Health Care Reform. Healthcare Reform PPACA

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1 Health Care Reform Healthcare Reform PPACA

2 The Basics of PPACA What is PPACA intended to do? One of the main purposes of PPACA is to reduce the number of Americans without health coverage and make coverage affordable. This has done by: Requiring most Americans to have some type of health insurance or pay a penalty Making it easier for individuals to obtain coverage, by: Creating insurance exchanges or marketplaces Incenting employers to provide coverage to all full-time employees Removing barriers for those who have medical problems 1 When does PPACA really begin? Parts of the law are already in effect. But the main parts of the law will take effect in 2014 and (Employers with employees, 2016)

3 Topics of Discussion History Mandated Fees and Reporting Requirements Health Plan Identifiers (HPID) Individual and Employer Mandates High-Value Plan Tax Cadillac Tax Pay or Play Strategies

4 2010 PPACA TIMELINE Grandfathering- most plans have lost grandfather status Grandfathered Plans (annual notice) Lifetime Benefit Limits prohibited Annual Limits on Essential Benefits prohibited phase in period allowing a cap per year until 2014 Dependent coverage up to age 26 Appeal process required

5 2010 PPACA TIMELINE (cont d) Emergency coverage services always paid as in-network Patient Protections: o Select PCP of choice within network o Child s PCP can be physician specializing in pediatric care o Females can visit OB/GYN without a referral Preventive service 100% coverage - plan years beginning on or after 9/23/10 (does NOT apply to grandfathered plans) Pre-existing conditions - limitations removed for children under age 19

6 2011 PPACA Timeline OTC Drug Exclusion no longer eligible for reimbursement under FSA, unless prescribed by a doctor Tax for Non-Qualified Distributions penalty on distributions from HSA that are not used to offset qualified medical expenses increases from 10% to 20% Women s Health Preventive Services covered at 100%

7 W-2 Reporting for 2012 Plan year Required for employers that filed more than 250 W-2s Must show total cost of employer sponsored medical benefits (exclusive of FSA Benefits) on each employee s W-2. Effective January 2013 for benefits provided in Delay for employers with less than 250 employees. (Soonest this will apply to these employers is for 2013 reporting year.) Not included as taxable income

8 New Summary of Benefits and Coverage Requirements Required starting 1 st day of 1 st plan year after Sept. 23, 2012, or the 1 st day of the 1 st open enrollment period after this date. Health insurers and group health plans must provide the Summary of Benefits and Coverage (SBC) and the uniform glossary to consumers. May be provided electronically in connection with online enrollment or renewal but must provide the option to receive a paper copy. SBC can be displayed on a single webpage In individual market or for group health plan/sponsors, must be provided no later than 7 business days after receiving a substantially complete application Penalty: up to $1,000 per instance of willfully failing to provide required information During the first year of applicability, no penalties on plans and issuers that are working diligently and in good faith to comply with the final regulations.

9 Material Modification of Plan Provision If group health plan or health insurance issuer makes any material modification (during the plan year) in terms of the plan or coverage involved that s not reflected in most recent SBC, plan or issuer shall provide notice of such modification to enrollees not later than 60 days prior to the date on which such modification will become effective.

10 Minimum Loss Ratio First of the rebates were issued in August 2012 The Minimum Loss Ratio is: 85% for large group plans (>101 employees) 80% for small group plans (<100 employees) and individual plans Carriers will have to issue a premium rebate to individuals for plans that fail to meet the Minimum Loss Ratio requirements Applies to all fully insured and grandfathered plans. Self-insured plans are exempt

11 How To Handle Medical Loss Ratio (MLR) If participants paid part of the premium-participants get a pro rata share of the rebate. If rebate calculations results in rebates that are considered minimal ($50 $75 per participant) to avoid excessive administrative costs and the potential tax consequences of providing a cash refund employer can: applying the rebate to reduce future premiums in the current year (a premium holiday ) enhance benefits (providing onsite, free flu shots to participants) ERISA requires that participant monies in private employer plans be put into a trust within 90 days after they are received. Very few insured plans operate through a trust. To avoid the 90-day rule, private plans should take steps to use or pay out the rebate within 90 days after it is received.

12 2013 Additional Modifications FSA Annual Limit $2,500 per year o o limit applies on a plan year basis and is effective for cafeteria plans beginning after December 31, May carry over up to $500 of unused contributions to the following year. Plan must be amended. You may use either the grace period or carry over provision but not both. Pass through in Product Cost Manufacturers can pass this cost on to consumers DME Excise Tax 2.3% on some durable medical devices o o Increases claims expenses (though modest) Additional Medicare Withholding for High Earners o o Effective 1/1/13 and applies to all employers Additional 0.9% (from 1.45% to 2.35%) of employees share for Medicare/HI must be withheld once the wages exceed $200,000

13 2013 Tax for Comparative Research Was due July 31, 2013 for plan years ending 10/1/12 12/31/12 Due July 31, 2014 for plan years ending 1/1/13 9/31/13 Federal per head tax on fully insured and self-insured group health plans to fund research programs. Used to fund Patient Centered Outcome Research (PCORI) Fee imposed on private insurance plans = $2 x average # lives covered ($1 for policies ending during fiscal 2013) Self-funded: o TPAs can t file the return or pay the fee o Plan sponsors must file Form 720 ( Quarterly Federal Excise Tax Return ) annually o Fees must be paid by July 31 st of each calendar year immediately following the last day of the plan year. Fee does NOT apply to policy years ending after September 30, 2019

