HealthCare Reform Compliance

Michael A. DiLorenzo Michigan Planners, Inc.

800-MPI-9235 www.miplanners.com

April 30, 2013

Previous Reform Changes

• In 2010 – Dependent coverage extended to include all dependents to age 26 – Removal of lifetime policy limits – Enhancement of Preventive Services – No Pre-Existing Condition limitations

• 2011 – Medical Loss Ratio Reporting – HSA early withdrawal penalty increased from 10% - 20%

• 2012 – Summary of Benefits and Coverages required (SBC) – Medical Loss Ratio Rebates

• Large groups – 85% / 15% • Small groups / individuals – 80% / 20%

– Enhanced Women’s Preventive Services

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What is Happening in 2013

• Mandatory W-2 Reporting of health insurance premiums is required for Employers who produce 250 W-2’s or greater. – If dental/vision is bundled with medical, then those premiums are

included as well – Amounts are included on spot DD of W-2

• Medicare payroll tax increases for high-wage employees – 1.4% to 2.35% – Applies to individuals earning over $200,000 and couples filing jointly

earning over $250,000 • Applies to amounts over above limits

• Notice of Public Marketplaces begin in late summer/fall – This has been postponed from the original date in March – Also will be required for any New Hire employees – Marketplace in lieu of “Exchange”

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What is Happening in 2013

• Annual Reporting of Health Insurance Coverage – Requires all large (50+) employers to submit an information return to

the IRS that includes some of the following information: • Name, date and employer ID number • Number of Full-Time employees for each month during the calendar year • Name, address and tax ID number of each FT employee and the months

during which they were covered under any health plan offered • Length of waiting period • Monthly premium for lowest cost option in each category

• Flexible Spending Accounts are capped at $2,500 annually – Employers should amend plan by January 1, 2014 – Employers can fund above the $2,500 – Annual Consumer Price Index increases anticipated

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What is Happening in 2013

• Comparative Effectiveness Fee is $1 annually per covered individual, not per contract, and expires in 2019 – Increases to $2 in 2014 - 2019

• “Play or Pay” Rules for Employer Mandate – Employers determine if they have 50 or more Full-Time Employees and

Full-Time Equivalents • Part-time employee hours are added for the month and divided by 120 to

determine Full-Time Equivalent EEs (FTE’s) – Employers with variable-hour employees (seasonal/part-time) need to

finalize the measurement, stability and administrative periods • 12-month measurement and stability periods are recommended

– Begin measuring variable-hour employees’ hours to determine eligibility for the 2014 plan year

– Ongoing employees and New Hire employees will have separate periods of measurement and stability

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What is Happening in 2013

• Controlled Groups – All employees of a controlled group are considered in determining if

an employer is “large” or “small” group – W-2 Reporting requirements are not based on a controlled group, but

each individual entity – Each individual entity of a controlled group is looked at with regards to

penalties under the employer mandate • Not based on a controlled group

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What is Expected to Happen in 2014

• Minimum Value – Employers with 50 or more full-time equivalent employees must

provide health insurance program that offers at least a 60% minimum value

• Minimum value tests are typically performed by the carrier – Small group employers (less than 50 FT) are not required to offer

coverage, however any coverage offered must hit metal levels – Metal levels include Bronze (60%), Silver (70%), Gold (80%) and

Platinum (90%)

• Affordability Clause – Coverage under an Employer-sponsored plan is deemed affordable

when the lowest cost plan’s single premium does not exceed 9.5% of the household income for that taxable year

“The Big Two”

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What is Expected to Happen in 2014

• Affordability Clause Safe Harbor Provisions – W-2 Wages: Employee’s share of the premium for self-only coverage

is less than 9.5% of his/her W-2 wages with that employer – Rate of Pay:

• Hourly Employees: Take the hourly rate x 130 hours for the month. Determine affordability based on 9.5% of the resulting wage amount

• Salary Employees: Monthly salary would be used – Federal Poverty Line: A plan will be affordable if the employee’s cost

for self-only coverage does not exceed 9.5% of the federal poverty line for a single individual

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What is Expected to Happen in 2014

