Health Care Reform Update

Transcription

1 Health Care Reform Update Conference Forum March 23, 2012 Caring For Those Who Serve

2 Agenda Recent Guidance and Near-Term Changes Court/Political Posture Long-Term Outlook Impact Study on the UMC Church Alliance Update 2

3 Changes Summary of Benefits and Coverage (SBC) 2013 Health FSAs Limited to $2, Notice of Exchange Eligibility 2013 Reporting Value of Health Coverage on Employees Form W * Large Employer (200+) Automatic Enrollment 2015 * Earliest possible date for employers in self-insured church plans (and small employers) under Notice January 2014 Form W-2 for the 2013 tax year. 3

4 Uniform SBC Final Rule Four pages (double-sided, 12 pt. font) Benefits, cost-sharing and exclusions Coverage examples 44-term glossary Premium information not required Good faith reasonable best efforts Agency FAQ Part VIII (03/19/12) 4

5 Uniform SBC Delivery Beginning January 1, 2013 Annual enrollment Fall 2012 Non-duplicative Plan, employer, insurer or third-party administrator Upon request within seven days 60 days advance notice of plan changes Failure to comply: $1,000 per incident 5

6 SBC Preview 6

7 ACA* FAQs from Three Agencies Automatic enrollment (employers with 200+ employees) delayed until 2015 Employer mandate will have 90-day grace period and look-back/stability rule 90-day limit on waiting periods in 2014 *ACA Patient Protection and Affordable Care Act 7

8 Preventive Care Rule Plans must cover preventive services at first-dollar (no co-pay, no deductibles) Preventive services include FDA-approved contraceptives for women 03/16/12 proposal suggests OTC (e.g., condoms) and men s services (e.g., vasectomies) excluded from rule Some church employers have objections Compromise rule for fully-insured plans Seeking solution for self-funded plans 8

9 Exchange Regulations Final rule March 12, 2012 Greater state flexibility Church plans may be subject of additional guidance Risk-Adjustment/Reinsurance Final Rule March 16, 2012 All plans must contribute to reinsurance pool Self-insured plans through their TPAs 9

10 Additional Changes Coming Comparative Effectiveness Fee* 2013 Quality of Care Reporting 2013 Exchanges, Subsidies and Market Reforms 2014 Risk-Adjustment Fees* for Exchanges 2014 Exchanges for Large Employers (100+) 2017 Cadillac Plan Tax 2018 * These fees apply to self-insured plans. 10

11 Judicial Outlook Supreme Court Oral argument March 26 28, 2012 Decision likely June 2012 Three Primary Questions 1. Does the Anti-Injunction Act bar this suit until 2015? 2. Does the individual mandate exceed Congress Constitutional power? 3. Is the mandate severable from the ACA? 11

12 Political Outlook Presidential Election November 2012 Congressional balance after Senate votes for full repeal? If repealed: What will become of popular provisions (e.g., no pre-existing exclusions, exchanges, subsidies, Part D, dependent coverage)? 12

13 2014 and Beyond Individual mandate applies, with tax penalty Insurers cannot deny coverage due to health condition or exclude pre-existing conditions Exchanges for individuals and small employers Individuals with Medicare, Medicaid or affordable employer coverage are excluded from the Exchange Exchange plan premiums subsidized for individuals earning less than 400% of federal poverty level (FPL) 13

14 Health Insurance Exchanges State-based (or regional) single risk pool Many states not ready; Federal Exchange will step in Only insurance companies may offer coverage HHS* has indicated in its Final Exchange Rule that future guidance may cover church plans Church Alliance effort: allow church plans Premium rate variation limits: age (3:1 limit) Platinum (90%), gold (80%), silver (70%) and bronze (60%) plans * HHS: U.S. Department of Health and Human Services 14

15 Exchange Subsidies Individuals/households earning less than 400% FPL receive federal subsidy for exchange insurance FPL 2011 for individual: $11,170 (x 4 = $44,680) Estimated 400% FPL for 2014: $47,500 FPL 2011 for family of four: $23,350 (x 4 = $92,200) Estimated 400% FPL for 2014: $98,000 Premium limited to 2% to 9.5% of income Out-of-pocket cost-sharing limited for low income (less than 250% of FPL) 15

