ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company.

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ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

Transcript of ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company.

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

HEALTH CARE REFORM

What You Need to Do from Now to 2015

This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Summarize the key provisions affecting plan sponsors

• Provide action steps for each• Review long-term plan sponsorship options

AGENDA

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SETTING THE STAGE

• 1,000 pages of legislation drafted and enacted very quickly

• Rules are still being developed– Federal agency guidance– Role of states

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Cornerstone year of Health Care Reform– State Exchanges– Individual mandate– Federal premium tax credit to purchase

Exchange coverage– “Employer responsibility”

2014

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• States must build Exchanges or federal government will provide default

• Bronze, silver, gold, and platinum options• Coverage will be guaranteed issue, no

preexisting condition limits, no individual medical underwriting

STATE EXCHANGES

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• Must obtain minimum essential coverage or pay a tax, beginning January 1, 2014

• Penalty is capped at average cost of bronze level Exchange coverage

• Exceptions if coverage is unaffordable, for low income taxpayers, and short coverage gaps

INDIVIDUAL MANDATE

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• May use to purchase Exchange coverage• Available to certain individuals with household

income up to 400% FPL• Credit not available if eligible for:

– Adequate/affordable employer coverage– Government provided coverage

FEDERAL PREMIUM TAX CREDIT

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Penalty may apply if:– No coverage offered to full-time employees and

dependents– Coverage is “unaffordable” or “inadequate”– Employee enrolls in Exchange coverage and

qualifies for a federal premium tax credit• Effective January 1, 2015

FREE RIDER PENALTY

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Transitional relief for non-calendar year plans

Large employer :– 50+ full time equivalents– Members of a controlled group treated as single

entity to determine “large employer”

FREE RIDER PENALTY (CONT’D)

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Full-time employees:– 30+ hours/week or 130+ hours/month– Includes non-work time for which pay is due

FREE RIDER PENALTY (CONT’D)

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Variable hour and seasonal employees:– Optional “measurement” and “stability” periods– Look-back over measurement period to calculate

actual hours worked– Measurement period may be 3-12 months– Stability period must be as long as measurement

and not less than 6 months

FREE RIDER PENALTY (CONT’D)

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Special rules for educational institutions:– Two methods for determining full-time employees

• Use “measurement period” excluding employment breaks

• Treat employee as credited with hours for employment breaks

FREE RIDER PENALTY (CONT’D)

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Penalty for failing to offer coverage :– 1/12th x $2,000 per month/per employee (after 1st

30 employees)– Must offer to “substantially all” full-time employees– Includes children to age 26; does not include

spouses

FREE RIDER PENALTY (CONT’D)

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Penalty if available coverage is inadequate or unaffordable:

– 1/12th x $3,000 per month (per employee who qualifies for a federal premium tax credit)

– Inadequate: plan pays <60% allowable costs– Unaffordable: employee pays >9.5% household

income for employee-only coverage

FREE RIDER PENALTY (CONT’D)

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Affordability examples:– Coverage is affordable– Coverage is unaffordable

• Enroll in coverage anyway• Enroll in spouse’s plan• Enroll in Exchange

FREE RIDER PENALTY (CONT’D)

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• Mechanics:– Notice– Timing – Method of payment

FREE RIDER PENALTY (CONT’D)

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FREE RIDER PENALTY

Questions?

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• Plan sponsor must provide a Summary of Benefits and Coverage (SBC)

• Effective for annual enrollments/plan years beginning on or after September 23, 2012

• Distribute with annual enrollment materials, following special enrollment events, and upon request

SUMMARY OF BENEFITS AND COVERAGE

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• Government provided template– Fully insured – get SBC from insurer– Self-funded – employer fills in template– In either case, the employer is responsible

• Must also provide Uniform Glossary upon request

SUMMARY OF BENEFITS AND COVERAGE (CONT’D

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ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Employee contributions are limited to $2,500• Effective plan years beginning on or after

January 1, 2013• Applies per individual• Must amend plan by December 31, 2014

HEALTH FSA CONTRIBUTION LIMIT

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STAND-ALONE HRAS

• Stand-alone HRAs violate prohibitions on annual and lifetime limits

• Employees must elect HRA and other coverage (not just have the option to elect)

• HRAs may not be used to pay for individual market insurance coverage

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• Two components effective January 1, 2013– Additional 0.9% Medicare tax on wages– New 3.8% Medicare contribution tax on unearned

income

MEDICARE TAX

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• Generally applies to income over $200,000 for individuals, $250,000 for couples

• Employers must withhold 0.9% tax once employee’s wages exceed $200,000

MEDICARE TAX (CONT’D)

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• Plan sponsors and insurers must pay a fee to help fund comparative effectiveness research

• Fee must be paid by the following July 31st – File tax form 720– First forms due July 31, 2013

PCORI FEE

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• Amount of the fee is based on the average number of covered lives– $1 per individual for 1st plan year ending after Sept.