14 2013 New Employer Discloser Obligation Regarding Exchanges Employers must supply employees with written notice regarding: the existence of the Insurance Exchange(s), the services supplied by the Exchange, how the employee may contact the Exchange, and if the employer is not supplying qualifying coverage that the employee might qualify for subsidies in the exchange for the purchase of insurance

15 Plan Fees What is it? Patient Centered Outcome Research Fee Annual plan year fee on insured and self insured plans beginning 10/2/2011 Excludes Dental/Vision Includes HRA/105/FSA How Much? Annual fee of $1 PMPY, $2 PMPY; indexed to medical inflations until 2019 First payable in July 2013 Who Pays FI: Carrier pays SF: Employer must calculate and pay their own fee Transitional Reinsurance Fee Annual calendar year fee on insured and self insured plans, Excludes Dental/Vision $63 PMPY in 2014, $44 PMPY in 2015 Projected to decrease in 2016 FI: Carrier pays SF: Employer must calculate and pay their own fee Health Insurance Industry Fee Annual fee on all insured plan beginning in 2014 Includes Dental/Vision Estimated Costs: 2 to 2.5% for to 4% for later years FI: Carrier pays Applies to all insured plans and will be based on each insurer s share

16 Play or Pay Employee

17 Play or Pay What happens in 2014? The individual mandate, which requires most people to have some type of medical coverage in effect or pay a tax, begins Exchanges are to be in effect in each state to make it simpler for individuals and small employers to purchase coverage. What happens in 2015? Employers who have 100 or more employees must provide health coverage that meets minimum requirements, or pay a tax. This requirement is often called play or pay or employer-shared responsibility.

18 Individual Responsibilities How do people avoid the individual mandate tax? To avoid the tax, a person must have minimum essential coverage. This coverage can be obtained through the person s employer, Medicare, Medicaid, TRICARE, some VA programs, an individual policy, or an Exchange. What happens if a person doesn t have the required coverage? The person will have to pay a tax, which will be collected with their federal income tax. The tax is being phased in. It is: Greater of 1% of taxable income or $95 per adult and $47.50 per child (up to $285 per family) for 2014 Greater of 2% of taxable income or $325 per adult and $ per child (up to $975 per family) for 2015 If an entire family is without coverage, the tax applies to each adult. Fifty percent of the tax applies to each child under age 19. There is a family maximum of three times the individual adult tax.

19 Individual Responsibilities Household Income 2014 Penalty 2015 Penalty 2016 Penalty Minimum $95.00 $ $ Percent of Income 1.0% 2.0% 2.5% $10,830 $ $ $ $21,660 $ $ $ $32,490 $ $ $ $43,320 $ $ $1, $55,125 $ $1, $1, $66,150 $ $1, $1, $77,175 $ $1, $1, $88,200 $ $1, $2,205.00

20 Individual Responsibilities What if the person can t afford coverage? Premium tax credits (which may be claimed during the year, rather than waiting until the person files his or her federal income tax return) are available to help pay a person s premium if: o Payable on a sliding scale from 100% to 400% of FPL o If the state opted to expand Medicaid, the minimum limit is 133% of FPL o Actually paid via a tax credit (paid in advance) o Individuals (and their dependents) are not eligible for subsidies if the employer provide minimum value and affordable coverage.

21 Premium Subsidies Tax credit subsidizes the amount between the actual premium and the maximum monthly cost, based on a percentage of household income FPL Max. Premium as % of Income (2014) 0% % No Subsidies Available 100% % No Subsidies Available 133% % 3% to 4% 150% % 4% to 6.3% 200% % 6.3% to 8.05% 250% % 8.05% to 9.5% 300% % 9.5% 400% No Subsidies Available

22 400% of Poverty level Household size 400% 1 $44, , , , , , , ,560 For each additional person, add $15,840

23 Exchange/Marketplace How will exchanges work? The exchanges will not provide insurance, but they will oversee the insurance options available through the exchanges and provide resources such as plan summaries to individuals to help them choose a plan. The exchanges will be responsible for: Plan management functions certifying and overseeing qualified health plans and assigning price and quality scores to plans in the exchange. (The exchange can either accept all insurers and plans that meet the guidelines or be an active purchaser of coverage and negotiate with insurers who wish to participate in an exchange. Consumer assistance operating the website and a toll-free call center, providing a cost of coverage calculator and creating a Navigator program to help people understand their choices Eligibility determinations and enrollment determination of eligibility for premium and cost-sharing subsidies, and coordinating enrollment in the exchange, Medicaid, and CHIP

24 Exchange/Marketplace Effective no later than 1/1/2014 Levels of coverage to be offered through the Exchange: Bronze Plan - Silver Plan - Gold Plan - Provides 60% of actuarial value of minimum qualifying coverage. Provides 70% of actuarial value of minimum qualifying coverage. Provides 80% of actuarial value of minimum qualifying coverage. Platinum Plan - Provides 90% of actuarial value of minimum qualifying coverage. Catastrophic Plans are available to individuals aged at the time of enrollment and also those exempt from coverage mandate due to affordability or hardship

25 Exchange/Marketplace Are there limits on stopping and starting coverage in an exchange? People may only enroll in an exchange during open enrollment or if they have a special enrollment event. Open enrollment will run from November 15, 2014 through February 15, People who have a special enrollment event (such as marriage, birth, adoption, loss of coverage under an employer plan, or loss of coverage that was affordable and met minimum value requirements) will have a special enrollment period in which they can elect coverage through an exchange, or change plans within the exchange.

