Health Care Reform: Be Prepared for 2014
Your Health Care Reform Team: Moderator Eboni Britt POMCO Group Marketing Manager Co-presenter Jessica Marabella POMCO Group Account Manager Co-presenter Amy Zell Staff Attorney and Plan Benefit Analyst Visit go.pomcogroup.com/blog 2
POMCO Group Overview One of the nations largest benefits administrators Syracuse, NY Customized, flexible plan designs Dedicated compliance department Visit go.pomcogroup.com/blog 3
What is Health Care Reform? Patient Protection and Affordable Care Act (ACA): ACA; March 23, 2010 Health Care and Education Reconciliation Act (amended ACA); March 30, 2010 ACA Timeframe: 2010 through 2018 Affected Plans: Insured health plans Self Insured health plans Private health plans Municipal health plans ACA Regulations: Continuously developing ACA Repealed Mandates: Class Act (Long Term Care Insurance) Vouchers for Exchange 1099 Reporting Visit go.pomcogroup.com/blog 4
2010-2013 Mandates Plans became Grandfathered (GF)/ Non-Grandfathered (NGF) Extended coverage for dependents to age 26 Removal of pre-existing condition exclusion for children No lifetime dollar limits on essential health benefits (EHB) Phase-out of annual dollar limits on EHB Rescission limitations No FSA/HRA/HSA reimbursement for OTC drugs except insulin Expanded claims & appeals process (NGF plans) Preventive care at no cost-sharing (NGF plans) Emergency Room coverage (NGF plans) Primary Care Physician designation & referral restrictions (NGF plans) Women s Preventive Service Mandates (NGF plans) Summary of Benefits and Coverage Health FSA plans limit employee contributions to $2500 5
Upcoming 2013 Mandates PCORI Fees Essential Health Benefits Medical Device Fees Medicare Regulations SBC Template Updates COBRA and Health Insurance Marketplace (Exchange) Notifications go.pomcogroup.com/blog 6
PCORI Fees ACA created the Patient-Centered Outcomes Research Institute (PCORI) to promote research to evaluate and compare the health outcomes and clinical effectiveness, risks and benefits of medical treatments, services, procedures and drugs. The fee is $1 per person per year for policy or plan years ending before October 1, 2013. The fee increases to $2 per person per year for policy years ending after September 30, 2013. Fees cease for plan years ending after September 30, 2019. Clarification released 5/31/13: PCORI Fees are tax deductible as an ordinary and necessary business expense. 7
Essential Health Benefits 2013 annual dollar limits on essential health benefits cannot be lower than $2 million. Ten Classes: Ambulatory Patient Services Hospitalization Mental/Substance Services Rehabilitative/Habilitative Services Preventative and Wellness Services, Chronic Disease Management Pediatric Services Emergency Services Maternity/Newborn Care Prescription Drugs Laboratory Services 8
Medical Device Fees The amount is based on a 2.3% excise tax that will be levied on the total revenues of a company, regardless of whether a company generates a profit, starting in 2013. Many device companies fear that they will owe more in taxes than they will generate from their operations. 9
Medicare Regulations Increase in the Medicare hospital insurance tax rate on wages by 0.9% (from 1.45% to 2.35%) for higher-income individuals starting in 2013. Increase applies to wages over $200,000 for single tax filers and $250,000 for couples filing jointly ($125,000 for a married individual filing separately). This expansion of the Medicare tax is intended to be one of many funding vehicles established by ACA. 10
Medicare Regulations (continued) Effective January 1, 2013 eligible employers must pay tax on retiree drug subsidies (RDS program). Subsidies currently tax-free. Subsidies were meant to encourage employers to continue offering their Medicare-eligible retirees creditable prescription drug coverage. Tax will diminish the value of the subsidy. Employers may wish to reconsider how they offer prescription drug benefits to their Medicare-eligible retirees. Employer Group Waiver Plans (EGWP) may be more cost effective than RDS once plan loses tax-favored status on the reimbursements. 11
SBC Template Update Statements added to address: Whether the plan or coverage provides minimum essential coverage Whether the plan or coverage meets the minimum value requirements FAQ XIV: DOL is allowing enforcement relief for plans that are already preparing SBCs to be issued in the second year of applicability. Plans may continue to use the year one template if the SBC is furnished with a cover letter or similar disclosure stating whether the plan provides minimum essential coverage and meets the minimum value standards. Good faith compliance Plans may continue to use the coverage examples calculator. 12
Exchanges - Notification Employers must provide employees with written notice about the health insurance exchanges (now referred to as the Health Insurance Marketplace) in their state Deadline: October 1st 2013 Model notice now available, which includes information regarding: How the exchanges operate and the circumstances under which an employee may obtain subsidized coverage through the exchange. Eligibility for tax credits and the possible loss of the employer s contribution toward coverage if an employee elects to obtain health insurance from the exchange. Initial open enrollment period for exchanges to begin in October 2013 Also Updated model election notice for COBRA for group health plans. Incorporates language about the availability of the exchanges so that employees qualifying for COBRA are aware of this option 13
