Healthcare Reform – What Employers Need to Know An Informative Seminar for Employers of All Sizes...

Healthcare Reform – Healthcare Reform – What Employers Need to KnowWhat Employers Need to Know

An Informative Seminar for Employers of All An Informative Seminar for Employers of All SizesSizes

Presented by Presented by National PEO LLC,National PEO LLC,

Nexus Partners Insurance LLC & Nexus Partners Insurance LLC & Ogletree Deakins, Nash, Smoak & Stewart P.C.Ogletree Deakins, Nash, Smoak & Stewart P.C.

January 30, 2013January 30, 2013

DisclaimerDisclaimer

Health Care Reform is still evolving and subject to Health Care Reform is still evolving and subject to change. What we will tell you today is correct to the change. What we will tell you today is correct to the best of our knowledge as of this moment but is not a best of our knowledge as of this moment but is not a comprehensive discussion of all aspects of the Health comprehensive discussion of all aspects of the Health Care Reform. We are not giving legal advice, not even Care Reform. We are not giving legal advice, not even the attorney is giving legal advice. Certain the attorney is giving legal advice. Certain explanations have been simplified for explanations have been simplified for understandability. There will be exceptions to many understandability. There will be exceptions to many provisions we explain. If you are a National PEO provisions we explain. If you are a National PEO client, you may contact us for assistance with any client, you may contact us for assistance with any aspect of Health Care Reform. If not, please contact aspect of Health Care Reform. If not, please contact your legal counsel or CPA or health insurance carrier.your legal counsel or CPA or health insurance carrier.

Patient Protection and Patient Protection and Affordable Care ActAffordable Care Act

• Signed by Obama on March 23, 2010• Enacted October 23, 2010• Also know as

– PPACA– Affordable Care Act (ACA)– Health Care Reform (HCR)– Obamacare

PPACA Provisions Already in EffectPPACA Provisions Already in Effect

• No pre-existing conditions under age 19

• Adult child coverage until age 26

• Lifetime dollar limits prohibited

• Annual dollar limits restricted ($2,000,000 in 2013)

• Donut Hole closed

• Preventive services with no cost sharing

• Small business tax credit

• Summary of Benefit Coverages (SBC)

• OTC medications not eligible for FSA, HRA, HSA

• Minimum Medical Loss Ratio

• Small business wellness grants

• 60 day advance notice on material modifications

• Women’s preventive services with no cost sharing (2013)

• High earner tax (2013)

• FSA contributions limited to $2,500 (2013)

• W-2 reporting of health care costs (2013)

• HealthCare.gov

PPACA Provisions Already in Effect (cont.)PPACA Provisions Already in Effect (cont.)

Patient Protection and Patient Protection and Affordable Care ActAffordable Care Act

2014 & Beyond

Essential Health Benefits (EHB)Essential Health Benefits (EHB)• Preventative and wellness services• Chronic disease management• Prescription drugs• Lab services• Ambulatory patient services• Emergency services• Hospitalization• Rehabilitative services• Maternity and newborn care• Pediatric care (includes oral and vision care)• Mental health and substance abuse disorder services

• Self-insured plans have some flexibility with what constitutes EHB

Essential Health Benefits (EHB)Essential Health Benefits (EHB)

Provisions related to plan benefits go into effect as of 2014 renewal date. If no existing plan, then January 1, 2014.

Essential Health Benefits (EHB)Essential Health Benefits (EHB)

Maximum Out Of Pocket Cost

$6,250 Individual

$12,500 Family

Underwriting CriteriaUnderwriting Criteria

2013 and priorMedical underwriting

-Including dependentsPre-existing conditionsGenderAgeTobacco UseLocationClaims HistoryNo guaranteed issueSIC Code

2014 and beyondAge (3:1)Location (Adjusted Community Rating) Tobacco Use (1.5:1)

No medical underwritingNo pre-existing conditionsGuaranteed issue

Large group plans expected to be able to use group claims experience

Health Care ExchangesHealth Care Exchanges

Virtual insurance store where individuals and small business will be able to purchase coverage directly from

carriers.

Health Care Exchanges (cont.)Health Care Exchanges (cont.)

• Can be set-up and operated by the State or Federal Government but act the same.

• Arizona elected to allow Feds to operate the exchange in Arizona

• Oklahoma ex rel. Pruitt v. Sebelius, No. 11-CV-30 (E.D. Oklahoma, Sept. 19. 2012)

Types of ExchangesTypes of Exchanges

Public

-Small Business

-Individual

Private

Types of Exchanges (cont.)Types of Exchanges (cont.)