• Tax Credits and Penalties – Employees can only access the premium tax credit on the Marketplace

if the employees’ share of the premium exceeds 9.5% of the household income and if the Employer does not provide minimum essential coverage

– If an employer does not offer any health care coverage, an annual penalty will be assessed in the amount of $2,000 per employee

• Penalty is not assessed on the first 30 employees – If an employer does not offer affordable coverage or the plan doesn’t

have minimum value, then the tax will be $3,000 annually for each full-time employee receiving the subsidy or $2,000 per employee (minus the first 30 employees), whichever is less

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Full-Time and Part-Time Employees

• Full-time employee – Employees who work 30 hours per week or 130 hours per month – New hire wait period cannot exceed 91st date of employment

• First of month following 60 days is recommended – Measurement testing is not required as long as hours are fixed

• Part-time employee – Employees with fixed hours per week that are less than 30 hours

(Example: 28 hours for each week throughout the year) – Employer not required to offer benefits – Measurement testing is not needed as long as hours do not fluctuate

• Hours of service includes paid leave – Vacations, holidays, leave for illness/disability, layoffs, jury duty

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How to Minimize Administrative Efforts

• Employers can eliminate variable-hour employees and deem all employees are either Full-Time or Part-Time Fixed. – This will eliminate the need for the measurement testing and

administrative tracking of variable-hour employees – Only the Full-Time employees would need to be offered coverage

• Employing only Full-time and Part-time Fixed employees would lessen the burden of Health Care Reform worries. – Pure FT + Pure PT Fixed = NO WORRIES

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Measurement, Administrative & Stability Periods

• Standard Measurement Period: Period of time used to determine whether a variable-hour employee has averaged at least 30 hours of service per week

• Administrative Period: Period of time after the standard measurement period that allows employer to determine which variable-hour employees are to be offered coverage and to enroll them into the group health plan – Maximum of 90 days

• Stability Period: Period of time when variable-hour employees who have been deemed FT must be treated as FT and offered coverage

• First of month start dates recommended to limit testing to 12 times per year, rather than potential 365 days

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Example 1: Ongoing Variable-Hour EES

• Safe harbor for determining status of Ongoing variable-hour employees (beginning in 2014, but measuring begins in 2013)

12 month standard measurement and stability periods January 1 renewal date

Standard Measurement Period

(11/01/12 – 10/31/13)

Stability Period

(01/01/14 – 12/31/14)

Admin Period (11/1/13 – 12/31/13)

Standard Measurement Period

(11/01/13 – 10/31/14)

Stability Period

(01/01/15 – 12/31/15)

Admin Period (11/1/14 – 12/31/14)

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Example 2: New Hire Variable-Hour EE • Safe harbor for determining status of new hire variable-hour employees, in

which employee is deemed FT during initial measurement period

• Part time employee is hired May 10, 2013. Initial measurement period begins first of month following DOH (June 1, 2013)

• Includes 30 day administrative period • Initial measurement period and initial admin period can’t be more than a

combined 13-months • If employee is still considered FT after standard measurement period,

then coverage would continue from 07/01/2015 – 12/31/2015

Initial Measurement Period

(06/01/13 – 05/31/14)

Initial Stability Period

(07/01/14-06/30/15)

Admin Period (06/01/14-06/30/14)

Standard Measurement Period

(11/01/13 – 10/31/14)

Stability Period

(01/01/15 – 12/31/15)

Admin Period (11/1/14 – 12/31/14)

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Example 3: New Hire Variable-Hour EE

• Safe harbor for determining status of new hire variable-hour employees, in which employee is deemed PT during initial measurement period

• Part time employee is hired May 10, 2013. Initial measurement period

begins first of month following DOH (June 1, 2013), in which they are considered PT. Coverage is not offered during Initial Stability Period

• During the initial measurement period, the standard measurement period begins. If considered FT during the standard measurement period, then the employee would start coverage effective January 1, 2015

Initial Measurement Period

(06/01/13 – 05/31/14)

Initial Stability Period (07/01/14-12/31/14)

Admin Period (06/01/14-06/30/14)

Standard Measurement Period

(11/01/13 – 10/31/14)

Stability Period

(01/01/15 – 12/31/15)

