The Affordable Care Act: Time to Prepare for 2014 and Beyond Howard Van Mersbergen Vice President of Employee Benefits, Christian Schools International Brian C. Meekhof Benefits Administrator, Christian Schools International Julie Sessions Mercer
Patient Protection and Affordable Care Act (PPACA) GOALS Enacted March 23, 2010, health reform s goals were: Provide access for 30+ million uninsured Cost control Quality Focusing on all three goals was a challenge Health reform is primarily health insurance reform It does not address major cost saving opportunities Provider payment Harmonization across payer programs Tort reform
Health Care Reform (ACA- Accountable Care Act) Reduces Premium Cost Growth and Increases Access to Affordable Care Before ACA, Small Employers faced many obstacles to Covering workers: - Higher premiums and unpredictable rate increases - Higher rates for groups with women, older workers & those with chronic health concerns or highcost illnesses, in most states Today, under ACA, insurance companies: - Face limits on administrative spending. Most insurers must now spend at least 80 percent of consumer s premium dollars on actual medical care Starting in 2014, insurance companies: - Can t charge higher rates or deny coverage because of chronic or pre-existing conditions - Cant charge higher rates for women, and face limits on charging additional premiums for older employees - Must not have annual dollar limits on coverage - Must offer plans that provide a core package of essential health Benefits equal to typical employer plans in the state
What is a definition of Small vs Large Employer Specific to Health Care Reform Small Employer: 1-49 Employees Large Employer: 50 + Full Time Equivalent Employees (FTE s) Number of FTE s are calculated by counting the number of total hours worked by entire workforce, then divide by number of total employees in the last Calendar Year.
How Will ACA Impact Small Businesses? It often depends on the size of the business, and how many employees the business has. 10 or fewer 11-24 25-29 50 and above
Key Elements of Health Care Reform for Employers
FOCUS ON 2014 REQUIREMENTS
Small Business Health Care Tax Credit Must have average annual wage below $50,000; and Contribute 50% or more toward employee s self-only premium cost Maximum tax credit is available to employers with 10 or few full-time equivalent employees and average annual wages of less then $25,000 Sliding scale tax credit for 11-24 full-time equivalent employees (each FTE above 10 ees) 2010-2013, up to 35% of a for-profit employer s premium contribution. Starting 2014, the credit goes up to 50% if small group employers buy coverage through one of the new small business health insurance Marketplaces known as SHOP (Small Business Health Options Program) This is a Federal Credit Employers with 25-49 FTE s are not eligible for small business health care tax credits on the Federal level
Individual Mandate All individuals must have health coverage OR Pay a penalty 2014: Greater of $95(single)/$285 cap (family) or 1% of household income By 2016: Greater of $695(single)/$2,085 cap (family) or 2.5% of household income
Medicaid Expansion Federal funds available to expanded State Medicaid population; those at, or below, 138% FPL $16,332 single $33,474 family Not all states have agreed to expand coverage In these states, public insurance exchange subsidies may be available for certain people to buy coverage (with income as low as 100% FPL) Those ineligible for Medicaid or federal subsidies may have no option for coverage other than employer plan, Again, small employers are not required to offer health coverage Emerging options, e.g., counties expanding Medicaid; Basic Health Plan
State and territory Medicaid expansion decisions (as of Feb. 15, 2013)
State and territory exchange decisions for 2014 (as of Feb. 15, 2013)
2014 Public Exchanges Products Offered in Exchanges Exchanges Group Features Bronze Silver Gold Platinum Catastrophic (age <30) The Silver plan is used to determine any subsidies through the Exchange 1 Some provisions apply differently for grandfathered and non-grandfathered plans If an employer offers some essential benefits today, they must coverage all essential benefits based on new guidelines Plan design1 Actuarial value 60% 70% 80% 90% HSA rules >60% Covered services Essential & preventive benefits Essential & preventive benefits Essential & preventive benefits Essential & preventive benefits Essential & preventive benefits Essential benefits not required Essential benefits No dollar limits No dollar limits No dollar limits No dollar limits No dollar limits No dollar limits if covered 2014 deductible maximums 2013 cost sharing maximums - will be indexed to 2014 levels HSA rules HSA rules HSA rules HSA rules HSA rules $2,000 (I) $4,000 (F) Up to $6,050 (I) $12,100(F) Up to $6,050 (I) $12,100(F) Up to $6,050 (I) $12,100(F) Up to $6,050 (I) $12,100(F) Up to $6,050 (I) $12,100(F) Up to $6,250 (I) $12,500(F)