Public - Small Business• Small Business Health Options Program (SHOP)

– Not all States will have them– Companies will be able to buy group policies– Limited to employers with up to 50 employees– Acts as an insurance agent but DIY on-line– Probably won’t be open by 1/1/2014


Public – Individual- Employers required to notify employees of existence of exchanges in

writing by late summer 2013 (actual date TBD)

- Open enrollment begins October 2013

- Individual can buy policy and may be eligible for financial assistance

- Individuals can purchase through the exchange even if they have the opportunity to participate in their employer’s plan

- On-line transaction but Navigators will have brick and mortar offices

NavigatorsNavigators

Individuals paid by the exchanges to

guide individuals to the best coverage

options. Similar to function of insurance

agent today, but compensated by the exchange

rather than the insurance company.

Actuarial ValueActuarial Value

For a given population, averages historical usage and cost for all members of that population and applies them to individuals in similar populations. Does not limit costs for any one participant. Only predicts average or expected cost for entire population.

Coverage LevelsCoverage Levels

• Platinum: 88% - 92% Actuarial Value (90%)• Gold: 78% - 82% Actuarial Value (80%)• Silver: 68% - 72% Actuarial Value (70%)• Bronze: 58% - 62% Actuarial Value (60%)

Balance paid by insured through deductibles, co-pays and co-insurance

Subsidies and CreditsSubsidies and Credits

• Available only through the Exchanges• Not available if employee is eligible for affordable

employer coverage• Not available if eligible for Medicaid• Premium Tax Credits and Cost Sharing Subsidies• Available to individuals and families up to 400% of

the Federal Poverty Line

Subsidies and Credits (cont.)Subsidies and Credits (cont.)

2012

Federal Poverty Line (FPL) 400%• Individuals $10,834 $43,336• Family of 2 $14,570 $58,280• Family of 3 $18,310 $73,240• Family of 4 $22,050 $88,200


Premium Subsidies

For individuals up to 400% of FPLa/k/a PremiumTax CreditIncome X Income Level % = Maximum Premium*

*For second lowest cost Silver plan

Courtesy of Humana

Subsidies and Credits (cont.)Subsidies and Credits (cont.)Premium SubsidiesPremium Subsidies

Income LevelUp to 133% of FPL133% - 150% of FPL150% - 200% of FPL200% - 250% of FPL250% - 300% of FPL300% - 400% of FPL

Premium as a % of Income2% of income3% - 4% of income4% - 6.3% of income6.3% - 8.05% of income8.05% - 9.5% of income9.5% of income

Courtesy of Humana

Subsidies and Credits (cont.)Subsidies and Credits (cont.)Premium Subsidy ExamplePremium Subsidy Example

Assumptions:Single personIncome $28,735Second Lowest Silver Plan

Cost $5,733/yr.2014 FPL - $11,494 (est.)$28,735 / $11,494 = 250%

Subsidy Calculation:

Income X Income Level = Max.Premium$28,735 X 8.05% = $2,313

Premium Tax Credit = $3,420

Courtesy of Humana


Cost-Sharing Subsidies

For individuals up to 250% of FPL

Provides for higher actuarial value plan for same premium. Protects insured from high out of pocket costs.

Courtesy of Humana


Cost-Sharing Subsidies

Income Level Actuarial Value

100% – 150% FPL 94%

150% – 200% FPL 87%

200% - 250% FPL 73%


Private• Large employers• Defined contribution plans• Employees pick from selection of plans• Evolving concept• No subsidies available

Pay or PlayPay or Play

• Large Employers

• Individuals

Pay or PlayPay or Play (cont.)(cont.)Large Employer

Employer Mandate

• a/k/a Employer Shared Responsibility

• Pay penalty for failure to provide affordable coverage (“Pay”) or provide an employee health insurance plan that provides Minimum Value Benefits (MVB) to Full Time employees and meets maximum cost requirements (“Play”).

Pay or PlayPay or Play (cont.)(cont.)Large Employer (cont.)

• 50 or more Full Time Equivalents during the Measurement Period

• FTE based on 30 hours per week• Includes PTO hours• Excludes owners seasonal workers under 120 days• Variable hour employees <30 hours/week count as

fractions of an FTE each based on 30 hour weeks• Best estimate of hours to be worked if no prior

history

• Common law employer (IRC Sec.6056)

Pay or PlayPay or Play (cont.)(cont.)

