Health Care Reform. Impact of 2014

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Colleen Briggs
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1 Health Care Reform Impact of 2014 MBA BEST Conference April 26, 2013

2 Today s Agenda The health insurance market changes in 2014 Employer shared responsibility or play or pay 30 hour week issue is critical Non-calendar year plan potential delayed effective dates Fewer opt-outs? Employer plan changes New fees for health plans Concluding Thoughts 2

3 Just a Recap Health care reform statute has two components: Patient Protection and Affordable Health Care Act (PPACA) Health Care and Education Reconciliation Act of 2010 (HCERA) The combined Acts are often referred to as the Affordable Care Act or ACA We call it Health Care Reform or HCR In addition to the statute, there are tens of thousands of pages of guidance 3

4 2014 The New Marketplace Health Exchanges 4

5 New Marketplace Health Exchanges States must develop operational health Exchange by 2014 Federal government will run Exchange if state does not Market for individual coverage and small group coverage (under 50 ees) Low and moderate income individuals may be eligible for government subsidies to help purchase coverage Can t be eligible for qualifying employer coverage Can t be eligible for any qualifying governmental coverage Exchanges will: Certify health plans are qualified (QHPs) Determine eligibility for subsidies and Medicaid Facilitate enrollment in QHPs and Medicaid Exchange status (Avalere Heath, February 2013 ): Federally Run Federal/State Partnership State Run 23 states 10 states (MI included) 17 states plus the District of Columbia 5

Individual Coverage Options - 2014 Household Income Will

Individual Plan Option 3 Non-subsidized Individual Plan

than 138% of FPL Household Income between 133% - 400% of

Not Determining Factor Will vary by state No Subsidy if

6 Individual Coverage Options Household Income Will Impact Options Option 1 Medicaid Option 2 Subsidized Individual Plan Option 3 Non-subsidized Individual Plan Option 4 Employer- Sponsored Coverage Household Income Less than 138% of FPL Household Income between 133% - 400% of FPL Household Income Exceeds 400% of FPL Household Income Not Determining Factor Will vary by state No Subsidy if Eligible for Qualifying Coverage! An Option only if Employer Offers Coverage 6

Plans in Exchange Four levels of benefits will be offered by carrier (2% variance) Platinum Gold Silver Bronze 90% Value 80% Value 70% Value 60% Value For comparison, 2012 MW median survey plans are

7 Plans in Exchange Four levels of benefits will be offered by carrier (2% variance) Platinum Gold Silver Bronze 90% Value 80% Value 70% Value 60% Value For comparison, 2012 MW median survey plans are valued at: PPO HMO CDHP Deductible $500/$1000 $500/$1000 $1,500/$3,000 Network Coinsurance 80% 90% 80% OOP (inc. ded) $2,000 / $4,000 $1,500 / $3,000 $2,600 OV Copay $25 $20 n/a Rx Copay $10/$30/$60 $10/$30/$60 n/a Estimated Actuarial Value* 80.5% 84.1% 76.5% Essential health benefits must be covered Source: 2012 Nyhart Actuarial Determination 7

8 Specific Enrollment Opportunities Limited enrollment opportunities Initial enrollment period October 1, 2013 March 31, 2014 Annual enrollment period October 15 December 7 Special enrollment periods events that allow midyear enrollment Gaining a dependent or becoming a dependent through marriage, birth, adoption or placement for adoption Newly attained status as a US citizen, national or lawfully present individual An Exchange error, misrepresentation or inaction of Exchange party Proof a QHP materially violated its contract Becoming newly eligible for an insurance affordability program, regardless of whether individual is currently enrolled in a QHP Loss of minimum essential coverage Insurance carriers will subject to new rules as well: No pre-existing condition limitations No medical underwriting Limitations on relative value between age bands 8

9 Eligibility for Subsidies Certain individuals will be eligible for premium subsidies and benefit subsidies based upon their income in the Public Exchange Subsidy Premium Subsidies Benefit Subsidies Households with incomes: Between 138% - 400% FPL Between 138% - 250% FPL Eligibility for certain coverage (minimum essential coverage) will block availability for premium/benefit subsidies (ER coverage/gov t coverage) To block potential eligibility for any subsidies, employer-sponsored coverage must pass Benefits test (60%) Affordability test (Single coverage can t cost more than 9.5% household income) 9

