vice president / benefits specialist chris goff, cic, lutcf healthcare reform “what you need to...

Vice President / Benefits Specialist

Chris Goff, CIC, LUTCF

Healthcare Reform“What you need to know”

Presentation Summary

• Healthcare Reform Timeline

• A Closer Look At The Individual Mandate

• The Health Insurance Exchanges

• The Impact to Health Insurance Premiums

• The Impact to Medicare

This presentation is designed to provide a general overview of the health reform law.

It does not attempt to cover all of the law’s provisions and should not be used as legal advice.

You are encouraged to seek professional advice, including legal counsel regarding how the law’s requirements will affect you or your business.

PPACA

The Patient Protection & Affordable Care Act

Commonly Called: OBAMACARE

Enacted By the 111th United States Congress

Signed into law by President Barack Obama on March 23, 2010

HEALTHCARE REFORM TIMELINE

2010 Insurance Reform

• Access to a temporary national high-risk pool for people who are uninsured because of pre-existing health conditions. Provides coverage through 2014 when state insurance exchanges become operational.

• Non-dependent adult children must be allowed to remain on a parent's health insurance policy until age 26.

• Insurers cannot deny coverage to children with pre-existing conditions.

2010 Insurance Reform Continued

• Insurers cannot place lifetime limits on the dollar value of coverage. Prohibits use of restrictive annual limits on coverage.

• Insurers cannot deny or rescind coverage of insureds who become sick.

• All new group health plans and plans in the individual market must provide first-dollar coverage for certain preventive services and immunizations.

2010 Tax Changes

THE FIRST WITH MANY TO FOLLOW

• A 10% tax on the amount paid for indoor tanning services provided on or after July 1, 2010 must be paid.

2011 Insurance Reform

• Large group plans must spend at least 85% of premium dollars on medical services; 80% for small group and individual plans. Effective January 1, 2011, rebates must be provided to customers of plans that spend a lower percentage of premium dollars on medical services.

• Chain restaurants and food sold from vending machines must disclose the nutritional content of each food item.

2011Tax Changes

• Costs for over-the-counter drugs not prescribed by a doctor cannot be reimbursed through an HRA or health FSA, or reimbursed on a tax-free basis through an HSA.

• The penalty tax on distributions from an HSA that are not used for qualified medical expenses is increased from 10% to 20% of the distribution.

2012 Insurance Reform

• Provision of the Affordable Care Act (ACA) that requires private individual and group health plans to provide a uniform summary of benefits and coverage (SBC) to all applicants and enrollees. The intent is to help consumers compare health insurance coverage options before they enroll and understand their coverage once they enroll.

2013 Insurance Reform

• Create the CO-OP (Consumer Operated and Oriented Plan) program to foster creation of non-profit, member-run health insurance companies.

• Limit annual contributions for health FSA’s to $2,500 per year, indexed for inflation in subsequent years.

• Adopt a single set of operating rules for eligibility, enrollment and claims processing.

• Require disclosure of financial relationships between all health entities.

2013 Tax Changes

• Increase the itemized deduction threshold for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income.

• The itemized deduction threshold increase is waived for individuals age 65 and older for tax years 2013 through 2016.

• Increase the Medicare Part A payroll tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers and over $250,000 for married taxpayers filing jointly; applies only to the employee portion of the tax.

2013 Tax Changes Continued

• Impose an unearned income 3.8% Medicare contribution on net investment income received by higher income taxpayers (over $200,000 individual/$250,000 married filing jointly). Net investment income includes interest, dividends, rents, royalties, gain from disposing of property, and income earned from a trade or business that is a passive activity. Self-employed individuals, as well as estates and trusts, will also be liable for this tax. Distributions from qualified retirement plans, however, will be exempt from paying the additional tax.

• Eliminate the tax deduction for employers who receive Medicare Part D retiree drug subsidy payments.

