CONSTANGY B ROOKS & S MITH, LLP 1 Health Care Reform: Employers’ Responsibilities Timothy A. Davis...

CONSTANGYBROOKS & SMITH, LLP

1

Health Care Reform:Employers’ Responsibilities

Timothy A. Davis

913.205.8647

[email protected]


2

Health Care Legislation

• President Obama signed the Patient Protection and Affordable Care Act (“PPACA”) on March 23, 2010

• Reconciliation Act signed on March 30, 2010 to make certain changes to PPACA

• Combined, these acts constitute what is known as health care reform

• Future changes?• Repeal?


3

Overview of Impact on Employers

• Health care reform will impose significant new responsibilities on plan sponsors

• Requirement to amend plan documents• Many new reports and administrative

requirements• Employers will have very little time to

adjust to the new requirements• Many changes effective as early as

September 23, 2010


4

Wellness Initiatives

• Wellness Initiatives– Significant push to expand wellness offerings– Establishment of a national agency to

coordinate federal prevention, wellness and public health activities

– Creation of a grant program to offer delivery of prevention and wellness services aimed at strengthening prevention initiatives, reducing chronic disease rates and addressing health disparities


5


• Wellness Initiatives– Elimination of cost-sharing provisions for

preventive services in Medicare and Medicaid [2010]

• Medicare recipients would receive a comprehensive health risk assessment and personalized health prevention plan

– Incentives for Medicare and Medicaid participants to complete wellness behavior modification programs [2010]


6


• Wellness Initiatives– Grants for up to five years to small employers that

establish wellness programs [2011]– Wellness program rules modified to increase

permitted financial incentives (premium discounts, waivers of cost-sharing requirements, etc.) from 20% to 30% of cost of coverage (and up to 50% if deemed appropriate) [2014]

• Employers must still offer a reasonable alternative standard for employees for whom it is unreasonably difficult or inadvisable to meet the wellness standard


7

Grandfathered Plans

• Plans in place on March 23, 2010 that have not been significantly changed

• Avoid certain of the mandates, and certain of the design features required in 2014

• Regulations describe changes that will cause loss of grandfathered status:– Elimination of all or substantially all benefits

for a particular condition


8

Grandfathered Plans

• Loss of grandfathered status (cont.):– Increase in percentage cost-sharing– Increase in fixed-amount cost-sharing (other

than a copayment) if greater than medical inflation

– Increase in fixed-amount copayment if in excess of greater of (i) $5 increased by inflation, or (ii) increase in inflation plus 15%

– Decrease in contribution rate by employer of more than 5%


9

Health Care Changes – 2010

• Elimination of lifetime limits• Elimination of annual limits• Coverage of children up to age 26• Rescission of coverage only for fraud or

misrepresentation• Elimination of pre-existing condition

exclusiong for children under 18• Prohibition limiting eligibility only to highly

compensated employees


10


• To implement the new age 26 dependent coverage requirement, employers will have to notify plan participants that their children may be eligible for coverage

• The new regulations require a “special enrollment” (similar to the current HIPAA special enrollment)

• Likely will be done in regular open enrollment, but the rule could apply to other children (e.g., who lose other coverage)


11


• Prohibition of requirement for prior authorization or increased cost sharing for emergency services

• Prohibition of requirement for authorization or referral for ob/gyn care provided by specialist

• Requirement of coverage for preventive services and immunizations without cost sharing


12


• Employers must implement an effective internal appeals process for coverage determinations and claims

• The appeals process must comply with any applicable State law requirements

• If no State process, or health plan is self-insured, then HHS will deem the existing claims procedures to be in compliance


13


• Covered individuals must be allowed to select their primary care provider from any available participating primary care provider

• This applies to pediatricians in the case of children

• No distinction between in network and out of network physicians


14


• Reinsurance Program– Temporary measure for employers providing

health insurance coverage to retirees over age 55 who are not eligible for Medicare

– Would reimburse employers 80% of retiree claims between $15,000 and $90,000

– Payments would be used to lower costs for enrollees in the employer plan


15


• Small Business Tax Credit [2010-2014]– Who would receive the small business tax

credit?• Employers with 25 or fewer employees and

average annual wages of less than $50,000 that provide group health coverage

• For tax years 2010-2013, employer would receive tax credit of up to 35% of contribution toward health insurance premium if employer contributes at least 50% of total premium cost or 50% of a benchmark premium

