HealthCare Reform: Part 1 ACA

Transcription

1 HealthCare Reform: Part 1 ACA HealthFlex Summit October 3-4, 2013

2 Agenda Updates and Recent Guidance ACA* Exchanges Premiums Exchanges for Individuals: Affordability Dependent Coverage Interaction with Exchanges Exchanges for Employers Employer Shared Responsibility Rule * ACA: Affordable Care Act (Patient Protection and Affordable Care Act, PPACA) 2

3 Updates and New Guidance

4 Exchange Notice Fair Labor Standards Act (FLSA) amendment generally applies to most employers October 1, 2013 DONE Ongoing requirement for new hires October 1 December 31, 2013 (on date of hire) After December 31, 2013 (within 14 days of hire) General Board Toolkit available for conference, churches, UMC employers Summary, helpful hints, FAQs, template notices 4

5 PCORI Fee Patient-Centered Outcomes Research Institute Applies to plan years ending after October 1, 2012 and before October 1, 2019 $1 per covered life in 2012; paid July 2013 $2 per life in 2013; due July 31, 2014 Information Return (Form 720) with payment HealthFlex pays PCORI fee for active plans and Medicare companion plans Plan sponsors pay PCORI fee for Extend Health HRAs 5

6 Reinsurance Program Fee Fee for to fund reinsurance programs for exchanges Applies to HealthFlex Not applied to covered lives for whom Medicare is primary $63 per covered life in 2014 Likely to be lower in 2015 and 2016 HealthFlex will pay this fee for all plan participants 6

7 Reinsurance Program Fee November 15: Head count to HHS* December 15: Invoice from HHS January 15: Payment due * HHS: U.S. Department of Health and Human Services 7

8 Reporting Health Coverage Minimum essential coverage (MEC) reporting (Code 6055) HealthFlex should be able to report for all plan participants and dependents Required for 2015 coverage (annually thereafter) Plan must submit Form 1095-B (under development) to IRS (February/March 2016) Plan must provide statement to covered individuals by January 31,

9 Employer Coverage Reporting Applicable large employers* must report covered full-time employees (FTEs) to IRS (Code 6056) Required for 2015 calendar year Submit Form 1095-C for each covered FTE (with single Form 1094-C) by February 2016 (electronically March 31) Provide statement to each covered FTE by January 31, 2016 * Applicable large employer: 50+ full-time equivalent employees 9

10 Coming Attractions

11 Non-Discrimination Rule Highly compensated employee (HCE) defined differently than for retirement plans: 5 highest-paid officers, or Highest-paid 25% of all employees (including the 5 highest-paid officers) Penalties for non-compliance different Self-funded: Benefits of HCE are taxable Insured: An excise tax ($100/day per HCE), civil money penalty, or a civil action to compel nondiscrimination Enforcement of Section 105(h) currently on hold pending further guidance from IRS Strange legislative and regulatory history 11

12 W-2 Reporting Employers required to report value of health coverage on employees W-2s January 2013 on many W-2s Temporary exemption for: Employers in church plans (unless church plan is subject to ERISA) Small employers (fewer than 250 W-2s) Multiemployer (union) plans IRS may end the exemption upon notice No earlier than

13 Cadillac Plan Tax Applies to the value of plans in excess of certain thresholds 40% excise tax on plan s value in excess of: $10,200 for individual coverage $27,500 for family coverage HealthFlex planning now for containing costs by

14 ACA 2014: Refresher

15 Reminder: ACA 2014 Individual Mandate Individual insurance market reforms Health Insurance Exchanges (October 1) Government assistance for modest income premium tax credits (PTCs) Employer Shared Responsibility Rule Pay or play or employer mandate Delayed to 2015 Expanded Medicaid 15

16 Individual Mandate

17 Individual Mandate 2014 Rule: Have minimum essential coverage (MEC) or pay excise tax Individual penalty (adults) Maximum Greater of $95 or 1% of income Greater of $325 or 2% of income Greater of $695 or 2.5% of income National average bronze plan premium 17

18 Individual Mandate 2014 Penalties Children under 18: One-half of adult amounts Family penalty: Max 3x individual penalty Certain exemptions apply (e.g., no affordable coverage, undocumented, etc.) 18