26 Play or Pay Employer

27 Play or Pay Employer Size 2015 Plan Year 2016 Plan Year 1-49 Full Time Employees Does Not Apply Does Not Apply Full Time Employees Does Not Apply Employer must offer coverage to 95% of full-time employees and dependents to age Employees Employer must offer coverage to 70% of full-time employees and dependents to age 26 Employer must offer coverage to 95% of full-time employees and dependents to age 26

28 Employer Play Responsibilities What must I do to avoid the employer taxes? Beginning in 2015, if you average 100 or more full-time employees or full-time employee equivalents during a calendar year, to avoid the shared-responsibility penalty you must provide medical coverage that: Provides minimum essential coverage; and Is affordable and provides minimum value. Do I have to cover dependents? Employers need to offer coverage to children up to age 26 to avoid penalties for not offering coverage. Employers do not have to offer coverage to spouses.

29 Employer Play Responsibilities What is minimum value coverage? Minimum value coverage is coverage that is expected to cover at least 60 percent of expected claims costs. Large employer plans provided outside the exchanges do not have to provide the 10 essential health benefits listed previously, but they do have to provide minimum value coverage to avoid penalties. The government has provided a minimum value calculator for plans with standard features. Non-standard plans will be expected to obtain an actuarial certification. HSA contributions and HRA contributions that may not be used to pay premiums will count toward the 60 percent minimum value calculation.

30 Employer Play Responsibilities What makes coverage affordable? Coverage is considered affordable if it costs less than 9.5 percent of the employee s household income. Because employers typically do not know their employees household income, under the proposed rules coverage will be considered affordable for purposes of the employer-shared responsibility penalty if the cost of single coverage is less than 9.5 percent of one of the safe harbors: The employee s W-2 (Box 1) income for the year The employee s rate of pay at the start of the year Federal Poverty Level for a household of one at the start of the year There will be no requirement that employers contribute to dependent coverage. Employer contributions to HSAs will not count toward affordability. HRA contributions will only count if they may be used toward premium costs.

31 Employer Pay Responsibilities What happens if I, an employer, decide not to offer coverage? If you do not offer minimum essential coverage to at least 95 percent (70% for 2015) of your full-time (30 hours per week) employees and dependent children and any fulltime employee receives a premium or cost-sharing credit through an exchange, you must pay a fee of $2,000 per year for each full-time employee, excluding the first 30 employees (80 for 2015). What happens if I offer coverage but it doesn t meet government requirements? If you do not offer coverage under at least one plan option that provides minimum value and is affordable, you must pay a $3,000-per-year fee (calculated monthly) for each full-time employee who purchases coverage through an exchange and who receives a premium credit.

32 Do you offer coverage? Yes Does the plan provide minimum value? Plan pays 60% of claims Yes Is the coverage affordable? Yes No Penalty Employer Penalties For those with 100 Full-Time Equivalents No No No $2,000 per FTE (minus first 30 / 2015 its 80) Only applies if one full-time employee receives federal premium assistance (i.e. credit or subsidy) for exchange coverage. Lesser of: $3,000 per FTE receiving tax credit/subsidy; or $2,000 per FTE (minus first 30 / 2015 its 80) Only applies if one full-time employee receives federal premium assistance (i.e. credit or subsidy) for exchange coverage.. Employer Safe Harbor Coverage would be considered affordable if the premium contribution for single coverage does not exceed 9.5% of an employee s W-2 wages.

33 Plan Provisions Pre-Existing Conditions prohibited for all members as of the start of the 2014 plan year; must guarantee issuance and must be renewable Definition of Full-Time Employee employee averages 30 or more hours per week; effective 2015 Waiting Period may not be more than 90 days; effective with the start of the 2014 plan year Annual limits entirely prohibited for 2014 plan years Clinical Trials Plans must provide coverage for treatment of cancer or other life-threatening diseases; effective with the start of the 2014 plan year

34 Essential Coverage Beginning with the 2014 plan year, non-grandfathered plans on the exchange and small group market plans must have a qualified plan which provides essential health benefits. Benefits shall include the following categories Ambulatory patient services Laboratory services Emergency Services Hospitalization Mental Health and substance use disorders, including behavioral health treatment Prescription drugs Maternity and newborn care Rehabilitative & habilitative devices and services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care

35 Essential Coverage for Self-Funded Plans Self-funded plans and those in the large employer market must provide an actuarial benefit of at least 60%, which is considered minimum value. However, self-funded plans will not be allowed to impose lifetime or annual limits on essential health benefits.