Employer Mandate Shared Responsibility Large Employers: Employers those with at least 50 FTE equivalents in previous calendar year may face penalties if at least one FTE receives tax-subsidized benefits through a public health exchange These employers must offer minimum essential coverage to substantially all FTEs or face a penalty of $2,000 multiplied by the number of FTEs (not counting first 30FTEs) Coverage offered to 95% of FT employees considered offer to substantially all employees Employers offering minimum essential coverage may still face penalties if coverage does not have a value of at least 60% or is not affordable Penalty is $3,000 for each employee receiving tax-subsidized benefits through a public health exchange (unless above penalty is smaller) Small Employers: If an employer offers coverage, they must offer a minimum essential coverage at a value of at least 60%. NO Penalty applies for employers with less than 50 employees
Employer Mandate Shared Responsibility All Large Employers & Small Employers that offer health coverage: Who must be offered coverage? FTEs and their dependent children under age 26 (but not spouse or domestic partners) - Dependents include biological, adopted, step and eligible foster children - No 2014 Plan Year penalties for lack of dependent coverage if working to add by 2015
Employer Mandate Shared Responsibility All Large Employers & Small Employers (over 50 employees) who offer health coverage: What coverage must be offered? Insured or self-funded both count 60% minimum value using a federal calculator or checklists; alternatively, get actuarial certification. For CSI Schools, our plans currently offer value above this minimum value Affordable if doesn t exceed 9.5% of employee s household income - Based on self-only payroll contribution - 3 safe harbors for penalty avoidance: W-2 wages; rate-of-pay; federal poverty line (2013 = $11,490; $14,350 in AK; $13,230 in HI) Universal Approaches Satisfying Affordability 138%* of Federal Poverty Level (projected to 2014) Employee contribution for employer to avoid penalty 100% of Federal Poverty Level (projected to 2014) Employee contribution for employer to avoid penalty Individual coverage $16,332 per year $129 per month $11,835 per year $93 per month *This alternative can only be safely applied in states that fully expand Medicaid eligibility
Shared Responsibility Decision Tree Effective in 2014 You will not be subject to any Shared Responsibility penalty 1. Do you have 50 or more full-time equivalent employees? YES 2. Do you offer minimum essential coverage to all full time employees (FTEs) (and their dependents)? YES NO 3. Do all of your employees have household income that exceeds 400% of first 30 FTE s Federal Poverty Level YES NO NO 4. Does the health plan offered to FTEs pay less than 60% of total benefit costs or is the required employee contribution for plan > 9.5% of household income? YES NO You will pay the lesser of up to $3,000 (indexed*) times the number of FTE s receiving income based assistance for exchange coverage; or up to $2,000 (indexed*) times the total number of fulltime employees; first 30 FTE s not counted. You will not be subject to any Shared Responsibility penalty You will pay a penalty fee of up to $2,000 (indexed*) annually for every FTE if at least one FTE receives income-based premium assistance to purchase coverage through the exchange. Penalties do not apply to the first 30 FTE s. You will not be subject to any Shared Responsibility penalty *Penalties will increase each year to reflect average national increase in health insurance premiums
Wellness Recently Released Guidance Large Employers & Small Employers that offer health coverage Increases Maximum Size of Wellness Reward/Penalty: For health contingent wellness program, highest permitted amount will increase from 20% to 30% of the cost of coverage, and up to 50% for tobacco programs Other changes/clarifications: A wellness program that involves a measurement, test or screening is not reasonable designed to promote good health unless it provides some reasonable means of qualifying for the reward to all those who don t meet the standard Issues concerning reasonable alternatives to meeting a health standard include: - Prior attempts are not disqualifying - Plans must identify & pay for educational programs - Plans must pay participation fee for diet program but not cost of food Effective: These changes do not apply until plan years on/after Jan. 1, 2014