19 Minimum Essential Coverage Government coverage Medicare, Medicaid, CHIP*, TRICARE and veterans coverage Employer-sponsored coverage Church health plans are minimum essential coverage Individual market plans Exchange plans, private market plans, grandfathered plans Other health benefit plans recognized by HHS examples: Student health plans and state high-risk pools (2014 only) Medicare Advantage plans Refugee Medical Assistance AmeriCorps coverage Foreign health services (if approved) * CHIP: Children s Health Insurance Program 19

20 Exchanges (Marketplaces)

21 Status of State Exchanges August 2013 State Exchange Partnership Exchange No State Exchange (Federal Exchange)) Split Exchange 21

22 Exchange Readiness October 1: Open Enrollment begins Through March 31, 2014 October to December in future years Most state exchanges appear to be ready Some (e.g., OR, DC) will have short delay in full function Federal Exchange appears to be ready Federal SHOP Exchange online enrollment delayed to November 1 Paper enrollment during October 22

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24 Exchange Plans Bronze Silver Gold Platinum Group Plans Actuarial Value 58-62% 68-72% 78-82% 88-92% 60% Covered Services Essential health benefits and preventive services Essential health benefits and preventive services Essential health benefits and preventive services Essential health benefits and preventive services Preventive services (need not cover Essential Health Benefits) Essential Health Benefits No annual limits No annual limits No annual limits No annual limits No annual limits (on covered EHBs) 2014 Deductible Maximums $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family $2,000 Individual $4,000 Family None 2014 Out-of- Pocket Maximums $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family $6,350 Individual $12,700 Family Silver plan used to determine any government subsidies through the exchange 24

25 Market Reforms Premiums Guaranteed issue/renewal No pre-existing condition exclusions Community-rating: Premium rate variation limits Age: 3:1 (age 21 to 64) Tobacco use: 1.5:1 Family size Geography (regional cost factors) States can vary these factors Example: New York and Vermont use pure community rating Rate shock for young (healthy) Rate joy for older (less healthy) 25

26 Exchange Premiums Emerging State-by-State (for individual and SHOP* Exchanges) Lowest-cost plan (bronze) to date (as of September 26) Minnesota: Age 60 Age 40 Family of 4 $245 monthly ($2,940 annually) $128 monthly ($1,536 annually) $380 monthly ($4,560 annually) These are full premiums (absent potential premium tax credits). * SHOP: Small Business Health Options Program 26

27 Exchange Premiums Sample estimates of second-lowest cost* silver plan premium (age 40) without PTC: State Monthly Premium Annual Premium Colorado $250 $3,000 Georgia $239 $2,868 Indiana $274 $3,288 Maryland $228 $2,736 New Mexico $194 $2,328 New York $349 $4,188 Texas $201 $2,412 Wisconsin $244 $2,928 * Premium tax credit is benchmarked to second-lowest cost silver plan in any exchange. 27

28 Exchange Premiums Sample estimates of second-lowest cost* silver plan premium (age 50) without PTC: State Monthly Premium Annual Premium Colorado $390 $4,680 Georgia $334 $4,008 Indiana $382 $4,584 Maryland $356 $4,272 New Mexico $271 $3,252 New York $349 $4,188 Texas $264 $3,168 Wisconsin $341 $4,092 * Premium tax credit is benchmarked to second-lowest cost silver plan in any exchange. 28

29 Exchange Premiums Sample estimates of second-lowest cost* silver plan premium (age 60) without PTC: State Monthly Premium Annual Premium Colorado $531 $6,372 Georgia $507 $6,084 Indiana $581 $6,972 Maryland $484 $5,808 New Mexico $413 $4,956 New York $349 $4,188 Texas $401 $4,812 Wisconsin $518 $6,216 * Premium tax credit is benchmarked to second-lowest cost silver plan in any exchange. 29

30 Exchanges for Individuals

31 Exchanges for Individuals Exchange plan premiums subsidized with federal assistance: Premium Tax Credit (PTC) For individuals and families with household income* between % of federal poverty level (FPL) State and federal exchanges eligible for PTCs * Household income = modified adjusted gross income (MAGI) 31

32 MAGI (Code 36B) Modified adjusted gross income (MAGI) = taxpayer s adjusted gross income (AGI) (Code 62) Form 1040: Line 37 (last line of page 1) Form 1040A: Line 21 Form 1040EZ: Line 4 Increased by: Foreign income Tax-exempt interest Non-taxed Social Security benefits 32

