GROUP HEALTH PLAN COMPLIANCE Legalization of Same-Sex Marriages. o Immediate Impact o Strategic Considerations o Action Items

Transcription

1 GROUP HEALTH PLAN COMPLIANCE Legalization of Same-Sex Marriages o Immediate Impact o Strategic Considerations o Action Items October 28, 2015

2 AGENDA: BIG PICTURE How are Spouse & Legal Marriage Defined under Federal Law? Proactively Confront Evolving Financial & Administrative Implications What is the Potential Impact to Domestic Partnership Benefits? What Proactive Communication Steps are Necessary to Assist Employees and Families in Understanding Coverage Options Today? IMPORTANT REMINDER A Spouse is NOT a Dependent under the ACA

3 AGENDA: SMALLER PICTURE Evaluate Risks & Opportunities as Coverage Options Continue to Shift in the Marketplace Spousal Coverage Trends Contribution Strategies Carve-out Options Surcharges Audits & Affidavits How do the Rules Change for Fully Insured & Self-funded Plans? Is your Plan at Risk of Becoming a Non-Competitive Magnet plan? How will New Options Impact Morale, Recruitment & Retention?

4 LEGALIZATION OF SAME-SEX MARRIAGE Oswald Companies BACKGROUND 4

5 State-by-State Laws: Snapshot-in-Time As of 6/25/14 Legal Same-Sex Marriages Same-Sex Marriage Banned; Challenged in Court Same-Sex Marriage Struck Down, Pending Appeal Source: Leavitt Partners

6 THE DEFENSE OF MARRIAGE ACT (DOMA) 1996 U.S. Supreme Court Allowed States to Refuse to Recognize Same-Sex Marriages Legally Performed in Other States JUNE 2013 DOMA Repealed DOMA SECTION 2: Non-recognition for Federal Purposes including Benefits for Government Employees, Social Security Survivor Benefits, & Filing Joint Tax Returns DOMA SECTION 3: Under Federal Law, Marriage is ONLY a Legal Union Between One Man and One Woman. Spouse Refers Only to a Person of the Opposite Sex.

7 THE U.S. SUPREME COURT U.S. v. WINDSOR JUNE 2013 U.S. Supreme Court Ruled Section 3 of DOMA as Unconstitutional DOMA SECTION 2: REMAINED State-by-State Non-recognition for Federal Purposes including Benefits for Government Employees, Social Security Survivor Benefits, & Filing Joint Tax Returns Limiting Federal Definition of a Spouse or Marriage to a Person of the Opposite Sex is Unconstitutional

8 POST-WINDSOR ADMINISTRATIVE NIGHTMARE FOR EMPLOYERS! Equal Federal Tax Law with Varying State-by-State Marriage & Tax Laws

9 THE U.S. SUPREME COURT Obergefell v. Hodges: 5-4 Decision JUNE 2015 ALL couples, regardless of gender, have the fundamental right of marriage. Each state MUST recognize same-sex marriage when lawfully performed. Same-sex spouses are entitled to the same legal benefits within the expanded definition of spouse. IMPACT? Health Plan Designs Taxation Domestic Partnership Benefits Opposite-Sex Partner Discrimination Same-sex Partners in Civil Unions or Domestic Partnerships are NOT Recognized under Federal Law and are NOT Afforded Spousal Benefits IRS regulatory guidance addressing several implementation details is not yet available, as of October 28, 2015.

