regularly represents public employers throughout the State of Ohio in all matters relating to labor relations. Marc has extensive experience in areas of representation including collective bargaining matters, disciplinary matters (arbitration and civil service), contract negotiations, mediation, and conflict resolution procedures. Mr. Fishel also represents employers in state and federal courts in employment related litigation. Mr. Fishel is a former member of the Board of Directors of the Ohio Public Employers Labor Relations Association and has served as an adjunct professor of employment law at Wittenberg University. He is a frequent speaker and lecturer on numerous issues relating to employment law. Marc has been named to the 2013 U.S. News list of Best Lawyers and also named to the 2013 Ohio Super Lawyers, recognized for his outstanding work in the areas of Labor and Employment Law and Litigation. 400 S. Fifth Street, Suite 200 iii (614) Facsimile

4 TABLE OF CONTENTS Page No. I. Introduction... 1 II. Glossary Of Common Terms... 2 III. ACA s Effect On Employer-Sponsored Group Health Plans... 4 IV. Notice to Employees V. Effect On Negotiations VI. What Does All This Mean For Employers? VII. Timeline For Implementation S. Fifth Street, Suite 200 iv (614) Facsimile

5 I. INTRODUCTION A. Enacted March 23, B. Administered by the IRS, Department of Labor, and Department of Health and Human Services. C. Changed the Internal Revenue Code, Employee Retirement Income Security Act (ERISA), and Public Health Service Act (PHSA). D. National Federation of Independent Business v. Sebelius, 132 S.Ct (June 28, 2012). 1. Found the Individual Mandate portion of the ACA constitutional under the Taxing and Spending Clause of the U.S. Constitution. a. No power to compel individuals, but can tax if they fail to obtain coverage. 2. Justice Roberts noted that in dollar terms, the amount of tax penalty for failure to comply with the Individual Mandate will make it much cheaper than annual health insurance premiums. a. Tax is not apportioned to states. 3. Medicaid Expansion Mandate of the ACA was found unconstitutional because Congress cannot withhold funding for Medicaid program if state refuses to expand its program. a. Wanted to go up to 138% of Federal Poverty Level for eligibility. b. This mandate is now optional. c. Ohio has expanded Medicaid coverage. E. Please note that the effective dates below are accurate as of the date of this presentation. In several instances, effective dates of provisions in the ACA have been pushed back to allow the administering agencies to determine the logistics of implementing the many aspects of the ACA. This means implementation dates described below are subject to change. F. All provisions of the ACA apply to private and public sector health plans equally. G. Reporting requirements for employers and employer penalties have been delayed until January 1, S. Fifth Street, Suite (614) Facsimile

6 II. GLOSSARY OF COMMON TERMS A. Individual Mandate - every person with household income greater than 138% of the federal poverty level ($32,499 in 2013) must either enroll in a healthcare plan that offers minimum essential coverage to themselves and any dependents, or pay a tax penalty. B. Employer Mandate - a large employer must provide adequate, affordable (offering minimum value ) health coverage to its full-time employees and their dependents or pay a non-deductible excise tax to the federal government. C. Large Employer (for purposes of Employer Mandate) - employer who employed at least 50 full-time employees (and full-time equivalent employees) during the preceding calendar year. This figure does not include employees who worked less than 120 days in the calendar year (seasonal employees). For 2014 coverage only, employers may use any six month period, rather than the entire 2013 year, to determine their coverage. 1. Note - to date, focus has been on defining employee, not employer, in the ACA. Therefore, it is currently unclear if an employer is, for example, an entire county or specific department in a county. At this time, we recommend assuming that an employer under the ACA is considered the entire municipality. D. Full-time employees - employees who regularly work 30 hours or more per week. Uses all hours compensated (actually worked, sick, vacation, holidays, etc.). E. Minimum essential coverage - coverage that is affordable, offers essential benefits, and pays at least 60% of the total allowed costs of the plan benefits (aka actuarial value). 1. Total allowed cost of benefits - No set definition, but IRS proposed regulations provide three ways to determine whether or not a plan meets actuarial value / offers minimum essential coverage: a. Enter data regarding coverage and cost-sharing into calculator designed by government. b. Compare plan design against safe-harbor checklists (not ready yet). c. Call an actuary. F. Essential Health Benefits - Each state is permitted to choose the benchmark plan in their state. This plan s benefits will be essential benefits in that state. If a state does not choose, the benchmark plan will be the largest small group (100 employees or less) plan in the state. 1. The ACA lists the following categories of essential benefits that must be included in all benchmark plans: ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use 400 S. Fifth Street, Suite (614) Facsimile