2013 Tax Changes Continued

• Medical device tax that imposes an excise tax of 2.3% on the sale of any taxable medical device.

2014 Insurance Reform

• Unless they qualify for an exemption, U.S. citizens and legal residents are required to have minimum essential health insurance coverage or pay a penalty. AKA - THE INDIVIDUAL MANDATE

• Individuals who fail to maintain minimum essential coverage in 2014 are liable for a penalty equal to the greater of $95 or 1% of income, which increases to the greater of $695 or 2.5% of income by 2016.

• Health insurance premium subsidies are available to eligible individuals and families with incomes between 133% and 400% of the federal poverty level (currently $29,327 to $88,200).

2014 Insurance Reform Continued

• Medicaid coverage is provided to all individuals under age 65 with incomes up to 133% of the federal poverty level, based on modified adjusted gross income.

• Taxpayers below the threshold for filing an income tax return are exempt from the minimum essential coverage penalty.

• State-based health insurance exchanges are created, through which individuals and small businesses can comparison shop for standardized health insurance coverage.

2014 Insurance Reform Continued

• Guaranteed issue and renewability is required, meaning that insurers cannot deny or cancel coverage to anyone with a pre-existing condition.

• Any waiting periods for coverage cannot exceed 90 days.

• For individual and small group policies, as well as policies sold through Exchanges, premium rating variations can be based only on age, premium rating area, family composition and tobacco use.

2014 Insurance Reform Continued

• The out-of-pocket limits paid by those with incomes up to 400% of the federal poverty level are reduced.

• Employers with 50 or more full-time employees must offer health care coverage or pay penalties.

AKA –THE EMPLOYER MANDATE

2018 Tax Changes

• Impose a 40% nonrefundable excise tax on group insurers of employer-sponsored plans on the portion of annual premiums that exceed an inflation-adjusted $10,200 for individual coverage and $27,500 for family coverage.

• While insurers will be responsible for calculating and paying the tax, they can pass along the excise tax to their customers in the form of higher premiums.

THE INDIVIDUAL MANDATE

The law requires all United States citizens

and legal residents to have minimum

essential health insurance coverage

beginning January 1, 2014 or pay a penalty.

The penalty in 2014 is the greater of $95 peradult and $47.50 per child (up to $285 for a

family) or 1% of family income.

The penalty in 2015 is the greater of $325 per adult and $162.50 per child (up to $975 for a family) or 2% of family income.

The penalty in 2016 is the greater of $695 per adult and $347.50 per child (up to $2085 for a family) or 2.5% of family income.

After 2016, penalty amounts are increased annually by the cost of living.

Penalty Exemptions

• You are part of a religion opposed to acceptance of benefits from a health insurance policy.

• You are an undocumented immigrant.

• You are incarcerated.

• You are a member of an Indian tribe.

Penalty Exemptions Continued

• Your family income is below the threshold for filing a tax return ($10,000 for an individual and $20,000 for a family in 2013).

• You have to pay more than 8% of your income for health insurance after taking into account any employer contributions or tax credits.

You will not pay a penalty if you were covered the whole year by any combination of the following:

• Medicare.• Medicaid or the Children’s Health Insurance Program

(CHIP).• TRICARE (for service members, retirees and their

families).• The veteran’s health program.• A plan offered by an employer.• Insurance bought on your own that is at least at the

Bronze level.• A grandfathered health plan in existence before the

health reform law was enacted.

HEALTH INSURANCEEXCHANGES

Exchanges will be marketplaces for purchasing insurance. Each State must set up an exchange or use the federal government exchange.

Insurance carriers have the option of whether or not to sell plans on the exchange.

Exchange Plan Categories

Plan tiers are categorized by “actuarial value”

What is “actuarial value”?As an example, a Gold Plan hasan actuarial value of 80%.

That means, for a standardpopulation:

• The plan will pay 80% of their healthcare expenses.

• The enrollees themselves will pay 20% through a combination of deductibles, copays and coinsurance.