36 Employer Responsibilities What happens if I offer coverage that meets government requirements and an employee purchases coverage through an exchange? If you offer even one plan option that provides the required 60 percent minimum value and costs less than 9.5 percent (9.56% in 2015) of the employee s safe harbor wages, no penalty will apply to the employer even if an employee purchases coverage through an exchange. Note that the employee s purchase will be with after-tax dollars premiums for coverage through an exchange cannot be paid on a pre-tax basis through a Section 125 plan.

37 Additional Fees and Taxes The Transitional Reinsurance Program (TRP) Intended to provide funding to cover additional costs associated with covering formerly uninsured individuals who may have unmet health needs. The program will run from 2014 through 2016 and would be funded by both fully insured and self-funded plans. Applies only to major medical coverage. Estimated fee for 2014 is $5.25 per covered person per month ($63 per year). This fee will decline by about onethird for 2015 ($44 PMPY) and by yet another one-third for Self-administered, self-funded plans will possibly be exempt from paying the fee for 2015 and 2016.

38 Health Insurance Tax Effective in 2014 Paid by the insurer, does not apply to self-funded plans Applies to all Health Insurance Providers, including medical, dental and vision insurance Fee will be based upon the insurer s size and market share Predicted affect to fully insured premiums is an increase of 1.9% to 2.3% then 3 to 4% in later years. This tax does NOT phase out

39 Counting Employees To Determine If You Are A Large Employer

40 Counting Employees Under PPACA Full-Time employee works an average of at least 30 hours per week during the month, he/she is considered full time for that month. (EXCLUDES: Sole proprietors, partners and 2% S Corporation shareholders.) FTE (Full-Time Equivalent) to calculate the number per month, divide total hours of service of all part-time employees by 120. This number (rounded down if a fraction) is added to the Full Time number to determine total number of Full-Time employees.

41 Counting Employees Under PPACA Part-Time works less than 30 hours per week or 130 hours monthly Seasonal Employees work either part time or full time hours during a busy season; not specifically defined in the new notice so will be employers good faith determination at least for Variable Hours Employees hours are uncertain and not reasonably expected to average 30 hours or more (includes those working full time at first but knowing hours will be reduced later and those on-call employees).

42 Who Is Considered An Employee? Common Law Employee Common-Law Employee no set definition but the parameters are: Hirer has control over how an individual performs a task and where the tasks are performed Length of relationship is indefinite Hirer provides material needed to complete the task Ability to assign additional tasks Sets work hours Payment is made on set schedule of time Work is part of regular business Benefits and perks are provided and person is invited to company events Training is provided Expenses are reimbursed

43 Controlled Groups and Affiliated Service Groups When one business owns a significant part of another business, there may be a controlled group. There are 3 types of Controlled Groups*: Parent-Subsidiary Brother-Sister Combined Group A group of businesses working together to provide services to each other or jointly to customers is called an Affiliated Service Group. Each business is a shareholder in the first service organization *. There are 3 types of Affiliated Service Groups: A-Organization (A-Org) B-Organization (B-Org) Management groups *All members of a controlled group and affiliated group will be used in combination to determine if an employer is large.

44 Defining Dependents Beginning in 2015, employers must offer minimum essential coverage to full-time employees and their dependent children (to age 26) to avoid the no offer penalty. (Coverage does not have to be offered to spouses.) Dependents will not be eligible for premium tax credits if the employer offers affordable coverage to the employee. If the plan is affordable for the employee alone, then it is also affordable for any person eligible to join that employee s plan. *Some states (Massachusetts) may offer state subsidies to help families who do not qualify for federal assistance based on the cost of the individual plan, but cannot afford the higher cost of employer-based family coverage.

45 How To Count Hours For Play or Pay?

46 Handling Employees Expected to Work Full-Time To avoid penalties, a new employee who is reasonably expected to work 30 or more hours per week must be offered coverage following satisfaction of the eligibility waiting period. Under PPACA, the waiting period generally cannot be more than 90 days. No Play or Pay penalty will be owed during the waiting period if the employee is offered coverage that would be effective on or before the end of the permissible waiting period.

47 Handling Seasonal and Variable Employees Seasonal employee is not defined in the new notice and at least for 2014, an employer s good faith determination that an employee is seasonal will be honored. Also for 2014 only, employers can take into consideration the anticipated termination date. Usually, seasonal employment means employment for a limited period to perform a specific function, such as retail during holiday seasons. Variable hours employees are those whose hours are variable or are otherwise uncertain and who are not reasonably expected to average 30 or more hours per week over the measurement period. This would include both those expected to work full-time when initially hired but who are expected to have their hours reduced at some point.

48 How Will Employers Count Hours? It is expected that current DOL rules for counting hours for pension plan purposes will be used to count an employee s hours of service as a full-time employee or full-time employee equivalent. Under these rules, a person is considered to have completed an hour of service with each hour for which he is paid for work, vacation, holiday, sick time, layoff, jury duty, military duty, etc. When converting time to a monthly basis, 30 hours per week would mean 130 hours per calendar month.

49 Determining Average Hours Worked An employer may simply look at its population on a current, month by month basis if it wishes to. However, to avoid the complications that may arise if an employee alternates between working more and less than 30 hours, or to simply reduce calculation frequency, IRS Notice gives an employer the option of using longer calculation periods to get a smoother, more predictable result if it prefers to do that. If the employer wants to use a smoothing technique, different processes apply to existing and new employees.

