Simplifying Insurance ACA Update Insurance Employee Benefits Risk Management Financial Strategies
simplifying Insurance
simplifying Insurance
simplifying Insurance BACKGROUND
simplifying Insurance Affordable Care Act (ACA) Backgroundg Core of law is an attempt to reduce # of uninsured Multiple approaches to expanding insurance coverage Requires most in US to have health insurance Create state-based exchanges through which individuals can purchase coverage, with premium and cost sharing credits available for individuals/families with household income of 100% - 400% of federal poverty level Requires large employers to offer coverage to all full time employees or pay penalties Delayed to 2015! More Later Expands Medicaid to 138% of poverty level 5
simplifying Insurance Uninsured in the U.S. Family y Work Status SOURCE: KCMU/Urban Institute analysis of 2011 ASEC Supplement to the CPS.
simplifying Insurance Uninsured in the U.S. Uninsured rates vary dramatically by state 2011 Adult Uninsured Rate U.S. Average 18% Texas 27% California 22% Michigan 15% Minnesota 11% Massachusetts 5%
simplifying Insurance Uninsured in the U.S. Uninsured rates vary dramatically by income 35% 25% 2011 Uninsured Rates by FPL 31% Household 200% FPL 400% FPL 30% 1 $15,856 $45,960 20% 15% 18% 2 $21,404 $62,040 3 $26,951 $78,120 4 $32,499 $94,200 5 $38,047 $110,280 10% 6 $43,594 $126,360 5% 6% 0% <200 % FPL National Average Over 400% FPL
simplifying Insurance 2019 Insurance Coverage Source: Sisko A et al., Health Spending Projections Through 2019: the Estimated Impact of Reform Health Affairs 29, no. 10 (2010) (9 September 2010).
simplifying Insurance HEALTH INSURANCE EXCHANGES/MARKETPLACES
simplifying Insurance Health Insurance Exchanges Public Exchange (Marketplace) A marketplace where carriers will sell individual and small group health insurance plans Individual id Health Insurance Public Exchanges will certify and administer ACA subsidies for low and middle income individuals purchasing individual id health insurance though h the Exchange Guarantee issue, no medical underwriting Small Group Insurance Small group program is called Small Business Health Options Program ( SHOP exchange )
simplifying Insurance Health Insurance Exchanges SHOP and Small Group Insurance Rules Group plans available to small employers 2014 & 2015 small employer is <50 or <100 ees based on state law Beginning in 2016 small employer is <100 in all states Small group markets beginning in 2014 In almost all states there will continue to be small group plans offered by carriers outside the state or federal exchange
simplifying Insurance Health Insurance Exchanges Small Group Rules ACA small group reform rules apply to all small group plans both inside and outside the exchange No medical underwriting or pre-ex limitationsit ti Modified Community Rating No rating based on claims experience Age rate spread of no more than 3:1 Maximum deductible of $2000 Applies to small group fully insured plans only New regulations allow carriers to issue higher deductible plan to offer a bronze level plan Carriers have introduced d 2014 plans with deductibles d as high as $5000 in some states
simplifying Insurance CURRENT EMPLOYER ISSUES
simplifying Insurance Small Employer Tax Credit Small Employer Tax Credit Tax Credit of 35% (up to 50% beginning in 2014) of employer s QHP premiums Small employer 25 or fewer FTEs and average annual wages not more than $50,000 Self-employed, S-Corp 2%+ shareholders, & 5% owners are excluded Beginning on 2014 small group plan must be purchased through a state or federal exchange to qualify for the credit IRS Website http://www.irs.gov/uac/small-business-health-care-tax- Credit-for-Small-Employers
simplifying Insurance Cost Sharing Limitations Cost Sharing Limitations Effective first plan year in 2014 Total participating cost sharing cannot exceed HSA eligible plan HDHP limits Applies to all plans including large group and self-funded 2014 limits - $6,350 for self-only coverage, $12,700 for family This maximum includes all participant cost sharing Co-insurance, Co-payments, Rx Co-payment, etc. Transition rule for 2014 only Plans with separate administrators for different elements of plan (e.g. major medical and Rx) can have separate OOP for 2014 plan year.
