Key Compliance Issues for School Districts March 17, 2011
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Transcript of Key Compliance Issues for School Districts March 17, 2011
© 2011 McNees Wallace & Nurick LLC
Key Compliance Issues for School Districts
March 17, 2011
YEAR #2 OF HEALTHCARE REFORM:
Eric N. Athey Jennifer E. WillCo-Chair, Labor & Employment Member717.581.3708 [email protected] [email protected]
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PPACA AT A GLANCE Patient Protection and Affordable Care Act
Passed 3/23/10 Some Near-Term Highlights:
• Unpaid breaks for nursing mothers (2010)• Dependent care extended to age 26 (2010-11)• Pre-existing condition exclusions phased out (2010-
14)• Lifetime & Annual Maximum Benefit Limits phased
out (2010-14)• FSA/HRA/HSAs: OTC reimbursements nixed (2011)• Extension of nondiscrimination rules to fully insured
plans (unknown)
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PPACA AT A GLANCE PPACA Long-Term Requirements (2014)
• Free Rider Penalty: Up to $2085 annual penalty for families who don't have coverage
• No Coverage Penalty for Employers: $2000/yr per employee
• Unaffordable Coverage Penalty for Employers: $3000 per subsidized employee
• Free Choice Vouchers• Cadillac Tax (2018)
Issue: How much of PPACA will survive the 2012 elections?
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PPACA COMPLIANCE AND YOUR CBA:WHERE TO BEGIN?
Determine whether your plan is grandfathered ("GF")
Determine cost/benefits of maintaining GF status
Determine timing & costs of PPACA mandates
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PPACA COMPLIANCE AND YOUR CBA:WHERE TO BEGIN?
Develop a bargaining strategy that ensures compliance without breaking the bank(i.e. what does district get in exchange for new benefits)
Develop a bargaining strategy that complies with bargaining obligations
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GRANDFATHERING AND COLLECTIVE BARGAINING AGREEMENTS (CBAS)
General Rule: ALL collectively bargained plans must comply with PPACA requirements when they become effective BUT fully-insured CBA plans may retain grandfathered status longer than non-CBA plans
Fully Insured collectively bargained plans in effect before 3/23/10 remain grandfathered until expiration of CBA
Issue: Scope of "binding contract" exception?
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GRANDFATHERING AND COLLECTIVE BARGAINING AGREEMENTS (CBAS)
Once CBA expires, any post-3/23/10 changes to fully-insured collectively bargained plans will be analyzed under general GF rules
Change of carriers or of TPA during current term does not eliminate grandfathered status
Grandfathered status determined on a benefit package level rather than plan-wide
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 1: CBA (July 1, 2009-June 30, 2012) Employee Health Contributions Per
Month: 2009-10: $1002010-11: $1102011-12: $120
Still Grandfathered?
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 2: CBA (July 1, 2008-June 30, 2012) Employee Health Contributions Per
Month:2008-09: 7%2009-10: 8% 2010-11: 9% 2011-12: 10%
Still Grandfathered?
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 3: CBA (July 1, 2008-June 30, 2011) Employee Health Contributions Per
Month:2008-09: $1002009-10: $1002010-11: The % equivalent of $100
Still Grandfathered?
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 4: CBA (July 1, 2008-June 30, 2012) No changes in cost-sharing – but
indemnity plan option is eliminated in 2010-11
Still Grandfathered?
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 5: CBA (July 1, 2008-June 30, 2012) No changes in cost-sharing or
benefits – but plan moves from self-insured to fully insured in 2010-11
Still Grandfathered?
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 6: CBA (July 1, 2008-June 30, 2013) The following cost-sharing changes are
implemented during the CBA – which ones defeat GF status:
• 7/1/08: Exclude benefits for treatment of morbid obesity
• 7/1/09: Reduce "supplemental insurance" pool from $300 to $200 per year
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APPLYING THE GRANDFATHERING RULES TO CBAS
Hypothetical 6 (cont'd):• 7/1/10: Annual Deductible increased from
$200 to $400• 7/1/11: Office visit co-pay increase from $10 to
$20• 7/1/12: District decreases its contribution to
indemnity plan premium from 90% to 75%
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BARGAINING CONSIDERATIONS FOR PRE-2014 REQUIREMENTS How important is GF status to your
District? Should you renegotiate (or delay)
concessions to maintain GF status? What is the cost of losing GF status
relative to desired cost-sharing concessions?