16 2014 and Beyond Employer responsibility mandate pay or play begins for large employers Employers with 50 or more employees must provide affordable coverage or pay a penalty 16

17 Employer Mandate Large employer averages at least 50 full-time employees (FTEs) FTEs work 30 hours per week FTE equivalents (i.e., aggregated part-timers) are counted to determine whether employer is subject to the free-rider penalty But FTE equivalents do not count toward amount of penalty Controlled group rules Code 414(c) apply Some uncertainty for churches under current law 17

18 Employer Mandate Large employers to pay free-rider penalty in 2014 if they: Do not offer coverage at all, or Offer coverage and at least one (even if only one) FTE qualifies for an Exchange subsidy 18

19 Affordable Coverage Employee s contribution (share of premium) under employer plan cannot exceed 9.5% of household income* Safe Harbor: Employers may use employee s W-2 compensation If contribution exceeds 9.5% of income, employee can opt out for Exchange coverage Employer plan must pay 60% of total costs of plan (actuarial determination) * Employers often have little information about employees household income 19

20 Affordable UMC Coverage 9.5% of UMC median compensation (minus housing) $44,100 UMC median clergy compensation ($56,795) minus housing ($12,695) $4,190 annually, or $350 monthly Conferences wishing to stay in the health plan business may struggle with this requirement 20

21 Employer Penalty Calculation No coverage offered: Total number of FTEs x $2,000 Coverage too costly (coverage offered, but one FTE receives an Exchange subsidy) Penalty is lesser of: Total number of FTEs receiving a subsidy x $3,000, or Total number of FTEs x $2,000 ( no coverage penalty) Adjusted for inflation after 2014 First 30 FTEs do not count in calculating penalty 21

22 GBPHB/Mercer Study Analyze impact of Exchanges and subsidies on UMC Assuming local church is primary employer Compare UMC clergy household income to Exchange subsidy FPL thresholds Quantify portion of clergy who may be subsidy-eligible on Exchanges Quantify portion for whom plan sponsors may still need a group health plan Regional analysis to help further identify where the Exchanges/conference plans may be more or less meaningful 22

23 GBPHB/Mercer Study Foundation for further conference-specific analysis, including the following: Geography (household income variation and Exchange readiness of states) Conference/employer contributions vs. individual contributions for coverage Plans offered now and in Exchanges Retiree coverage 23

24 Clergy and Federal Poverty Level (FPL) Health Flex 2014 Enrolled Est. Family Income Single 1 Dep 2 Deps 3 Deps 4+ Deps Total 100% FPL 0% 1% 0% 0% 1% 0% 100%-125% FPL 0% 0% 0% 1% 4% 1% 125%-138% FPL 0% 0% 0% 1% 5% 1% 138%-150% FPL 0% 0% 0% 3% 7% 1% 150%-200% FPL 1% 1% 10% 20% 21% 7% 200%-250% FPL 1% 9% 17% 15% 13% 10% 250%-300% FPL 3% 16% 14% 8% 6% 12% 300%-350% FPL 18% 10% 8% 7% 2% 10% 350%-375% FPL 10% 4% 2% 2% 0% 4% 375%-400% FPL 11% 3% 2% 2% 0% 4% 400%-425% FPL 15% 2% 2% 0% 0% 4% 425%-450% FPL 9% 3% 2% 0% 0% 3% >450% FPL 32% 49% 43% 41% 41% 43% 2% Medicaid Eligible 48% Core Subsidy Eligible 7% Close to subsidy-eligible 43% No Subsidy % of Population 15% 50% 12% 15% 8% 100% 24

25 Primary Findings Approximately 50% of UMC clergy would be eligible for the Premium Tax Credits ( subsidies ) for Exchange coverage Additional 5-10% are reasonable marginal distance from cliff of subsidy eligibility (400% FPL) to possibly adjust income to qualify 40% are significantly enough above 400% FPL unlikely to qualify for subsidies Some part-time working spouses might quit working These clergy will pay full freight, i.e., the whole premium, on the Exchanges They need an alternative health plan or greater compensation Mercer results affirmed by sample data (Pacific Northwest and Northern Illinois) 25