7 disorder services, including behavioral health treatment, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, as well as pediatric services, including oral and vision care. a. The ACA does not state which specific services (as subsets of the above categories) must be covered, or the amount, duration, and scope of covered services that is left to the state. 2. Self-insured group health plans, health insurance coverage offered in the large group market (100+ employees), and grandfathered plans are not required to cover essential health benefits. Other aspects of the Employer Mandate still apply to these plans (i.e., offer affordable coverage). G. Large group market - the market wherein an individual obtains insurance coverage on behalf of themselves (and their dependents) through a group health plan maintained by an employer who employed an average of at least 101 employees on business days during the preceding calendar year and who employs at least two (2) employees on the first day of the plan year. H. Cost Sharing - deductibles and co-insurance. I. Full-time equivalent employees - employees that work less than an average of 30 hours per week, but are still used in the computation to determine a large employer (defined above) status for purposes of the Employer Mandate. To convert part-time employees into full-time equivalents, divide the total number of monthly hours worked by the parttime employees by 120. This number is added to the number of full-time employees to determine if an employer has 50 full-time employees and is therefore subject to the Employer Mandate. This does not mean these employees must be offered benefits. J. Federal Poverty Level - minimum amount of gross income a family needs for food, clothing, transportation, shelter, and other necessities. Determined by the Department of Health and Human Services. For 2013, the FPL levels are as follows: Persons In Poverty Family/Household Guideline 1 $11,490 2 $15,510 3 $19,530 4 $23,550 5 $27,570 6 $31, S. Fifth Street, Suite (614) Facsimile

8 7 $35,610 8 $39,630 For families/households with more than 8 persons, add $4,020 for each additional person. (Taken from the Dept. of Health and Human Services Website K. Waiting period - period of time that must pass before coverage for an employee (or dependent) who is otherwise eligible to enroll under the terms of the plan may so enroll. 1. Otherwise eligible to enroll - employee has met plan s substantive eligibility requirements (i.e., be in eligible job classification). L. Coverage levels - Health plans on the state Exchanges must offer four levels of coverage: bronze, silver, gold, and platinum. Each plan must cover the same set of minimum essential benefits, but the value of those benefits will vary across the plan levels, based on the cost-sharing requirement (bronze plans are the least generous in regards to costsharing, while platinum are the most generous). III. ACA S EFFECT ON EMPLOYER-SPONSORED GROUP HEALTH PLANS A. The Individual Mandate (ACA 1501). 1. Individuals must enroll in healthcare plans that offer minimum essential coverage or pay a penalty if you have a household income greater than 138% of the Federal Poverty Level. 2. Penalty for an individual s refusal to enroll equals: a. The lesser of: i. The greater of: Dollar amount per individual not receiving coverage: o $ o $ o 2016 and beyond - $ (indexed for inflation thereafter, but capped at 300% of the flat dollar amount). Percentage of taxable income: o %. 400 S. Fifth Street, Suite (614) Facsimile

9 o %. o 2016 and beyond 2.5%. (For dependents under age 18, penalty is half the individual amount). i The amount of the national average premium for qualified health plans at the bronze level of coverage available through the state s Exchange. Note the total household penalty may not exceed three times the individual penalty. i Individual penalties are not affected by the delay of employer penalties. In some cases, individuals may be able to receive government assistance (in the form of tax credits and subsidies) to procure health insurance on state-sponsored Exchanges. a. Individual subsidies through tax credits are not affected by the delay of employer penalties. iv. Eligibility requirements for premium tax credit to pay for qualified health plan purchased on the Exchange and perhaps also a cost-sharing subsidy. a. Household income must be between % of the Federal Poverty Level (approximately $94,200 household income for a family of four in 2013). b. Not eligible for credit if: i. Eligible for Medicare, Medicaid, or an affordable and adequate employer-sponsored health plan. v. Amount of tax credit is on a sliding scale with income: vi. Willful failure to pay the tax may lead to criminal prosecution. 400 S. Fifth Street, Suite (614) Facsimile