50 Standard Measurement and Stability Period

51 Calculation Option for Existing Ongoing Seasonal or Variable Hours Employees Instead of tracking time currently, an employer may look at how many hours the employee averaged during a lookback period called a Standard Measurement Period. Once the determination is made whether the employee worked full-time during the standard measurement period that determination will apply throughout the related Stability Period regardless how many hours the employee actually works. Note that the employer will still have to track the employee s hours during the Stability Period, as that information will be needed to make the determination for the next Standard Measurement Period.

52 Standard Measurement and Stability Period for Ongoing Employees Standard Measurement Period A lookback period of 3-12 months used to track and determine how many hours he worked on average during this time period. The employer must choose a start date for the Standard Measurement Period. It can be any date the employer chooses. Stability Period Period for which the employee is considered Full-Time or not Full-Time and must be: o At least as long as the Standard Measurement Period. o At least 6 months if the employee is Full-Time but not more than 12 months. Must immediately follow Standard Measurement Period and any applicable Administrative Period.

53 Administrative Period A period of up to 90 days given to employers to determine whether an employee is full-time during a Standard Measurement Period, and to enroll the employee if he is eligible. Can include time at both the beginning and the end of the Measurement Period. Cannot reduce or lengthen the Standard Measurement Period or Stability Period. Must overlap the prior Stability Period.

54 Example of Ongoing Seasonal or Variable Hours Employee If seasonal or variable hourly employee works an average of 30 hours in the Standard Measurement Period, they must be offered coverage through the next Stability Period. Ridge, Inc. has chosen to use a 12-month standard measurement period for on-going employees running from November 1 st to October 31st. Administrative period of 61 days will be from November 1 st to December 31 st. Stability period of 12 months from January 1 st to December 31 st.

55 New, Seasonal or Variable Employees Initial Measurement Period of 3-12 months Combined Initial Measurement Period and Administrative Period cannot exceed 13 months plus a fraction of a month (dependent on the hire date). Initial Stability Period: Must be the same length as the Stability Period for ongoing employees For new employees deemed to be full-time: o must be at least as long as Initial Measurement Period and at least 6 months For new employees that are deemed not to be full-time: o may not be more than one month longer than the Initial Measurement Period

56 ABC Company Transitioning New Hires Into Standard Measurement Period 12 Month Standard 11 Month Initial Tim was hired on November 10, His Initial Measurement Period goes from November 10, 2014 to October 9, 2015 and the Administrative Period is October 10, 2015 to December 31,2015. He works an average of 32 hours. He must be offered coverage for a Stability Period that runs January 1, 2016 through December 31, ABC Company must also test Tim s hours during the Standard Measurement Period of September 1, 2015 through August 31, 2016 and if he works under an average of 30 hours/week, his Initial Stability Period still continues until December 31, 2016

57 Stability Period Special circumstances: If an employee leaves and is rehired within 13 weeks, the employee s status as a full-time or a non-full-time employee will be reinstated when he returns to work. If he was full-time and covered by the plan, coverage must resume on the date he returns to work. If the break is more than 13 weeks, he can be treated as a new employee, subject to a new waiting period and measurement period. If the employer wishes, for employees who had worked fewer than 13 weeks when they left, the employer may use a break period equal to the employee s original period of employment (but not less than four weeks) instead of 26 weeks at the break period.

58 Standard Measurement and Stability Period Employers may use different standard measurement and stability periods start dates for these classes of employees: Collectively bargained and non-collectively bargained Hourly and salaried Employees of different entities Employees located in different states

59 Paying the Penalty The penalty will be determined after the end of each calendar year, after employees have filed their federal tax returns (so penalties will be assessed sometime after April 15). Although the penalty is calculated monthly, it will be paid annually. The penalty will not be included in any standard tax filing but instead will be charged through a notice of assessment from the IRS. Employers will have the right to dispute the amount due.

60 Excise Tax on High Value Health Plans Cadillac Plans Taxable years beginning after December 31, 2017 Employers offering health plans that exceed a certain cost (the total employee and employer cost) would be subject to 40% excise tax on amount above that value. For individual coverage, the threshold would be $10,200; for family coverage the threshold would be $27,500. These thresholds would be indexed at CPI plus one percentage point. Certain high-risk professions would have higher cost thresholds. (Calculation includes value of medical, dental, vision, reimbursement from HRA and FSA, and employer contributions to H.S.A)

61 Reporting Requirements

62 Proposed: Minimum Essential Coverage Reporting (6055 Requirement) *Prepared by the insurer for insured plans and the plan sponsor for self-funded plans. *Only required on individuals who actually elect coverage. Must report: The insurer s or plan sponsor s name, address, and employer identification number (EIN) The name, address, and Social Security number of the named insured The name, address, and Social Security number (or date of birth if a Social Security number is not available) of each covered spouse and dependent. The number of months each covered person was covered for at least one day The name, address, and EIN of an employer sponsoring the plan Whether coverage is through a SHOP exchange, and if so the SHOP s unique identifier *Effective January 1, 2015 with the first report due January 31, 2016 for employees, and employer roll-up report due 2/28, or 3/31 if filing electronically.

