Welcome Presented by: Sponsored by:

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1 Welcome Presented by: Sponsored by:

2 Speakers Julie Bunde Director, Product Management, Product & Market Solutions, HealthPartners Ed Wegerson Partner, Employee Benefits and Executive Compensation, Lindquist + Vennum Greg Thurston Director of benefits, Doherty Employer Services

3 Moderator Dale Kurschner Editor in Chief, Twin Cities Business

4 ACA: Benefit Reform Other than Grandfathered Plans 2010 Coverage of dependents to age 26 No pre-existing condition exclusions for children Preventive care must be covered at 100 percent No lifetime limit/restricted annual limit on essential benefits ER covered at the same level in and out of network New claims and appeals process 2011 No CDHP reimbursement for OTC medications without prescription Penalty for non-qualified HSA payments increased to 20% Medical Loss Ratio 2012 Supreme Court affirms ACA "tax" Summary of Benefits & Coverage 2013 Medical FSA capped at $2,500

5 ACA: Coverage Reform 2014 Covering all adult individuals and dependents Guaranteed issue and renewal Individual mandate (or pay tax) to have coverage Medicaid expansion Employer requirements Play or Pay Essential Health Benefits required for all plans Exchange - new marketplace New taxes and assessments

6 Employer Shared Responsibility AKA pay or play penalty Not applicable to controlled groups with fewer than 50 full-time (FTE) and full-time equivalent employees Requires large employers to offer coverage to 95% of FTEs (30+ hours/week) that is affordable and provides minimum value or pay penalties Effective January 1, 2014 Detailed scenarios posted at tcbmag.com

7 Health Care Reform: Employer Play or Pay Penalties Start Does the employer, on a controlled group basis, have at least 50 full-time (avg. 30 hours per week) and fulltime equivalent employees (aggregate hours of all nonfull-time employees divided by 120) on average during the preceding calendar year? Yes Coverage Does the employer offer minimum essential health coverage to at least 95% of its full-time employees and their dependents? Yes Minimum Value Does the health plan pay for at least 60% of the total costs of benefits provided under the health plan? Yes Affordable Is the employee s contribution for health coverage 9.5% or less thanthe employee s household income? Yes No No No No The employer is not subject to the play or pay penalties. Minimum Coverage Penalty The employer may be required to pay a penalty equal to $ per month ($2,000 annually) for every full-time employee of an entity (minus up to 30 employees) if at least one full-time employee of the entity enrolls in health coverage through a Health Exchange and receives a premium tax credit or costsharing reduction Value & Affordability Penalty The employer may be required to pay a penalty equal to $250 per month ($3,000 annually) for each full-time employee that enrolls in health coverage though a Health Exchange and receives a premium tax credit or cost-sharing reduction The employer does not owe any play or pay penalties.

8 Small Employers Exempt from Pay or Play Tax Must employ an average of < 50 full-time equivalent employees over 6 month period in 2013 for 2014 status Aggregate employees of all companies in controlled group Aggregate monthly hours of part-time employees and divide by 120 to determine full-time employee equivalent May exclude seasonal employees Work less than 120 days per year "Seasonal" not defined in ACA; good faith determination for 2014 Small employer worksheet available at tcbmag.com

9 Large Employer Minimum Coverage Penalty Employer entity must offer minimum essential coverage to at least 95% of FTEs (30+ hours/week) employees and their dependents IF NO The employing entity must pay a penalty of $166.67/month ($2,000 per employee per year) for every FTE of an entity (minus up to 30 FTEs) if at least one FTE of entity enrolls in health coverage through a Health Exchange receives a premium tax credit or cost sharing reduction

10 Calculating Full Time Employees 95% of FTEs is calculated monthly in 2014 for tax penalty FTEs are employees "reasonably expected to work 30 hours or more per week" (130 hours/month) Actual hours for hourly 8 hour/day or 40 hours/week equivalent for non-hourly Penalty can fluctuate monthly

11 Calculating Full Time Employees Safe Harbor for counting hours Measure FTEs in prior year (measuring period) Next year's tax on prior year's FTEs (stability period) Up to 90 days between periods (administrative period) Safe Harbor prevents fluctuations in FTEs during the year Helps for variable hour employees (where employer can't determine if expected to work 30 hours/week) Special measuring period for new hires Must offer coverage if new hire changes from variable to FTE during initial measurement period Tracking software available