10 » In the News

11 State-by-State Laws: Today As of 6/26/15 Legal Same-Sex Marriages Same-Sex Marriage Banned; Challenged in Court Same-Sex Marriage Struck Down, Pending Appeal Source: Leavitt Partners

12 INITIAL IMPACT Employer-Sponsored Health Plans Payroll Providers are Determining when to stop Imputing Income for Same-sex Spouses. In general, Employers Should Stop Imputing Income Prospectively Employers May Consider Collecting Information from all Employees as to Change-in-Status Events for Ongoing Recordkeeping Final Tax Regulations TO BE ISSUED Going Forward, Newly married spouses may be Added to an Employer-sponsored Plan as Permitted under Customary Special Enrollment Guidelines Employers Should Take Steps Towards Consistency & Develop a Process to Avoid Discrimination

13 SELF-FUNDED PLANS vs. FULLY INSURED PLANS FULLY INSURED & SELF-FUNDED PLANS FACE DIFFERENT REGULATION REQUIREMENTS UNDER STATE INSURANCE LAWS & UNDER ERISA Self-Funded Plans In General, Self-funded Plan Sponsors have Greater Flexibility in Plan Design Options and in Drafting Plan Documents Majority of Plan Sponsors will Implement Changes to Comply ALL Employers are at Greater Risk of Discrimination Challenges Fully Insured Plans Fully Insured Plans Must Comply with State Insurance Rules Following Windsor, State Tax Withholding & Imputed Income Issues are No Longer an Administrative Burden for Employers

14 TAX IMPACT Employer-Sponsored Health Plans Payment for Same-Sex Coverage (ALL Legal Spousal Coverage) is with Pre-Tax Contributions Benefits Will Not Extend to Unmarried Same-Sex Partners Unless Pre-ACA IRS Code Definition of Dependent Met *UNLIKELY* IRS CODE SECTION 152 DEFINITION Final Tax Regulations TO BE ISSUED Tax-Free Reimbursements from HRA, HSA & FSA Accounts Any Retroactive Considerations Address Taxes & NOT Claims. Employers may Need to Reverse Form W-2 Imputed Income for State Tax Purposes, Assuming Couple was Already Legally Married

15 JUST MARRIED

16 WHAT SHOULD EMPLOYER EXPECT NEXT? COVERAGE TRENDS, CARVE-OUT OPTIONS, SURCHARGES, CONTRIBUTION STRATEGIES & AFFIDAVITS TO MANAGE COVERAGE REQUIREMENTS FOR FULL-TIME EMPLOYEES & DEPENDENTS NEW CONSIDERATIONS Benchmark Plans to Avoid Non-Competitive Magnet Plans EEOC Risks? Domestic Partnership Benefits? Opposite-Sex Partner Discrimination? Increased & Complex Communication & Administration Steps?

17 LEGALIZATION OF SAME SEX MARRIAGE EEOC Administrative Ruling In 2015, the U.S. Equal Employment Opportunity Commission (EEOC) Concluded Discrimination Based on Sexual Orientation Gives Rise to a VALID CLAIM FOR SEX DISCRIMINATION under Title VII of the Civil Rights Act of 1964 [W]e conclude that sexual orientation is inherently a sex-based consideration, and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII. A complainant alleging that an agency took his or her sexual orientation into account in an employment action necessarily alleges that the agency took his or her sex into account. This EEOC Statement is an Administrative Ruling Carrying Limited Weight (Deviates from Federal Law). Additional Guidance is Anticipated!

18 DOMESTIC PARTNERSHIP PLANS CONSIDERATIONS: Whether to Eliminate all DP Benefits for Employers / Plan Sponsors Offering Self-funded Plans NOTE: Fully insured Plans are Subject to State Laws When & How to Communicate Eligibility Changes to Employees Before or Within the Customary Open Enrollment Window GRACE WINDOW FOR DP PLANS TO TRANSITION? If Applicable, Will Eliminating DP Benefits Impact Morale or Alienate Employees Currently Enrolled in DP Plans? REVERSE DISCRIMINATION FOR DOMESTIC PARTNERS? Additional guidance is anticipated!