33 Effects on MAGI Clergy housing/parsonage not included in gross income Elective deferrals to 401(k)/403(b)/FSA plans reduce MAGI Certain above-the-line deductions reduce MAGI: Example: 50% of SECA taxes paid IRA contributions 33

34 PTC Eligibility Requirements Two main* requirements (both required to be PTC-eligible ) MAGI Between 100% and 400% of FPL Inadequate or no employer coverage No employer coverage Employer coverage is less than minimum value Employer coverage is not affordable to employee * Other requirements include not being: 1) incarcerated; 2) covered by Medicare, Medicaid, or other govt. coverage: CHIP, TRICARE, etc.; 3) married, filing separately. 34

35 PTC Eligibility: % of FPL* Household Income (MAGI**) % FPL Single Family of 2 Family of 3 Family of 4 100% $11,850 $15,996 $20,142 $24, % $16,353 $22,074 $27,796 $33, % $17,775 $23,994 $30,213 $36, % $23,701 $31,992 $40,284 $48, % $29,626 $39,990 $50,355 $61, % $35,551 $47,988 $60,426 $73, % $47,401 $63,984 $80,868 $97,815 >400% >$47,401 >$63,984 >$80,868 >$97,815 For families/households with more than 4 persons, add $4,020 for each additional person. * Estimated 2014 federal poverty level (FPL) ** MAGI: Modified adjusted gross income 35

36 Minimum Value and Affordability

37 PTC Eligibility Minimum Value Employer plan must pay 60% of total costs of plan (actuarial determination) Employees whose employer plan does not cover minimum value can opt out and seek PTCs for exchange coverage Minimum value shown on employer Exchange Notice, summaries of benefits and coverage All HealthFlex plans satisfy this requirement for 2014! 37

38 PTC Eligibility Affordable Coverage Employee s required contribution (share of premium) for participant-only (single) coverage under employer plan cannot exceed 9.5% of household income* (MAGI) If employee contribution exceeds 9.5% of MAGI, employee can opt out; choose exchange coverage and PTC Dependent coverage affordability glitch Cost to cover dependents affordable as long as it does not cost the employee more than 9.5% of MAGI to cover self-only * Employers often have no information about employees household income 38

39 Three Affordability Rules ACA has several differing definitions Eligibility for PTCs if employer plan is unaffordable >9.5.% of MAGI for self-only coverage Employer avoiding pay or play penalty Safe Harbor: <9.5% of W-2 wages (known to employer) for self-only coverage Individual avoiding the mandate penalty >8% of MAGI for coverage (determined separately for dependents) 39

40 Affordability Examples Rev. Ryan s MAGI = $47,000 Total compensation: $60,000 minus $10,000 housing exclusion $3,000 United Methodist Personal Investment Plan contribution Grace UMC offers plan through annual conference Rev. Ryan contributes $1,800 for self-only coverage (3.8% of MAGI) Rev. Ryan has minimum essential coverage Ineligible for PTC 40

41 Affordability Examples Rev. Ryan has spouse and three children Rev. Ryan pays $6,000 for family coverage Contribution = 12.8% of MAGI But: $1,800 is cost for self-only coverage Cost is < 9.5% of MAGI (3.8%) Plan is affordable for Rev. Ryan and family (despite costing 12.8% of MAGI) Rev. Ryan, spouse and children are ineligible for PTCs Dependents can decline employer coverage and not receive individual mandate penalty (cost >8% of MAGI) Penalized if declines church coverage 41

42 Premiums After Tax Credits

43 Illustrative Exchange Premiums* $425 $1,700 * Premiums estimate based on age and demographics of UMC clergy and preliminary premiums from CO, CT, DC, IN, MD, ME, MT, NE, NM, OR, RI and WA. 43

44 PTC Impact on Premium PTC Impact on Premiums Clergyperson Age 50, MAGI $35,000 State Bronze Plan w/o PTC Bronze Plan with PTC Silver Plan w/o PTC Silver Plan with PTC CO $291 $176 $390 $275 GA $279 $220 $334 $275 IN $280 $173 $382 $275 MD $228 $147 $356 $275 NM $215 $215 $271 $271 NY $276 $202 $349 $275 TX $185 $185 $264 $264 WI $250 $166 $341 $275 44