10 B. The Employer Mandate. 1. Applies only to large employers - defined in this section as employers with more than 50 full-time employees (and full-time equivalent employees). Seasonal employees are excluded. a. The ACA does not prohibit an employer from reducing employee work hours to avoid application of the statute; however, a collective bargaining agreement may prohibit this. 2. Penalties will not apply until January 1, Potential Penalty #1: a. Large employer does not offer group health benefit plan coverage to all full-time employees and their dependents AND one bona fide full-time employee enrolls in an Exchange plan AND receives the premium tax credit. b. Amount of Penalty #1: i Annual penalty equal to total number of full-time employees minus 30, multiplied by $2,000. After indexed by a premium adjustment percentage for the calendar year. c. Safe Harbor. i. Avoid penalty if coverage is offered to 95% of full-time employees. i iv. If an employer has less than 100 employees, may refuse to offer coverage to up to five employees, even though this is technically more than 5%. Coverage must be offered to children (under 26 per ACA), but NOT spouses. Spouses may be excluded for coverage. v. Employers have until 2015 to secure health insurance that covers eligible employees children. 400 S. Fifth Street, Suite (614) Facsimile

11 4. Potential Penalty #2: a. Large employer offers coverage to all full-time employees and their dependents, BUT i. Coverage is not affordable - employee s share of the single premium is greater than 9.5% of the employee s household income. (Single premium is used even if the employee selects family coverage) OR i The plan s share of covered health benefit costs does not offer minimum value. And at least one bona fide full-time employee enrolls in an Exchange plan and receives the premium tax credit. b. Minimum value - plan pays at least 60% of the total allowed cost of benefits. If a plan does not have minimum value AND at least one bona fide full-time employee enrolls in an Exchange plan and receives the tax subsidy for premiums, the employer is subject to a penalty. i. 98% of people covered by employer-sponsored plans are enrolled in plans that have an actuarial value of at least 60%. - c. Amount of Penalty #2: i Equal to the number of bona fide full-time employees who receive the tax subsidy when enrolling in the Exchange plan, multiplied by $3,000. But never more than (total # of full-time employees - 30) x $2,000. Beyond indexed by premium adjustment percentage for the calendar year. d. 9.5% Premium threshold. i. Use employee s W-2 and employee portion of the self-only premium for the employer s lowest cost plan that provides minimum value to determine whether or not employee s premium contributions exceed 9.5% of his/her household income. Premium contribution for employee selecting family coverage can exceed 9.5% of household income without creating a penalty. 400 S. Fifth Street, Suite (614) Facsimile

12 i iv. Can also use salaried employee s monthly salary or hourly employee s rate of pay multiplied by 130 hours. Finally, can multiply the Federal Poverty Level for single individual by 9.5%. No limits in ACA on premium contribution. e. For 2014 only, if an employer s plan year is anything other than a calendar year, there is no penalty until the start of the plan year so long as: i. ¼ of the employees are enrolled or 1/3 of employees were offered coverage during the last open enrollment AND Full-time employees are offered coverage on the first day of the plan year. i Not clear if this will apply in f. All penalties under the ACA are measured on a month-to-month basis. 5. Determine who is a full-time employee. a. Works an average of more than thirty hours per week. i. Includes all hours compensated for work performed (plus vacation, sick, etc.) b. Excludes seasonal employees. i. May differ from civil service definition O.A.C. 123: Review use of seasonal employees for The delay gives employers the opportunity to adjust how they use seasonal employees to avoid coverage in c. Variable hour employees - employees who it is unclear at the time of hiring (or thereafter) whether they will work an average of more than thirty (30) hours per week. i. Standard measurement period (3-12 consecutive months). Subsequent stability period (at least 6 months, but never shorter than measurement period). Note: For new hires, a stability period wherein the employee does not receive benefits because she/he 400 S. Fifth Street, Suite (614) Facsimile