2014 Mandates Health Insurance Marketplace Employer Mandate No-Offer Penalty Unaffordable/Inadequate Coverage Penalty Individual Coverage Mandate Transitional Reinsurance Fees Medicaid expansion Wellness Program Regulations Plan Compliance Regulations Non-grandfathered Plans Regulations Auto-Enrollment go.pomcogroup.com/blog 14
Health Insurance Marketplace Exchanges - new organizations set up at the state level to create a more organized and competitive marketplace for buying health insurance. 2014 - Marketplace will serve primarily individuals buying insurance on their own and the small business health options ( SHOP ) for 50 or fewer employees in NY, 100 in 2016, large employers possibly in 2017). They will offer a choice of different health plans in four different levels Bronze level actuarial value of 60 percent Silver level actuarial value of 70 percent Gold level actuarial value of 80 percent Platinum level actuarial value of 90 percent States are expected to establish their own state-based exchange with the federal government stepping in if a state does not set them up. ACA also allows for Consumer Operated and Oriented Plans (CO-OPs) Non-profit, member-run health insurance issuers for individuals and small group markets. Must be non-profit entities. 15
Individual Subsidy Advanced Premium Tax Credits - Used to lower monthly health plan premiums for coverage purchased on the exchange only for individuals and families with incomes between 133 percent and 400 percent of the federal poverty level (FPL) Amount of the eligible subsidy will be based on the cost of plans offered in the exchange and set on a sliding scale according to income. Apply the subsidy to reduce the monthly premium or receive the subsidy when filing federal tax return. 16
Individual Subsidy Income (Individual) Minimum Premium Contribution FPL (2013) Annual Dollar Amount Annual Percent of Income Annual Dollar Amount 100 150% $11,490 - $17,235 2 4 % $229.80 - $689.40 150 200% $17,235 - $22,980 4 6.3 % $689.40 - $1,447.74 200 250% $22,980 - $28,725 6.3 8.05% $1,447.74 - $2,312.36 250-300% $28,725 - $34,470 8.05% - 9.5 % $2,312.36 - $3,274.65 300 400% $34,470 - $45,960 9.5 % $3,274.65 - $4,366.20 17
Individual Subsidy All people who buy coverage through an exchange will have a cap on their total out-of-pocket spending, including deductibles, co-pays and coinsurance. Limits are based on the out-of-pocket limits that apply to high-deductible plans used with Health Savings Accounts (HSAs). Individuals with incomes under 400 % of FPL will get subsidies to lower those caps based on their income. Income OOP Limit (based on 2011 HSA Limit) 100 200% FPL 1/3 HSA limit ($1,983/individual; $3,967/family) 200 300% FPL 1/2 HSA limit ($2,975/individual; $5,950/family) 300 400% FPL 2/3 HSA ($3,967/individual; $7,933/family) Above 400% FPL 100% HSA limit ($5,950/individual; $11,500/family 18
Employer Mandate and No-Offer Penalty Only applicable large employers (50 or more full-time employees/full-time equivalents) are subject to the employer mandate and the two related penalties. No-offer penalty imposed when employers fail to offer health coverage to substantially all full-time (FT) employees and their children, and one or more of its FT employees buys health insurance on an exchange with premium assistance. Penalty determination does NOT include full-time equivalents. Monthly penalty = 1/12 x $2,000 x all FT employees employed for that month (less the first 30). Penalty is not limited to the number of FT employees who are not offered coverage or who receive the federal subsidy. 19
Unaffordable/Inadequate Coverage Penalty Unaffordable/inadequate coverage penalty Imposed on large employers that offer unaffordable (individual coverage contribution exceeds 9.5% of the employee s income) or inadequate coverage (plan must meet minimum value requirements by covering 60% of health care costs) and one or more of its full-time employees buys insurance on an exchange with premium assistance. The federal government developed a minimum value calculator plans may use. Monthly penalty = 1/12 x $3,000 x each FT employee who receives the subsidy for that month. Penalty cannot be larger than the payment owed if employer did not offer coverage. New IRS reporting requirements on the details of employer s health plan awaiting regulations. 20
Start Does the employer, on a controlled group basis, have at least 50 FT (avg. 30 hrs/wk) and FTE employees (aggregate hrs per month of all non-ft employees divided by 120) on avg during the preceding calendar year? Yes Does the employer offer minimum essential health coverage to at least 95% of its FT employees & their dependent children? Yes Does the health plan pay for at least 60% of the total costs of benefits provided under the health plan? (Most plans will satisfy the minimum value calculator) Yes Is the employee s contribution for health coverage more than 9.5% of the employee s household income? Safe harbor allows consideration of only the employee s income to determine affordability Yes The employer does not owe any play or pay penalties No No No No The employer does not owe any play or pay penalties Employer may be required to pay a penalty of $2,000/yr for each FT employee of an entity minus up to 30 employees if at least 1 FT employee enrolls in federally subsidized health coverage through a Health Insurance Exchange Employer may be required to pay a penalty of $3,000/yr for each FT employee that enrolls in federally subsidized health coverage through a Health Insurance Exchange. This chart is intended for general information only and is not to be construed as legal advice. Any federal tax information on this chart cannot be used to avoid penalties under the Internal Revenue Code or to recommend to another party any transaction or matter 21
Individual Coverage Mandate Requires most U.S. citizens to have minimum essential coverage - a base level of health insurance coverage for themselves and their dependents. Penalty administered by IRS through income tax filing process. Concern of adverse selection that low-risk individuals will decline insurance. Penalty = the greater of a flat dollar amount per individual or a percentage of the individual s taxable income. Flat dollar amount per individual = $95 in 2014; $325 in 2015 and $695 in 2016. After 2016, the flat dollar amount is indexed to inflation. *Note these are minimum penalties. Percentage of taxable income = 1% in 2014; 2% in 2015; Max 2.5% in 2016 and the years that follow. 22
Transitional Reinsurance Fees Fee on group health plans to establish a reinsurance pool for insurers in the individual market to lessen the risk and limit premium costs Fee for 2014 = $63 for each person covered by a group health plan (including dependents) The total fee = $25 billion from 2014 2016. The payment is front-end loaded so the fee will decline over the three-year period. Applies to plans that provide major medical coverage. Includes retiree only plans (unless Medicare-eligible) 23
States may expand Medicaid Effective January 1, 2014, Medicaid will be expanded to include individuals between the ages of 19 up to 65 (including adults without dependent children) with incomes up to 133% of the FPL based on modified adjusted gross income. Supreme court ruling on ACA allowed states to opt-out of expansion. NY State participating in Medicaid expansion. 24
Increase in Wellness Limit Final regulations issued 5/29/13 for health-contingent wellness programs: Maximum size of the reward for meeting the standard increased from 20% to 30% of the cost of the coverage. In addition, if the reward is based on tobacco use, the reward can be up to (in the aggregate) 50% of the cost of coverage. Materials describing the program should provide notice of the availability of an alternative for those for whom it is unreasonably difficult or medically inadvisable to meet the standard. 25
Plan Compliance Regardless of Grandfather status, in 2014 all plans must: Allow dependent coverage to age 26 regardless of whether the dependent has coverage available from an employer or spouse (presumes plan offers dependent coverage). Remove all pre-existing condition limits. Remove any waiting period over 90 days. Remove all annual dollar limits on in-network essential health benefits. Annual limit waiver program concludes in 2014. Stand-alone HRAs must be integrated with employer s major medical plan (limited & retiree-only HRAs are an exception). 26
Non-Grandfathered Plans Additional 2014 standards for non-grandfathered health plans: Out-of-pocket maximums limited to HSA-compatible HDHP amount ($6,250 individual/$12,500 family in 2013) Only in-network essential health benefits need be counted toward this out-of-pocket limit Provider non-discrimination Coverage of routine medical costs of clinical trial participants 27
Fully Insured Health Plans 2011 Medical Loss Ratio (MLR) Insurance companies are required to spend a specified percentage of premium on medical care & quality improvement. Companies exceeding the ratio must provide rebates to policyholders Health Insurance Nondiscrimination Requirements 2014 Annual Fee on Health Insurance Providers Health insurance providers will pay an annual fee based on net premiums beginning at $8 billion in 2014, gradually increasing to $14.3 billion in 2018 and indexed for rate of premium growth in 2019 and thereafter Excludes self-insured employers and government entities Guaranteed Issue Individual/small group rate restrictions Essential Health Benefits Non-grandfathered individual/small group plans must offer EHB Non-grandfathered individual/small group plans must cap annual deductibles (all NGF plans/policies must cap total OOP expenses) 28
Automatic Enrollment Purpose: Expand access to affordable coverage. Employers with more than 200 full-time employees to automatically enroll new full-time employees in one of the employer s health benefits plans and continue the enrollment of current employees in a health benefits plan. Subject to any waiting period authorized by law. Requires adequate notice. Employees must have an opportunity to opt out. Slated for 2014, but will be delayed. 29
Beyond 2014 2015, 2016, 2017: Employer Reporting Plan and Insurer Reporting Exchanges go.pomcogroup.com/blog 30
2018 Excise Cadillac Tax 40% excise tax on cost of coverage above the threshold levels. Current regular threshold levels for costs (premiums/premium equivalents) set for 2018: $10,200 single $27,500 family Threshold levels will increase by CPI after 2018. 31
Thank you. For additional information visit the POMCO Group blog, Health Care Educator go.pomcogroup.com/blog 32