63 Proposed: Minimum Value/Affordable Coverage Reporting (6056 Requirement) Must be filed by all large employers. Employers in a controlled or affiliated service group are combined for purposes of deciding if an employer is large, but each employer in the group will file the 6056 report separately. Must report: The employer s name, address, and employer identification number (EIN) The name and telephone number of a contact person The calendar year for which the information is being reported (non-calendar year plan MUST report on a calendar year basis) A certification, by calendar month, as to whether minimum essential coverage was offered to employees (and dependents) The number of full-time employees for each month For each full-time employee: The months during the year that minimum value coverage was offered The employee s share of the cost of self-only coverage for the least expensive minimum value plan offered to the employee, by calendar month The employee s name, address, and Social Security number and the number of months, if any, that the employee was actually covered *Effective January 1, 2015 with the first report due January 1, 2016 for employees, and employer roll-up report due 2/28 or 3/31 if filing electronically.

64 Section 6055 & 6056 Key Dates Statements to employees by 1/31 Hard copy filings to IRS must be postmarked by 2/28 Electronic filings to IRS by 3/31 required for 250 or more individuals

65 What Are The Penalties? 6055 and 6056 Non-Compliance Penalties assessed for: Any failure to furnish a statement Any failure to include all of the information required Submitting incorrect information on a furnished statement Penalty: $100 for each statement, up to a maximum of $1.5MM; penalties reduced accordingly if corrected within 30 days, or on or before August 1 st.

66 Health Plan Identifier ACA requires an unique ID number be assigned to each health pan HPID Plans with more than $5 million in annual receipts by Nov 5 th,2014 Plans with less than $5 million in annual receipts by Nov 5 th, 2015 Online application process managed by CMS.gov

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68 Employers offering health plans that exceed a certain cost (the total employee and employer cost) would be subject to 40% excise tax on amount above that value. For individual coverage, the threshold would be $10,200; for family coverage the threshold would be $27,500. These thresholds would be indexed at CPI plus one percentage point. Certain high-risk professions would have higher cost thresholds. (Calculation includes value of medical, dental, vision, reimbursement from HRA and FSA, and employer contributions to H.S.A) Excise Tax on High Value Health Plans Cadillac Plans Taxable years beginning after December 31, 2017

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70 Cost Access Quality of Care

71 Wellness Programs are Increasing but also are becoming Regulated ACA/HIPAA State Law Compliance Issues ERISA/IRC NLRA Wellness Programs ADA Title VII and Other EEO Risks GINA

72 2014 Provisions Wellness Incentives Types of programs: Participatory: not based on health status Activity-Based and Results-Based: rewards are offered for achieving set goals Employers may vary premiums: up to 30% (for programs not related to avoidance of tobacco) or, up to 50% (for programs related to tobacco) Employers must provide a reasonable alternative standard if employee has medical condition that prohibits them from participating or accomplishing set goals, as per his/her doctor s waiver.

73 Wellness Programs -- On the Brink of Major Changes? May 8, 2013: EEOC announces wellness programs must be reviewed to avoid discrimination: To date, the Commission has not spoken clearly and definitely on the myriad of legal issues that can arise under these laws for wellness programs. EEOC Commissioner Chai Feldblum Many of the most pressing questions on wellness programs involve the interaction of the laws within our jurisdiction with other health-related statutes, most notably, the Health Insurance Portability and Accountability Act, or HIPAA. Commissioner Victoria Lipnic

74 Regulatory Issues We Will Address Today ACA/HIPAA: To which wellness programs do these rules apply? Health Contingent: Activity-Only v. Outcome-Based Programs Rewards, Incentives, Penalties Reasonable Alternatives ERISA and Tax Issues Other issues to consider with your legal advisor. Impacts of GINA and ADA on wellness programs, Title VII/EEO, NLRA, State laws 74

75 Questions You Should Be Pondering As You Listen Does our wellness program meet clear minimum statutory or regulatory requirements? Does our wellness program design raise other statutory or regulatory concerns? Should we make design changes to ensure we are in compliance and/or to reduce potential exposure to systemic attacks?

76 ACA/HIPAA To which wellness programs do these rules apply?

77 HIPAA Non-Discrimination & Privacy Historical perspective ( ): HIPAA, ADA, GINA, PPACA. Basic Nondiscrimination Rule: Group health plans and issuers cannot discriminate with regard to eligibility or benefits on the basis of a health factor. Health factors include - health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability. o Exception Rule of construction, PPACA codification. Basic Privacy and Security Rule: Group health plans, issuers and their business associates may not use and disclose protected health information except as permitted under the HIPAA privacy rules, and must safeguard electronic PHI as required under the HIPAA security rules. 77

78 HIPAA: Basic Regulatory Approach Pre-PPACA Participatory programs Programs that require satisfaction of health-related standard Reasonable design easy! Limitation on reward 20% employee-only premium Reasonable alternative required to address medical condition/medical inadvisability Reasonable alternative notice Post-PPACA (plan years beginning on and after Jan 1, 2014) Participatory programs Health contingent programs Activity-only (reasonable alternative under old rules) v. Outcome-based programs (reasonable alternative for all) Limitation on reward 30% employee-only premium; 50% for tobacco prevention programs. Updated reasonable alternative notice

79 Participatory Programs Under the ACA/HIPAA Definition: Programs that either do not provide a reward or do not include any conditions for obtaining a reward that are based satisfying a standard related to a health factor. Participatory wellness programs must be made available to all similarly situated individuals, regardless of health status.

