Health Care Reform Group Medicare Advantage. John F. DiLorenzo Michael A. DiLorenzo

Transcription

1 Health Care Reform Group Medicare Advantage October 3, 2012 John F. DiLorenzo Michael A. DiLorenzo Garfield Road, Clinton Township South Saginaw, Flint MPI.9235

2 Michigan Planners, Inc. began operations in 1962 and continues to work with Michigan based employers, as we now celebrate 50 years of service to our customers. Our specialty is our customer! We earn your trust and never let you down. As a result, we offer AT NO CHARGE uncompromising support programs designed to ensure your satisfaction and the satisfaction of all covered employees and dependents, as well. Our goal is to provide our customers with competitive and innovative programs provided through the industry s leading carriers. Michigan Municipal Planners (MMP) is a Michigan Planners, Inc. (MPI) company focusing specifically on the needs of public sector employers. MMP provides all of the same benefits as MPI to our public sector employers, with additional assistance on PA 106 and 152 laws, labor negotiation, accident and sickness programs and post-65 retirement programs. We never forget who the customer is! 1

3 Full COBRA Administration provided at no cost, which virtually eliminates employer liability ERISA Compliant Summary Plan Description provided at no cost Various Plan Documentation (as provided by Clark Hill) Customized, Understandable Employee Benefit Guides Unified Enrollment Form Employee Benefit ID Cards Deep Discounts on FSA, HSA and HRA Administration Online Benefits Administration Services Dedicated Customer Service Representatives Toll-Free HIPAA Compliant Employee Claims Assistance Annual Preparation, Dissemination, Compilation and Presentation of Bid Process and Results, Including Annual Program Recommendations Plan Management Post 65 GMA Plans Wellness & Productivity and Cost Containment Strategies Comprehensive Employee Orientations PA 106 and 152 Compliance Labor Negotiations 2

4 The Patient Protection and Affordable Care Act ( PPACA ), with amendments by the Health Care Reconciliation Act of 2010, was signed into law in March The new law substantially changes the way group health plans will operate in the future, as well as the options that will be available to individuals for obtaining group health care coverage. Some of the law s provisions will not be effective for a couple years; but others must be addressed sooner and some went into effect for the first plan year beginning on or after September 23, Regulations and other guidance continue to be issued. However, a significant amount of guidance is still necessary. 3

5 Effective January 1, 2011, over-the-counter drugs are no longer reimbursable under a health FSA (HRA or HSA) without a prescription. Health FSAs may reimburse expenses for adult dependent children. Plan documents should have been amended by June 30, Beginning in 2013, PPACA limits FSA maximum annual employee deferrals to $2,500. 4

6 PPACA requires that employers issuing at least 250 W-2s must report the cost of employer-sponsored health care on employee s W-2s issued for 2012 (issued in 2013). Small employer exception (less than 250 employees) determined on an individual employer basis and not on a controlled group basis. IRS issued Notice which provides interim guidance in the form of a series of FAQs. Also issued a convenient compliance chart summarizing the reporting obligations for different coverage types and coverage situations. (Both can be found at 5

7 Reporting is to inform employees of the cost of their health care coverage and does not cause excludable coverage to become taxable. Also will assist IRS in determining Cadillac Plans come With limited exceptions, all employers sponsoring group health plans and filing more than 250 Form W-2s must comply (including governmental employers and churches). Employers MUST report aggregate reportable cost of coverage it provided, including both ER and EE portions of the premium. In other words, the total plan cost. Employers are not required to issue a Form W-2 including aggregate reportable cost to individuals to whom the employer is not otherwise required to issue a Form W-2 (such as a retiree). 6

8 PPACA created new disclosure requirements for group health plans called the Summary of Benefits and Coverage ( SBC ), including a uniform glossary. SBC is in addition to an ERISA required Summary Plan Description ( SPD ). Applies to all group health plans, even those exempt from ERISA requirements (e.g. governmental plans, church plans, etc.). Required for first open enrollment/plan year beginning on or after September 23,

9 SBC must be provided in the following instances: Upon application for enrollment, if applicable. By first day of coverage if not provided during an application for enrollment, or if there were any changes in coverage since the application. Special enrollees. Upon renewal during open enrollment period. (If plans utilize an evergreen election provision or provide no opportunity to change election, SBC must be provided no later than 30 days prior to first day of the new plan year.) Upon request as soon as practicable, but no later than 7 business days after request. 8

10 The agencies have provided a template for coverage beginning before (Updated templates are expected at a later date.) Full SBC template must be used. SBC must be provided in a culturally and linguistically appropriate manner. (Participants living in counties where 10 percent or more of the population are literate only in the same non-english language must be given an SBC in that non-english language.) Presently, there are no Michigan counties affected by this rule. 9

11 Final regulations allow the SBC to be provided as either a stand-alone document or in combination with other summary materials (e.g. the SPD), provided the SBC information is intact and prominently displayed at the beginning of the materials. Not required for excepted benefits (e.g. stand-alone dental or vision benefits, etc.). Penalty for noncompliance = up to $1,000 for each individual who did not timely receive the SBC. 10