90% Platinum Plan

80% Gold Plan

70% Silver Plan

60% Bronze Plan

One Additional Coverage Category

Catastrophic Plans

• People under 30 would have the option to buy this lower – cost health plan with limited benefits.

• It is also for people with financial hardship or who cannot afford more costly coverage.

• These plans cover three primary care visits, preventive services as well as essential benefits after they meet their cost-sharing requirement.

Exchange Example

Exchange Timeline

Open enrollment begins October 1, 2013

We are currently waiting on the statelegislature to determine essentialbenefits and this could impact planofferings.

Unclear which insurers will beparticipating in the public exchanges

Exchanges – 3 Options

Group 1100% - 400% FPL

*Financial Assistance

Individual with annual income of $10,830 to $43,336

or

Family of 4 with annual income of $22,050 to $88,200

Must purchase on the exchange to receive subsidy

Group 2Income higher than 400% FPL

Individual with annual income higher than $43,336

or

Family of 4 with annual income higher than $88,200

Option to purchase on or off the exchange, but they will not receive a subsidy

Group 3Opt to pay penalty

2014 is the greater of $95 per adult and $47.50 per child (up to $285 for a family) or 1% of family income, etc…

Supplemental plans like limited medical & hospital gap plans may prove to be suitable alternatives

Financial Assistance(2 Types)

1 Premium Subsidies (AKA Premium Tax Credits)• For those who are 100% to 400% FPL• Ensure that participants do not have to pay more than a percentage of their income for health

insurance

2 Cost-Sharing Subsidies• For those whore are 100% to 250% FPL

• Protects participants from high out-of-pocket cost at point of service

IMPACTto Health Insurance Premiums

The law mandates significant changes that provide additional new benefits and protections, which will put upward pressure on premiums:

• Age Bands3:1 Limit (Previously 6:1) *Tobacco Use 1.5 Limit

• No UnderwritingYou Cannot be turned down for health conditions

• New Taxes and Fees on PremiumsThis will add as much as $475 per year to the average family premium

• Mandated Minimum 60% Actuarial Value More benefits = Higher Premiums

IMPACT to MEDICARE BENEFTS

Medicare changes will focus on cost containment:

Complete closure of the “donut hole”

By the end of the decade, you won’t have to worry about navigating through the Medicare prescription drug coverage gap known as the donut hole. On top of the 50 percent brand-name drug discount pharmaceutical companies will be required to provide beginning in 2011, in 2013 the government will start phasing in additional subsidies for both brand name and generic drugs until the donut hole is closed in 2020.

Medicare Changes Continued

Medicare Advantage cuts:

The government is going to reduce the amount of subsidies it provides for Medicare Advantage coverage, so if you have a private Medicare Advantage plan to help you pay for health-related expenses not covered under traditional Medicare, you can expect some reductions in your coverage beginning in 2012. The plans can’t reduce benefits for your basic health needs, but they will be able to cut coverage for services Medicare doesn’t consider primary.

Medicare Changes Continued

Premium changes for Medicare Parts B and D:

From 2011 through 2019, the premiums you pay for Medicare Part B coverage (doctor’s visits, medical equipment, etc.) won’t go up. However, if your annual income is more than $85,000 (for an individual), or $170,000 (for a couple), the government is going to reduce the amount of Medicare Part D premium subsidy you receive to help pay for prescription drugs.

Medicare Changes Continued

Reduction in catastrophic coverage threshold:

Beginning in 2014, Medicare will reduce the amount of money you’ll have to pay out of pocket before your Medicare Part D catastrophic prescription coverage kicks in. However, the reduction will only last five years, until 2019.

Medicare Changes Continued

Changes to Medicare Part D cost sharing:

In 2012, Medicare will make the costs you pay out of pocket for home and community-based care the same as the amount you’d pay if you received care in a hospital, nursing home, or other health-care institution.

Q & A

Thanks!