80 Participatory Programs Examples: Reimburses cost for membership in a fitness center. Reward for participation in diagnostic testing regardless of outcomes. Waiver of co-payment or deductible to encourage preventive care (e.g., prenatal care or well-baby visits). Reimburses costs of smoking cessation programs regardless of outcomes. Reward for attending monthly health education seminar. NEW: Reward for completing a health risk assessment regarding current health status, without any further action (educational or otherwise) required by the employee with regard to the health issues identified as part of the assessment.

81 Health Contingent Programs: 1) Activity-Only Definition: Program that requires an individual to perform or complete an activity related to a health factor in order to obtain a reward, but does not require the individual to attain or maintain a specific health outcome. Examples: Walking, diet, or exercise programs. Some individuals may be unable to participate in or complete (or have difficulty participating in or completing) program due to a health factor, such as severe asthma, pregnancy, or a recent surgery.

82 Health Contingent Programs: 2) Outcome-based Definition: Program that requires an individual to attain or maintain a specific health outcome in order to obtain a reward. Examples: Stop smoking, or attaining certain results on biometric screenings, such as cholesterol, BMI, blood pressure. Typically two-tiers: Tier one. Measurement, test, or screening is applied. If satisfied, individual earns reward. If not, individual moves to tier two Tier two. Individual takes additional steps to earn the same reward, such as meeting health coach, taking health/fitness course, complying with a walking or exercise program, or complying with a health care provider s plan of care.

83 Health Contingent: Activity-only v. outcome- based programs

84 Health Contingent Programs: Activity Only Requirements: Annual qualification: Provide opportunity to qualify at least 1x/year. Reward limit: 30% taking into account all health contingent programs; 50% for tobacco prevention programs. Reasonably designed: (i) reasonable chance of improving health or preventing disease, (ii) not overly burdensome, (iii) is not a subterfuge for health factor discrimination, and (iv) is not highly suspect in method chosen. Facts and circumstances determination. Uniform availability to similarly situated individuals: Provide a reasonable alternative standard or waiver for individuals who have difficulty meeting the standard due to a medical condition. Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver. Sample language included in regulations.

85 Requirements: Health Contingent Programs: Outcome-based Annual qualification: Same as activity-only. Reward limit: Same as activity-only. Reasonably designed: Same as activity-only, except a reasonable alternative also must be provided to any individual who does not meet the initial standard (tier one) based on a measurement, test, or screening that is related to a health factor. Uniform availability to similarly situated individuals: Same as activity-only, except provide a reasonable alternative standard (or waiver) as described above. Program description: All plan materials describing the program must disclose the existence of reasonable alternative standard or waiver.

86 Differences Between Reasonable Design Standard Activity-Only Program This determination is based on all the relevant facts and circumstances. Outcome-Based Program This determination is based on all the relevant facts and circumstances. To ensure that an outcome-based wellness program is reasonably designed to improve health and does not act as a subterfuge for underwriting or reducing benefits based on a health factor, a reasonable alternative standard to qualify for the reward must be provided to any individual who does not meet the initial standard based on a measurement, test, or screening that is related to a health factor, as explained in paragraph (f)(4)(iv) of this section.

87 An ACA Compliance Challenge: Distinguishing: Participatory Programs: Joining a fitness center Receiving preventive care Attending monthly nutrition education seminar Not subject to the incentive limits (30%) Health Contingent: Activity- Only Programs Participating in an exercise program, regardless of outcomes Keep up with all recommended preventive care Participating in a diet program, regardless of outcomes Subject to the incentive limits

88 Program Feature Flu shot Participatory v. Activity-Only v. Outcome Based? Participatory v. Activity-Only v. Outcome-Based? Preventive in nature, no particular outcome required so participatory, right? But a medical condition/health factor could prevent an individual from getting a flu shot, so health contingent? Complete up to 5 calls with health coach Activity only requires calling health coach, so participatory, right. What if calls are longer for persons with certain health factors? Is this now health contingent? What if program requires 3 calls for all participants and 5 calls for other participants identified as higher risk based on results of health risk assessment? Is this health contingent? Complete health risk assessment Seems participatory go on-line, answer 20 questions, and get reward regardless of answers to questions. What if the participant is blind, or has a learning disability, or a language barrier exists? Keep up with preventive care Participatory only? Maybe. But what if individual s health condition qualifies her to receive more preventive services?

89 Rewards, Incentives Penalties

90 Reward Limits Not applicable to participatory programs Prior years, no more than 20% (30%/50% in 2014) of cost of: o EE-only level of coverage; or o cost of coverage levels in which employee and any dependents are enrolled if dependents can to participate in the program. Examples: Annual premium (ER+EE portion) for EE-only coverage is $3,600 and the annual premium (ER+EE portion) for family coverage is $9,000, the annual reward for participating in the wellness program could not exceed $720 (20% of $3,600). If any class of dependents is allowed to participate and the employee is enrolled in family coverage, the plan could offer the employee a reward of up to $1,800 (20% of $9,000).