26 Federal Poverty Level (FPL) Mercer Model 2012 FPL % 2014 FPL % % of HF 100% 400% 100% 400% Participants Single $11,170 $44,680 $11,850 $47,401 15% Family of 2 $15,130 $60,520 $16,051 $64,206 50% Family of 3 $19,090 $76,360 $20,253 $81,010 12% Family of 4 $23,050 $92,200 $24,454 $97,815 15% Family of 5+ $27,010 $108,040 $28,655 $114,620 8%¹ ¹ Percentage for family of 5 or more. % of HF Participants includes: Clergy enrolled in HealthFlex active plans, with reported salary greater than $0; and excludes waived/ineligible participants Salary assumptions: Housing allowance or parsonage not included Household income is estimated using assumptions in Mercer's model as base; however, modified to replicate lower household income than national average (confirmed by previous UMC household income surveys) 26

27 UMC Clergy Salary Regional Analysis Geography States HealthFlex Non-HealthFlex Total East North Central IL/IN/MI/OH/WI $44,540 $41,652 $42,713 East South Central AL/KY/MS/TN $39,346 $41,128 $40,792 Mid Atlantic NJ/NY/PA $40,301 $40,399 $40,333 AZ/CO/ID/MT/ Mountain UT/NM/NV/WY $39,651 Insufficient Data $40,147 New England CT/MA/ME/ NH/RI/VT $38,151 Insufficient Data $38,372 Pacific AK/CA/HI/OR/WA + GUAM $39,727 $41,262 $40,765 South Atlantic DC/DE/FL/GA/MD/ NC/SC/VA/WV +PR $46,852 $44,257 $45,220 West North Central IA/KS/MN/MO/ ND/NE/SD $41,352 $42,260 $41,772 West South Central AR/LA/OK/TX $47,463 $47,081 $47,186 Average $43,144 $43,197 $43,175 Median $41,338 $41,000 $41,135 27

28 Geography Impact South Central and Southeast Jurisdictions Expected MAGI is significantly higher Implies fewer clergy will qualify for Exchange subsidies Increased need for on-going conference health plan or other funding solutions State Exchange readiness is lowest Northeast and Western Jurisdictions State Exchange readiness is highest Conferences may have greatest immediate opportunity to opt toward Exchange coverage Annual Conferences that cross state lines may have particular difficulties with Exchanges Exchange plans and pricing, or even Exchange availability, may vary significantly HHS has promised a federal Exchange where states are not ready by 2014 uncertainty remains 28

29 Exchange Coverage and Subsidy Eligibility Subsidy Eligibility Premium for individual/family is limited to 2% to 9.5% of income Underlying premiums do not matter to the individual Income is based on modified adjusted gross income (MAGI, household income) Excludes housing allowance Subsidy Mechanism subsidies are a Premium Tax Credit Assignable Paid by HHS/IRS directly to Exchange plans removing the cash flow problems for individuals Advanceable i.e., paid at the beginning of the tax year, 16 months before the individual submits a tax return 29

30 Exchange Subsidy Example Example: January 2014 Clergyperson enrolls in silver Exchange plan Based on 2012 tax return, Exchange charges clergyperson $199/month, which he or she pays monthly by EFT, credit card, etc. The remaining $451/month is paid by HHS directly to the Exchange April 2015: clergyperson submits tax return, calculates actual Tax Credit for which he or she qualifies Note: This may mean paying some (or all) of premium advance back to the IRS, or receiving more refund! 30

31 Exchange Premiums Adjusted Household Illustrative 2014 Exchange Coverage % FPL Income (AHI) Plan Maximum Monthly Contribution Single Family of 4 Value % of AHI Single Family of 4 138% $16,353 $33,746 94% 3.00% $41 $84 150% $17,775 $36,681 87% 4.00% $59 $ % $23,701 $48,907 73% 6.30% $124 $ % $29,626 $61,134 70% 8.05% $199 $ % $35,551 $73, % $281 $ % $47,401 $97, % $375 $774 >400% >$47,401 >$97,815 No Max Full Cost $650 $1,950 31

