Affordable Care Act Part 1: Impact on Counties as Employers

Transcription

1 Affordable Care Act Part 1: Impact on Counties as Employers November 22,

2 Webinar Recording and Evaluation Survey This webinar is being recorded and will be made available online to view later Recording will also be available at After the webinar, you will receive a notice asking you to complete a webinar evaluation survey. Thank you in advance for completing the webinar evaluation survey. Your feedback is important to us. 2

3 Tips for viewing this webinar: The questions box and buttons are on the right side of the webinar window. This box can collapse so that you can better view the presentation. To unhide the box, click the arrows on the top left corner of the panel. If you are having technical difficulties, please send us a message via the questions box on your right. Our organizer will reply to you privately and help resolve the issue. 3

4 Today s Speakers: David Kester Director, Human Resources & Risk Management Harris County, Texas Rick Johnson Senior Vice President National Public Sector Health Practice Leader Segal Consulting 4

5 How many people are attending this webinar from your computer? a. 1 b. 2 c. 3 d. 4 e. 5 or more 5

6 Regarding the classification of full-time and part-time employees, is your county a. Changing how full-time and part-time employees are defined b. Considering changing how full-time and part-time employees are defined c. Waiting to see what happens d. Not sure 6

7 What will be the cost impact of implementation on your county health plan in 2014? a. Less than 3% b. 3-5% c. More than 5% d. Not Sure 7

8 Disclaimer The information provided during this webinar is for informational purposes only and does not constitute legal advice. Counties should consult legal counsel for detailed information about how certain provisions and related regulations should be interpreted and applied to their plans specifically. 8

9 Health Care Legislation Update

10 The Affordable Care Act (ACA) Today is Tomorrow Signed into law March Supreme Court upheld portions of the law June 28, Ongoing Regulations and Guidance have been issued. Changes in County s group health plan to comply as required. Effective March 1, 2012 Harris County lost its grandfathered status.

11 ACA Where we ve been Increased taxes for Tanning Services, Pharmaceuticals and Medical Device Manufacturers. Applied for the Early Retiree Reinsurance Program funds exhausted in early Limits and limited reimbursement of overthe-counter medicine from Flexible Spending Accounts. Adult children ages covered by plan regardless of student or marital status. Preventive care covered at 100%.

12 Expanded preventative care benefits. ACA Where we ve been Additional communication information included in enrollment materials. Appeals process expanded for internal claims and new external review requirements. Value of benefits reported on W-2 s. Long-Term Care (CLASS Act) was repealed.

13 (More) Fees, Taxes and the Opening of the Exchanges Comparative Effectiveness Fee of $1 per covered life per year in 2013 increasing to $2 for 2014 Marketplace Availability Model Notice to all employees by October 1, 2013 Marketplace exchanges open enrollment began October 1, 2013 Exchange coverage and individual compliance begins..

14 ACA Annual Health Insurance Provider Fee (Tax) effective January 1, 2014 for Harris County s dental and vision plans Limit effective dates for coverage of newly hired eligible employees to 90 days or less beginning March 1, 2014 Coverage for expenses related to approved clinical trials Transitional Reinsurance Fee, effective from January 1, 2014 through December 31, For 2014, the contribution will be $5.25 per covered member per month Maximum out of pocket limits for essential health benefits (Medical only for 2014; prescription drugs added in 2015)

15 Employer Mandate Delay Must offer minimum essential coverage that is affordable as defined by the ACA Must identify and offer health coverage to all fulltime employees as defined by the ACA Full-time (FT)= any employee who regularly works 30 or more hours per week, or averages 130 hours per month (use look back period to determine eligibility)

16 ACA 2014 and Beyond Essential health benefits definitions will continue to be modified Annual reporting requirement for employers and selfinsured plans recently delayed until 2015 An excise tax (40% of incremental costs) is imposed on employersponsored health plans in 2018.

17 What does all this mean?

18 ACA Implications on County Plan Incremental cost increase of claims due to mandated eligibility and coverage requirements Expansion of coverage for essential benefits (as defined by the DHHS) Incremental cost increases due to fees and taxes imposed on insurers, medical device manufacturers and pharmaceuticals

19 Medical Cost Drivers Uncompensated Care Medicare Reimbursement Rates Advancement in Treatment Options and Technology Waste and Fraud Pre-Mature Babies and Aging Population Increased Life Span Prescription Drugs Chronic and New Illnesses Legislative Changes/ACA Defensive Medicine Physician Ownership of Facilities Utilization (Demand) Catastrophic (and large) claims

20 NACo Webinar: Affordable Care Act Part I Impact on Counties as Employers Presented by: J. Richard Johnson Senior Vice President, Public Sector Health Practice Leader rjohnson@segalco.com November 22, 2013 Copyright 2013 by The Segal Group, Inc. All rights reserved.