13 worked less than 30 hours a week is slightly shorter than for ongoing employees. i Administrative period (up to 90 days) (overlaps with previous periods). Includes period from employment start date to first day of measurement period. Initial measurement and administrative period cannot extend beyond last day of first calendar month following first anniversary of employment start date. iv. This method is only guaranteed through Not clear if it will be extended to v. It is unclear how this will work with paid volunteer firefighters who choose their hours. d. For employees who leave City employment and return in a subsequent year, they are only considered new hires for the ACA if they were separated for 26 consecutive pay periods or a period greater than the period which the employee actually worked for the employer. C. 90-Day Limit On Waiting Periods For An Otherwise Eligible Employee To Receive Coverage. 1. Applies to all eligible plan participants, not just full-time employees. 2. Applies to all employers, not just large employers. 3. Eligibility conditions not based completely on the passage of time are permitted (example: full-time status, work in a specified number of hours in a work period). a. Condition cannot be designed to avoid compliance with 90 day restriction. b. Full-time status will save Fire Departments from covering volunteers. c. Eligibility conditions based completely on the lapse of time cannot exceed 90 days. 4. IRS Notice : a. In regards to variable hour employers and the 90-day limit, employers will not violate waiting period time limit if coverage is made effective no later than 13 months from the employee s start date, plus if the employee s start 400 S. Fifth Street, Suite (614) Facsimile

14 date is not the first day of a calendar month, the time remaining until the first day of the next calendar month. 5. A cumulative hour of service condition regarding part-time employees is permissible so long as the condition does not require more than 1,200 hours. Therefore, an employee must be eligible on the 91 st day after s/he achieves 1,200 hours of service. Otherwise, the waiting period would be deemed as designed to avoid compliance with the 90-day waiting period limitation. This only applies if the Employer chooses to offer coverage to part-timers. 6. Waiting period restrictions apply on January 1, D. The Exchanges. 1. Serve as way for individuals and small businesses ( employees for this section) to purchase qualified coverage. 2. Federally-mandated, state-run. 3. States had until November 16, 2012 to submit the blueprint for their Exchange. This blueprint will either be accepted or denied by the Department of Health and Human Services. If the state failed to submit a blueprint or its blueprint is rejected, then HHS establishes the Exchange for the state. a. Final rule allows a state not prepared for 2014 to apply to operate the Exchange for 2015 or any subsequent year. b. Ohio did not submit a blueprint; therefore the Dept. of Health and Human Services will establish Ohio s Exchange. 4. First open enrollment begins October 1, 2013, with guaranteed issue and community-rated coverage available for individuals and small employers effective January 1, Designed to assist small employers in facilitating the enrollment of their employees in qualified health plans offered in the small group market in the state. 6. Individuals may receive government subsidies to pay premiums for plans received on the Exchanges if the person has a household income between 100% and 400% of the Federal Poverty Level. a. However, individuals are ineligible for the subsidies if: i. They have available to them affordable, adequate employerprovided coverage; OR 400 S. Fifth Street, Suite (614) Facsimile

15 They receive Medicaid or Medicare. 7. Each state chooses a single benchmark plan type. That type s array of essential benefits serves as the standard for all qualified health plans offered on the state s Exchange. a. Plans sold through the Exchanges must offer benefits based on the essential health benefit benchmarks to ensure comprehensive coverage. E. Protections For Employees. 1. Employers cannot retaliate against employees for seeking coverage on an Exchange and obtaining a tax subsidy or credit. 2. Employers cannot retaliate against an employee who provides information to the employer, the federal government, or the state regarding potential violations of the ACA. F. Limits On Cost-Sharing. 1. ACA Effective date: January 1, Applies to non-grandfathered employer-sponsored plans and plans offered on the Exchanges. 4. No plan may impose deductibles, copayments, or other forms of cost-sharing greater than those imposed by high deductible plans. 5. Employers with 100 or fewer employees: a. Max aggregate cost-sharing obligation: i. HSA limits $6250 for single / $12,500 for family in b. Max deductible (non-hsa plans): i. $2,000 for single / $4,000 for family. 6. Employers with more than 100 employees: a. Max aggregate cost-sharing obligation: i. HSA limits $6250 for single / $12,500 for family in S. Fifth Street, Suite (614) Facsimile

16 No limits on deductibles (non-hsa plans). 7. All amount limits are annually adjusted for inflation. 8. No plan may apply a deductible or charge any cost-sharing for certain evidencebased preventative health services. 9. Limits apply effective January 1, G. Requirement To Provide Employees With Summary Of Benefits Coverage ( SBC ). 1. Health insurance issuers and group plans must provide participants and beneficiaries with a concise, uniform summary of benefits coverage options for comparative purposes. 2. Effective first day of open enrollment period starting on or after September 23, If enrollment is through means other than open enrollment, effective first day of first plan year on or after September 23, Must be easy to understand and include glossary of health insurance terms. 4. Model form available on Department of Labor website 5. Penalty for willful failure is up to $1,000 per each failure. 6. Not necessary for plans, policies, or benefits packages that constitute HIPAAexcepted benefits under 26 CFR (c) (see list at a. Most HSA s, FSA s, and stand-alone vision and dental. H. Material Modifications. 1. Health insurance issuers and group plans must provide 60 days advance notice of material modification to healthcare plan. 2. Definition. a. Any change that would affect the information provided in the SBC; b. Not reflected in the most recent SBC; and c. Occurs independently of a renewal or reissuance of coverage. 3. Effective date is same as SBC. 400 S. Fifth Street, Suite (614) Facsimile

