Health Care Reform What Do We Do Now? Webinar July 18, 2012
Today s Presenters Danny Miller, Attorney, Conner & Winters, LLP, Washington, DC
SUPREME COURT DECISION
Breakdown of Decision Court has jurisdiction to decide case now Anti Injunction Act does not apply Mandate is unconstitutional under Commerce Clause and Necessary and Proper Clause Individual mandate is tax and is constitutional under Congress taxing authority Unanimous 5 for (Roberts, Scalia, Kennedy, Thomas, and Alito) 4 against (Kagan, Breyer, Sotomayor and Ginsberg) 5 for (Roberts, Kagan, Breyer, Sotomayor and Ginsberg) 4 against (Scalia, Kennedy, Thomas, and Alito)
Breakdown of Decision Medicaid expansion is unconstitutionally coercive...... but expansion survives HHS cannot withhold federal Medicaid funds from noncomplying states 7 for (Roberts, Scalia, Kennedy, Thomas, Alito, Kagan, Breyer) 2 against (Sotomayor and Ginsberg) 5 for (Roberts, Scalia, Kennedy, Thomas, and Alito) 4 against (Kagan, Breyer, Sotomayor and Ginsberg)
PREVENTIVE CARE COVERAGE
Preventive Care Effective for plan years beginning on or after 9/23/2010, plans must: Provide coverage for designated preventive care services; and Cover such services without the imposition of any cost sharing requirements (such as a copayment, coinsurance or deductible). Not applicable to grandfathered plans.
Covered Preventive Care Services Evidence based items/services rated A or B in U.S. Task Force recommendations. Immunizations for routine use. Preventive care and screenings for infants, children and adolescents. Preventive care and screenings for women. For a complete list of covered services, see: www.healthcare.gov/center/regulations/prevention.html
Coverage for Contraceptives Effective for plan years beginning on or after August 1, 2012, preventive care services that must be provided to women without imposition of costsharing includes contraceptives. Regulations exempt certain religious employers from the requirement to provide contraceptives without cost sharing.
Exemption for Religious Employers Religious employer for purposes of exemption must meet four requirements. The employer must: have the inculcation of religious values as its purpose; primarily employ persons who share its religious tenets; primarily serve persons who share its religious tenets; and be a church or integrated auxiliary of a church. Note: There is no explicit exemption for a church.
Exemption for Religious Employers Temporary Enforcement Safe Harbor One year delay in effective date of rule for certain religious organizations not entitled to the exemption: Must be nonprofit entity; From 2/10/2012 onward, must not have provided some or all of the contraceptive coverage otherwise required at any time because of religious beliefs of organization; Must provide notice to participants; and Must self certify that it meets the above requirements.
Exemption for Religious Employers Notice of Proposed Rulemaking: Expressed intent is to address objections of many religious organizations not otherwise covered under religious employer exemption. Two primary goals: Maintain provision of contraceptive coverage without cost sharing to individuals covered through religious organizations in simplest way possible; and Protect such religious organizations from having to contract, arrange, or pay for contraceptive coverage.
Exemption for Religious Employers Notice of Proposed Rulemaking (cont d) Seeking comments on proposals: Insurance companies would cover contraceptives free of charge if the religious organization chooses not to. In case of self funded plan, TPA would provide contraceptive coverage at no cost to participants. Religious organizations will not be required to subsidize cost.
Exemption for Religious Employers Congress is considering legislation to broaden religious conscience exemption: o Rubio Blunt attempt to enact legislation allowing all employers (not just church related employers) to decline to cover medical services that are contrary to their religious beliefs was defeated in Senate. o Churches and religious organizations are working with members of Congress to secure legislation to broaden the definition of religious employer. A number of lawsuits have been filed challenging the religious conscience exemption.