32 Exchange Plans Exchanges HealthFlex Bronze Silver Gold Platinum PPO B750 Actuarial value 60% 70% 80% 90% ~80% Covered services Essential and preventive benefits Essential and preventive benefits Essential and preventive benefits Essential and preventive benefits Essential and preventive benefits Essential benefits No dollar limits No dollar limits No dollar limits No dollar limits No dollar limits 2014 deductible maximums HSA rules HSA rules HSA rules HSA rules $750 (I) $1,500 (F) (in-network) 2010 cost sharing maximums Will be indexed to 2014 levels Up to $5,950 (I) $11,900(F) Up to $5,950 (I) $11,900(F) Up to $5,950 (I) $11,900(F) Up to $5,950 (I) $11,900(F) Up to $3,500 (I) $7,000(F) (in-network) Silver plan is used to determine any government subsidies through the Exchange 1 Some provisions apply differently for grandfathered and non-grandfathered plans 32

33 Subsidy Eligibility Is Key Individual Comparison 401% of FPL: monthly premium = $650 (est.) ($7,800 annual) 400% of FPL (subsidy-eligible): monthly premium = $375 ($4,500 annual) Family (of 2) Comparison 401% of FPL: monthly premium = $1,300 (est.) ($15,600 annual) 400% of FPL (Subsidy-Eligible): monthly premium = $508 ($6,096 annual) Family (of 4) Comparison 401% of FPL: monthly premium = $1,950 (est.) ($23,400 annual) 400% of FPL (subsidy-eligible): monthly premium = $774 ($9,288 annual) 33

34 Transition to Exchanges Compensation adjustments for individuals close to (just over) 400% of FPL Conference funding (premium support) for non-subsidy-eligible (possibly also those subsidy-eligible) Health Reimbursement Arrangements funding vehicle for conference commitment Non-Discrimination in Funding Code 105(h) Federal government position is uncertain Annual Limits problem for stand-alone HRAs Tax-exempt status of HRA and other account-based, employer-provided coverage arguably counter to the purposes of the ACA 34

35 Transition to Exchanges Increase participant responsibility Year-by-year building block prior to Exchange transition Increase participants premium cost share Move to less rich plan; more parallel to those on Exchanges Socialize participants to the new world of health plans 35

36 Conference Transition Options The Fix HealthFlex and conference plans could be offered in the Exchanges Would require legislative or regulatory relief Church Alliance Plans would receive subsidy for participants who are Exchange-subsidy-eligible Smaller Scale Continue to provide conference group coverage for certain employers and employee groups Plan sponsors reluctant to transition to Exchanges Plan sponsors in slow-adopting states Large employers wanting to avoid penalties Group coverage for non-subsidy-eligible (higher-paid) participants Loss of conference plan scale may increase need for denominational plan 36

37 Conference Transition Terminate Plan Dissolution of conference health plan completely, as a result of losing scale, stable risk pool, etc. Purposeful exit/wind-down strategy Policy for appropriate use of plan reserves, if any, e.g., wellness initiatives, ancillary/supplemental health benefits, funding account-based plans, reversion to employers Support Role Advice, support, etc. Exchange transition/navigation assistance for participants (similar to Extend Health model for retirees) Account-based plans administration and service 37

38 Who Is the UMC Employer? Clergy are self-employed for FICA/SECA purposes under federal law Tax Court Case: Weber v. Commissioner UMC clergy are employees for income tax and benefits purposes Applied common law test Code 414(e)(3)(B) Church plan definition of employee The Book of Discipline

39 Church Alliance Efforts Obtaining qualified health plan status Church plan access to Exchanges Participant eligibility for individual subsidies Legislative Bipartisan bill (hopefully soon introduced) Administrative/Regulatory Memo to White House Comment letter to Exchange Regulations 39

40 General Conference 2012 Petition to amend 639 Annual Conference Health Plans Provide greater flexibility for annual conferences to adjust to the changing health plan landscape Preserve reasonable administrative and financial support for health coverage for clergy 40

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