Association Insurance Cooperative

PPACA 2013 – 2014

June 5, 2013 Webinar Handouts: Click Here

THE BASICSMinimum Essential CoverageMinimum ValueEmployer Shared Responsibility PaymentCompliance With Cost-Sharing LimitsEssential Health BenefitsAffordable PremiumsAnnual Maximum Out-of-PocketHealth Insurance Premium Tax Credit

Qualified Health Plans (QHPs)State Essential Benefits Package Option

PPACA Topology

Large/Small Employer

Employer Penalty Flow Chart

Pay or Play

Strategies by Employer SizeGrandfathered PlansUnder 50 Employees50 and Over Employees100 and Over Employees

Large/Small Employer

Look-Back Measure Method – if the employee worked an average of 30 hours/week during the look-back period, then that person is a FTE during the subsequent stability period.

On-Going Employees Look-back period of 3 to 12 months Applied uniformly and consistently for employees in the

same categoryNew Variable Hour Employees Look-back period of 3 to 12 months Look-back begins between the start date and the 1st day of

1st month following the start date

Jane Example: Contract at 20 hrs./week for 9 months and 40 hrs./week for 3 months = 1,200 hrs./52 = 23 hrs. – not eligible for coverage

Stability Period – FTEOn-Going Employees Begins immediately after the Look-back and administrative period Greater of six consecutive calendar months or the length of the

Look-back period If not an FTE, the stability period cannot be longer than the Look-

back periodNew Variable Hour Employees Same as On-Going Employees If not an FTE the Stability Period can be 1 month longer than the

Look-back Stability period begins between the start date and the 1st day of

1st month following the start date

Administrative Period – Up to 90 days to determine eligibility for coverage, notification, enrollment

New Employee Example

Bob is employed on 1/1/2014 and is categorized as a variable hour employee.

Bob’s employer uses a 12 Look-back period.As of 12/31/2014, Bob’s hours classify him as FT.Bob’s employer can use a 1 month administrative

period to determine which employees need coverage during the stability period.

Bob’s offer of coverage must start on 2/2/2014 and continue through January, 2015, even if he is no longer working full-time.

Affordable Care Act Tax Provisionshttp://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Minimum Essential Coverage (MEC) DefinedThe type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. MEC includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE State health benefits risk pool, and certain other coverage.

An “eligible employer-sponsored plan,” a health plan offered in the individual market, or, a grandfathered health plan

eligible employer‐sponsored plan is not explicitly defined by a set of benefits, features or coverage. Rather, it is defined by what are not considered as health insurance coverage.

◦ Examples: coverage only for accident, and/or disability income insurance, Workers’ compensation, dental or vision benefits, nursing, home care, home health care, and/or community‐based care, hospital indemnity or other fixed indemnity insurance, or supplemental coverage provided under a group health plan.

MEC Provisions Require that All CMS Preventive Services be Covered by the Insurance Plan

Although large employers must offer “adequate” coverage (i.e., 60% of actuarial value) to avoid the penalty associated with the employer mandate, the minimum essential coverage rule does not expressly provide that employer-sponsored coverage must be adequate to qualify as minimum essential coverage for compliance with the individual mandate.

Minimum Value Defined

On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which states under § 36B(c)(2)(C)(ii), a plan fails to provide minimum value if “the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” If the coverage offered by the employer fails to provide minimum value, an employee may be eligible to receive a premium tax credit. An applicable large employer (as defined in § 4980H(c)(2)) may be liable for an assessable payment under § 4980H if any full-time employee receives a premium tax credit.

Employer Shared Responsibility Payment equals The Employer Compliance With Cost-Sharing Limits◦ The four metal tiers vary based on the percentage of full actuarial value

of benefits the plan is designed to provide, as follows:◦ Bronze: actuarially equivalent to 60% of full value◦ Silver: actuarially equivalent to 70% of full value ◦ Gold: actuarially equivalent to 80% of full value◦ Platinum: actuarially equivalent to 90% of full value

Essential Health Benefits Defined

To be further defined by regulations, but they include minimum benefits in ten general categories and the items and services covered within those categories:

Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including

behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease

management Pediatric services, including oral and vision care.

Affordable Premiums

Individuals who get insurance through their employer can get subsidized coverage in an Exchange if their premiums are unaffordable (more than 9.5 percent of their W-2 wages) or the plan is inadequate (pays less than 60 percent of the cost of covered benefits).