12 Remember that self-insured plans are already subject to nondiscrimination testing rules under IRC 105(h). The IRS has delayed implementation of non-discrimination testing rules for non-grandfathered insured group health plans (IRS Notice ). Delay was implemented in response to concern about plan sponsors ability to comply without regulatory guidelines. Compliance is not required (and sanctions for failure to comply do not apply) until regulations or other administrative guidance of general applicability has been issued. IRS anticipates guidance will not apply until plan years beginning a specified period after issuance (earliest is likely January 1, 2013). 11

13 PPACA codified existing wellness plan parameters (HIPAA nondiscrimination): Reward/incentive limited to 20% of cost; Reasonable alternative made available; Program communication materials notify participants of alternative; Reasonably designed to promote health or prevent disease; and Allow for qualification at least once per year. Only change is to increase the incentive limit from 20% to 30% of the cost of coverage beginning in Also gives Secretary of HHS discretion to further increase limit to 50%. 12

14 Defining Full-Time Employees: PPACA currently defines full-time employee as working 30 hours per week. Impact on determination of large employer status and corresponding coverage and penalty requirements. Impact on future automatic enrollment requirements. DOL Public Forum held on April 8, IRS Technical Release discussed expected future guidance. 13

15 Future guidance expected to provide: For first three months following date of hire, employer will not be subject to penalties for failing to provide coverage to an employee. Propose a look back period for purposes of determining whether an existing employee is a full-time employee under PPACA (likely 12 months). Methods for determining whether a newly hired employee is a full-time employee for purposes of PPACA (likely will have 6 months to decide). 14

16 Under PPACA, large employers will face penalties beginning in 2014, if one or more of their full-time employees obtains insurance through a health care Exchange and qualifies either for a premium tax credit or cost-sharing reduction payment. Also referred to as the Employer Shared Responsibility provision or penalty. 15

17 What is a large employer? 50 or more full-time equivalent employees. Include both part-time and full-time employees in the calculation. Full-time employees are those expected to work over 30 hours per week. Add up part-time hours for all part-time employees in a month and divide by 120 to get number of full-time equivalents. Excludes seasonal employees working less than 120 days per year. Calculated on a controlled group basis. 16

18 When do the penalties apply and how are they calculated? 1. If an employer does not provide health coverage and if one or more of its full-time employees receives federal insurance subsidies and obtains coverage on an Exchange, the employer will pay a penalty of $2,000 per year per employee (minus the first 30 employees). For example, for an employer with 50 employees who does not provide health coverage and one full-time employee is subsidized and obtains coverage through an Exchange, the employer would pay a total of $40,000 ($2,000 x (50-30)). 17

19 2. If an employer does provide health coverage, and if one or more of its full-time employees receives insurance subsidies and obtains coverage through an Exchange because the coverage is deemed unaffordable or fails to provide minimum value, the employer will pay $3,000 per subsidized employee per year or $2,000 per employee (minus the first 30), whichever is less. For example, an employer with 50 employees that provides health coverage but has one full-time employee who receives a subsidy and coverage on the Exchange would pay a penalty amount of $3,000. However, if the same employer had 30 full-time employees who received subsidies and obtained coverage on the Exchange, the potential annual penalty for the employer would be $90,000 ($3,000 x 30 employees). Because $90,000 exceeds the employer s overall limitation of $40,000 ($2,000 x (50-30 employees)), the employer penalty would be limited to $40,

20 Who qualifies for premium credits on an Exchange? Employee with a household income of less than 400% of the federal poverty level (currently $88,200 for a family of four). Eligible for employer group health plan but plan does not meet the affordability standards. Eligible for employer group health plan but plan fails to provide minimum value in that it pays for less than 60% of covered expenses. 19

21 Coverage under an employer-sponsored plan is affordable to a particular employee if the employee s required contribution to the plan does not exceed 9.5% of the employee s household income for taxable year. Household income is defined as the modified adjusted gross income of the employee and any members of the employee s family (including spouse and dependents). Privacy concerns and difficulty obtaining information. IRS expected to propose a safe harbor whereby affordability measured by reference to employee s wages from employer. 20

22 Under proposed safe harbor, employers would likely be required to meet certain requirements including but not limited to: employer must offer full-time employees the opportunity to enroll in minimum essential coverage under employer sponsored plan; the employee portion of the self-only premium for the employer s lowest cost coverage that provides minimum value must not exceed 9.5 percent of the employee s W-2 wages. If the employer met the safe harbor requirements, the employer would not be subject to a penalty payment with respect to that particular employee. 21

23 Effective January 1, 2018, PPACA imposes a 40% excise tax on insurers of Cadillac health plans with aggregate annual value amounts that exceed $10,200 for individual coverage and $27,500 for family coverage (indexed annually), provided higher thresholds apply for retirees age 55 and older not eligible for Medicare (and subject to additional special limits) and employees in high risk professions. Annual value amount with indexed annually based on the medical inflation rate (typically 3-5%). Paid by plan sponsor for each participant. Based on total cost of benefits, not just what employer pays, so shifting more cost to employees does not get employer out of tax. 22