simplifying Insurance Waiting Period Limits Waiting g Period Rule Effective first plan year in 2014 Waiting period limited to no more than 90 days for first plan years beginning on or after 1/1/2014 Applies to large and small employers Exception for variable hour and seasonal employees Employers can use an initial measurement period of up to 12 months to determine eligibility for variable hour and seasonal employees
simplifying Insurance ACA Notice of Exchange Backgroundg Originally due March 1, 2013 delayed by DOL New Guidance Notice due by October 1, 2013 for existing employees Then must be provided to all employees within 15 days of hire date Notice must be sent to ALL employees FT, PT, temp, etc. - must even provide to employees not eligible for employer health plan
simplifying Insurance ACA Notice of Exchange Content Requirements Information on the existence of an exchange and a description of the services provided by the exchange Information that employees may be eligible for a premium tax credit through the exchange if the employer s plan does not meet minimum essential coverage Inform employees that if they purchase a plan through the exchange they would lose any employer contribution Contact information for exchange Model notice and guidance released by DOL www.dol.gov/ebsa/healthreform Model notice contains many elements not required by the law
simplifying Insurance ACA Notice of Exchange New Model COBRA election notice language g Encourages COBRA QBs to explore exchange options Employers can benefit from helping COBRA QBs find coverage through an Exchange
simplifying Insurance SUBSIDIES FOR PURCHASE OF INDIVIDUAL INSURANCE
simplifying Insurance Subsidies for Low & Middle Income Individual Mandate
simplifying Insurance Low and Middle Income Subsidies Subsidies FPL 400% FPL 1 $11,170 170 $44,680 2 $15,130 $60,520 3 $19,090 $76,360 4 $23,050 $92,200 5 $27,010 $108,040 To help low and middle income individuals afford health insurance when purchasing individual id insurance though a public Exchange Income 100% - 400% Federal Poverty Level (FPL) Premium Tax Credit based on household income Qualified individuals will pay no more than a fixed maximum contribution depending on household income Cost Sharing Reductions (i.e. lower deductibles and out-ofpocket costs)
simplifying Insurance Low and Middle Income Subsidies Subsidies not available to individuals eligible for affordable employer sponsored coverage Affordable = Employee contribution for single coverage is no more than 9.5% of household income Affordability for family members Jan. 31, 2013 IRS guidance An employee s family member qualification for subsidy is based on the employee s contribution for employee only coverage This approach will significantly limit the number of family members who will be eligible for subsidized coverage
simplifying Insurance Low and Middle Income Subsidies Household income Modified adjusted gross income (MAGI) of individual, spouse and tax dependents in household For most taxpayers MAGI is the same as Adjusted d Gross Income (AGI) Found on Line 4 on a Form 1040EZ, or Line 37 on a Form 1040 The employer will never know employee s household income AGI includes things like alimony payments, self-employed business profits and losses, etc
simplifying Insurance Low and Middle Income Subsidies Employee p y Qualification for Subsidies Bottom Line - Very few employees (or their family members) who are eligible for an employer plan will qualify for subsidized individual id coverage though the Exchange! $24,000 Household Income $2,000 mo. X 9.5% Employee contribution for single coverage must exceed $190.00 00 mo. This is what employers really need to communicate to employees!
