ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company.
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Transcript of 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
Full-time employees:– 30+ hours/week or 130+ hours/month– Includes non-work time for which pay is due
FREE RIDER PENALTY (CONT’D)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• Mechanics:– Notice– Timing – Method of payment
FREE RIDER PENALTY (CONT’D)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• Two components effective January 1, 2013– Additional 0.9% Medicare tax on wages– New 3.8% Medicare contribution tax on unearned
income
MEDICARE TAX
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
• 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)
ESB-2132-0913 Copyright 2013 American Fidelity Assurance CompanyCopyright 2013 American Fidelity Assurance Company
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
ESB-2132-0913 Copyright 2013 American Fidelity Assurance Company
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
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.