Participant Handout Presented by

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1 Healthcare Reform PPACA Continues... What Do You Do Now? Participant Handout Presented by HCR ICCCFO October 2012

2 Healthcare Reform PPACA Continues... What Do You Do Now? 2012 Gallagher Benefits Services, Inc. The Gallagher Centre Two Pierce Place, 21 st Floor Itasca, IL This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is provided to seminar participants or sold with the understanding that the publisher is not engaged in rendering legal, accounting, tax, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Neither this manual/reference, nor any seminar presentation where it is used, should be construed as legal advice. If you need legal advice upon which you can rely, you must seek a written legal opinion from your attorney. Copyright law prohibits the reproduction or transmission in any form or by any means, whether mechanical, photographic or electronic, of any portion of this publication without the express written permission Gallagher Benefits Services, Inc. Table of Contents Chapter 1 Key Imminent PPACA Requirements...1 Chapter 2 Employer Shared Responsibility...5 Chapter 3 Resources... 10

3 Healthcare Reform PPACA Continues What Do You Do Now? Notes Chapter 1 Key Imminent PPACA Requirements W-2 Reporting Requirements & guidance Box 12, code DD Reporting not required if employer filed fewer than 250 W-2s for preceding year Three permissible methods for calculating cost generally the COBRA premium less the 2% administrative fee Guidance provided on determining premium for tax year if plan is non-calendar year Cost changes or coverage changes mid-year must be reflected Cost of wellness programs, on-site clinics & EAPs need not be reported if employer does not charge a premium for them under COBRA HFSA coverage funded solely through employee salary reduction elections need not be reported Cost of hospital or fixed indemnity insurance need not be reported if noncoordinated and includible in employee s income Cost for dental or vision plans qualifying as an excepted benefit need not be reported Key 2012 PPACA Requirements

4 Notes Healthcare Reform PPACA Continues What Do You Do Now? Key 2012 PPACA Requirements Summary of Benefits & Coverage SBC must be provided to participants and beneficiaries Four-page summary, which agencies have interpreted as four double-sided pages Applicability date delayed to first open enrollment period beginning on or after September 23, 2012 and first plan year beginning on or after that date Template for coverage beginning before 2014 available on DOL & HHS websites Stand-alone HFSAs and HRAs that are not excepted benefits and are not integrated with major medical must satisfy the requirement independently Must be provided to participant/beneficiary no later than first day of eligibility to enroll by plan administrators (self-insured plans) and insurers (insured plans) Must be provided within 7 days of special enrollment opportunity and within 7 days of request Must be provided with open enrollment materials A notice of material modification must be provided no later than 60 days prior to the date on which the change will become effective, if it is not reflected in the most recent SBC provided and occurs other than in connection with a renewal Electronic distribution rules different for those currently enrolled (DOL electronic disclosure requirements) versus those not enrolled (format must be readily accessible and free paper copy provided upon request) Must be provided in a culturally and linguistically appropriate manner following the rules for appeals notices Group health plan s obligation to provide is satisfied if an insurer provides the summary coordination with insurers (and TPAs for self-insured plans) will be required May be provided in combination with an SPD if certain requirements met

5 Healthcare Reform PPACA Continues What Do You Do Now? Notes HFSA Limit Limit is $2,500 on annual salary reduction contributions Limit is a taxable-year limit that applies beginning January 1, 2013 According to IRS guidance, the limit applies on a plan year basis and is effective for cafeteria plan years beginning after Dec. 31, 2012 The limit applies to health FSA salary reduction contributions. Nonelective employer contributions to a health FSA (matching or seed contributions, or flex credits) generally do not count toward the limit. However, if employees may elect to receive the employer contributions in cash or as a taxable benefit, then the contributions will be treated as salary reductions and will count toward the limit if contributed to the health FSA Cafeteria plan documents must be amended by December 31, 2014 Key 2013 PPACA Requirements Exchange Notice Applicable beginning March 1, 2013 Applicability (employers) appears very broad Regulations expected from DOL Must be provided to new hires and current employees Employees hired after effective date must be provided the notice at the time of hire Must be written