simplifying Insurance Low and Middle Income Subsidies Subsidy y Process Individuals must apply for health insurance coverage through a public (state or federal) Exchange Exchange will collect income and employer coverage data and certify if individual is eligible for subsidy Exchange must notify an employer if an employee is certified Exchange will administer premium tax credits Individual will pay only their portion of premium Exchange will facilitate payment of tax credit portion to carrier Tax credit will be settled up when taxes are filed
simplifying Insurance Subsidized Coverage Examples Assumes a Silver Base Plan with $6300/$12,600 600 OOP Federal Example of Monthly Retail 300% FPL Maximum Premium Cost Income Premium Assistance Max OOP Age 30 family(4) $861 $70,300 $554 $308 $12,600 Age 30 single $318 $34,500 $273 $45 $6,300 Age 50 family(4) $1,436 $70,300 $554 $882 $12,600 Age 50 single $530 $34,500 $273 $256 $6,300 Kaiser Family Foundation Subsidy Calculator: http://kff.org/interactive/subsidy-calculator
simplifying Insurance Subsidized Coverage Examples Assumes a silver base plan with $6300/$12,600 600 OOP Example of Monthly Retail 150% FPL Maximum Federal Premium Cost Income Premium Assistance Max OOP Age 30 family(4) $861 $35,250 $117 $745 $2,250 Age 30 single $318 $17,250 $58 $260 $4,500 Age 50 family(4) $1,436 $35,250 $117 $1,319 $2,250 Age 50 single $530 $17,250 $58 $472 $4,500 Kaiser Family Foundation Subsidy Calculator: http://kff.org/interactive/subsidy-calculator /i t ti / id l t
simplifying Insurance EMPLOYER SHARED RESPONSIBILITY RULES
simplifying Insurance What Should Employers Not Do Now
simplifying Insurance Shared Responsibility Rules Backgroundg Beginning in 2014 2015, applicable large employers must offer minimum essential health coverage to all full-time employees ees or face possibility of shared responsibility payments (penalties) Full time generally employees averaging g 30 hours per week More later! Applicable large employer Employed an average of at least 50 full-time equivalent (FTE) employees in the prior calendar year
simplifying Insurance Shared Responsibility Rules Pay y or Play Requirements Delayed to 2015 Large employer can continue most current eligibility rules though 2014 plan year Still need to make sure waiting period is no more than 90 days for eligible employees in 2014 Employer reporting requirement also delayed IRS plan information reporting for all applicable large employers and coverage reporting for self-funded employers Originally scheduled to go into effect beginning g January 2015 (for 2014 plan year) has been delayed until 2016 (for 2015 plan year) Shared responsibility rule delay does not effect other areas of ACA
simplifying Insurance Shared Responsibility Rules 4980H(a) ( ) Penalty Employer does not offer minimum essential coverage to all full time employees and dependent children Penalty = $166.67/mo 67/ ($2000/yr) times total t number of fulltime employees (not counting first 30 ) 95% margin of error rule 4980(H)(a) penalty will not apply as long as coverage is actually offered to at least 95% of all FT employees
simplifying Insurance Shared Responsibility Rules 4980H(b) ( ) Penalty Employer offers coverage to all FT employees but coverage is unaffordable or not minimum value Penalty $250/mo ($3000/yr) times number employees who purchase individual coverage through an exchange and is certified to receive subsidies IRS safe harbors allow employer to set contribution based on employee wage, rate of pay, or Federal Poverty level to avoid penalty even if employee qualifies for subsidy
simplifying Insurance Shared Responsibility Rules 4980H(b) ( ) Penalty Safe Harbor Example Using rate of pay safe harbor Lowest wage employees make $10.00 hr $10.00 00 hr X 130 = $1300 Employer set contribution for single coverage in lowest option minimum value plan at $120 mo. (9.23%) Employer will pay no penalty even if these employee occasionally work fewer hours and make less than $1300 in a given month Employer will also pay no penalty even if an employee has a household income lower than the actual pay and qualifies for subsidized coverage
simplifying Insurance Full Time Employees Beginning g g in 2015 full time equals 30 hours of service per week Employer can continue to define eligibility on a monthly basis or use option look back method Optional IRS Safe-harbor measurement period 130 hours per month equivalent to 30 hours per week Employers have option to use a look back measurement period to determine full-time status for benefits purposes This FTE definition is for purpose of ACA health insurance requirements only and does not change an employers definition of full-time for other purposes (Retirement plans, wage and hour rules, etc.)
simplifying Insurance Full Time Employees Using g the Measurement Period We have found very few times that using anything less than a 12 mo. measurement period makes sense Employers with very few variable hour or seasonal employees make be better off staying with monthly eligibility determinations Remember the 95% rule if an employer misses a couple employees for a couple months they will not face the 4980(H)(a) ) penalty The initial measurement period method can only apply to variable hour and seasonal employees f All regular full time employees must have 90 day waiting period
simplifying Insurance OTHER ISSUES
simplifying Insurance Other Issues Fully y Insured Non-discrimination Rules Still delayed until guidance is issued by the IRS Unlikely to be enforced 1/1/2014 Rules will prohibit discrimination in favor of highly compensated individuals (HCIs) Will be similar to existing 105(h) rules already applicable to self-funded health plans Does not necessarily mean benefits will have to be identical for all classes of employees However - benefits, eligibility, or contribution arrangements that clearly favor a subset of employees including HCIs will likely be discriminatory
simplifying Insurance
Simplifying Insurance ACA Update Insurance Employee Benefits Risk Management Financial Strategies