• Employers with 10 or fewer employees and average annual wages of less than $25,000 would be eligible for the full tax credit


16


• Small Business Tax Credit [2010-2014]– Tax-exempt small employers meeting the

requirements would also be eligible for a tax credit of up to 25% of the employer’s contribution to the employee’s health insurance premium

– For tax years 2014 and later, eligible small businesses that purchase coverage through an insurance exchange will receive a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium

– This tax credit would be available for two years


17


• Over the counter (“OTC”) drugs not allowed in health reimbursement arrangements (“HRAs”) or cafeteria plan medical flexible spending accounts (“FSAs”)

• OTC drugs may be reimbursed from a health spending account (“HSA”), but will be taxed


18


• The employer must disclose the value of health benefits provided to employees on their Forms W-2


19


• Insured group health plans must report annually on the percentage of premiums spent on clinical services

• If plans spend less than 85% of premiums on clinical services (80% for small plans), the plan must rebate the excess to the participants


20


• Public Option– What is the public option?

• Health insurance plan sponsored by the Federal Government

– Why a public option?• A way to hold insurance companies accountable

for the costs passed on to consumers• However, detractors argue a government-

sponsored health insurance plan would kill free market competition between insurance companies

– Public option lost out to health insurance exchanges


21


• Health Insurance Exchanges [2011-2017]– The creation of state-based insurance exchanges is

viewed as a way to provide a more organized and competitive marketplace for consumers to purchase health insurance

– The insurance exchanges would offer a choice of health plans and provide consumers with standardized information regarding benefit levels and costs associated with each plan

– Would also provide administrative mechanisms for enrolling participants and for adjudicating claims and processing consumer complaints


22


• Health Insurance Exchanges [2011-2017]– Office of Personnel Management required to

contract with insurers to offer at least two multi-state plans in each insurance exchange• At least one plan would be offered by a non-profit

entity• The other plan would not provide coverage for

abortions outside those allowed by federal law• Each multi-state plan would be licensed in each

state and must meet qualifications of a qualified health plan


23


• Health Insurance Exchanges [2011-2017]– Would also create the Consumer Operated

and Oriented Plan (“CO-OP”)• Used to foster the creation of non-profit, member-

run health insurance companies in all 50 states to offer qualified health plans

• Would create four categories of plans plus a separate catastrophic plan to be offered through the insurance exchange and in the individual and small group markets


24


• Health Insurance Exchanges [2011-2017]– State-based American Health Benefit Exchanges and

Small Business Health Options Programs (“SHOP”) Exchanges will be created, which would be administered by governmental agencies or non-profit entities

– Would allow individuals and small employers with up to 100 employees to purchase qualified coverage

– Employers with more than 100 employees would be able to purchase coverage in the SHOP Exchange [2017]

– States would be allowed to form regional exchanges or have more than one exchange to operate in a state so long as each exchange serves a distinct geographic area


25


• Nothing• Time out for elections?


26


• Cafeteria Plan Health Care Spending Accounts– Limitation on the amount of contributions to

flexible spending accounts• Participants would be limited to contributing no

more than $2,500 annually• Limit would be increased for inflation for future

years


27


• Employers will need to adjust their payroll systems to include the new 0.9% Medicare tax on both employees and the employer (in addition to the current 1.45% tax on each)

• The new tax applies to a single employee with compensation greater than $200,000, or an employee who is married and files jointly where the family income is greater than $250,000


28


• No pre-existing condition (“PEC”) exclusion for adults

• No waiting periods > 90 days• Plan must offer “essential health benefits”

package to avoid employer penalty


29


• Waiting Periods– Generally capped at 90 days– Employers that impose a waiting period

before employees begin coverage would be required to pay:

• $400 for any full-time employee in a 30-60 day waiting period

• $600 for any full-time employee in a 60-90 day waiting period


30


• Employers must provide notice to employees about the availability of coverage through the State sponsored health insurance exchanges


31


• Employers must report annually to HHS information about whether essential minimum health coverage has been offered to its employees

• The employer must also provide a notice to each individual whose name is included in the annual notice to HHS


32


• Employers with more than 50 employees must report annually to the Internal Revenue Service whether minimum essential coverage is offered through an “eligible plan”

• A notice must be given to each employee whose name is included in the notice to the IRS


