Experience, Commitment, Results

Federal Health Care Reform The impact on individuals, employers, and our health insurance coverage…

National Worksite Benefit Group

Patient Protection and Affordable Care Act (PPACA)

• Most sweeping healthcare reform law in U.S. History

• Amended by the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Bill”)

• Law impacts:• Insurance Market Reforms• Employer Responsibilities• Individual Responsibilities

Insurance Market Reforms:

2010: Coverage (Grandfathered Plans

Included):• Coverage for dependents to age 26• No annual or lifetime maximums for certain benefits• No cost sharing on certain preventive services

Market Reforms:• Minimum Loss Ratio (MLR) reporting and rebating (LG-

85%, Ind + SG-80%)• Pre-existing exclusions under age 19 not allowed (high

risk pools)• Retiree coverage reimbursement• HHS annual review of “unreasonable increases”

Insurance Market Reforms:

2011:

2012:

• Over the Counter (OTC) medications no longer eligible for reimbursement through FSAs, HSAs, and HRAs

• Tax on non-qualified HSA distributions increases from 10% to 20%

• Federally subsidized LTC program (CLASS Act)

• Medicare Advantage payments frozen

Insurance Market Reforms:

2013: • FSA contributions limited to $2,500 (inflation

adjusted after 2013)• Medical Device Tax: 2.3% on manufacturers and

importers of certain medical devices• Comparative Effectiveness Tax: $2 per covered

individual annually• Medical Expense Deductibility: For individual

income tax returns, floor raised from 7.5% AGI to 10%

Insurance Market Reforms:

2014: • Health Insurance Exchanges established• “Essential Benefits” defined• Guarantee Issue, no pre-x exclusions• Annual Fee on health insurance providers starting

at $8 billion in 2014, increases to $14.3 billion by 2018

• Medicaid eligibility expands

2011:• W-2 Reporting: must report value of employer sponsored

health benefits (postponed to 2012)• Begin automatic deductions for CLASS Act (unless opt-out)

2012:• 1099 Reporting: New requirement for business-to-business

transactions of $600 or more• Summary of Benefits that meet new reporting standards (4

page maximum, 12 point font minimum)• Report to secretary of DHHS regarding whether plans

meet certain criteria (health outcomes, patient safety, etc.), report must be provided to all plan participants at open enrollment

Employer Responsibilities

2013:• Elimination of Deduction for Part D Subsidy • Medicare Payroll Tax increase: 0.9% increase on those with

income in excess of $200k ($250k for joint-filers), also new 3.8% tax on investment income

2014:• New hire waiting periods no greater than 90 days• Employer mandate for firms with 50+ employees

Employers that DO NOT offer coverage:– PT equivalents also calculated– $2,000 fine per employee (1st 30 excluded) if one

employee buys subsidized coverage through the exchange

Employer Responsibilities

2014:Employers that DO offer coverage:– Coverage must meet new standards (60% minimum actuarial

value)– Contributions must result in “affordable” coverage for

employees (employees contributions not to exceed 9.5% of family income)

– $3,000 fine per employee receiving subsidized coverage if employer does offer coverage

– Must offer Free Choice Voucher for employees required to contribute between 8% and 9.8% of household income when under 400% FPL (voucher equal to highest employer contribution for group plan)

* Free Choice Voucher applies to all group plans* Employers cannot deduct any tax they pay

Employer Responsibilities

2018:Excise Tax on “Cadillac Plans”:– 40% excise tax on coverage in excess of $10,200

individual, $30,950 family– Indexed to CPI (expect creep)– Multiple values go into calculation including:

• ER HSA contributions (likely includes EE pre-tax contributions)• HRA contributions (full value)• FSA contributions (EE + ER)• Pre-tax supplemental premiums

* Consider reporting requirements

Employer Responsibilities

– Full credit- 10 or fewer employees, $25,000 or lower average wage• Phases out from 10-25 employees and $25k-$50k average salary)

– Maximum credit- 50% employer premiums (or the benchmark premium)

– Two phases:• Up to 35% for 2010-2013• Up to 50% for 2014 and 2015 (must purchase through exchange)

– Claim on tax return at the end of the year– Tax Exempt companies eligible for reduced subsidy (25%

phase 1, 35% phase 2)– Taking the credit reduces the amount of the deduction

employers can take for employer paid health insurance premiums

Small Employer Health Care Tax Credit

Individual Responsibility:2014:

• All individuals must purchase “minimum

creditable” coverage• 2014- fee is $95 or 1% of income• Increases to $695 or 2.5% of income by 2016• Indexed to inflation thereafter

• Refundable Health Care Premium Tax Credit• Sliding scale subsidy for those between 100%-

400% FPL• Must be a U.S. citizen• Advanced payments available

Other Considerations:• Many details will emerge as regulations are

written

• We don’t know what amendments may come to address practical implications

• Volatile political landscape

Questions?Joel Allumbaugh

National Worksite Benefit Group(207)623-1110 ext 201joel@nwbgroup.com