Financial Help Through Exchange For some low-income individuals, Exchange options will be more attractive than employer coverage As income increases, even with subsidies, Exchange coverage will be

10 Financial Help Through Exchange For some low-income individuals, Exchange options will be more attractive than employer coverage As income increases, even with subsidies, Exchange coverage will be less attractive than employer options Family Income as % of FPL 2012 FPL based on # of Members in Household 1 4 >133% $14,856 $30,357 Max Monthly Cost $37 $77 150% $16,755 $34,575 Max Monthly Cost $56 $ % $22,340 $46,100 Max Monthly Cost $117 $ % $27,295 $57,625 Max Monthly Cost $137 $ % $33,510 $69,150 Max Monthly Cost $265 $ % $44,680 $92,200 Max Monthly Cost $354 $730 *Based on 2 nd lower cost Silver Plan (70% value) Employee Premium Cap as % of income Benefit Subsidy increases value of 70% value silver plan to: 3.00% 70% 94% 4.00% 70% 94% 6.30% 70% 87% 8.05% 70% 73% 9.5% 70% 9.5% 70% 10

11 Will Coverage Be Affordable? Significant pricing differential in Exchange based on age banding and sloping of rates Pricing below reflects estimated second lowest cost silver plan Plans can rate for tobacco use 50%, member based Age Lower Cost Area Single Annual Premium Medium Cost Area Higher Cost Area Family of Four Annual Premium Lower Cost Area Medium Cost Area Higher Cost Area 20 $2,959 $3,699 $4,439 $7,976 $9,969 $11, $3,003 $3,753 $4,504 $8,822 $11,027 $13, $3,927 $4,909 $5,891 $10,586 $13,233 $15, $6,090 $7,613 $9,135 $14,711 $18,390 $22, $8,877 $11,096 $13,316 $20,982 $26,228 $31,473 *Kaiser Family Foundation Estimate of Silver Plan Costs trended to

12 In Summary Exchanges will offer new opportunities for purchasing health coverage If individuals are eligible for subsidies Lower end of the income ranges (up to 250% of FPL), subsidies are attractive Upper end on income ranges (above 250% of FPL) coverage is subsidized but still expensive when compared to employer benchmark coverage If employers continue to offer coverage, it may block individuals from securing subsidies in Exchange 12

13 Today s Agenda The health insurance market changes in 2014 Employer shared responsibility or play or pay Non-calendar year plan potential delayed effective dates 30 hour week issue is critical Fewer opt-outs? Employer plan changes New fees for health plans Concluding Thoughts 13

14 "Play or Pay" Requirements Employers need to understand a number of issues as part of the "Play or Pay" mandate 1. Only applies to large employers (50 or more FT/FT equivalents) 2. In general, "Play or Pay" is effective January 1, 2014 some employers with non-calendar year plans may be able to delay effective date until renewal date 3. Employer must offer coverage to full-time employees (30 or more hours per week) or pay a penalty determining full-time 4. Employers may be assessed one of two penalties (annual amounts) a) Employer does not offer minimum essential coverage to at least 95% of full-time employees, a penalty of $2,000 per full-time employee (less the first 30) b) Employer does not offer affordable or minimum value coverage to full-time employees, a penalty of $3,000 per employee that purchases subsidized coverage in Exchange 14

Employer Play or Pay Employer with 50 or more full-time equivalent employees must provide

rules) Penalties, assessed separately to each company in controlled group Mandate: Does

Yes Benefits: Does employer pay at least 60% of health care expenses?