33


• Wellness programs that are designed to promote healthy behavior may impose a reward/punishment of up to 30% of the premium for the employee’s coverage

• The current reward/punishment limit under a wellness program is 20%

• HHS may determine that it is appropriate to raise the limit to 50%


34


• Free Choice Voucher– Employers that offer group health coverage

would be required to provide vouchers to employees making less than 400% of the Federal Poverty Level (currently $10,830) whose share of the total premium exceeds 8% but less than 9.8% of their income and who choose to enroll in a plan offered in a state insurance exchange


35


• Free Choice Voucher– Voucher amount must equal what the employer

would have otherwise paid to provide coverage under the employer’s plan

– Voucher can be used by the employee to offset the cost of premiums in insurance exchanges

– Employers who provide free choice vouchers would not be subject to play or pay penalties for employees who enroll in the insurance exchange


36


• Automatic Enrollment– Employers with more than 200 employees will

be required to automatically enroll employees in the employer’s group health plan(s)

– However, employees may opt out of the group health plan(s)


37


• Any employee who is automatically enrolled in the health plan must receive a notice of the enrollment, and an explanation that the employee may choose to opt out of the plan


38


• Employer Mandate: Play or Pay– General aim of health care reform is to

encourage employers to offer group health plan coverage to employees or pay a penalty tax (“play or pay”)

– This feature is central to President Obama’s goal of health care reform and is provided for in both PPACA and reconciliation bill


39


• Employer Mandate: Play or Pay– The “play” option is presented as involving

employer “contributions” to insurance, however, the money is coming from what would be employees’ wages

– Employers with 50 or fewer employees would be exempt


40


• Employer Mandate: Play or Pay– Employers who offer coverage must either:

• Provide coverage that is “qualifying coverage” and pay at least 60% of the cost, or

• Pay the lesser of $3,000 for each employee receiving a premium credit, or $2,000 for each full-time employee

– Employers who don’t offer coverage must pay $2,000 for each full-time employee, excluding the first 30 employees


41


• Individual Mandate [2014-2016]– Those without health insurance coverage

would be required to a pay penalty tax of the greater of $695 per year, up to a maximum of three times that amount per family ($2,085), or 2.5% of household income

• The penalty would be phased in accordingly:– $95 in 2014, or 1.0% of taxable income– $325 in 2015, or 2.0% of taxable income– $695 in 2016, or 2.5% of taxable income


42


• Individual Mandate [2014-2016]– Beginning after 2016, the penalty will be increased

annually according to cost-of-living adjustment– Exemptions would be granted for: financial hardship;

American Indians; religious objections; those without coverage for less than three months; undocumented immigrants; incarcerated individuals; if the lowest cost plan option exceeds 8% of the individual’s income; and, if the individual has income below the tax filing level


43


• The plan must offer an essential health benefits package to be a qualified plan (and avoid the taxpayer penalty)

• The required features:– Minimum level of coverage (described below)– Provide employer-paid benefits of at least

60% of the full actuarial cost of the plan– Limit annual cost-sharing under the plan to

the annual HSA limits (currently $5,950 for individual and $11,900 for family)


44


• Minimum coverage must include:– Ambulatory patient services– Emergency services– Hospitalization– Maternity and newborn care– Mental health and substance abuse– Prescription drugs– Rehabilitative services and devices– Laboratory services– Preventive and wellness services– Pediatric services


45


• Excise Tax on “Cadillac” Plans– Insurers must pay a 40% tax on the amount a

health plan’s total annual premiums increase above:

• $10,200 for individual plans• $27,500 for family plans• Amounts indexed for inflation beginning in 2020

– Unions were instrumental in getting this delayed for an additional 5 years


46

Surprise Provisions?

• Nutrition labeling of standard food items at chain restaurants

• Reasonable break time for nursing mothers

• During first year after birth of child• Opportunity to express breast milk• Place other than bathroom, shielded from

view and free from intrusion• Do not need to compensate for break• Not applicable if < 50 employees and

hardship


47

QUESTIONS?

CONSTANGY B ROOKS & S MITH, LLP 1 Health Care Reform: Employers’ Responsibilities Timothy A. Davis...

Documents

Transcript of CONSTANGY B ROOKS & S MITH, LLP 1 Health Care Reform: Employers’ Responsibilities Timothy A. Davis...