Large Employer (cont.)

• Controlled group (as defined by IRCSec. 414(b), (c) & (e))

• Generally 80% direct or indirect ownership• Includes Affiliated Service Groups• Seek assistance of your tax accountant• Applicable Large Employer Members can “pay

or play” differently but the 30 “free” employees must be pro-rata apportioned to all members in the controlled group

Pay or PlayPay or Play (cont.)(cont.)Measurement Period

• Standard Measurement Period as opposed to Initial Measurement Period

• Period of time beginning with effective date (2014 renewal date) and counting backwards from 3 to 12 months at employer choosing

• Exception for calendar year plans: Any consecutive 6 month period of 2013 beginning no later than July 1, 2013 and ending no earlier than 90 days prior to the implementation date.

• Stability period can still be 12 months if exception is used.

Pay or PlayPay or Play (cont.)(cont.)Large Employer Example

• Assumptions:• Employer A has 90 employees, including 20 salaried managers

@ 40 hrs• 70 hourly employees• Calendar year insurance policy• 6 month Measurement Period (July 1 – December 31, 2013)

• Step 1 – Separate employee out into FT and not necessarily FT• Managers and employees that consistently work over 30 hours /

week• Each one counts as an FTE

Pay or PlayPay or Play (cont.)(cont.)Large Employer Example (cont.)

• Step 2 – Eliminate seasonal employees• Each one counts as 0 FTE

• Step 3 – Variable Hour Employees• Add hours worked for all such employees by week or month or

pay period• Any hour worked in excess of 30 per week or 120 per month are

rounded down to 30 or 120• Divide by number of weeks or months in measurement period (13

or 6 in this example)

EE# July Aug Sep Oct Nov Dec Total FT Hrs FTE

1 140 125 138 120 135 147 805 780 1.03

2 75 50 60 40 90 42 357 780 .46

3 80 80 80 80 80 80 480 780 .61

4 170 50 50 125 70 60 400 780 .51

5…70 5,800 5,800 5,800 5,800 5,800 5,800 34,800

51,480

44.61

Total 47.22

Variable Hour EmployeeFTE Calculation before 30 hour limit

EE# July Aug Sep Oct Nov Dec Total FT Hrs FTE

1 110 115 120 85 120 117 667 780 .85

2 75 50 60 40 90 42 357 780 .50

3 80 80 80 80 80 80 480 780 .67

4 120 50 50 120 70 60 470 780 .62

5…70 5,700 5,600 5,700 5,600 5,600 5,600 33,800

51,480

43.33

Total 45.97

Variable Hour EmployeeFTE Calculation after 30 hour limit

Pay or PlayPay or Play (cont.)(cont.)Large Employer Example (cont.)

FTE= 20 Full Time

45 Variable Hour

65 FTE

20 Full Time employees and any Variable Hour Employees who equal an FTE must be offered health insurance.

Pay or PlayPay or Play (cont.)(cont.)Stability Period

• Period of time beginning with effective date (2014 renewal date) and counting forwards equal to the length of the measurement period but not less than 6 months

• Represents the period of time that full time employees will be entitled to participate in employer health insurance plan even if they don’t work 30 hours/week

• Expiration of Stability Period is a qualifying event

Pay or PlayPay or Play (cont.)(cont.)Administrative Period

• Period of time beginning with the end of the measurement period and ending at the beginning of the stability period

• Allows employers time to determine which employees are full-time and which are not

• Cannot exceed 90 days

Pay or PlayPay or Play (cont.)(cont.)Penalties

• Coverage Not Offered

• Less Than Minimum Value (MVB)

• Coverage Not Affordable (MEC)

– Penalties are payable monthly

Pay or PlayPay or Play (cont.)(cont.)Minimum Value Benefits (MVB) vs.

Minimum Essential Coverage (MEC)

• MVB = EHB for at the 60% AV (Bronze Level)

• MEC = MVB for which employee’s premium cost for employee only coverage is less than 9.5% of employee’s household income

Pay or PlayPay or Play (cont.)(cont.)Minimum Essential Coverage (MEC)

Safe Harbors

• W-2 box 1 – Net of Section 125 premium costs– Don’t know it until year is over

• Rate of Pay– Project for year

• Federal Poverty Line


Coverage Not Offered

• $2,000/yr per FT employee (>30) in excess of 30• Can exclude offering coverage to 5% of FT

employees• Triggered when 1 employee receives subsidy from

the exchange• Coverage needs only to be offered for employee and

children under age 26 (not spouse). Can’t be mandatory to enroll.