SUMMARY OF BENEFITS AND COVERAGE
Types of Plans Group health plans must provide participants with a summary of benefits and coverage ( SBC ). The following benefits are not subject to the SBC requirement: Excepted benefits (e.g., stand alone dental or vision plans and certain health FSAs). HSAs. (However, an SBC for a high deductible health plan associated with an HSA can explain the effects of employer contributions to HSAs.) HRAs are generally subject to the SBC requirement: Standalone HRA generally must have a separate SBC. The effects of an HRA integrated with major medical coverage can be incorporated into the SBC for the medical coverage.
Effective Date Plans must provide participants with SBC by the first day of the first open enrollment period that begins on or after September 23, 2012 for participants who enroll or re enroll for coverage through an open enrollment period (including re enrollees and late enrollees); For participants who enroll for coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), SBCs must be provided effective with the first day of the first plan year that begins on or after September 23, 2012.
Template SBC template provided (with instructions, sample language and guide for coverage examples calculations). The template should be completed in manner as consistent with the instructions as possible, while still accurately reflecting the plan s terms.
Providing SBC Obligation to provide SBC generally rests with plan administrator; in case of insured plan, jointresponsibility for insurer and plan administrator. Paper or electronic format are permissible.
When to Provide SBC Initial enrollment: Must be provided as part of written material distributed for initial enrollment; if plan does not distribute written material, must be provided by first day the participant (or beneficiary) is eligible to enroll. Must be provided to each eligible participant and beneficiary. If there is any change to the information included in the SBC, then a new SBC must be provided before first day of coverage. Must be provided with respect to each benefit package. For HIPAA special enrollees, must be provided within 90 days of enrollment.
When to Provide SBC Re enrollment: New SBC must be provided upon re enrollment. If a plan requires participants to actively elect to maintain coverage during a re enrollment period or provides them with the opportunity to change coverage options, SBC must be provided at the same time as the re enrollment materials. If re enrollment is automatic (i.e., there is no requirement to renew or opportunity to change coverage options), SBC must be provided no later than 30 days prior to first day of the new plan year.
Penalties for Failure to Provide Generally, same penalties as would otherwise apply under Code for purposes of health reform (i.e., Code excise tax of $100/day per individual). In case of willful violations, there is new penalty of up to $1,000/day for each affected individual. But no penalties during first year of applicability if plans are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with regulations.
SMALL EMPLOYER TAX CREDIT
Small Employer Tax Credit Qualified small employers may be eligible for a tax credit for their contributions to purchase health insurance for employees. Tax credit also available to self insured denominational health care plans. Tax credit available beginning in 2010. Tax credit applies on fiscal year basis, not calendar year basis.
Applying for Tax Credit For tax exempt employers, this is refundable credit applied to following payroll tax obligations: Federal income tax withholding. Employer and employee portions of Medicare taxes. Use Form 8941 to calculate tax credit; claim credit on Line 44f of Form 990 T.
Amount of Tax Credit The maximum credit for 2010 2013 is 25% of lesser of: Actual cost; or Maximum costs (based on average premium for small group market in the state) See IRS Form 8941 for list of state average premiums for small market. The credit increases to 35% for 2014 2016, but only for coverage purchased from an exchange. Credit phases out for employers paying average wages to employees between $25,000 and $50,000 and for employers with between 10 and 25 FTEEs. Obama Administration has proposed expanding and simplifying credit.