21 The Playing Field Has Changed! Why it s different now and for the future 1. Health Care Reform places new and increasingly more stringent requirements onto public sector health plans 2. The Federal Government is now a player in every state and local jurisdiction health plan. 3. Medicaid will now impact more employees and dependents 4. State and local government s traditional role in providing hire to grave health benefits for active and retired employees is changing 5. Public employers will have to make possibly significant changes to their health plan eligibility and/or workforce composition 6. Public plans have a new competitor (state health insurance exchanges) that may be more cost effective for some groups 21

22 ACA Mandates a FLOOR for Health Insurance Extends access to health insurance coverage to all citizens by imposing an individual mandate: have health coverage or pay a tax penalty Upheld by Supreme Court 6/28/12 as a valid tax Imposes coverage and minimum benefit mandates and reporting requirements on insurers and employers sponsoring health benefits Expands Medicaid eligibility To individuals under 65 with income under 133% of Federal Poverty Level (FPL) Increases Medicaid funding to states that expand coverage Allows CMS to withhold Medicaid funding to states that don t expand Overturned by Supreme Court 6/28/12 Expands certain Medicare benefits Creates new virtual marketplaces (exchanges) to buy coverage Provides subsidies for low-income individuals to buy Exchange coverage 22

23 Individual Mandate The Individual Must be covered under minimum essential health coverage (including employer-sponsored coverage) OR pay a penalty Penalty is the greater of: 2014: $95 per adult or 1% of income 2015: $325 per adult or 2% of income 2016: $695 per adult (indexed for 2017, etc.) or 2.5% of income No penalty if: Cost of coverage exceeds 8% of household income Coverage lapses of 3 months or less Income is below income tax filing threshold Native American Individual penalty accounted for as an additional amount of federal tax owed 23

24 Employer Shared Responsibility Penalty Purpose: Encourage large employers to continue providing health coverage Applies to large employers with 50 or more full-time employee equivalents Full time = 30 or more hours of service per week (130 hours per month) Penalty triggered when a full-time employee receives a federal subsidy in a state Exchange Guidance provides safe harbor for determining whether variable hour employees and seasonal employees are treated as full-time employees under the ACA Cannot retaliate against employees for subsidies Effective: January 1, 2014 Delayed to

25 The 4980H(a) and (b) Penalties The Details (a) If a large employer does not offer minimum essential coverage to at least 95% of its full-time employees (and dependent children under age 26) and if one full-time employee receives subsidized coverage on the Exchange: Penalty is $2,000 (annualized) times the total # of full-time employees (minus first 30 workers) (b) If a large employer does offer coverage to 95% of its full-time employees (and their dependent children under 26), but the coverage is either: Not affordable (premium for self-only coverage is 9.5% or more of household income), or Not of minimum value (actuarial value is less than 60%) and one full-time employee receives federally subsidized coverage in the Exchange Penalty is $3,000 (annualized) times the # of full-time employees getting a tax credit in an Exchange (subject to a penalty maximum) Safe harbor allows employer to use employee s gross taxable wages (W-2, Box 1) without pre-tax contributions and deferrals 25

26 Safe Harbors for Counting Full-Time Employees Voluntary safe harbors for employers to determine whether employees work full time for penalty purposes. Four categories: Variable Hour Employees Seasonal Employees Ongoing Employees New Employees Do not need to use safe harbors if it is reasonably clear which employees have 30 or more hours of service per week (130 hours per month) How it works: Count hours of service during measurement period Lock in status as full-time employee (or not) for associated stability period Employer can set length of measurement period, but must use a common period for all similar employees 26

27 Time to Rethink Eligibility for the Plan How will you handle part time and seasonal employees and those who will now be considered full time under ACA who could trigger a Shared Responsibility Penalty? Acquired discrimination due to change in the laws need to adjust policies and practice to new rules and new reality Practical Decisions What about the people you hire in the summer to mow grass or teach in parks and recreation programs? How will you handle part-time employees who work two positions? 27

28 Pre-Medicare Retirees and the Health Exchange Retirees not yet eligible for Medicare may: Purchase coverage on the state exchanges even if eligible for employer plan coverage Qualify for Medicaid and/or federal exchange subsidies due to limited (retirement benefit) income Most expensive group to insure, have limited income Exchange premiums for early retirees may be more attractive than employer plan No employer shared responsibility penalty for retirees Reduced GASB OPEB liability if early retirees go to the exchange Question: Should public employers encourage pre-65 retirees to go to the exchange? 28