Yes No No No No penalty applied to employer Did at least one employee receive subsidy in

Employees can choose to buy coverage in an Exchange and receive a premium tax credit

15 Employer Play or Pay Employer with 50 or more full-time equivalent employees must provide coverage or pay penalty If applicable, all members of employer controlled group (IRS rules) Penalties, assessed separately to each company in controlled group Mandate: Does employer offer coverage to 95% of FT workers (and kids)? Yes Benefits: Does employer pay at least 60% of health care expenses? Yes Affordability: Do employees pay under 9.5% of income for single coverage? Yes No No No No penalty applied to employer Did at least one employee receive subsidy in Exchange? Employees can choose to buy coverage in an Exchange and receive a premium tax credit Employees can choose to buy coverage in an Exchange and receive a premium tax credit Yes Penalty: $2,000 year x FTEs (less 30) Not tax deductible For Each That Does Penalty $3,000 year x number with subsidy Not tax deductible For Each That Does 15

16 Relief for Non-Calendar Year Plans Applies if the intent of the employer is to make plan modifications and extend coverage to employees If employer does not intend to offer coverage, penalties will apply as of January 1, 2014 Use the term fiscal plan year but don t define it Seems to imply ERISA plan year but preamble also makes reference to renewal year and open enrollment season The whole intent is to allow the plan to make changes on their regular schedule not force a mid year plan change to bring into compliance To be eligible for the non-calendar year delay, the employer must meet specific eligibility and participation tests 16

17 The Determination Process Is your renewal/ plan year January 1? (as of 12/27/12) No Yes Must comply on 1/1/14 Was coverage offered to at least 33% of employees at last open enrollment period prior to 12/27/12? or Does the plan cover at least 25% of employees? No Yes Must comply on 1/1/14 Comply on non-calendar plan year 17

18 CLICK HERE TO EDIT TEXT Determining 30 or More Hours Per Week 18

19 Types of Employees to Consider Full Time Employees Can be hourly or salaried Employee is regularly scheduled/expected to work 30 or more hours Variable Hour/ Seasonal Employees These employees have a variable weekly schedule; employer doesn t know what hours will be worked Employer needs to address ongoing employees and newly hired employees Part Time Employees Non-Traditional Employees Can be hourly or salaried Employee is regularly scheduled/expected to work less than 30 hours These employees are not paid or tracked by hours worked Employer must identify these employees and determine how to assign employee hours 19

20 Variable Hour Employees Variable Hour/ Seasonal Employees Variable hour employee is an employee that the employer can not determine if they will work 30 or more hours per week Based on facts and circumstances If employee starts at 30 hours/week but employer does not expect those hours to be consistent, employee can be considered variable Employer will need to measure hours of service to determine if full-time Hours of service will include: Any hour for which an employee is paid (or entitled to payment) Each hour an employee is entitled to payment even if no work is done Vacation, holidays, sick days, layoff, jury duty, and so on FMLA leaves and military leaves (even though not required to be paid leave) 20

21 Determining Hours Worked Variable Hour/ Seasonal Employees Employer needs to establish measurement periods, stability periods and administrative periods. In general: Measurement period: The time period the employer measures hours of service to determine if employee is full-time Administrative period: Optional time an employer can set between measurement and stability period for communication/enrollment Stability period: The time period the employer must either cover full-time employees identified by the measurement period or be subject to penalty Rules apply to how the employer sets these periods The employer will set these periods for two groups of employees 1. Ongoing employees employed for at least one full measurement period 2. Newly hired employees 21

22 Ongoing Employees Variable Hour/ Seasonal Employees Measurement period: Must be at least 3 but no more than 12 consecutive calendar months Administrative period: Up to 90 days permitted; it can neither lengthen or reduce measurement or stability periods Stability period: Must be at least 6 months and can t be shorter than the measurement period The rules do not address how employer documents time periods These periods can only be changed prospectively Employers can set different periods for different classes of ees: Collective-bargained and not bargained employees Salaried and hourly Employees located in different states 22

23 Example: Ongoing Employees Variable Hour/ Seasonal Employees ABC sets its time periods as follows. These timeframes will all line up with their open enrollment with January 1 st effective date. ABC intends to offer coverage to all full-time employees. Floyd works full-time during this measurement period Floyd should be offered coverage during this stability period Measurement look-back Period Admin Period Stability Coverage Period Floyd continues to be a variable hour employee 10/15/14 10/14/15 10/15/15 12/31/15 1/1/16 12/31/16 Floyd does not work full-time during this measurement period Floyd should not be offered coverage during this stability period Measurement look-back Period Admin Period Stability Coverage Period 10/15/15 10/14/16 10/15/16 12/31/16 1/1/17 12/31/17 23