6 Notes Healthcare Reform PPACA Continues What Do You Do Now? PPACA Notice & Disclosure Requirements Notice Notice describes... Timing Dependent coverage Transition opportunity for eligible children to By first day of FPYBOA for adult children enroll Patient protections Choice of primary care provider/pediatrician By first day of FPYBOA and OB/GYN care without referral; applicable to non-grandfathered plans Appeals process Appeals and external review process; applicable to non-grandfathered plans Enforcement grace period extended to for calendar year plans Grandfather plan Belief that plan is grandfathered, GF plans Presumably FPYBOA status only Rescission Advance notice of retroactive cancellation When coverage cancelled retroactively prohibition Lifetime limit prohibition Reinstatement of individuals who previously exhausted lifetime limit By first day of FPYBOA for affected individuals Early retiree reinsurance program participation* Participation in program, and use of reimbursements Reasonable time after plan sponsor receives first reimbursement Annual limit restriction Plan does not meet annual limit requirements; applicable to plans receiving waivers (such as mini-med plans & HRAs) W-2 reporting* Aggregate cost of applicable employersponsored coverage Summary of benefits Summary of benefits and coverage (four-page) No later than for plans that received waivers for plan years before ; no specific deadline for later waivers 2012 tax year (optional for 2011) First open enrollment period beginning on or after September 23, 2012 and first plan year beginning on or after that date Exchange* Exchange coverage availability, etc. March 1, 2013 Automatic enrollment* Opportunity to opt out of coverage Upon issuance of regulations not expected in time for 2014 plan year Quality of care Report to HHS regarding reimbursement structures Originally required FPYBOA that improve quality of care, including wellness HHS to provide regulations by March 23, and health promotion activities; applicable to nongrandfathered 2012 plans Transparency in coverage Large employer & offering employer report* Minimum essential coverage report* Report to HHS, exchanges and state insurance commissioner on claims payments, enrollment, denied claims, rating practices, etc.; applicable to non-grandfathered plans Report to IRS on whether employer offers minimum essential coverage, monthly premiums, number of FTEs during each month and months covered by plan Report to IRS on portion of premium required to be paid by employee and other information if coverage is offered through an exchange Originally required FPYBOA enforcement unlikely before exchanges operational and guidance issued January 1, 2014 January 1, 2014

7 Healthcare Reform PPACA Continues What Do You Do Now? Notes Chapter 2 Employer Shared Responsibility Employers Subject Employers who employed an average of 50+ fulltime employees on business days during the preceding calendar year FT = 30 HPW avg. All FT and PT employees must be counted on a fulltime equivalent basis to determine size of employer Mo. hrs. of PT 120 = FT Equiv Certain seasonal workers are not counted in this calculation Employer Shared Responsibility In determining eligibility, employer must apply controlled group and affiliated service group rules under Internal Revenue Code subsidiaries and affiliated companies may need to be combined Penalties If minimum essential coverage is NOT offered to FT employees AND any FT employee enrolls in Exchange plan and receives premium assistance from federal government: $2,000 annually for each FT employee (first 30 free) $2,000 Penalty Bucket #1 a.k.a. Pay If minimum essential coverage IS offered to FT employees BUT any FT employee enrolls in Exchange plan and receives premium assistance from federal government: $3,000 annually ($250 per month) for each FT employee receiving premium assistance, capped at amount equal to $2,000 for all FT employees (less first 30) $3,000 Penalty Bucket #2 a.k.a. Play Penalties are assessed monthly No penalties apply to PT employees Exchange notifies employer that FT employee is eligible for tax credit

8 Notes Healthcare Reform PPACA Continues What Do You Do Now? Substantially All Wording & Exceptions IRS Notice (emphasis added): These rules are merely being considered by regulatory agencies. No guidance or proposed regulations have been issued. Information comments from regulatory officials indicate this represents agencies current thinking, and solicits comments on these approaches. It is contemplated that the proposed regulations would make clear that an employer offering coverage to all, or substantially all, of its full-time employees would not be subject to the 4980H(a) assessable payment provisions. Comments are requested on the challenges employers may face in being able to offer coverage to certain categories of employees even after implementation of the changes made by the Affordable Care Act to the group insurance market, and on other situations where application of the... assessable payment may not be appropriate. Comments are requested on whether there are appropriate exceptions that should be provided for under the employer responsibility provisions... Employer Shared Responsibility Full-Time Employee Variable hour employee = employee for whom it cannot be determined that the employee is reasonably expected to average 30 HPW, including employee for whom initial employment period at 30 HPW+ is reasonably expected to be of limited duration. Seasonal employee employers are permitted to use a reasonable, good-faith interpretation of the term through at least 2014 IRS Notice issued Aug. 31,2012 Employers may rely on guidance at least through end of 2014 Conversely, employer may employ a month-bymonth determination Ongoing employees safe harbor Ongoing = those employed for at least one complete standard measurement period Standard measurement period (SMP) is determined by employer; cannot be less than 3, and cannot more than 12 consecutive calendar months If employee averages at least 30 HPW during SMP, then employee is considered FTE for following stability period, regardless of hours actually worked during the stability period If employee does not average 30 HPW during SMP, employee may be treated as not FTE during following stability period Stability period must be at least 6 calendar months, or if longer, the length of the measurement period Employer may also adopt an administrative period between SMP and stability period of up to 90 days Measurement period must apply uniformly to employees in same employment classification: New employees safe harbor If employee is reasonably expected to work FT, employer offering coverage at or before employee s first three calendar months of employment will not be subject to shared responsibility payment Variable hour and seasonal employees o Initial measurement period (IMP)of 3 to 12 months may be used in which employer measures hours of service o Stability period must be at least 6 calendar months, or if longer, the length of the measurement period o Administrative period of no longer than 90 days may be used, including any period between start date and beginning of IMP, and any period between IMP and date coverage is effective; IMP + administrative period together cannot extend beyond last day of first calendar month beginning on or after the first anniversary of employee s start date Transition rule requires HPW measurement for collectively bargained and non-collectively first full SMP after hire 6 bargained; salaried and hourly; different 2012 business entities; employees in different states