29 ACA Imposes a CEILING on Tax Free Benefits 40% Excise Tax on High Cost Health Plans (2018) Threshold $10,200/$27,500 indexed to the CPI-U Based on total cost of coverage Employer + Employee cost Thresholds increased in 2018 if CBO projections incorrect No regional adjustment for cost of medical care Increased thresholds ($11,850/$30,950) for high-risk professions and retirees Includes public safety, construction, etc. Appears to exclude most dental and vision; includes health FSAs and HRAs Tax payable by plan administrator No guidance yet! 29

30 The 40% Excise Tax An Example Illustrative county health benefit plan Current Enrollment Employee only: 500 EE + Spouse: 800 EE + Children: 300 EE + Family: 2,400 Total employees: 4,000 No retirees assumed Current Monthly Rates Employee only: $450 EE + Spouse: $950 EE + Children: $750 EE + Family: $1,500 Minimum Value 92% (Gold tier equivalent) 30

31 Ten-Year Summary of Selected Medical, Prescription Drug Carve-Out and Dental Trends: Actual and 2013 and 2014 Projected 1 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 11.1% 10.5% 10.0% 10.2% 10.2% 10.4% 9.8% 9.7% 10.6% 9.3% 8.4% 9.6% 9.5% 9.4% 9.7% 8.7% 9.5% 9.5% 8.9% 9.7% 8.0% 8.4% 8.8% 8.4% 7.2% 7.7% 8.3% 7.3% 8.2% 7.9% 7.9% 7.9% 7.6% 7.4% 7.8% 7.0% 7.5% 6.4% 7.2% 6.7% 6.4% 5.8% 6.3% 5.0% 5.0% 5.5% 5.5% 4.7% 5.1% 5.0% 4.5% 3.6% 4.0% 3.0% 3.4% 3.5% 3.0% 3.1% 3.3% 2.6% 2% PPO (without Rx) POS (without Rx) HMO (without Rx) MA HMO Rx DPO Source: 2014 Segal Health Plan Cost Trend Survey 1 All trends are illustrated for actives and retirees under age 65, except for MA HMOs. 2 Prescription drug trend data for only reflects retail. For , prescription drug retail and mail order delivery channels are combined. 31

32 Projection of The Excise Tax Single Coverage Per Employee Excise Tax Projected Expected Projected Expected Projected Expected Calendar Tax Free Single Cost Annual Single Cost Annual Single Cost Annual Year Trend Excise Trend Excise Trend Excise Tax 2018 $10,200 $7,226 $0 $7,934 $0 $8,697 $ $10,550 $7,660 $0 $8,569 $0 $9,566 $ $10,800 $8,120 $0 $9,255 $0 $10,523 $ $11,050 $8,607 $0 $9,995 $0 $11,575 $ $11,350 $9,123 $0 $10,795 $0 $12,733 $553 Aggregate Excise Tax Projected Expected Projected Expected Projected Expected Calendar Single Cost Annual Single Cost Annual Single Cost Annual Year Trend Excise Trend Excise Trend Excise Tax $3,613,209 $0 $3,967,186 $0 $4,348,377 $ $3,830,002 $0 $4,284,561 $0 $4,783,215 $ $4,059,802 $0 $4,627,326 $0 $5,261,536 $ $4,303,390 $0 $4,997,512 $0 $5,787,690 $105, $4,561,593 $0 $5,397,312 $0 $6,366,459 $276,584 32

33 Projection of The Excise Tax Family Coverage Per Employee Excise Tax Projected Expected Projected Expected Projected Expected Calendar Tax Free Family Cost Annual Family Cost Annual Family Cost Annual Year Trend Excise Trend Excise Trend Excise Tax 2018 $27,500 $24,088 $0 $26,448 $0 $28,989 $ $28,450 $25,533 $0 $28,564 $45 $31,888 $1, $29,150 $27,065 $0 $30,849 $680 $35,077 $2, $29,900 $28,689 $0 $33,317 $1,367 $38,585 $3, $30,650 $30,411 $0 $35,982 $2,133 $42,443 $4,717 Aggregate Excise Tax Projected Expected Projected Expected Projected Expected Calendar Family Cost Annual Family Cost Annual Family Cost Annual Year Trend Excise Trend Excise Trend Excise Tax ,400 $57,811,345 $0 $63,474,973 $0 $69,574,032 $1,429, ,400 $61,280,026 $0 $68,552,971 $109,188 $76,531,435 $3,300, ,400 $64,956,827 $0 $74,037,208 $1,630,883 $84,184,579 $5,689, ,400 $68,854,237 $0 $79,960,185 $3,280,074 $92,603,037 $8,337, ,400 $72,985,491 $0 $86,357,000 $5,118,800 $101,863,340 $11,321,336 33