91 Application of New Reward Limits Example for employee-only program: Annual premium (ER and EE portion) for employeeonly tier of coverage = $6,000. Employer s wellness program has 3 components: o participatory on-line assessment - $500 annual reward; o outcome-based biometric screening program - $600 annual reward; and o tobacco prevention program - $2,000 annual reward. 91

92 Application of New Reward Limits Result: Reward limit 50% of annual premium = $3,000 per year based off the $6,000 annual premium. Does total reward ($3,100) exceed 50% limit? NO rewards for participatory programs (here, $500) not included in calculation. Total reward for purposes of the reward limit is $2,600. Because total reward for biometric screening and tobacco prevention program ($2,600) is less than 50% reward limit ($3,000), and total reward for biometric screening program ($600) is less than 30% reward limit ($1,800) reward limit requirement is satisfied.

93 Application of New Reward Limits An employer may want to consider the same type structure if incentives are also available to dependents. Caution: Is to really think about your structure base and how you will incentivizes those dependents. Question: If one member does not meet the requirements does the entire family lose the incentive?

94 Reasonable Alternatives

95 Reasonable Alternative: Activity-Only Follows the old HIPAA rules - Must give individuals opportunity to meet a reasonable alternative standard (or waive standard) if, due to a medical condition, it is unreasonably difficult for individual to meet the wellness program standard, or it is medically inadvisable to attempt to meet the standard Multiple attempts/alternatives contemplated Plan sponsor may seek verification from individual s physician

96 Reasonable Alternative: Activity-Only When is reasonable alternative reasonable? Facts and circumstances determination, including the following: Education program alternatives program must pay for and provide or assist individual in finding program. Diet program alternatives program must pay for program or membership fee, but not food. Time commitment must be reasonable. Personal physician s recommendations must be taken into account if physician determines standard is medically inappropriate. If alternative also is an outcome-based program, it too must meet these requirements.

97 Reasonable Alternative: Outcome-Based Must provide an alternative for any individual who does not meet the initial standard based on a measurement, test or screening that is related to a health factor, regardless of health condition. Plan sponsor may NOT seek verification from individual s physician For reasonableness of alternative, follow same rules as activity-only

98 What if Reasonable Alternative is another Outcome-based Program? Alternative must meet basic requirements for outcomebased programs, PLUS: If it is a different level of same standard, program must provide additional time to comply, taking into account the individual s circumstances. Give individual opportunity to comply with his Dr. s recommendations as a second alternative to meeting the plan s reasonable alternative, but only if the Dr. joins in the request. Individuals can inject Dr. s recommendations at any time, and Dr. can adjust recommendations any time, as medically appropriate. May not seek physician verification, unless the reasonable alternative is activity-only.

99 What Are Employers Doing? Health Care Reform Opportunity Changes the discussion we need to re-think the question Why do we offer benefits? Provides an opportunity to take a fresh, strategicallybased approach to planning.

100 Play Continuum of Possibilities Pay Play Play & Redirect Pay & Redeploy Pay & Exit Play by meeting PPACA requirements Play by meeting PPACA requirements Discontinue employer-sponsored plan Discontinue employersponsored plan Optimally manage design and delivery to sustain an employersponsored plan Define contingencies for future exit Structure contributions to encourage low-wage earner qualification for subsidies Pay $3,000 penalty for those who exit and are subsidized by the Exchanges Pay $2,000 penalty for all FTEs Direct employees to Exchanges Provide monetized value (e.g., Defined Contribution) in whole or part Pay $2,000 penalty for all FTEs Direct employees to Exchanges Provide no financial subsidy

101 What Are Employers Doing? In-depth ANNUAL analysis on how employee population is affected by Health Care Reform Use a Proprietary Actuarial Tool Evaluate the Exchange plan rates available to Employees Consider using the Exchange as an advantage not an obstacle

102 Health Care Reform Analysis Model REPORTING: DEMOGRAPHICS Sample Output from PPACA Tool

103 Health Care Reform Analysis Model REPORTING: SUBSIDY-ELIGIBLE RANGE This report provides an analysis of how many employees are in the subsidy-eligible range, based on employee salary, spousal earnings assumptions and monthly premium contribution. Note: If you are married, you must file joint tax return in order to qualify for a subsidy.

104 Health Care Reform Analysis Model REPORTING: PLAY OR PAY IMPACT This report provides the estimated impact to employees of plan termination.

105 Identify the Cost Drivers PPACA Evaluate the Network & Utilization Education Lower Cost Per Event

106 What Are Employers Doing? Be proactive in managing health risk within population. Are you aware of what is driving your cost?

107 Poor Standard Care 1. Diabetes 2. Coronary Artery Disease 3. Hypertension 4. Back Pain 5. Obesity 6. Cancer 7. Asthma 8. Arthritis 9. Allergies 10. Sinusitis 11. Depression 12. Congestive Heart Failure 13. Lung Disease 14. Kidney Disease 15. High Cholesterol

108 (~10%) can be identified and monitored/managed to greatly reduce risk and improve quality over the next months

109 What Are Employers Doing? Be proactive in managing health risk within population. Are you aware of what is driving your cost? Disease Management Onsite (not telephonic) Results Based Wellness Plan Design $7,248 58%