24 Variable Hour/ Newly Hired Variable Employees Seasonal Employees You must set different periods for newly hired employees Initial measurement period: Must be at least 3 but no more than 12 consecutive calendar months measured from start date (or first of the month following) Initial administrative period: Up to 90 days permitted- Important, the combined measurement period and administrative period can t be more than 13 months measured from first of month following start date Initial stability period: The stability period associated with the initial measurement period must be the same as ongoing employee stability period A new hire variable hour employee may be in the initial measurement period when the next ongoing measurement period begins There will be overlap with new and ongoing measurement periods 24

ABC s Initial Measurement Variable Hour/ Seasonal Employees ABC sets the following newly hired employees initial periods Initial measurement period: 11 month period measured from start date Initial

25 ABC s Initial Measurement Variable Hour/ Seasonal Employees ABC sets the following newly hired employees initial periods Initial measurement period: 11 month period measured from start date Initial administrative period: 1+ month period measured from end of initial measurement period until the first day of the first month following one full month Initial stability period: 12 month period measured from end of administrative period These initial measurement periods meet the requirements Initial measurement period does not exceed 12 months Administrative period is less than 90 days Measurement and administrative period less than 13 months Stability period is 12 month period, same as ongoing employees 25

Example of Newly Hired Variable Hour/ Seasonal Employees ABC hires Zeppelin on May 10, 2014. They are not sure he will be working fulltime in his position as a graphic artist.

26 Example of Newly Hired Variable Hour/ Seasonal Employees ABC hires Zeppelin on May 10, They are not sure he will be working fulltime in his position as a graphic artist. Zeppelin is continually employed. Zeppelin works full-time during this measurement period 5/10/14 Initial Measurement look-back Period 4/9/15 Admin Period 4/10/15 5/31/15 Zeppelin should be offered coverage during this stability period ABC can t short Zeppelin Stability Coverage Period coverage he must be offered through 5/31/16 6/1/15 5/31/16 Zeppelin continues employment, ABC needs to start counting for ongoing measurement period Zeppelin does not work full-time during this measurement period Zeppelin should not be offered coverage during this stability period Measurement look-back Period Admin Period Stability Coverage Period 10/15/14 10/14/15 10/15/15 12/31/15 1/1/16 12/31/16 26

27 When to Start Counting? Variable Hour/ Seasonal Employees The latest guidance requires employers to start the first measurement period in 2013 / their first stability period in 2014 Not crystal clear, but appears the government expects employers to tie their stability periods to their plan year/open enrollment timeframes Example: Employer has a October 1 September 30 plan year Employer sets ongoing measurement period from July 1 June 30 th The ongoing administrative period is July 1 September 30 th The ongoing stability period is October 1 September 30 th In this case, the employer can start counting as of July 1, The stability period would begin October 1,

28 Special Rules for 2013 Variable Hour/ Seasonal Employees Since these clarifications were made early January, the IRS will allow some flexibility for ongoing employees in 2013 (primarily for calendar year plans) For stability periods that start in 2014, employers may adopt: A measurement period beginning in 2013 that can be shorter than 12 months, but must be at least six months Must begin no later than July 1, 2013 Must end no earlier than 90 days before the first day of the first plan year beginning on or after January 1, 2014 The stability period associated with this modified ongoing measurement period can be 12 months (even if measurement period is not) If an employer intends to use a 12-month measurement period that begins in 2013, they are not required to start that period by July 1,

29 Fewer Opt-Outs Employers need to be mindful that their opt-out rates may change in 2014 Several factors may drive increased participation: Individual Mandate May encourage employees currently without coverage to enroll in the medical plan Other Employers Dropping Coverage May result in employees currently enrolled in spouse s plan to enroll in medical plan Automatic Enrollment New rules will require employers to enroll employees who do not actively waive coverage (employers > 200 employees, effective date delayed to 2015) Employers need to take into account potential newly eligible (30 hour requirement) and potential increased take up rates when budgeting for

30 Today s Agenda The health insurance market changes in 2014 Employer shared responsibility or play or pay Non-calendar year plan potential delayed effective dates 30 hour week issue is critical Fewer opt-outs? Employer plan changes New fees for health plans Concluding Thoughts 30