17 I. Medical Loss Ratio Rebates. 1. Beginning in August 2012, health plans must provide rebates to enrollees if their medical loss ratio (% of premiums spent on reimbursement for clinical services and activities that improve health care quality) does not meet minimum standards for a given plan year. a. Paid by plan. b. Paid to employer and employee in proportion to premium percentage. J. Auto-Enrollment for Full-Time Employees. 1. Applies to employers with more than 200 full-time employees. 2. Only applies to full-time employees. 3. Must include adequate notice and chance for an employee to opt out of coverage. 4. According to the Department of Labor, auto-enrollment guidance will not be ready to take effect by 2014 (and therefore neither will auto-enrollment). K. W-2 Reporting of Healthcare Coverage. 1. Only applies to employers who issued 250 or more W-2 forms in Begins with W-2 s issued in 2013 that cover For informational purposes only this amount is NOT taxed. 4. Report: a. Insurance premium for insured plans. b. COBRA rate (less 2% administrative fee) for self-insured plan. c. Include employer subsidy of FSA. 5. Do not report: a. Stand-alone dental and vision plans. b. HSA contributions. c. HRA contributions. 400 S. Fifth Street, Suite (614) Facsimile

18 d. Pre-tax salary reductions to a HFSA with no employer contributions to the HFSA accounts. 6. Not applicable to retirees that receive healthcare coverage. 7. Calculate the premium: a. Self-insured plans - use COBRA premium. b. Fully-insured plans - use actual premium charged. L. Employer Reporting Requirements Employees Receiving Coverage. 1. Delayed to January 1, For large employers and employers offering minimum health insurance coverage. 3. Report to HHS: a. Number and names of full-time employees receiving coverage. b. Costs of options. c. Employer s share of costs. 4. U.S. Dept. of Treasury will issue proposed rules. M. Transitional Reinsurance Program. 1. Insurance issuers and third-party administrators pay a $63 fee per enrollee. 2. $63 in 2014, declines, and later ends in Meant to ease cost of covering all persons with pre-existing conditions. a. Funds reinsurance entities. b. Entity makes payments to issuers that cover high-rick individuals. c lifespan for fee. 4. Fee assessed on all major medical insurance plans. 400 S. Fifth Street, Suite (614) Facsimile

19 N. Patient-Centered Outcomes Research Institute ( PCORI ) Fee. 1. Being in 2012, phased out in Purpose of PCORI is to provide information about the best available evidence to help patients and their health care providers make informed decisions Fee equals the average number of covered lives for the policy year multiplied by the applicable dollar amount. a. Policy years ending between Oct. 1, 2012 until Sept. 30, $1. b. Policy years ending between Oct. 1, 2013 until Sept. 30, $2. c. After that, the dollar amount is the prior fiscal year s amount plus an adjustment for medical inflation. 3. Insurance issuers and self-insured plan sponsors file federal excise tax return annually with the IRS. O. Fully-Insured Plan Nondiscrimination Requirement of the ACA applies to ALL employers. 2. Prohibits discrimination in eligibility or benefits in fully-insured plans (similar rules already exist for self-insured plans). 3. Effective date delayed until IRS guidelines are ready. 4. Eligibility test. a. Plan benefits at least 70% of all employees covered. b. 70% of all employees are eligible to benefit under the plan, and at least 80% or more of those eligible in fact benefit OR 5. Benefits test. i. Plan benefits a nondiscriminatory class of employees (i.e., plan does not discriminate in favor of highly-compensated employees). a. All benefits provided to highly-compensated employees must be provided to all other participants. b. Based on benefits eligible for reimbursement, not actual payment of claims. 400 S. Fifth Street, Suite (614) Facsimile