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PROJECTED PPACA COMPLIANCE COSTS
Extension of Dependent Coverage to Age 26: 0-3% premium increase
Elimination of Lifetime Limits and Gradual Elimination of Annual Limits: 0-1.5% premium increase
Remaining Requirements Effective for Plan Years Beginning on or after 9/23/10: No anticipated impact
*Source: Aetna, "Impact of Health Care Reform in 2010
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NEGOTIATING THE RIGHT LANGUAGE
Minimize changes to CBA; Address Amendments in Plan Document/SPDs
Annual/Lifetime Limits – OK in CBA with proper context language
Can you charge more for older dependents – No.
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NEGOTIATING THE RIGHT LANGUAGE
What if older dependents have other coverage – Irrelevant unless GF plan
Amend FSAs, HSAs and HRAs to eliminate OTC
Amend FSAs to implement $2500 limit
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NEGOTIATING THE RIGHT LANGUAGE
Preventive Health Services – Avoid listing in CBA
Appeals Procedure – Avoid listing in CBA
Reopener language as needed for compliance
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BARGAINING CONSIDERATIONS FOR 2014/2018 REQUIREMENTS What are the 2014/2018
requirements? Will the 2014/2018 requirements be
repealed? How will they impact school
districts? What are the key bargaining
considerations?
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WHAT ARE THE 2014/2018 REQUIREMENTS?
Free rider penalty for employees No coverage penalty: $2,000 x [# of
FTEs – 30] Unaffordable coverage penalty:
$3,000 x # of subsidized FTEs [if employee cost of coverage exceeds 9.8% of gross household income]
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WHAT ARE THE 2014/2018 REQUIREMENTS?
Free choice vouchers [for employees earning less that 400% FPL and cost of coverage is b/t 8%-9.8% of gross household income]
Cadillac Tax [Eff. 2018 – 40% excise tax on plan costs over $10,200/$27,500]NOTE: $27,500 is threshold amount for all levels of coverage under multi-employer plan
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WILL THE 2014/2018 REQUIREMENTS BE REPEALED? 20 State Attorney Generals sue to block
2014 Provisions 6 States pass laws purporting to reject
2014 Provisions Republicans now control House Who will act first, Congress or the
Supreme Court? In the meantime, we must address the
2011 requirements
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GENERAL BARGAINING STRATEGIES FOR THE UNKNOWN
Short-term CBAs expiring pre-2014 Long-term CBAs with salary/benefit
reopeners pre-2014 "Me too" provisions to match
administrative or support staff (with a floor)
Negotiate waiver of duty to bargain as necessary to comply and/or avoid penalties
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SPECIFIC 2014/2018 STRATEGIES
Free Rider Penalties Strategy: Negotiate provision
prohibiting waiver of coverage or allowing waiver only with proof of other coverage
No Coverage Penalty Strategy: Compare current coverage to
plans on Exchange Consider sharing of savings if
elimination of coverage is feasible
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SPECIFIC 2014/2018 STRATEGIES
Unaffordable Coverage Penalty Strategy: Knowing gross household
income (GHI) will be key to avoidance
Implement GHI reporting requirement Mutually explore benefit of
eliminating coverage Tighten up opt-out payments
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SPECIFIC 2014/2018 STRATEGIES
Free Choice Vouchers Strategy: Control cost-sharing to stay
below 8% of GHI Monitor cost/benefits of exchange
plans Consider negotiating elimination of
coverage Trigger elimination of coverage on
threshold number of employees seeking vouchers?
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SPECIFIC 2014/2018 STRATEGIESCadillac Tax (eff. 2018) Reopener provision to avoid imposition of
tax Elimination of benefits triggered by
imposition of tax Unilateral reduction of benefits provision
to avoid imposition of tax Greater employee contributions triggered
by imposition of tax Union/Employee indemnification if tax
imposed
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WILL THE CADILLAC TAX BE DRIVING YOUR DISTRICT IN 2018?
2010 Avg. District Pseudo Rate*: • Employee Only: $6996/yr or 68.5 of
$10,200• Family: $16,344/yr or 60% of $27,500• Avg. % Premium Increase for Districts
since 2006: 10.65% Where will the avg. pseudo rate be in
2018?*Source: Lancaster County School District Data
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ANTICIPATED AVERAGE PSEUDO-RATE FOR 2018:
Assuming 10.65% increase per year• Employee Only: $15,719
Excess of $5,519/yr subject to 40% tax (or $2,207 tax per employee per year)
• Family: $36,726Excess of $9,226/yr subject to 40% tax (or $3,690 tax per employee per year)
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QUESTIONS
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