34 Projection of The Excise Tax Total All Coverage Tiers Aggregate Excise Tax Projected Expected Projected Expected Projected Expected Calendar Total Cost Annual Total Cost Annual Total Cost Annual Year Trend Excise Trend Excise Trend Excise Tax ,000 $77,242,380 $0 $84,809,617 $0 $92,958,637 $1,429, ,000 $81,876,923 $0 $91,594,386 $109,188 $102,254,501 $3,300, ,000 $86,789,539 $0 $98,921,937 $1,630,883 $112,479,951 $5,689, ,000 $91,996,911 $0 $106,835,692 $3,280,074 $123,727,946 $8,442, ,000 $97,516,726 $0 $115,382,547 $5,118,800 $136,100,741 $11,597,920 Observations for this illustrative plan: Within a relatively narrow range of trend rates, excise tax exposure can range from zero to over $11 million by 2022 At 10% trend, excise tax represents 8.5% of plan costs in 2022 Choice of tiering factors could affect excise tax amounts Plan costs must include FSA and HRA contributions There is no official guidance yet on how to calculate plan costs for purposes of excise tax. 34

35 What County Plan Sponsors Should Do Now Understand Your Organization What role do benefits play in attracting and retaining talent? How do employees value their health benefits as part of the overall compensation package? Understand and Manage The Cost Encourage and reward healthy behaviors that reduce future benefit costs Renegotiate vendor contracts to capture savings Explore alternative program designs to encourage appropriate utilization For Medicare retirees: MAPDs, EGWPs and Part D plans Understand Your Options Maintain your sponsored group plan or provide benefits through an exchange? Update your benefit strategy to recognize the developing state health insurance exchange environment 35

36 And Don t Forget the Environmental Factors The population is aging (Older = Sicker = Costlier) The cost of health care keeps rising faster than inflation Private employers will likely continue to cut or curtail employer sponsored and subsidized health benefits, making public employers even more attractive Public employees are likely to work longer just to keep subsidized health benefits (impact on budgets and retirement plan costs?) 36

37 Some Predictions: In 10 Years or Less A majority of employees in the workforce will be covered by health insurance through an exchange. Many persons applying for work with public jurisdictions will have been covered by health insurance through an exchange either individually or in their previous private sector employment. New hires will expect to be able to keep their exchange coverage and merely change the source of funding. Employer health benefit subsidies will be on a defined contribution basis (fixed dollar amount or fixed percent of pay) Public sector employers will become health plan facilitators, not health plan sponsors; health insurance will no longer be an employer risk. To gain a competitive employment edge, private employers will offer supplemental policies to the exchange to protect the employee from gaps. Public employers may have to follow suit. 37

38 Health Reform Resources On the Segal Website: Rick Johnson Senior Vice President Health Care Reform Timeline Health Care Reform Insights Stat! Bulletins Public Sector Letters Webinar recordings and slides Health Reform Resources: 38

39 NACo Resources Health Reform Implementation Site Here you can find: Counties as Employers Toolkit (Updated) at 39

40 Type your question into the questions box and the moderator will read the question on your behalf during the Q&A session. If we are unable to answer all of the questions during the Q&A session, we will send you the questions and answers in an . 40

41 Upcoming Webinars Affordable Care Act Part 2: Impact on Self-funded Employers o Counties with self-funded plans can no longer opt out of certain requirements of Title XXVII of the Public Health Service Act. In Part 2, the impact of the law on self-funded plans and the challenges and opportunities for self-funded plans will be discussed. o When: Thursday, December 12 th, 2pm to 3:15pm ET Please contact Emmanuelle St. Jean at or estjean@naco.org for more information. 41

42 2014 Healthy Counties Forum What: This forum will focus on using Accountable Care Communities (ACCs) to mobilize and advance healthy changes in counties. An ACC is a model of care that permits counties to align and prioritize the needs of their residents and employees to prevent disease and reduce health care costs. When: January 30-31, 2014 Where: San Diego County, CA Please contact Emmanuelle St. Jean, MPH, Program Manager, or estjean@naco.org 42