24 Example: 2018 Annual Value Amount Individual Insurance Plan s Actual 2018 Annual Value Amount Individual Difference: Plan s Amount v. Allowed Amount $10,200 $11,200 $1,000 40% Excise Tax $400 per participant 100 Participants in Cadillac Plan $40,000 = Total Excise Tax Due to IRS 23

25 Conduct an analysis of your organization s plans: Determine which plans are subject to PPACA. Update/amend coverage and documentation as needed to comply with requirements. Work with your insurance carriers, third party administrators and benefits advisors to make sure everyone is in compliance and on the same page. Stay abreast of the ever changing rules and regulations. 24

26 Continue to offer health benefits? Conduct a qualitative and quantitative analysis for your organization. Develop an implementation plan for next several years. For example: If it appears the Cadillac Tax may apply in 2018, should you start implementing reductions over the next several years? Do you have insured plans that will likely run afoul of the nondiscrimination requirements? Will your plans meet the affordability standards? Will your plans meet the minimum essential health plan coverage standards? 25

27 For employers with collectively bargained employees: Do you have a reopener in your CBA that allows the contract to reopen to clarify new health care rules or regulations (i.e. to exclusively address health care reform)? Develop a communication plan. Keep employees informed with frequent updates. Use as opportunity to highlight/promote the benefits you offer to employees. 26

28 DOL website (can sign up for updates): IRS website: HHS website: 27

29 Group Medicare Advantage Cost effective plan alternative for post 65 retiree coverage. Average cost savings of 20% or better. Removes post 65 retirees from risk pool of self-funded municipalities. Minimum required enrollment of 5 Individual contracts (a two person group contract is split into 2 individual contracts). Multiple Plan Options available through both Blue Cross and Blue Care Network. 28

30 Group Medicare Advantage Medicare Plus Blue Group PPO offers a statewide PPO network. Lower cost sharing for in network services. Members traveling outside of Michigan, have access to local Blue Cross Blue Shield networks under the BlueCard program. Any doctor that accepts Medicare will be covered at the in-network benefit level out of state. Worldwide Coverage (covered the same as in the US, not limited to ER and Urgent Care). 29

31 Group Medicare Advantage Blue Care Network Medicare Advantage HMO offers provider access across 42 Michigan counties beginning in Lower price point than comparable Medicare Plus Group PPO programs. Primary Care and Managed Care rules are applicable. 30

32 Subscriber Advantages of a Medicare Advantage Plan Unification of Medicare Parts A, B, C and D benefits into one program. Single ID card for all benefits. Single Explanation of Benefits (EOB) when claims are processed. Elimination of Donut Hole / Coverage Gap in Part D coverage. Silver Sneakers and other additional programs/coverages can be added at minimal additional cost. 31

33 Area 1 Area 2 Area 3 Area 4 Area 5 Area 6 Area 7 Area 8 Area 9 All Areas Year Southeast Lansing Kalamazoo Grand Rapids Saginaw Flint Traverse City Upper Peninsula Southwest Statewide % 3.9% 7.3% 4.7% 5.8% 3.8% 4.4% -1.4% 7.3% 4.7% % 7.0% 9.9% 5.7% 11.5% 9.1% 9.7% 8.7% 9.9% 8.9% % 9.3% 9.9% 8.2% 9.5% 9.5% 9.3% 8.5% 9.9% 9.5% % 7.5% 8.6% 7.3% 8.1% 9.1% 7.3% 8.2% 8.5% 8.6% % 13.2% 3.4% 16.1% 8.5% 7.5% 9.8% 13.8% 15.5% 9.2% 2011 Reform 12.1% 9.0% 13.3% 13.6% 15.9% 10.8% 13.2% 18.1% 13.5% 12.3% 2011 Non Reform 20.9% 22.1% 34.3% 14.5% 19.5% 13.2% 12.3% 24.2% 26.9% 19.5% 2011 Total 13.9% 11.3% 17.7% 13.8% 16.4% 11.2% 13.2% 13.2% 28.3% 14.2% 2012 Reform 4.6% 6.8% 3.1% 8.0% 0.0% -6.0% 0.0% 30.0% 9.1% 4.0% 2012 Non Reform 1.8% 7.2% -2.8% 16.6% 9.3% 9.2% 13.5% 9.2% 10.4% 5.6% 2012 Total 4.1% 6.8% 2.3% 9.5% 1.3% 1.1% 1.4% 1.8% 9.2% 4.3% 2013 Reform 6.8% 5.0% 12.2% 11.8% 8.6% 7.8% 9.5% 13.0% 6.2% 7.8% 2013 Non Reform 8.8% -0.7% 8.5% 5.0% 5.2% 2.5% 6.4% 7.6% 3.6% 6.2% 2013 Total 7.2% 4.3% 11.8% 10.6% 8.2% 6.9% 9.2% 12.2% 5.9% 7.6% 32

34 This document is not intended to give legal advice. It is comprised of general information. Employers facing specific issues should seek the assistance of an attorney. 33

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36 42400 Garfield Road, Clinton Township South Saginaw, Flint MPI.9235