Small Business Tax Credit, Nonprofit Firms in 2010 2013 Average wage Firm size Up to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 10 25% 20% 15% 10% 5% 0% 11 23% 18% 13% 8% 3% 0% 12 22% 17% 12% 7% 2% 0% 13 20% 15% 10% 5% 0% 0% 14 18% 13% 8% 3% 0% 0% 15 17% 12% 7% 2% 0% 0% 16 15% 10% 5% 0% 0% 0% 17 13% 8% 3% 0% 0% 0% 18 12% 7% 2% 0% 0% 0% 19 10% 5% 0% 0% 0% 0% 20 8% 3% 0% 0% 0% 0% 21 7% 2% 0% 0% 0% 0% 22 5% 0% 0% 0% 0% 0% 23 3% 0% 0% 0% 0% 0% 24 2% 0% 0% 0% 0% 0% 25 0% 0% 0% 0% 0% 0% Enhancing Trust
W 2 REPORTING
W-2 Reporting Requirements PPACA requires employers to report aggregate cost of applicable employer sponsored coverage on 2012 Form W 2 (Report in box 12 using Code DD). Exemptions: Self insured plans that are not subject to COBRA (e.g., selfinsured church plans). Employers who filed fewer than 250 Forms W 2 for the previous year Note: This is transitional relief. In future, IRS could require self insured church plans to comply with reporting requirements.
W-2 Reporting Requirements Aggregate cost of applicable employer sponsored coverage = total cost of coverage under all applicable employer plans. Determined under rules similar to COBRA rules. Includes both employer and employee contributions Employers not required to include: Contributions to Archer MSA, HSA or HRA; Contributions to EAP, wellness program or on site medical clinic if employer does not charge premium for that coverage under COBRA; Salary reduction contributions to health FSA; Cost of dental or vision plan that is not integrated into health plan.
FSA CONTRIBUTIONS
FSA Contributions Effective 1/1/2013, contributions to health FSAs limited to $2,500/year. Dollar limit will be indexed for inflation. Employers whose FSA plans have higher limits will need to amend plans.
MARKET REFORMS
State-Based Exchanges By 1/1/2014, each state is supposed to establish an exchange. Only qualified health plans can be offered on exchange such plans must be offered by licensed health insurers. Small employers ( 100 employees) will be able to offer coverage through exchange. States may allow large employers to offer coverage on exchange beginning 1/1/2017. NOTE: Federal government can establish and operate an exchange if a state fails to do so
Coverage Exchanges must offer four coverage levels difference based on actuarial value (share of health care expenses a qualified health plan covers for a typical group of enrollees). Coverage Level Actuarial Value Bronze 60% Silver 70% Gold 80% Platinum 90%
State-Based Exchanges Subsidies available for coverage on exchange for following individuals with income between 138% and 400% of FPL if: Employee contribution to employer plan > 9.5% of household income; Employer pays < 60% of covered health expenses; or Employer does not provide a health care plan.
Subsidies for Individuals in Exchanges Income Level (in terms of FPL) Max. % of Income Paid Toward Health Care Coverage Up to 138% 2% 138 150% 3% 4% 150 200% 4% 6% 200 250% 6.3% 8.05% 250 300% 8.05% 9.5% 300 400% 9.5 Income Level (in terms of FPL) Income Level (in terms of FPL) Cost Sharing Limit 150 200% 6% 200 250% 13% 250 300% 27% 300 400% 30% Out of pocket spending limits (Indiv./Family) 100 200% $1,983 / $3,967 200 300% $2,975 / $5,950 300 400% $3,987 / $7,973
Employer Mandate Effective 2014, there are penalties for large employers that offer no coverage or provide inadequate/unaffordable coverage. Large employer = one with 50 full time equivalent employees. Penalties apply only if at least one employee participates in and receives subsidies from an exchange.
Employer Mandate Penalties for large employers that fail to offer minimum essential coverage : Must pay excise tax for each FTE (after subtracting first 30 FTEs). Excise tax = 1/12 of $2,000 for each month in which at least one FTE receives subsidies from exchange. Minimum essential coverage includes coverage under an eligible employer sponsored plan. Preamble to proposed subsidy regulations indicates self insured plans can be eligible employersponsored plans.
Employer Mandate Penalties for large employers that offer inadequate or unaffordable coverage. Excise tax = lesser of: $3,000 for each FTE receiving subsidy; or $2,000 for each FTE (not including first 30 FTEs). Note: Part-time employees are not included in penalty calculation even though they are counted for purposes of determining if employer meets the 50 FTEE threshold.