45 PTC Impact on Premium PTC Impact on Premiums Clergyperson Age 50; Spouse Age 50; MAGI $40,000. State Bronze Plan w/o PTC Bronze Plan with PTC Silver Plan w/o PTC Silver Plan with PTC CO $582 $77 $780 $275 GA $558 $165 $668 $275 IN $560 $71 $764 $275 MD $456 $19 $712 $275 NM $430 $163 $542 $275 NY $552 $129 $698 $275 TX $370 $117 $528 $275 WI $500 $93 $682 $275 45

46 Cost-Sharing Reductions Limited to those between 100% and 250% FPL MAGI Actuarial Value Deductible Max Out-of-Pocket Doctor Visit Co-pay Hospital Co-pay 100% 150% FPL 94% Silver Plan $0 $1,000 $10 $ % 200% FPL 87% Silver Plan $250 $2,000 $15 $ % 250% FPL 250% FPL 73% Silver Plan 70% Silver Plan $1,000 $4,000 $30 $1,500 $2,000 $5,500 $30 $1,500 46

47 Honor System for 2014 One-year delay to full income verification systems Exchanges may rely on attestation of enrolling individuals regarding: Household income (MAGI) Lack of affordable or any employer coverage Random audits of a statistically significant sample of individuals Individuals must still reconcile advanced PTCs with income tax return Individual mandate for 2014 essentially on honor system 47

48 Conference Strategies

49 Conference Strategies Status Quo Full-time clergy required to be covered Maintains ease of appointment Forgoes cost savings in exchange plans with tax credits May cause more tension with local churches (seeking cost savings) Costs continue to accelerate New ACA burdens (e.g., fees, reporting, etc.) 49

50 Conference Strategies Affordability Option Maintain required full-time clergy coverage, but increase required individual contributions Clergy for whom coverage is not affordable (e.g., costs exceeds 9.5% of MAGI) seek exchange coverage May create appointment frictions and equity concerns May require a way to offset the increased health plan contribution for clergy remaining in the plan Other nontaxable benefits Taxable compensation 50

51 Conference Strategies Local Church Option Allow local churches to opt out of conference plan (for full-time clergy) Clergy at churches opting out have no employer coverage (can seek exchange coverage and tax credits) Appointment frictions and equity concerns Disruptions to conference plan risk pool Diminution in size Change in risk profile Problem for churches with multiple clergy Some would want to remain in the plan; some would not 51

52 Dependent Coverage

53 Dependent Affordability If spouse, dependent children (or both) are offered employer coverage (i.e., are eligible to enroll); and If cost for employee-only coverage is less than 9.5% of MAGI (household income) Even if cost to employee for covering spouse/dependents is very high: Spouse/dependents ineligible for PTCs! 53

54 Dependent Coverage Options Conference maintains status quo Clergy spouses and dependents likely to be considered having affordable coverage No PTCs for exchange coverage Conferences that blend rates or are apportioned may need to disclose single premium Even without PTC, full premium exchange coverage may be less costly than conference coverage 54

55 Dependent Coverage Options Conference ceases covering spouses and dependents at plan level (UPS Option) No spouses or dependents will have affordable coverage PTCs available for many families (cost savings to clergy/churches/conferences) Equity concern for families that do not qualify for PTCs They pay full premium on exchange with after-tax $ Supplement their cash income 55

56 Dependent Coverage Options Conference allows local churches to adopt conference plan for clergy-only Each local church chooses whether to adopt clergy-only coverage through the conference or clergy-plus-family coverage Potential to maximize cost savings Plan barrier? Administrative burden for conference New appointment friction? 56

57 Dependent Children Applicable large employers (50+ FTEEs*) Must offer coverage to dependent children up to age 26 Less flexibility to shift dependents to exchanges * FTEEs: full-time equivalent employees Note: Dependent children who are not tax dependents (not part of tax household) of participant appear not to be precluded from the PTCs by affordable employer coverage 57

58 Employer Interaction with Exchanges for Individuals

59 Individual Applications Coverage-only form (no PTC) short/simple Form seeking PTC complicated Employees may need help Appendix A to Form seeking PTC Directed at employers Resembles Exchange Notice Local churches may need help 59