30, 2012– $2 per individual for the next year– Increases in subsequent years

PCORI FEE (CONT’D)

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• Employers subject to FLSA must provide information about the state Exchanges– One or more employees– Generally firms with $500,000+ annual business– Plus hospitals, schools, and government agencies– Internet compliance tool is available to determine

applicability

EMPLOYEE EXCHANGE NOTICE

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• Notice must be provided:– To all current employees (including full-time and

part-time) by October 1, 2013– To all subsequent new hires in 2013, at the time of

hire and for new hires in 2014 within 14 days

EMPLOYEE EXCHANGE NOTICE (CONT’D)

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• May be paper or electronic (if satisfy DOL safe harbor rules)

• Two model notices were provided• Model COBRA notice was also updated

EMPLOYEE EXCHANGE NOTICE (CONT’D)

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2014 MANDATES

• All plans must comply– Waiting periods– Annual limit prohibition– Preexisting condition limits– Coverage for adult children

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

2014 MANDATES

• Additional requirements for non-grandfathered plans– Essential health benefits (insured small group

plans)– Clinical trials– Limits on deductibles (insured small group plans)– Limits on out-of-pocket maximums– Provider nondiscrimination

Copyright 2013 American Fidelity Assurance Company

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Limited to fraud or intentional misrepresentation of material fact

• Plan document must allow and must provide notice

• May want to consider dependent verification reviews

RESTRICTIONS ON RESCISSIONS

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• Fully-insured, non-grandfathered plans may not discriminate in favor of highly compensated individuals

• Self-funded plans are subject to similar rules, regardless of grandfathered status

• Effective for plan years beginning on/after 9/23/2010; IRS enforcement is delayed

NONDISCRIMINATION

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• Insurers and plan sponsors of group health plans must pay fee to HHS

• Applies for 3 years beginning 2014– HHS estimate for 2014: $63/covered life

EXCHANGE REINSURANCE FEE

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• Originally January 1, 2014, one year delay• Employers with 50+ full-time employees must

report extensive details about the employer’s health coverage and workforce to the IRS

• Employers are also required to submit the same information to each employee plus contact information

FREE RIDER PENALTY REPORTING

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• Future regulations are expected to establish the form and content– First reports will be due January 2016– Employers must collection information beginning

January 1, 2015• Must provide a written statement to each

employee named in the return each year

MINIMUM ESSENTIAL COVERAGE REPORTING

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• Plan sponsors with 200+ full-time employees must automatically enroll newly eligible full-time employees

• Must provide notice • Employees may opt out• Effective date to be established by regulations

AUTOMATIC ENROLLMENT

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• Effective 2018: 40% non-deductible excise tax • Imposed on aggregate value of health

coverage that exceeds threshold amounts• Applies for specified health coverage

CADILLAC TAX

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• General thresholds: – $10,200 individual coverage– $27,500 family coverage

• Indexed for inflation– CPI-U: 3-4% per year– Medical inflation: 7-10% per year

CADILLAC TAX (CONT’D)

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ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Assess the impact of the Free Rider Penalty• Obtain/complete/distribute SBCs• Amend Health FSA if necessary• Consider status of stand-alone HRAs and

possible revision • Prepare to withhold additional Medicare tax

ACTION PLAN

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ACTION PLAN (CONT’D)

• Prepare to pay PCORI fee• Send Exchange notices• Grandfathered plans

– Reassess eligibility and value– Gather documentation

• Plans losing grandfathered status– Adopt additional plan design mandates– Revise employee communication

Copyright 2013 American Fidelity Assurance Company

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

• Comply with 2014 mandates• Budget for Exchange Reinsurance Fee• Watch for guidance • May want to begin considering cost-

management strategies or changes in health coverage

ACTION PLAN (CONT’D)

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

WHAT DO YOU DO NOW?

1. Understand your responsibilities

2. Assess whether costs are sustainable

3. Understand your choices

4. Design an implementation strategy

5. Implement your plan

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CHOICE SPECTRUM

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

HEALTH CARE REFORM MADE EASY

• AFAS is ready to assist:– HCReducation.com– http://benefitsblog.americanfidelity.com– VIP emails and monthly webinars– Health Care Reform consulting (packages, retainer

arrangements, and custom solutions)

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

HEALTH CARE REFORM MADE EASY

• AFAS is ready to assist (cont'd):– Time management software to assist with the Free

Rider Penalty – Variable hour employee billing– Notice compliance support and fulfillment– Resources to help communicate plan changes to

employees

ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company

Thank you!This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.