Financial Impact Plan Enrollment Growth and Fees in 2014 Large Employers and Small Employers that offer health coverage Potential for enrollment growth in 2014 Current plan opt-outs and ineligibles may join plan in response to individual mandate and expanded eligibility to include those working 30+ hours/week More ACA fees/taxes (For fully insured plans, these fees will be managed by the insurance carrier: Fees could by build in rates or invoiced separately) Fee Effective Year Who Pays Estimated Cost Manufacturers of Branded Prescription Drugs Patient-Centered Outcomes Research Institute (PCORI) Fee Manufacturers of Medical Devices Fee on Health Insurance Providers Transitional Reinsurance Fee 2011 and continues thereafter Companies who manufacture or sell branded prescription drugs to certain government programs Policy or plan year that ends on or after Oct. 1, 2012, and before Oct. 1, 2019 Insurer for fully insured plans; group health plan sponsor for self insured plans (e.g., employer maintaining a single-employer plan) 2013 and continues thereafter Companies who manufacture or sell medical devices Begins in 2014 and continues thereafter Health insurance companies offering fully insured coverage 2014 and sunsets in 2016 Insurance providers; TPAs on behalf of self-insured plans Fees likely to be passed through indirectly to employers (impact unclear) $1 PMPY for policy or plan years ending on or after Oct. 1, 2012 but before Oct. 1, 2013, increasing in subsequent years 2.3% of every sale (indirect) Estimated at 1.9% - 2.3% in 2014 Estimated at $63 PMPY in 2014, decreasing in subsequent years
Transitional Reinsurance Fee Begins in 2014 and sunsets in 2016 To fund reinsurance pools to help stabilize the individual insurance marketplace, and to provide revenue to the federal government Total national amounts to be collected highest in 2014, and decreasing in 2015 and 2016 Some proposed guidance issued; more expected Fee = Average number of covered lives (includes dependents) during benefit year x national contribution rate for benefit year National contribution rate will be released each year by HHS HHS estimates the monthly reinsurance fee will be $5.25 per enrollee for 2014 (PMPY fee of $63) Estimates not released for 2015, 2016 2014 2015 2016 Fee PMPY $63.00* $40.00** $25.00** * Based on HHS estimate issued on November 30, 2012 in proposed rule **Mercer estimates calculated based on 200,000,000 estimated covered lives
Looking ahead to 2018 the Excise Tax Large and Small Employers that offer health coverage What is the Excise Tax? 40% excise tax on high cost coverage, including medical, health FSA contributions, onsite medical clinics, and employer contributions to HSAs Current interpretation does not include stand-alone insured dental and vision coverage or certain other coverage types Initial cap set at $10,200/single and $27,500 family Higher thresholds ($11,850/$30,950) for retirees and workers in high-risk professions Higher threshold ($27,500) for single multiemployer plan coverage Indexed to CPI (for 2019 only, CPI+1%) Aggregate cost determined using a methodology similar to that used for determining applicable COBRA premiums Employers must determine aggregate cost Insurers responsible for tax for insured coverage Benefit administrators responsible for tax for self-insured coverage Employers responsible for tax for HSA contributions
Despite added cost pressure, most employers will continue to provide health benefits Percent of employers that are likely to terminate plans within the next five years 20% 19% 22% 2010 2011 2012 6% 9% 7% Employers with 10-499 employees Employers with 500 or more employees
Summary Large Employers Coverage Mandate: No Penalty - Not Offering Coverage: No Penalty applies if employer offers coverage, but not offering to all FTE s (30hours)Yes $2,000 multiplied by number of FTE s Eligibility Rules (30 Hrs per week): Yes Must Comply Waiting Periods for Coverage: Cannot exceed 90 calendar days Employer paid Subsidy for EE s eligible for Public Exchange: Yes Coverage for Minimal Essential Coverage: Yes Coverage for at least 60% Value: Yes Plan Provisions beginning on or after January 1, 2014: All New & Non Grandfathered plans must limit Out of Pocket Maximum within HSA s ($6,250 individual/$12,500/family in 2013) Subject to Affordability Test: Yes Shared Responsibility Penalty: Yes Small Employers Coverage Mandate: No Penalty - Not Offering Coverage: No Eligibility Rules (30 Hrs per week): Do Not Need To Comply Waiting Periods for Coverage: Cannot exceed 90 calendar days Employer paid subsidy for EE s eligible for Public Exchanges: No Coverage for Minimal Essential Coverage: Yes Non-grandfathered insured plans in the small market must cover essential health benefits with limited deductibles (initially $2,000 /individual, $4,000/family) Coverage for at least 60% Value: Yes Plan Provisions beginning on or after January 1, 2014: All New & Grandfathered plans must limit Out of Pocket Maximum within HSA s (6,250 ind/$12,500/family in 2013) Subject to Affordability Test: Yes (for small employers with 50 or more FTE s) Shared Responsibility Penalty: Yes (for small employers with 50 or more FTE s)
Summary All Employers Communications: Exchanges notice to employees required: Yes Timing: Likely late summer or early fall Model Language will be available, likely on State/Gov Exchange Website. CSI will support efforts where needed Summary Plan Descriptions for 2013 Plan Year Plan Reporting Requirements: W-2 reporting required beginning for 2012 plan years: Employers with 250 ees as of today. This is expected to change in the near future 2014 projected Plan Fees: Apply to all plans that offer health coverage 2018 Excise tax apply to all plans that offer health coverage