19 SPOUSAL COVERAGE Employers are Considering a Wider Spectrum of Options Even if Spouse has No Claims Resulting from New Exchange Coverage Options & New Risk Exposure January 1, 2014 All Americans Must have Minimum Essential Coverage Spousal Coverage Increases Employer Costs January 1, 2016 Large Employers (>50) Must Offer Coverage to All Full-Time Employees and their Dependents

20 » COST CONSIDERATIONS Key Cost-Drivers? 2016 Strategic Considerations

21 WILL YOU? A Spouse is NOT a Dependent under the ACA

22 EMPLOYER SHARED RESPONSIBILITY Plan Years on or after January 1, 2015: 100 or More Full-Time Employees Plan Years on or after January 1, 2016: 50 or More Full-Time Employees Is Your Organization a LARGE Employer under the ACA and therefore Subject to Employer Shared Responsibility? Does Your Organization Employ > 100 Full-Time Equivalent Employees (2015) OR Employ > 50 Full-Time Equivalent Employees (2016)? FULL-TIME: Working 30 Hrs/wk; 130 Hrs/Mo on Average Yes No NO PENALTY Does Your Organization Offer Qualified Coverage to Substantially All Full-Time Employees and Dependents? Common Controlled Group Rules Apply (Spouses not Required Dependents under ACA) No Has At Least One Full-Time Employee Received a Premium Tax Credit (Subsidy) to Purchase Coverage in the Public Exchange? Yes NONDEDUCTIBLE EMPLOYER PENALTY OF $2,050 x Total Full-Time Employees ($2,000 Penalty Adjusted for Inflation in 2015 & Beyond) Less 80 (Less 30 in 2016) Yes Does Plan Cover a Minimum Value of at Least 60% of Covered Expenses? Yes Do Any Full-time Employees Pay > 9.5% of Household Income * for the Lowest Cost Employee-Only Coverage? No NO PENALTY No Yes Qualifying Full-time Employees May Receive a Subsidy in the Public Exchange if Household Income < 400% of the Federal Poverty Level (FPL) Employee Subsidy Eligibility in the Public Exchange if Household Income < 400% of FPL AND Not Offered Qualified, Affordable Coverage (>9.5% HH Income & 60% of Covered Expenses) Yes NONDEDUCTIBLE EMPLOYER PENALTY OF $3,100 x Number Full-Time Employees who Receive a Subsidy & Purchase Coverage in the Public Exchange Cap = $2,050 x Total Full-Time Employees Less 80 (Less 30 in 2016) * Plan Affordability Safe Harbor: Employee Only W-2 Income; OR IRS-issued Calculation for Hourly Employees; OR Federal Poverty Level (FPL)

23 OVERVIEW FEES, TAXES, COVERAGE EXPANSION & COST PROJECTIONS Medical Device Manufacturers Pharmaceutical Companies Health Insurers TRANSITIONAL REINSURANCE FEE PCORI FEE Patient-Centered Outcomes Research Institute HEALTH INSURER FEE PREVENTIVE CARE EXPANSION CADILLAC TAX $ 2.5 billion $ 1.8 billion $ 8.0 billion *

24 COST Employer & Employee Deductible Annual Increases Single Deductible 2010: $ : $1, Family Deductible 2010: $1, : $2,500 0 Single Deductibles Family Deductibles

25 COST Employer & Employee Contribution Annual Increases Single Employer Contribution 2010: $4, : $4, Family Employer Contribution 2010: $ 9, : $12, Single Employee Contribution 2010: $ : $1, Contribution Contribution Contribution Contribution Single Employer Single Employee Family-Employer Family -Employee Family Employee Contribution 2010: $3, : $4,

26 RISING COSTS & STRATEGIES WHAT DRIVES COSTS? COST QUALITY ACCESS COST OF UNITS VS. NUMBER OF UNITS USED COVERAGE TRENDS, CARVE-OUT OPTIONS, SURCHARGES & AFFIDAVITS TO MANAGE COVERAGE REQUIREMENTS FOR FULL-TIME EMPLOYEES & DEPENDENTS