12 Large Employer Affordability Penalty Large employer health plan must pay 60% or more of health care costs AND Employee must pay 9.5% or less of income for single coverage IF NO Large employer must pay penalty of $250/month ($3,000) only for those FTEs who enroll through Health Exchange and receive premium tax credit Scenarios at tcbmag.com

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14 Top Issues to be Dealing With Today 1. Benefit and cost sharing requirements 2. State of MN legislative activity 3. Updates on minimum value 4. Exchange trends and activity 5. Employer reporting requirements

15 Benefit and Cost Sharing Requirement Small Employer Plans Large Employer Plans Essential Health Benefits Cost Sharing Limits Must cover the 10 general categories and follow state or federal benchmark plan. Out of pocket maximums no greater than HSA qualified plan limits (HDHPs). In 2014 those are $6,350/$12,700. Medical and Rx OOP limits must be combined. No annual or lifetime maximums on essential health benefits. Out of pocket maximums no greater than HSA qualified plan limits (HDHPs). In 2014 those are $6,350/$12,700. Medical and Rx OOP limits must be combined. Actuarial Value/Minimum Value Actuarial value must meet metal levels bronze, silver, gold, platinum. Minimum value of.60 actuarial value to avoid employer penalty. Preventive Care No cost sharing. No cost sharing.

16 State of MN Legislative Updates Autism Mandate Effective January 1, 2014 as groups renew Applies to fully insured, large group plans Not required for individual, small group or selfinsured Must cover diagnosis, evaluation and treatment for children under age 18 Mandate expands coverage to include Applied Behavioral Analysis (ABA) No dollar limits

17 State of MN Legislative Updates Civil Marriage Amendment Effective August 1, 2013 same sex partners can be legally married in the State of MN We do not anticipate needing to make changes to plan documents Current definitions of a spouse and a domestic partner will continue to apply Self-insured groups that write their own plan documents will want to review them in light of the new law

18 State of MN Legislative Updates Tax & legal considerations of marriage amendment The state law does not change the federal definition of marriage Coverage for the same-sex spouse must be counted as imputed income for federal tax purposes For self-insured groups, COBRA provisions will not attach to the same-sex spouse

19 Minimum Value Update Minimum Value of Eligible Employer-Sponsored Plans and Other Rules Regarding the Health Insurance Premium Tax Credit - Proposed Rules released May 3, 2013 Comments due by July 2, 2013 Individuals cannot get a premium tax credit if they are eligible for affordable coverage under an eligible employer sponsored plan that provides MV

20 Minimum Value Update Minimum Value: Does the health plan pay at least 60% of the total cost of benefit? Three options to calculate: 1. Minimum Value Calculator: 2. Safe Harbor Plan Designs 3. Actuarial Certification (only if other options not sufficient)

21 Minimum Value Calculator Given the caps on out of pocket maximums equivalent to HSA qualified plans ($6,350/$12,700), most health plans will meet minimum value Safe harbor plans All small group metal level plans meet requirement

22 Safe Harbor Plan Designs 1. $3,500 integrated medical/rx deductible/80% coinsurance/$6,000 OOP Max 2. $4,500 integrated medical/rx deductible/70% medical coinsurance/$6,400 OOP Max/$500 HSA contribution 3. $3,500 medical deductible/60% medical coinsurance/rx copays of $10/$20/$50 and 75% coinsurance for specialty/$6,400 OOP Max

23 National Exchange Trends and Activity Oregon/California rates released Carriers got a do-over in Oregon California plans priced lower than expected Subsidy calculators Rate shock defense

24 National Exchange Trends and Activity

25 MNsure: Minnesota s Exchange Market for individuals and families (all plans are guaranteed issue and offer the Essential Health Benefits set, purchased directly from insurers or through brokers) Medicaid for parents, children and adults under age 65 MNCare (in lieu of BHP) Medicaid for infants to age 2 (280%) and for pregnant women and kids 2-18 (275%) Advanceable Tax Credits (subsidies) for Individuals and Families (all plans are guaranteed issue and offer the Essential Health Benefit Set) No subsidies available (all plans are guaranteed Issue and offer the Essential Health Benefit Set) 0% 75% 138%* 200% 275% 400% 2013 Federal 1 person $15,856 $22,980 $31,598 $45,960 Poverty Level (FPL) Family of 4 $23,550 $47,100 $64,763 $94,200 *133% plus 5% income allowance.