9 Healthcare Reform PPACA Continues What Do You Do Now? Notes Employer Shared Responsibility Individual Subsidies in Exchanges Eligible individuals: Individuals with household incomes between 100% and 400% of the federal poverty level (FPL) may purchase subsidized coverage in an Exchange if: Not enrolled in employer (or certain other) coverage and Premium purchase tax credit: Do not have access to employer-based coverage that: Pays at least 60% of covered and medical costs (a.k.a. minimum value ) Annual credit is sum of monthly credits Monthly credit is the lesser of: Is priced to the individual at no more than 9.5% of the individual s household income IRS Regulations on Health Insurance Premium Tax Credit ( 1.36B-2(c)(3)(v)(A)(1) (emphasis added):... an eligible employer-sponsored plan is affordable for an employee or a related individual if the portion of the annual premium the employee must pay, whether by salary reduction or otherwise (required contribution), for self-only coverage for the taxable year does not exceed [9.5 percent]. Monthly premium for coverage under an Exchange plan or Monthly premium for 2 nd - Premium cost for 1/12 th of employee s least expensive benefits household X Silver plan available judged to non-essential income for year Applicable table percentage Cost-sharing subsidies: Exchanges may reduce out-of-pocket costs based on income ranges from 94% (for 100%-150% of FPL) to 70% (for 250%-400% of FPL) of coverage of plan s benefits Table percentage is a sliding scale from 2% for 133% of FPL to 9.5% of 400% of FPL

10 Notes Healthcare Reform PPACA Continues What Do You Do Now? Affordability Safe Harbor IRS Notice (emphasis added):... Treasury and the IRS expect to propose an affordability safe harbor... It is contemplated that under the proposed safe harbor,... the employer must offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and... the employee portion of the self-only premium for the employer s lowest cost coverage that provides minimum value (the employee contribution) must not exceed 9.5 percent of the employee s W-2 wages.... Application of this safe harbor would be determined after the end of the calendar year and on an employee-byemployee basis... These rules are merely being considered by regulatory agencies. No guidance or proposed regulations have been issued. Information comments from regulatory officials indicate this represents agencies current thinking, and solicits comments on these approaches. Note: $11,310 = $7.25/hour for 52 weeks at 30 HPW Employer Shared Responsibility W-2 income 9.50% Mo. Prem. $11,310 $1,074 $90 $20,000 $1,900 $158 $30,000 $2,850 $238 $40,000 $3,800 $317 $50,000 $4,750 $396 $60,000 $5,700 $475 $70,000 $6,650 $554 $80,000 $7,600 $633 $90,000 $8,550 $713 $100,000 $9,500 $792 $110,000 $10,450 $871 $120,000 $11,400 $950 $130,000 $12,350 $1,029 $140,000 $13,300 $1,108 $150,000 $14,250 $1,

11 Healthcare Reform PPACA Continues What Do You Do Now? Notes Exchange Subsidies using 2012 Federal Poverty Level Guidelines (Sorted by family size) Subsidy is approx. the cost for 2nd least expensive Silver plan less amount in last column. Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 1 $ 11, $ 14, $ $ $ 11, $ 16, $ $ $ 11, $ 22, $ $ $ 11, $ 27, $ $ $ 11, $ 33, $ $ $ 11, $ 44, $ $ Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 2 $ 15, $ 20, $ $ $ 15, $ 22, $ $ $ 15, $ 30, $ $ $ 15, $ 37, $ $ $ 15, $ 45, $ $ $ 15, $ 60, $ $ Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 3 $ 19, $ 25, $ $ $ 19, $ 28, $ $ $ 19, $ 38, $ $ $ 19, $ 47, $ $ $ 19, $ 57, $ $ $ 19, $ 76, $ $ Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 4 $ 23, $ 30, $ $ $ 23, $ 34, $ $ $ 23, $ 46, $ $ $ 23, $ 57, $ $ $ 23, $ 69, $ $ $ 23, $ 92, $ $ Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 5 $ 27, $ 35, $ $ $ 27, $ 40, $ $ $ 27, $ 54, $ $ $ 27, $ 67, $ $ $ 27, $ 81, $ $ $ 27, $108, $ $ Fam. Size FPL 2012 % of FPL Hhld income Table factor 9.5% trigger/12 Subsidy = cost for 2 nd -least expensive silver plan less 6 $ 30, $ 41, $ $ $ 30, $ 46, $ $ $ 30, $ 61, $ $ $ 30, $ 77, $ $ $ 30, $ 92, $ $ $ 30, $123, $ $

12 Notes Chapter 3 Resources Healthcare Reform PPACA Continues What Do You Do Now? Government Resources DOL link Patient Protection and Affordable Care Act HHS link Health Reform White House link Health Reform in Action U.S. Department of Justice Defending the Affordable Care Act Resources Gallagher Resources GBS Internet website link