Admin Period (11/1/14 – 12/31/14)

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What is Expected to Happen in 2014

• Comparative Effectiveness Fee increases to $2 annually per covered individual, not per contract (Expires 2019)

• Wellness / Lifestyle programs rewards and incentives limit increases from 20% to 30%, ie. smoking incentive

• Premium rating will not include Industry Classification – Area groups with less than 50 enrolled – Does not affect Experience-Rated groups or Self-Funded groups

• Automatic Enrollment into Health Plan (Postponed beyond 2014) – Affects employers with more than 200 FT employees

• Accumulator / Integrated Copay– all copays, including flat dollar copays and prescription drug copays, will accumulate toward the out-of-pocket maximum to create a True-Out-of-Pocket Max

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2014 Key Reform Points to Retain

• Reform takes precedence over CBA benefit plans • Consider adding a reopener clause to union contracts to allow

for reform changes • When determining PA152 EE contributions, regardless of 20%

or Hard Cap election, the plan must pass affordability • Affordability rules state that the EE contribution cannot

exceed 9.5% of the lowest-paid EE’s wage, based on a 30-hour work week

• Affordability is based on the single premium of the lowest priced plan offered

• When it comes to our full-time EE mindset, remember 30 is the new 40!!

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Reform Changes in the Near Future

• 2016 – Definition of Small vs. Large Group Employers changes

• Threshold is increased to 100 employees

• 2018 – Cadillac Tax

• Imposes a 40% excise tax on plans with annual premiums that exceed $10,200 for individual coverage and $27,500 for family coverage

• The excise tax would apply to premium amounts that exceed the thresholds

• Assume an average of a 10% rate increase from 2013 to 2018, Employers with a single rate of $530 or more will be affected by the PPACA Cadillac Tax in 2018 and penalized 40% on the difference in cost between the $10,200 and their plans annual single cost

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Taxes and Fees Federal Insurance

Premium Tax

• 2014 • Annual tax that

funds premium subsidies and Medicaid expansion

• Based on fully insured net premiums

• Fully-insured group and individual, Medicare, self-funded stop-loss

• 2.5% - 4.0% PPO • .75% - 1.5% HMO

Comparative Effectiveness Fee

• 2013 - 2019 • Annual fee that

funds health outcomes and clinical effectiveness research

• $1 per covered ind. for 2013. $2 per covered ind. for 2014-2019

• Fully-insured group and individual, self-funded

• AKA Patient-Centered Outcomes Research Institute Fee

Reinsurance Fee

• 2014 - 2016 • Quarterly fee that

subsidizes individual market plan

• Per capita basis • Assessed January

2014 - 2016 • Fully-insured group

and individual, self-funded

• $5.25 PMPM estimated fee

Marketplace Fee

• 2014 • Monthly fee

applied to all plans purchased on the Marketplace

• 3.5% of monthly premium

• Small group (SHOP) and individual

• AKA Exchange User Fee

Risk Adjustment Fee

• 2014 • Annual fee that

funds the federal risk adjustment program

• $1 per member per year

• Small group (pooled) and individual

Projected Total Taxes PMPM: Self-Funded: $8-$10

Small Group (pooled): $22-$27 PPO $9-$13 HMO Large Group (pooled): $19-$24 PPO $11-$15 HMO

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Michigan Planners, Inc. Our NO COST value-added services include:

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• PA152 / Reform & PA106 Compliance • COBRA Administration • Summary Plan Descriptions • On-Line Billing Administration • Dedicated Service Representatives • Toll Free Claims Advocacy • Understandable Employee Communications • Customized Employee Handbooks • Employee Meetings & Open Enrollment Orientations • Annual Review & Recommendations • HRconnection® – Coming in July 2013

Contact Information

Michael DiLorenzo Michigan Planners, Inc.

mdilorenzo@miplanners.com Direct: 586-263-9001

42400 Garfield Road

Clinton Township, MI 48038 800-MPI-9253

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For additional questions regarding reform or if MPI can be of additional service to your municipality, please contact:

Legal Disclaimer

• Please note that the information provided in this presentation is not intended as legal advice. This is for general information purposes only.

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Questions

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