27 WHY CAN NO ONE AGREE ABOUT THE PRICE IMPACT OF THE ACA? BUT COSTS ARE RISING & EMPLOYERS ARE CONSIDERING OPTIONS REFORM? Many Rate Analyses Do Not Take Into Consideration New Taxes and Fees that will be Included in Premiums While Rates have to be Actuarially Justified, Carriers are Making Assumptions about the Market Impact when Developing Rates Changing Market Size Rules! Pricing Impact Primarily Hits Individual & Small Group Markets. Risk-sharing Protections Built in to Protect Against Adverse-Selection Subsidized Individuals will be Shielded from the Price Impact Because the Amount is Limited by Income Wide Variances Wide Variances with Ongoing State-by-State Differences But the Protections are Untested Even though the Subsidized Consumer won t Personally Absorb an Increase, Prices Remain the Same

28 SPOUSAL BENEFITS Coverage Strategies Carving Out Spouses Not Offering Coverage to Any Spouse Eligible for his or her Own Employer Coverage Spousal Surcharge Disincentive to take up Spousal Coverage by Charging an Average of $100/mo Extra per Spouse (or per spouse not eligible for his or her own coverage) Combined, these two Practices will Increased from 24% in 2013 to 45% in 2014 Numbers May Rise with New Exchange Options 2013: 4% of Employers 2014: 12% of Employers National Benefits Study October : 20% of Employers 2014: 33% of Employers National Benefits Study October 2013 Employers Should Avoid Offering a Magnet Plan

29 SPOUSAL BENEFIT STRATEGIES Employer Trends in Spousal Coverage Spousal Carve Out 4% 12% Spousal Surcharge 20% 33% 24% Considering Limiting Coverage To Spouses 45%

30 2016 DISCUSSION Understand, Quantify and Mitigate Your ACA Risk Exposure through a Demographic & Spousal / Dependent Eligibility Analysis Invest in Employee Outreach & Supervisor Education ASAP as Plan Changes are Anticipated. Reiterate the Value of Current Benefits with Employees & Families During this Umbrella of Marketplace Change Introduce New Initiatives during the 2016 Open Enrollment Communication Opportunity Revise COBRA Notices Reflecting 2014 Guaranteed Issue Coverage for COBRA Constituents & Pre-65 Retirees Promote Preventive Care with Employees & Families

31 DISCUSSION GOING FORWARD A LOOK AHEAD EMERGING BENEFITS Adoption Assistance Surrogacy? Fertility Parental Leave & Primary Care / Secondary Care Leave

32 2016 SPOUSAL COVERAGE REMINDERS OPTIONS TO CONSIDER TO MITIGATE LONG-TERM COST-DRIVERS CARVE-OUT OPTIONS, SURCHARGES, CONTRIBUTION STRATEGIES & AFFIDAVITS CONDUCT a spousal analysis to estimate projected costs based on plan designs today DEFINE/ REDEFINE spouse within plan documents & employee communications IMPLEMENT spousal and dependent audits/affidavits, as options for recordkeeping CONFIRM revised definitions of dependent under the ACA in plan documents ANTICIPATE the impact of plan design changes within your corporate culture (morale, retention and recruitment)

33 KEY CONSIDERATIONS FOR EMPLOYERS 2016 INITIATE A COMPREHENSIVE DEMOGRAPHIC ANALYSIS TO EXPLORE ALL NEW OPPORTUNITIES EVALUATE ALL PLAN DESIGNS, CONTRIBUTION STRUCTURES & FUNDING OPTIONS LEVERAGE DATA INTEGRATION TOOLS IN KEY DECISION MAKING MAXIMIZE (AND REITERATE) THE VALUE OF YOUR PLAN Track Hours of Service for Full-time Employees Benchmark Plans to Avoid Becoming a Magnet Plan Consider Defined Contribution Options Complete Revised Compliance Checklist Invest in Employee Education & Engagement 33

34 Thank you for Joining Us! Andrea Esselstein, JD Cindy Bowman