60 Appendix A 60

61 Appendix A 61

62 Employer Coverage Tool 62

63 Employer Coverage Tool 63

64 Verification Employee enrolls in exchange; chooses qualified health plan (QHP) and receives PTC Individual enrolls based on attestation of no employer coverage or unaffordable Exchange verifies employer coverage if possible 2014: Only FEHBP* or SHOP Database in later years ( ) Large employers and health plans will begin sending data (covered lives) to IRS * Federal Employee Health Benefit Plan 64

65 Verification Exchange verifies random individuals Notifies individual that it will contact employer Exchange contacts employer Employer can appeal PTC eligibility Exchange reports PTC to IRS IRS assesses penalty if employer is applicable large employer (2015) Employer may appeal assessed penalties 65

66 Exchanges for Employers (SHOP)

67 Exchanges for Employers Small Business Health Options Program (SHOP) Small employers can adopt exchange plans as their employer-provided coverage : Small employers with fewer than 100 full-time employees (FTEs) States can limit SHOP to employers with fewer than 50 FTEs 2016: Small employers with fewer than 100 FTEs 2017 and beyond: States can expand SHOP to employers with fewer than 250 FTEs 67

68 SHOP Characteristics Employer offers coverage to all full-time employees No premium tax credits (PTCs) for employees PTCs only available through exchanges for individuals Employees may have choice of plans* SHOP will aggregate employee premiums for employers Can be coupled with a cafeteria plan Employees can pay their contributions on pre-tax basis * Delayed in federally-facilitated exchanges to 2015; some states are ready. 68

69 SHOP Characteristics Small Business Health Care Tax Credit continues for employers in SHOP (up to 2 years after 2014) Only available through SHOP in 2014 and beyond Up to 50% of premiums for-profit employers Up to 35% of premiums tax-exempts Refundable credit for tax-exempt small employers Phases out As number of employees approaches 25 As average wages approach $50,000 69

70 Employer Shared Responsibility

71 Employer Shared Responsibility Also called employer mandate or pay or play rule Delayed until 2015 Applies only to large employers Large employer averages 50 or more full-time equivalent employees (FTEE) Small employers (<50 FTEEs) exempt The rule should not apply to most churches. 71

72 Employer Shared Responsibility Large employers must provide affordable coverage with minimum value to: Full-time employees (FTEs) (30+ hours/week) Includes employees on paid leave; excludes seasonal employees Dependent children of FTEs (up to age 26) Or else pay a penalty Spouse coverage not required Controlled group rules apply Local churches day care centers and schools Conferences camps and foundations 72

73 Are you a large employer? At least 50 FT equivalent workers Including FT (30+ hours/week) and PT workers (prorated) Excluding seasonal workers (up to 120 days per year) Are any of your FT employees receiving PTC for exchange coverage? Yes Do you have more than 30 FT employees? Yes Do you provide health insurance? Yes Yes No No No No No Penalty Pay monthly penalty 1/12 x $2,000 x (number of FT employees 30) Pay monthly penalty, lesser of: 1/12 x $2,000 x (number of FT employees 30) 1/12 x $3,000 x (number of FT employees receiving credits for exchange coverage)

74 Affordability Safe Harbors Safe Harbors for Affordability under Employer Shared Responsibility Rule W-2 Wages: Employee contribution for self-only coverage in lowest-cost plan is less than 9.5% of W-2 wages Rate of Pay: For any month, employee share of monthly cost for self-only coverage in lowest-cost plan is less than 9.5% of 130 hours multiplied by employee s hourly rate of pay FPL: For any month, employee share of monthly cost of self-only coverage of lowest-cost plan is less than 9.5% of 1/12 th of FPL for a single individual 74

75 Who Is Employer of Clergy? Clergy are self-employed for FICA/SECA purposes Tax Court case: Weber vs. Commissioner UMC clergy are employees for income tax purposes Applied common law standard Many factors of common law test point to local church (though some point to regional conference) Church Alliance comment letter (March 18, 2013) to Employer Shared Responsibility Rule Seeks application of pay or play rule at local level in all denominations Urges good faith standard 75

76 Church Alliance

77 Church Alliance Effort Church Health Plan Act of 2013 Introduced in Senate as S by Senators Mark Pryor (D-AR) and Chris Coons (D-DE) Amends ACA to make PTCs available to participants in denominational church health plans Regulatory Efforts Comment Letters 77

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