– In my example no penalty due because less than 30 Full Time employees


Coverage Not Minimum Value (MVB)Coverage Not Affordable (MEC)

• $3,000/yr per FT employee who obtains coverage from exchange and receives a subsidy

• Maximum penalty equal to $2,000/yr per FT employee so can never exceed no coverage penalty

Pay or PlayPay or Play (cont.)(cont.)

Small Employer

• Less than 50 FTE

• No employer mandate

• Small groups must still include EHB in any offering

Pay or PlayPay or Play (cont.)(cont.)Individual

Individual Mandate

• Obtain health insurance coverage through employer or from the exchange (“Play”) or pay a tax penalty (“Pay”).

Pay or PlayPay or Play (cont.)(cont.)Individual – Penalties

Per Individual

• 2014 - greater of $95 or 1% of income above tax filing threshold ($9,750 in 2012)

• 2015 - greater of $325 or 2% of income above tax filing threshold

• 2016 - greater of $695 or 2.5% of income above tax filing threshold

• Half off for dependents under 19

Pay or PlayPay or Play (cont.)(cont.)Individual – Penalties

Maximum per Family (300%)

• 2014 - greater of $285 or 1% of income above tax filing threshold ($9,750 in 2012)

• 2015 - greater of $975 or 2% of income above tax filing threshold

• 2016 - greater of $2,085 or 2.5% of income above tax filing threshold

Pay or PlayPay or Play (cont.)(cont.)Newly Hired Employees After Transition

Large Employers

• Full Time employees start benefits after regular waiting period

• Variable hour employees subject to Initial Measurement Period, Administrative Period and Stability Period

• Safe Harbor provided while employee is in Initial Measurement Period or Administrative Period

• Each employee must be tracked individually

• No waiting period for variable hour employees

• Employees will be re-measured as part of the Standard Measurement period but cannot lose benefits until after their initial stability period is over.

Healthcare ReformHealthcare Reform

Other Considerations

• Non-discrimination rules will apply (regulations have not been issued)

• Employers with over 200 employees will have to automatically enroll all Full Time employees at time of hiring (2015)

• Cadillac Plan Tax (2018)• 40% of earned excess benefit value, as define

Healthcare ReformHealthcare ReformOther Considerations (cont.)

• New Medicare Withholding Tax (2013)• .9% on wages over $200K for individuals and $250

for MFJ• Can only withhold on employee, who might not actually

owe when he/she files return MFJ. Or 2 people making $130 each may owe without having anything withheld

• No employer match

• Unearned Income Medicare Contribution Tax (2013)• Individuals over $200K or MFJ over $250K• 3.8% tax on lesser of Net Investment Income or modified

AGI

• 1.45% X 2 = 2.9% + .9% = 3.8%


Other Considerations (cont.)

• Employers must provide time and place for nursing mothers to express milk

• Maximum 90 day waiting period to qualify for benefits

• New Fees• PCORI - $2 per covered life• Transitional Reinsurance Fee - $63 per covered life• Annual Health Insurer Fee



• Reporting Requirements• Large employers will be subject to health insurance reporting

requirements regarding the health insurance coverage provided to their workforce.

• New penalties for failure to provide this information to the IRS.

• Retiree Prescriptions • No longer tax deductible to the extent of the federal

nontaxable subsidy received for reimbursement.

• Currently benefits were reimbursed tax free but deductible as paid.



• Unhealthy lifestyle surcharges • Up to 30%• Employee can avoid surcharge for a year

by attending a HIPAA certified wellness program

• Proposed Regulations

Healthcare Reform – Healthcare Reform – What Employers Need to KnowWhat Employers Need to Know

An Informative Seminar for Employers of All An Informative Seminar for Employers of All SizesSizes

Presented by Presented by National PEO LLC,National PEO LLC,

Nexus Partners Insurance LLC & Nexus Partners Insurance LLC & Ogletree Deakins, Nash, Smoak & Stewart P.C.Ogletree Deakins, Nash, Smoak & Stewart P.C.

January 30, 2013January 30, 2013

Healthcare Reform

The Future of Health Insurance

Presented by

Hans G. OlssonSenior Broker

Healthcare Reform – What Employers Need to Know An Informative Seminar for Employers of All Sizes...

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Transcript of Healthcare Reform – What Employers Need to Know An Informative Seminar for Employers of All Sizes...