20 c. Prohibits lower deductible or copayment for highly-compensated employees. d. Only looks to see if benefits are available, not utilization. e. So long as all eligible participants may elect a benefit package and the required employee contributions are the same, the Benefits Test is satisfied. 6. Highly compensated employee: a. Five highest paid officers. b. 10% or more shareholder. c. Person who is among the highest paid 25% of all employees. 7. Excludable employees: a. Not completed three years of service. b. Seasonal employees. c. Nonresident aliens. d. Part-time employees whose customary weekly employment is less than 35 hours. e. Employees subject to a collective bargaining agreement. f. Employees younger than 25. P. Wellness Program Incentives. 1. Begins in Not affected by delay. 2. Reward for program may not exceed 30% of the cost (employer and employee payment) of employee-only coverage under the plan. 3. Increases to 50% at some point yet to be determined. 4. Must be voluntary to avoid conflict with the Americans with Disabilities Act. 5. Potential conflict with Genetic Information Nondiscrimination Act (GINA). 400 S. Fifth Street, Suite (614) Facsimile

21 Q. Wellness Programs Under the Affordable Care Act 1. Generally, under the Affordable Care Act, plans may not discriminate based on a health factor for plan provisions that vary benefits, premiums or contributions for similarly situated employees. However, these items can vary between similarly situated employees if done in accordance with a properly-constructed wellness program. The ACA contains requirements for wellness programs 2. Terms: a. Wellness program a program of health promotion or disease prevention. b. Reward can include the following: discounts or rebates of a premium or contribution, a waiver of all or part of a cost-sharing mechanism, additional benefits, avoidance of a penalty and any financial or other incentive. c. Participatory wellness programs wellness programs wherein none of the conditions for obtaining the reward are based on an individual satisfying a standard relating to a health factor. Also includes programs that do not offer rewards. i. Examples: reimbursement for membership at a fitness center, diagnostic testing programs that provide rewards not based on outcomes, a program that encourages preventive care (like prenatal care or well-baby visits), smoking cessation programs that do not regard whether the employee quits, attendance at a monthly nocost health education seminar, and health risk assessments. d. Health contingent wellness programs a wellness program that requires an individual to satisfy a standard related to a health factor to obtain a reward. Also includes programs that require an individual to undertake more than a similarly-situated individual based on a health factor in order to obtain the same reward. There are two types of contingent wellness programs: i. Activity only requires the individual to perform or complete an activity related to a health factor in order to obtain the reward, but does not require the individual to attain or maintain a specific health outcome. Outcome based requires an individual to attain or maintain a specific health outcome (like not smoking or attaining certain biometric screenings) to obtain the reward. a. For individuals who do not attain or maintain the specific health outcome, compliance with an educational program or activity may be offered as an alternative to achieve the same reward. 400 S. Fifth Street, Suite (614) Facsimile

22 3. Requirements for participatory wellness programs: a. Must be made available to all similarly situated individuals, regardless of health status. 4. Requirements for health contingent wellness programs: a. Provide eligible individuals with the chance to qualify for the program s reward at least once per year. b. The reward cannot exceed 30% of the total cost for employee-only coverage (or 50% if designed to prevent or reduce tobacco use). i. If, in addition to employees, dependents may participate in the wellness program, the reward threshold uses the total cost of coverage in which an employee and the dependents are enrolled. Cost of coverage is determined based on the total amount of employer and employee contributions. c. The reward must be available to all similarly-situated employees. i. A reasonable alternative standard (or waiver of the otherwise applicable standard) must be available for those employees who cannot participate due to a medical condition, or for whom a medical condition makes it inadvisable for them to take part. i Reasonable alternative standard does not have to be determined until the employee so requests. All facts and circumstances are taken into account in determining whether a plan or issuer has furnished a reasonable alternative standard. iv. a. If an individual s doctor states a plan standard is not medically appropriate for that individual, the plan or issuer must provide a reasonable alternative standard that accommodates the recommendations of the doctor with regard to medical appropriateness. Plans and issuers may impose standard cost sharing under the plan or coverage for medical items and services furnished pursuant to the physician s recommendations. For activity only programs, plan or insurers may, if reasonable, seek verification from an individual s personal physician that a health factor makes it unreasonably difficult for the individual to satisfy (or makes it medically inadvisable for the individual to attempt to satisfy) the applicable standard. Verification may also be sought in regards to requests for reasonable alternative standards to evaluate the validity of the request. 400 S. Fifth Street, Suite (614) Facsimile

