Health Care Reform Update Presented by: Andy Impastato Vice President – Legal & Compliance.

Health Care Reform Update

Presented by:Andy ImpastatoVice President – Legal & Compliance

This publication is provided for educational and informational purposes only and does not contain legal advice. You should not act on any information provided without consulting legal counsel. To comply with U.S. Treasury Regulations, we also inform you that, unless expressly stated otherwise, any tax advice contained in this communication is not intended to be used and cannot be

used by any taxpayer to avoid penalties under the Internal Revenue Code.Proprietary and Confidential. Not for Distribution

Agenda

• Political Outlook• Marketplace (Exchange)• Individual Mandate• Employer Mandate• Plan Design Changes• Wellness Rules• Action Items



Political Outlook

• Awareness of PPACA?– 42% of Americans unsure if still law– 12% of Americans believe Congress repealed

law• 39 “show” votes to repeal in House since law’s

passage

– 7% of Americans believe Supreme Court struck down law



Political Outlook

• Administration under attack?– Medicaid expansion– Exchange (Marketplaces)– SHOP delayed– Discrimination rules delayed– Employer mandate delayed– Automatic enrollment delayed



Political Outlook

• Will PPACA be de-funded?– House passed bill last week

• Includes request to de-fund PPACA in its entirety

– Senate will now substitute its own version• Stripping defunding language

– Final vote on CR expected this weekend– Individual mandate delay?



Political Outlook

• Mid-term elections– Senate makeup

• 52 Democrats• 2 Independents• 46 Republicans

– House makeup• 234 Republicans• 201 Democrats



Political Outlook

• Mid-term elections– PPACA will be front and center (again)– Job growth– Super majority?

• Senate + 21 seats• House + 56 seats



Marketplace

• Overview– Now called “Marketplace”– Effective 1/1/14– Mississippi’s will be federally run– Vision is to be a one-stop shop for consumers– Vision is to decrease costs through

competition and subsidies– Carrier participation is weak– Plan design and network sufficiency



Marketplace

• Notice– Disclosure Requirement

• Employer is responsible• Deadline is October 1, 2013• Description of services provided by Marketplace• May be eligible for subsidy• Consequences for dropping employer coverage• Model Notices available• Penalty?



Individual Mandate

• Overview– Individuals must maintain “minimum essential

coverage” or pay a penalty– Effective for 1/1/14– Penalty is greater of percentage of salary or

flat fee• 1% (2014), 2% (2015) and 2.5% (2016-)• $95 (2014), $325 (2015) and $695 (2016-)

– Certain exemptions– Penalty assessed on individual tax filing



Employer Mandate

• Overview – Only applies to large employers– Requires large employer to offer coverage

that meets certain requirements or pay a penalty

– Original effective for January 1/1/14– Government recently announced delay– No penalties will be assessed until 2015



Employer Mandate

• Big (“Sledge Hammer”) Penalty – Mechanics

• “Large” employers that fail to “offer” “minimum essential coverage” to “substantially all” of its “full-time employees” and their “dependents” will be subject to a $2,000 per employee penalty if any full-time employee goes to an Exchange and qualifies for a subsidy. Penalty is calculated based on the total number of full-time employees (minus 30).



• “Large Employer” Status– Average of 50 or more full-time employees on

business days– Look at preceding calendar year (2014)– “Full-time” defined as 30 or more hours of service per

week– Part-time employees represent FTEs (total hours /

120)– Aggregation rules (controlled group) apply

Employer Mandate



Employer Mandate

• “Offer” of Coverage• Employee must have an effective opportunity to

accept coverage at least once during the plan year– Electronic offer permissible– Facts and circumstances– No “offer” for a month unless coverage available for

every day of month



Employer Mandate

• “Minimum Essential Coverage”– Employer-sponsored GHP plan offered on the

small or large group market



Employer Mandate

• “Substantially All”– An employer will be deemed to have offered covered

to “substantially all” full-time employees and their dependents if:• Coverage is offered to 95% of full-time employees and their

dependents (or, if greater, 5 employees)• Failure to offer to 5% need not be inadvertent (i.e., planning

opportunity)• Does not eliminate penalty for 5%



Employer Mandate

• “Full-Time Employees”• Part-time employees are excluded• Full-time employees only

– 30 “hours of service” per week– 130 “hours of service” per month– Hours worked v. “hours of service”