Plan Compliance Issues Limits on new hire waiting period No pre-existing condition limitations Required coverage of clinical trials Increased incentives for health contingent wellness plans Maximum

31 Plan Compliance Issues Limits on new hire waiting period No pre-existing condition limitations Required coverage of clinical trials Increased incentives for health contingent wellness plans Maximum out of pocket limits and rules on all plans Small group health plan deductible limits Dependent coverage limitation under grandfathered plans must be eliminated All of these requirements are effective as of the first day of the first plan year, on or after January 1,

32 Changes to Out of Pocket Limits Maximum out of pocket limits will apply to all health plans Tied to qualifying high deductible health plan parameters. In 2013, maximum out of pocket: $6,250 for single coverage $12,500 for family coverage Applies only to in-network level of benefits Must accumulate all cost-sharing related to deductibles, coinsurance, copayments Challenging for employers that carve out RX One year delay on Rx carveouts if medical plan limits do not exceed statutory requirements and Rx plan does not have separate out of pocket limits that are more than allowed 32

Coinsurance Office Visit Copay Deductibles Coinsurance Affected Benefits 2012 MW Survey $2,000 single (Benchmark)

33 Out-of-Pocket Maximum Limits A Cap On Annual Employee Cost Out of Pocket Maximums Today Out of Pocket Maximums in 2014 Prescription Drug Copay Emergency Room Copay Affected Benefits Some Include Deductibles Most Apply to Coinsurance Office Visit Copay Deductibles Coinsurance Affected Benefits 2012 MW Survey $2,000 single (Benchmark) $4,000 family New HCR Cap $6,400 Single Projected 2014 amounts $12,800 Family Should limit be adjusted to reflect added items? 33

34 Today s Agenda The health insurance market changes in 2014 Employer shared responsibility or play or pay Non-calendar year plan potential delayed effective dates 30 hour week issue is critical Fewer opt-outs? Employer plan changes New fees for health plans Concluding Thoughts 34

35 Direct and Indirect/Taxes and Fees Many new industry fees and taxes being imposed on insurers/tpas, health plans and manufacturers starting in 2012: Insurer market share tax (2014) Medical device tax (2013) Transitional reinsurance Comparative effectiveness fees (2012) Independent actuarial analysis suggests overall increase to employer costs range from 1.9% annually (in 2014) to 3.7% annually over time 35

All Plans will Pay More CER Fee: Reinsurance fee: $63 per year per covered member; Three year fee, will likely decrease in 2015 and 2016 Health Insurer Market Share Tax* (insured

36 All Plans will Pay More CER Fee: Reinsurance fee: $63 per year per covered member; Three year fee, will likely decrease in 2015 and 2016 Health Insurer Market Share Tax* (insured plans only): Year Conservative Estimate Aggressive Estimate % 2.3% % 3.2% % 3.1% *Source: Annual Tax on Insurers Allocated by State, Oliver Wyman November

37 Today s Agenda The health insurance market changes in 2014 Employer shared responsibility or play or pay Non-calendar year plan potential delayed effective dates 30 hour week issue is critical Fewer opt-outs? Employer plan changes New fees for health plans Concluding Thoughts 37

38 Create a Plan for 2013/2014 Your plan should address: Plan changes that will need to be made Issues that need to be addressed for 2014 "Play or Pay" Take the time to create the plan now Significant number of issues that need to be addressed Start thinking through how these issues will affect your plans keep track of issues and concerns Costs will be impacted for 2014 At a minimum, new taxes and fees will increase projected cost for 2014 Plan changes required will also have cost impact Cost may be affected by "Play or Pay" decisions 38

39 It Can Be Done! You need to allot time to plan for HCR - it will be a timeconsuming process this year Start working on it now-lead time is critical to making it through the next 12 months Leadership needs to be aware and understand 2014 changes Start your work meetings now and schedule them on a regular basis Education and awareness is critical to addressing all key issues You may not have all the answers, but know your questions Keep plugging away at your work plan Your organization will be ready with good planning! 39

40 Any Questions? Thanks for Coming! CLICK HERE TO EDIT TEXT 40