Are you a large employer? at least 50 FT equivalent workers Including FT (30+ hours/week) and PT workers (prorated) Excluding seasonal workers (up to 120 days per year) Are any of your FT employees receiving premium credit for exchange coverage? Do you have more than 30 FT employees? No Penalty Do you provide health insurance? No Pay monthly penalty 1/12 x $2,000 x (number of FT employees 30) 1/12 x $2,000 x (number of FT employees 30) Pay monthly penalty, lesser of: 1/12 x $3,000 x (number of FT employees receiving credits for exchange coverage)
Individual Mandate Beginning 2014, penalty applies to individuals: Who have income above threshold level ($9,350 single; $18,700 married filing jointly); and Who do not enroll for health care coverage. Penalty = 2014: greater of $95 or 1% of income. 2015: greater of $395 or 2% of income. 2016: greater of $695 or 2.5% of income. For family, penalty capped at 300% of individual rate
Calculator Kaiser Family Foundation Reform Subsidy Calculator http://healthreform.kff.org/subsidycalculator.aspx Illustrates premiums and government subsidies based on: Income Age Family type (e.g., single person, family of 4) Regional cost factor
Example One Employee age 40; family of 4; annual income of $45,000 (192% of FPL ); higher regional cost factor: Unsubsidized health insurance premium $14,556 Maximum % of income person must pay to be eligible for subsidy 5.94% Actual required premium payment $2,672 Government tax credit $11,885 Maximum out of pocket costs $4,167
Example Two Employee age 40; family of 4; annual income of $45,000 (192% of FPL ); lower regional cost factor: Unsubsidized health insurance premium $9,704 Maximum % of income person must pay to be eligible for subsidy 5.94% Actual required premium payment $2,672 Government tax credit $7,033 Maximum out of pocket costs $4,167
Example Three Employee age 30; single; annual income of $25,000 (217% of FPL ); higher regional cost factor: Unsubsidized health insurance premium $4,128 Maximum % of income person must pay to be eligible for subsidy 6.91% Actual required premium payment $1,726 Government tax credit $2,402 Maximum out of pocket costs $3,125
Example Four Employee age 30; single; annual income of $25,000 (217% of FPL ); lower regional cost factor: Unsubsidized health insurance premium $2,752 Maximum % of income person must pay to be eligible for subsidy 6.91% Actual required premium payment $1,726 Government tax credit $1,026 Maximum out of pocket costs $3,125
Example Five Employee age 55; family of 4; annual income of $70,000 (299% of FPL ); higher regional cost factor: Unsubsidized health insurance premium $23,700 Maximum % of income person must pay to be eligible for subsidy 9.47% Actual required premium payment $6,626 Government tax credit $17,074 Maximum out of pocket costs $6,250
Example Six Employee age 55; family of 4; annual income of $70,000 (299% of FPL ); higher regional cost factor: Unsubsidized health insurance premium $15,800 Maximum % of income person must pay to be eligible for subsidy 9.47% Actual required premium payment $6,626 Government tax credit $9,174 Maximum out of pocket costs $6,250
Example Seven Employee age 55; family of 4; annual income of $95,000 (406% of FPL ); higher regional cost factor: Unsubsidized health insurance premium $23,700 Maximum % of income person must pay to be eligible for subsidy None Actual required premium payment $23,700 Government tax credit $0 Maximum out of pocket costs $12,500
Example Eight Employee age 55; family of 4; annual income of $95,000 (406% of FPL ); lower regional cost factor: Unsubsidized health insurance premium $15,800 Maximum % of income person must pay to be eligible for subsidy None Actual required premium payment $15,800 Government tax credit $0 Maximum out of pocket costs $12,500
Today s Presenters Danny Miller, Attorney, Conner & Winters, LLP, Washington, DC
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Health Care Reform What Do We Do Now? Webinar July 18, 2012