• Common law definition of “employee”• Full-time status measured monthly on an ongoing

basis• Safe harbors mitigate impact of month-to-month

analysis



Employer Mandate

• Variable Hour Employees – Measurement period

• 3 to 12 months• Standard (ongoing employees) (SMP)• Initial (new employees) (IMP)

– Administrative period • Optional • Up to 90 days

– Stability period • Generally same as SMP or IMP



Employer Mandate

• Variable Hour Employees– Transition relief is gone– All large ER’s must comply with mandate on

1/1/14– ER’s with VHEs will commence safe harbors

in 2013• 10/3/13 to 10/1/14 SMP• 10/1/14 to 12/31/14 Administrative period• 1/1/15 to 1/1/16 Stability period



Employer Mandate

• “And Their Dependents”– The employer is required to offer coverage to

“dependents”• Does not include spouse

– Spousal carve out?

• Does include son, daughter, stepson, stepdaughter, adopted child, child placed for adoption, and foster children up to age 26)



• Example – No coverage (or coverage but not to

substantially all):• Employer A has 100 full-time employees. • Employer A does not offer coverage to any of its

employees. • Employer A owes $2,000 for each full-time

employee minus 30, so Employer A owes a total penalty of $140,000 (100 – 30 = 70; 70 x $2,000 = $140,000)

Employer Mandate



Employer Mandate

• Little (“Tack Hammer”) Penalty– Mechanics

• Large employers that offer coverage will be subject to a $3,000 per employee penalty if the coverage is either not “affordable” or does not meet “minimum value,” and as a result, any full-time employee qualifies for a subsidy. Penalty is calculated based on the number of full-time employees who obtain a subsidy (with a maximum penalty cap).



• “Affordable”• Employee’s premium for single coverage is greater

than 9.5% of employee’s household income– W-2 safe harbor– Rate of pay safe harbor– FPL safe harbor

Employer Mandate



Employer Mandate

• “Minimum Value”• Employer pays less than 60% of total allowed

costs • Not a contribution rate• Tests

– MV Calculator – Safe Harbor Checklists (waiting)– Actuary



• Example– No “affordable” coverage

• Employer B offers health coverage and has 100 full-time employees, 20 of whom receive a tax credit and enroll in the Exchange.

• Employer B owes $3,000 for each employee receiving a tax credit, so it owes a penalty of $60,000. (20 X $3,000 = $60,000)

• The penalty is capped at the amount Employer B would have to pay if it offered no coverage at all.

Employer Mandate



• Questions/Issues– Transition Relief?

• Fiscal Year or 1/1/14 for everyone

– FTE going from 30 to 40?– Subsidies on Federal Exchanges?

• Judicial scrutiny

– Difference in Eligibility for Subsidies• Americans v. non-Americans

Employer Mandate



Plan Design Changes

• Probationary Periods– Effective for plan years beginning on or after

1/1/14– Cannot exceed 90 days– 90 days exact– Calendar days (not business days)– EEs currently serving probationary period– Cumulative hours standard OK– Substantive eligibility standard OK



• Cost Sharing Limits– Out of pocket

• Effective 1st day of plan year beginning on or after 1/1/14

• GF plans excluded• $6,350 / $12,700• Everything accrues to OOP

– Deductible, Co-payments, Rx Co-payments

• Transition relief for plans using separate TPAs

Plan Design Changes



Plan Design Changes

• Prohibition on pre-existing condition exclusions

• Prohibition on annual limits• Clinical Trials



Wellness Rules

• Overview– Effective 1st day of plan year beginning on or

after 1/1/14– Codified existing HIPAA guidelines– Increased employer incentives



Wellness Rules

• Overview– Participatory programs– Health contingent programs

• Activity based• Outcome based

– ER has flexibility in design



Wellness Rules

• Health-Contingent Programs– Limited reward

• 30% or 50% if tied to tobacco use– Annual qualification– Reasonable in design– Reasonable alternative

• Difference between activity and outcome-based programs– Plan disclosure

• Availability of reasonable alternative• Physician accommodation• Contact information



• Between now and 1/1/15– Restructure part-time workforce– Independent contractor verification– Begin measurement periods– Compliance test wellness programs

• Affordability for tobacco-free programs

Action Items



Questions & Answers

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Health Care Reform Update Presented by: Andy Impastato Vice President – Legal & Compliance.

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Transcript of Health Care Reform Update Presented by: Andy Impastato Vice President – Legal & Compliance.