26 Employer Reporting Requirements Model notice of the existence of the Health Insurance Marketplace COBRA notice modifications Summary of Benefits and Coverage changes Patient-Centered Outcomes Research Institute (PCORI) fee Employer reporting of coverage

27 Model Notice of the Existence of the Health Insurance Marketplace Virtually all employers required to provide notice All current employees by October 1, 2013 New employees hired after October 1, 2013 upon hire

28 Model Notice of the Existence of the Health Insurance Marketplace (employer offering coverage) (employer not offering) Optional page with customized information for each individual employee

29 COBRA Notice Modification Includes notice of alternatives through the Health Insurance Marketplace

30 Summary of Benefits and Coverage Effective January 1, 2014 must state whether plan provides Minimum Essential Coverage and meets the Minimum Value requirement Extends additional safe harbors for content and delivery

31 Patient-Centered Outcomes Research Issuers of insurance and sponsors of applicable selffunded plans Initially $1/year per enrolled individual Due July 31, 2013 for plan years ending December 31, 2012 IRS Form 720 Institute (PCORI) Fee

32 Employer Reporting of Coverage IRS Sections 6055 and 6056 Reporting begins in 2015

33 Small Employers' Strategies Provide coverage through MNsure SHOP Employers with 50 or fewer employees (100 or fewer beginning in 2016) Pick a health plan or provided defined contribution amount to employee Employees can still pay premiums on a pre-tax basis Small employer tax credit (25 or fewer employees) May not know the rates or coverage options until October 1, 2013

34 Small Employers' Strategies Restructure Controlled Group (to remain a small employer of < 50 full time equivalent employees) Remove some entities from the controlled group Common ownership must be less than 80% Requires additional independent investors Each controlled group is tested independently for 50 FTEEs Scenario: 3 companies each with 24 FTEs If still large employer can use the full 30 FTE reduction to avoid penalty

35 Small Employers' Strategies Benefit restructuring Shift costs to employees by reducing coverage to bronze or silver type coverage to offset coverage increases Consider high deductible health plan and HRA/HSA Reduce cost of non-health benefits by limiting coverage to those working 40 hours Limit hours of employees to reduce number of FTEs eligible for coverage Use independent contractors where permitted Consider potential ERISA 510 and ACA whistleblower claims

36 Small Group Plans Renewing Early Groups may consider renewing their plan early Community rating effective January 1, 2014 Additional taxes included in premium effective for plans renewing January 1, 2014

37 Large Employers' Strategies Drop coverage Pay $2,000 after-tax penalty per FTE (minus 30 FTE) Consider impact on employee morale, retention, recruiting, uncertainty with Exchange coverage Increase taxable compensation to replace loss of coverage Expand coverage Offer coverage to at least 95% of FTE (and dependents) Reduce eligibility requirements to 25 hours a week to cover variable hour employees who may exceed FTE

38 Large Employers' Strategies Limit hours Limit employee hours to under 30 hours/week Restructure employees in controlled group Put employees who are not offered coverage in one entity so that the minimum coverage penalty will only apply to the one entity Scenario: 3 companies each with 24 employees; 1 company does not offer coverage Consider potential ERISA 510 interference with benefits ACA whistleblower claims by employees using Exchange

39 MEC without MV A Minimum Essential Coverage plan avoids the $2,000/ee penalty even if it does not provide Minimum Value Low cost/low value medical plan could meet MEC If Minimum Value not met could still face $3,000 penalty/ee receiving subsidy

40 Two-Tier Approach Offering multiple plan options Employee communication and understanding of the options

41 Small Employer 2013 Timeline July 31: Pay PCORI fee (2012 calendar year) August 1: Conform definition of "spouse" October 1: Cost of adding "essential health benefits" to plan Cost of 2014 additional taxes to plan Choose 6 mo. period for determining lowest number of FTEEs Compare Mnsure SHOP rates to premiums Deliver Exchange notice Update SBC and COBRA forms

42 Large Employer 2013 Timeline July 31: Pay PCORI fee (calendar year plans) August 1: Conform definition of "spouse" October 1: Deliver Exchange notice Update SBC and COBRA forms October 1 (calendar year plans): Cost of 2014 additional taxes to plan Determine FTEs in measurement period

43 Questions and Answers

44 The Dialogue Continues July 17 Health Care Times e-newsletter August 14 Health Care Reform Webinar #3 September 18 Health Care Times e-newsletter October 16 Health Care Reform Webinar #4 November 13 Health Care Times e-newsletter Sign up today for the next webinar(s) at tcbmag.com/hcwebinar

45 Thank you for joining us!

46 Presented by: Sponsored by: