Agenda 1.Supreme Court Decision – what it means 2.ACA Timeline 3.What’s Already Done? 4.What’s...

The Affordable Care ActWhere do we go from here?

Sue Nelson, Gulfshore Insurance

Agenda

1. Supreme Court Decision – what it means2. ACA Timeline3. What’s Already Done?4. What’s Coming?5. Mandated Coverage – Individual Mandate6. Exchanges/Minimum Essential Benefits/Subsidies7. Small Employers/Large Employers

Supreme Court Opinion

• Final Regulations Effective: 5/23/2012– All timelines remain active as previously set

• The Individual Mandate holds (as a tax)– Individuals must maintain minimal coverage or pay a

penalty beginning 1/1/2014 , allowed under “Congress’s Power to Tax”

• The Medicaid “threat” fails (unconstitutional)– States will still be entitled to existing Medicaid funding

even if they don’t expand program

ACA Timeline

What has already been implemented?• Key preventive services at 100% - no co-pays

• Elimination of lifetime policy limits

• Extension of coverage for “dependents” thru age 26 – regardless of… (in Florida many are 30)

• No Pre-X on enrollees to age 19

• No rescissions except for fraud

• MLR Rebates (Aug 2012)

• Women’s Preventive Health Services expansion (Aug 2012)

• Summary of Benefits and Coverage (SBC) (Sept. 23, 2012)

• W2 Reporting (cost of coverage / employers w/ 250+ W2’s)

What Happens Next?• Individual Mandated

Coverage• Exchanges for Individuals &

Small Employers (?)• Minimum Essential Benefits

required• No Pre-Existing conditions

permitted – all lives• SGR Max Deductible

$2000/$4000 and OOP Limits capped

• Guarantee Issue required / Rate Band compression

• 90 day Waiting Periods – maximum allowed WP

• Non – Grandfathered plans comply with federal non-discrimination

• Medicaid Expansion (?)• Employer Pay or Play

Mandate• Fees, Fees, Fees and a Tax

Florida – Our “Situation”Delayed decision making with regard to Exchanges

– Missed the deadline for establishing a State-based exchange (12/14/12)– Missed the deadline for “partnering” with the Federal government (02/15/13)– Default to Federally facilitated – watch and learn in 2014- Prep for 2015

Delayed decision making with regard to Medicaid Expansion– Expansion is targeted at adults without children between 100-138% FPL– Florida has 3rd largest population of uninsured non-elderly (3.1 million)– Florida has the largest number of uninsured in the nation (4 million)– Expansion means approximately 900,000 new enrollees to Medicaid – Failure to expand = more individuals eligible for Exchange subsidies – Feds “promise” to fully fund through 2016 and then at 90% beyond 2016

1.1.2014 – Mandated Coverage

ACA requires individuals to maintain health insurance for themselves and their dependents beginning January 1, 2014

Most individuals will be required to maintain “minimum essentialcoverage”, which includes: employer coverage, individual coverage, grandfathered

plans, student health plans, and Federal programs such as Medicare, Medicaid, TriCare, and VA benefits

Those who do not maintain minimum essential coverage, and who are not exempt from the mandate, will be required

to pay a tax penalty for noncompliance


Exceptions:• Individuals not lawfully present in the United States• Individuals who are incarcerated• Individuals residing outside of the United States• Individuals whose contribution for self-only coverage exceeds 8% of HHI• Individuals whose HHI is less than the federal income tax filing threshold• Individuals determined by HHS to have suffered a hardship• Individuals in a health care sharing ministry• Members of Indian tribes• Bona fide residents of any possession of the United States• No penalty imposed on those w/o coverage for less than 3 months

Only one three-month period allowed in a year


Annual Penalties:• 2014: $95 per adult and $47.50 per child, up to a family

maximum of $285 or 1 percent of family income, whichever is greater

• 2015, $325 per adult and $162.50 per child, up to a familymaximum of $975 or 2 percent of family income, whichever is greater

• 2016, $695 per adult and $347.50 per child, up to a familymaximum of $2,085 or 2.5 percent of family income, whichever is greater

Penalty cannot exceed national average for bronze exchange.

Exchanges:What Are They?• All states to establish an Exchange by January 1, 2014• Individual Exchange (American Health Benefit Exchange)• Small Business Health Options Program (SHOP) (up to 100 employees)• “The Metals”—Exchanges will require Health Plans to offer four levels of coverage:

– Bronze (60%)– Silver (70%)– Gold (80%)– Platinum (90%)– AND…a “Catastrophic Plan” for individuals under 30 years of age

Note: Insurers may offer separate health plan products outside of anExchange, but they are prohibited from offering rates for thosehealth plan products that are lower than those offered thru an Exchange

Exchanges & Benefits Required

“Essential Health Benefits” (EHB) to include: • Ambulatory patient services;• Emergency services;• Hospitalization;• Maternity and newborn care;• Mental health/substance use disorder services, incl. behavioral health

treatment;• Prescription drugs;• Rehabilitative and habilitative services and devices;• Laboratory services;• Preventive and wellness services and chronic disease management; and• Pediatric services, including oral and vision care.

“Premium Assistance/Subsidies”

• Federal subsidies – payments to insurance companies to subsidize lower-income individuals in state-based exchanges

• Subsidies are not for those eligible for Government programs (Medicaid)• Subsidies are not for those eligible for affordable group coverage• Potentially more than 50% of U.S. households could qualify (BLS statistic)• Dependent on the income, age and family size –subsidy can be substantial• The subsidy helps lower-income people between 100% and 400% of

Federal Poverty Level (FPL) purchase a silver level plan (70% plan)• Only available through the Individual Exchanges (not SHOP)• Application is lengthy and will require verification of citizenship

Small Employer Impacts (2-49)

Small Employers do not have to offer health coverage to their employees. If coverage is offered – it must

meet Minimum Essential Health Benefits

If the employer has 25 or fewer employees and average wages up to $50,000, it may be eligible for a health insurance tax credit – in 2014 credits will be limited

to Exchange-based coverage.

Large Employer Impacts (50+)• In 2014, the pay-or-play mandate requires employers of 50 FTEEs or more

to offer quality, affordable health insurance coverage to full time employees (those working on average at least 30 hours per week) and their families

Penalties apply if:– Employer does not provide coverage to all FT employees and any FT

employee gets subsidized coverage through exchange OR

– Employer does provide coverage and any FT employee still gets subsidized coverage through exchange

Large Employer Impacts (50+)

• Employers that do not offer coverage to all full-time employees:

– $2,000 per full-time employee (if one ee seeks subsidy)

– Excludes first 30 employees• Employers that offer coverage:

– $3,000 for each employee that receives subsidized coverage through an exchange

– Capped at $2,000 per full-time employee (excluding first 30 employees)

Things to consider NOW

1. Growth Plans – # employees now vs future?2. Are current benefits affordable? 3. Does current plan meet “minimum essential” reqs?4. Employee population – household income5. Role of benefits in attracting/retaining employees6. If not offering benefits, impacts of penalty

Ahhh haaaa haaa haaa haaa

Thank you for Participating!

Sue NelsonDirector of Business [email protected]

239-435-7101

Healthcare Reform Update

Robin Word, CPA, [email protected]

• Increased HI tax for high-earning workers• 3.8% surtax on unearned income• Higher threshold for medical deductions• Dollar cap on health FSA contributions• Retiree drug deduction eliminated• Fee on health plans• $500,000 comp deduction limitation• Excise tax on medical device manufacturers

TAX CHANGES TAKING EFFECT IN 2013

• Larger employer penalty for no health insurance• Individual mandate penalty• Refundable tax credit for low-income families• “Qualified health plans”/cafeteria plan option• Information reporting of employer health coverage• Excise tax on health insurance providers• Accelerated estimated tax payments large corps

TAX CHANGES TAKING EFFECT IN 2014

• High-cost plan excise tax

TAX CHANGE TAKING EFFECT 2018

The Affordable Care ActWhere do we go from here?

Lillian Chaves Moon, Jackson Lewis

Summary of Plan Benefits and Coverage (“SBC”)

• The SBC is a new disclosure requirement explaining each benefit package for which the participant is eligible – “mini-SPD”; applies to all group health plans.

• Effective the first day of the first open enrollment period that begins on or after 9/23/12; 1/1/13 for those who enroll outside of open enrollment (new hires).

• The requirement applies to both plans and insurers.• Insurers must automatically provide the SBC to the plan sponsor

prior to renewal and upon request.

29

SBC – Who Receives It and When?

• Must be provided to eligible employees, spouses and dependents.• At initial enrollment, open enrollment, upon request, and when

there is a material modification.• As soon as possible after a request, (including a request for special

enrollment) but no later than 7 days after the request.• At least 30 days prior to renewal/open enrollment.• At reenrollment, only the summary of the benefit package in which

the participant is enrolled must be provided.

30

SBC – Who Receives It and When?• Must be provided at least 60 days prior to any mid-year change

taking effect.• Can be provided in paper form or electronically if ERISA

requirements for electronic disclosure are met.• A plan that “willfully” fails to provide a summary may be fined up to

$1,000 for each failure; separate fine for each individual who doesn’t receive the summary.

• Separate tax penalties and civil fines under ERISA.

31

“Play or Pay”/“Shared Responsibility”

• Large employers (more than 50 full-time equivalent employees “FTEs” (30 hrs/wk)) in the previous year must offer adequate, affordable coverage to “substantially all” of their full-time employees and dependents or potentially pay a penalty.

• Dependents generally include children under age 26; spousal coverage not required to avoid the penalty.

• Effective January 1, 2014. Transition rule for non-calendar year plans.• Two different potential penalties apply if any full-time employee is

certified to receive a premium tax credit or cost sharing reduction when accessing coverage through a state exchange.

32


o “No Offer Penalty”: If an employer does not offer minimum essential coverage to substantially all (95%) of its full-time employees and their dependents, the penalty is $2,000/yr for each full-time employee in excess of 30 full-time employees; the penalty is based on the number of all full-time employees.

o “Inadequate Coverage Penalty”: If an employer offers minimum essential coverage that is unaffordable (if the employee’s required contribution exceeds 9.5% of the employee’s household income) or coverage that doesn’t provide minimum value (pays for at least 60% of plan

33


benefits without regard to co-pays, deductibles, and employee premiums), the penalty is $3,000/yr for each full-time employee that receives the premium credit on the exchange, but no more than the $2,000/yr penalty that would apply if no coverage was offered.

• The penalty is a non-deductible excise tax that is due to increase over time; the tax-advantage to the Employer of being able to deduct the cost of providing medical coverage must be considered when deciding whether it is “cheaper” to provide the coverage (play) or pay the penalty (pay).

34


• The penalty is assessed on an employer-by-employer basis (not imposed on all members of the controlled group).

• Employees who have access to affordable, minimum essential coverage under an employer plan will not be eligible for a premium tax credit.

• Deciding whether to Play or Pay will involve more than just a monetary decision; consider company culture, workplace morale, recruitment, and unionization efforts.

• Anti-Abuse Rule.

35


• Individual mandate penalty – for individuals with no coverageo 2014 - greater of $95 per uninsured person or 1% of household

income over 4x poverty level. o 2015 – greater of $325 per uninsured person or 2% of

household income over 4x poverty level.o 2016 and beyond – greater of $695 per uninsured person or

2.5% of household income over poverty level.

36

Applicable Large Employer• Penalties for the failure to offer coverage are only applicable to

those employers who employ at least 50 Full-Time or Full-Time equivalent (“FTE”) employees in a year.

• Full-time is defined as at least 30 hours per week or 130 hours per month.

• Hours of Service include hours for which the employee was paid but did not work (vacation, holidays, leave).

• Must count part-time employees for purposes of determining full-time equivalents (but coverage for part-time employees is not necessary to avoid penalties).

37

Applicable Large Employer

• Determined monthly by aggregating all hours of part-time employees for the month (up to 120) and dividing by 120; average the hours across the months in the year.

• The determination of whether an employer is a large employer is made on a controlled group basis.

• Special rule for “seasonal employees” - If seasonal employees cause an employer to exceed the 50 employee threshold to be considered a “large employer,” seasonal employees may be excluded if they were employed for 120 or fewer days in the year.

• Transition rule for 2013 under which the determination can be based on any consecutive 6-month period in 2013 (instead of the whole calendar year).

38

Full-Time Employees• Once you have determined you are a large employer subject to the

Play or Pay requirements, you must determine who is a full-time employee who must be offered coverage.

• The IRS has issued safe harbor rules to assist with determining who is considered a full-time employee – “Measurement Periods” and “Stability Periods”.

• Variable Hour Employees are employees for whom it cannot be determined whether they will average 30 hours a week.

• If a Variable Hour Employee averages 30 hours a week over a “Measurement Period”, he is treated as a full-time employee for the following “Stability Period”.

39

Full-Time Employees• The employer can select the length of the Measurement Period,

between 3-12 consecutive calendar months.• Measurement and Stability Periods must be applied in a uniform

and consistent basis, but may use different periods for (1) collectively bargained and non-collectively bargained employees; (2) each group of collectively bargained employees covered by a separate collective bargaining agreement; (3) salaried and hourly employees and (4) employees whose primary hours of employment are in different states.

40

Full-Time Employees

• Administrative Period – the Employer can set a period of up to 90 days between the end of the Measurement Period and the beginning of the Stability Period to determine who is eligible and notify eligible employees; the Administrative Period must overlap with the prior Stability Period.

• Ongoing Employees: o The Employer selects the months for the “Standard Measurement

Period”. o If an employee averages 30 hours/week during the Standard

Measurement Period, he must be offered coverage for the entire Stability Period that follows; the Stability Period must be at least as long as the Standard Measurement Period and no less than 6 months.

41

Full-Time Employees• New Employees

o The Employer selects months for the “Initial Measurement Period”; it can begin on any date between the employee’s start date and the 1st day of the month following the start date.

o If an employee averages 30 hours/week during the Initial Measurement Period, he must be offered coverage for the entire Stability Period that follows; the Stability Period for new employees must be the same length as the Stability Period for ongoing employees.

42

Minimum Value• The Plan must pay for at least 60% of total allowed costs for

benefits covered under the Plan.• IRS and HHS will provide a “minimum value calculator” that looks at

certain plan information, i.e. deductibles and co-pays to determine whether the plan provides minimum value.

43

Affordability• To avoid a potential penalty, coverage must be “affordable”.• This means the employee’s portion of the premium for individual

coverage only must be no more than 9.5% of his household income.• Three safe harbors to determine affordability:

o W-2 – the premium is no more than 9.5% of Box 1, W-2 wages; determined at year end.

o Monthly Pay Rate – the employee’s portion of the premium is no more than 9.5% of monthly pay or hourly rate of pay times 130 hours.

44

Affordabilityo Federal Poverty Line – the employee’s portion of the premium is

no more than 9.5% of the most recent federal poverty line for a single individual as of the first day of the plan year.

45

Non-Discrimination

Certain plan design options that may be considered discriminatory:– Charging different premiums.– Different eligibility/waiting periods.– Providing employer-paid post-termination coverage to

executives.– Penalty for noncompliance:

• Excise tax imposed on the plan sponsor equal to $100/day for each employee who is affected (i.e. each non-highly compensated employee who does not receive the benefit or coverage).

46

Non-Discrimination Requirements• Only applies to Non-Grandfathered plans.• Effective date delayed pending future guidance.• Requires that plans not discriminate in favor of “highly

compensated individuals” in terms of coverage and benefits.• Waiting for guidance, but will be similar to how nondiscrimination

rules under Code section 105(h) currently apply to self-insured plans.

47

Wellness Plans• Maximum premium discount you can offer for rewards for health-

based standards (e.g., low BMI, or cholesterol) is increased to 30% effective 1/1/14 (current limit 20%); HHS has discretion to increase limit to 50%.

• Other rewards for merely participating in a program do not count towards the limit.

• Can structure incentive as a reward or penalty (can charge smokers more subject to 20%/30% limit); must offer a reasonable alternative for those who are medically incapable of meeting the standard (such as attending a smoking cessation class for someone who is certified as addicted to smoking) to allow the employee to avoid the penalty.

48

Other Misc. Mandates to Keep in Mind

• Health FSAs limited to $2,500 (1/1/13).• Employers will have to provide notice to employees about health

exchanges and eligibility for premium credits (deadline extended until future guidance is issued). Timing of distribution of notices is expected to be late summer or fall to coordinate with open enrollment period for exchanges; model language expected.

• Plans will need to limit waiting periods to enroll to 90 days (1/1/14).• Fully-insured, small employer plans will have to offer “minimum

essential benefits” (2014).

49


• In addition to uninsured individuals, small employers (generally those with less than 50 employees) can purchase insurance for their group through the state exchange; some states may allow employers with up to 100 employees to purchase through exchange.

• Exchanges will offer fully-insured contracts that provide minimum essential health benefits at different levels of coverage (Platinum, Gold, Silver, Bronze).

• Employers with at least 50 FTEs must submit annual health insurance coverage returns to the IRS (1/1/14).

50


• Patient Centered Outcomes Trust Fund Fees – Plans will have to pay an annual fee ($1 (subject to increase) times the average number of covered lives) to fund research to determine effectiveness of various forms of medical treatment.

• Employers with more than 200 employees that offer health insurance will have to automatically enroll new full-time employees in coverage (with the opportunity to opt-out); Much like auto-enrollment in 401(k) plans; (effective once regulations are issued).

51


• Cadillac Plan Tax (2018) –o 40% excise tax on employers providing coverage valued in excess

of $10,200 for individual coverage and $27,500 for family coverage.

o Higher limits for certain high-risk professions (law enforcement, firefighters, construction, mining).

52

Why Should I Care• Negative consequences to employees.• Negative monetary consequences to employer.• Fiduciary Responsibility to:

Act prudently.In the exclusive interest of plan participants.

• Opportunity to redesign plan/benchmark.• DOL Audits beginning on compliance with requirements already in

effect.

53

What to Do Now• Discuss health care reform changes with your broker, insurer, third

party administrator, and legal counsel.• Create a timeline for ensuring each mandate is properly

implemented.• Assess your workforce; decide whether you will “Play or Pay”.• Make sure you have reliable systems in place to accurately track and

monitor hours of service.• Even if a particular mandate has not yet gone into effect, often

“good faith” compliance is required.

54

What to Do Now• Conduct a Self-Audit – ensure you have all documents to

demonstrate compliance with the Act.• Make sure you are keeping good records.• All of these requirements are constantly evolving. Consult legal

counsel with any questions and to review any plan materials.

© Copyright 2013. Please note that these materials were delivered in connection with a verbal panel presentation on February 27, 2013, and are incomplete without the accompanying oral comments. Since these materials and related discussions are informational and educational in nature and represent the speakers’ own views, attendees should consult with legal counsel before taking any actions and should not consider these materials or discussions thereabout to be legal or other advice. Professional advice should be obtained before attempting to address any legal situation or problem.

55

Agenda 1.Supreme Court Decision – what it means 2.ACA Timeline 3.What’s Already Done? 4.What’s...

Documents

Transcript of Agenda 1.Supreme Court Decision – what it means 2.ACA Timeline 3.What’s Already Done? 4.What’s...