23 a. For outcome-based programs, it is not reasonable to seek verification that a health factor makes it unreasonable difficult for the individual to satisfy, or medically inadvisable for the individual to attempt to satisfy, the otherwise applicable standard as a condition of providing a reasonable alternative. d. The program must be reasonably designed to promote health or prevent disease. i. Cannot be overly burdensome. i Cannot be subterfuge for discrimination. Cannot be highly suspect in the method chosen to promote health or prevent disease. e. The plan must disclose the wellness program and alternatives to the program. i. Regulations provide sample language. 5. Requirements apply to insurance coverage for plan years beginning on or after January 1, R. Lactation Benefits. 1. ACA Employer must provide reasonable break time and private location (other than a bathroom) to express milk for one (1) year after birth of child. 3. Not required to compensate the employee for the break. 4. Only applies to employers with 50 or more employees if compliance would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the business. 5. Does not preempt state law to the extent they may offer greater protections. S. Self-Insured Plans. T. Tax Credit for Small Businesses. 1. ACA 1421 and 10105(e). 400 S. Fifth Street, Suite (614) Facsimile

24 2. Here, small business is defined as fewer than 25 full-time equivalent employees, whose average annual wages are less than $50, Provides up to 35% tax credit for small employers who pay at least half the cost of health care coverage (increases to 50% in 2014). IV. NOTICE TO EMPLOYEES A. DOL Technical Release No B. Applies to all employers covered by FLSA. 1. Even if less than 50 employees. C. Must be provided to all employees. D. Notice of coverage options. 1. Marketplace exchanges 2. Potentially eligible for tax credit if plan is purchased through Marketplace. 3. If employee purchases coverage through Marketplace, may lose any employer contribution to health benefits. 4. All or portion of contribution may be tax deductible. E. Notice must be provided to each new employee hired after October 1, 2013 at time of hiring. V. EFFECT ON NEGOTIATIONS Model notice A. Parties may not negotiate terms that negate any provision of the ACA. B. Changes agreed upon prior to the effective date of any provision of the ACA will be valid until the contract expires (or that provision is re-opened). C. All changes required by the ACA can be bargained or implemented unilaterally. D. If in a re-opener, and union and management cannot agree, the employer MUST implement the changes required by the ACA. E. There is no obligation to re-open health plans mid-agreement to implement ACA provisions. 400 S. Fifth Street, Suite (614) Facsimile

25 VI. WHAT DOES ALL THIS MEAN FOR EMPLOYERS? A. Decide whether or not to employ more than 50 full-time equivalent employees. B. Pay or Play penalty is not deductible. C. Amounts paid to employees in lieu of health care coverage ( insurance buy-outs ) are taxable to the employee and the employer is subject to payroll taxes. 1. Not subject to PERS. D. If Ohio chooses to expand Medicaid, that could have a major impact because less people would be eligible for subsidies. VII. TIMELINE FOR IMPLEMENTATION A. September 23, 2012 Summary of Benefits and Coverage. B. January 1, 2013 Reporting Coverage on Form W-2 s; cap on HCFSA contributions; elimination of Medicare Part D Subsidy Deduction; quality of care report. C. October 1, 2013 Employee Exchange notices. D. January 1, 2014 Individual Mandate; no preexisting condition exclusions or limitations; elimination of annual limitations on essential benefits; no waiting period over 90 days; adjusted community rating instead of individualized rating; tax subsidies for individuals to participate in the Exchanges; pre-existing exclusion for adults eliminated; increase wellness incentive limits to 30% of coverage; coverage for participation in clinical trials; nondiscrimination rules for non-grandfathered fully-insured plans. Voluntary compliance by large employers with offering affordable, minimum essential coverage to full-time employees. E. January 1, 2015 Employer/self-insured plan reporting to IRS and employees. F. January 1, 2015 Employer mandate and penalties. G. January 1, 2017 Employers with 100+ full-time employees can purchase qualified health plan coverage through the Exchanges. H. January 1, 2018 Impose excise tax on high-cost plans. I. TBD non-discrimination rules for insured plans; automatic enrollment. Presentation\CLIENT PRESENTATIONS\OPAA\Winter 2013\ ACA presentation 400 S. Fifth Street, Suite (614) Facsimile