Annual Maximum Deductible Under the ACA, non-grandfathered fully-insured health plans offered in the

small group market (on or off the exchange) must limit annual deductibles to $2,000 single/$4,000 family for plan years starting on or after January 1, 2014. 2015 forward the deductible will be increased for cost of medical inflation

Large group and self-funded health plans do not need to limit deductible amounts◦ Some small group coverage may exceed the annual deductible limit if

doing so is necessary to reach a given “metal tier” level of coverage.

Annual Maximum Out of Pocket Expense Effective for new and renewing plans on and after January 1, 2014 - All

non-grandfathered group health plans of any size (insured or self-funded) must apply all member cost share for in-network services and out-of-network emergency services to the in-network out-of-pocket (OOP) maximum, which cannot exceed the following limits allowed by the Affordable Care Act (ACA): 2014: $6,350 individual / $12,700 family 2015 forward: increased for cost of medical inflation

Affordable Care Act Tax Provisionshttp://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Health Insurance Premium Tax CreditStarting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Tax credits or subsidies are provided to purchase health insurance through the exchange on a sliding scale to individuals and families with incomes up to 400% of the federal poverty level(under current guidelines, about $45,900 – Individual; $94,200 - Family).

The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.

Health Insurance Exchanges

Qualified Health Plans (QHPs):An Exchange will be required to make qualified health plans (QHPs) available to qualified individuals and qualified employers. An Exchange cannot make available any health plan that is not a QHP.

A QHP is an Exchange-certified “health plan” that offers an “essential health benefits package.” To provide the essential health benefits package, a plan must provide: ACA required preventative services; Essential health benefits; Include the four metal tiers/cost-sharing limits; bronze, silver, gold, or

platinum level coverage (that is, benefits that are actuarially equivalent to 60%, 70%, 80%, or 90% (respectively) of the full actuarial benefits provided under the plan

State Essential Benefits Package Option One of the three largest products in the small group market in the state The Health Maintenance Organization (HMO) with the largest commercial enrollment

in the state One of the three largest health plans offered to federal or state employees

ALL EMPLOYERS - 2013

Audio Summaryhttp://www.makinghealthcarereformwork.com/healthcarereform/assets/library/767234_36601WPBENMUB_ACA_and_you_4-19_Podcast_Development_DO_03_13_v2.mp3.

Report health plan values on W-2s. Business owners must report the value of their health plans on W-2s. This was optional in 2012. Who the provision applies to◦ The W-2 reporting provision applies to grandfathered and non-

grandfathered plans, both fully insured and self-funded groups.◦ The requirement applies to anyone who is still receiving

benefits from the employer, including COBRA participants and retirees (even though retiree-only plans are exempt from the health care reform law).

TECHNICAL RELEASE 2013-02DATE: MAY 8, 2013SUBJECT: GUIDANCE ON THE NOTICE TO EMPLOYEES OF COVERAGE OPTIONSUNDER FAIR LABOR STANDARDS ACT § 18B AND UPDATED MODELELECTION NOTICE UNDER THE CONSOLIDATED OMNIBUS BUDGETRECONCILIATION ACT OF 1985

◦ 1. Informing the employee of the existence of exchanges including a description of the services provided by the Exchanges, and the manner in which the employee may contact exchanges to request assistance;

◦ 2. If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an exchange; and

◦ 3. If the employee purchases a qualified health plan through an exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

Update the company rules on waiting periods. Many new workers have a “waiting period” before benefits kick in. With health care reform, this waiting period can’t be longer than 90 days.

2014 CHECK LIST Know if the business is a “small group” or “large group”. Today “small

group” includes businesses with one to 50 workers. But with health care reform, a business will be considered “small group” if it has one to 100 workers. States may put off this change until 2016.

Offer coverage if they have more than 50 workers.

Review and update benefits. Fully insured small group plans must cover an “essential health benefits” package starting in 2014. This rule applies to non-grandfathered plans sold inside and outside the health insurance exchanges. Plans are to be guaranteed issue and no life-time max.

Premium Costs for 2013

On average, Aon Hewitt forecasts that companies will see 2013 cost increases of 7.0 percent for health maintenance organization (HMO) plans, 6.1 percent for preferred provider organization (PPO) plans and 6.1 percent for point-of-service (POS) plans.

Overall, the National Business Group on Health projects a seven percent increase in 2013. The average premium cost per person for major companies, from 2012 to 2013, is estimated to have increased from $10,659 to $11,405 for HMOs, $10,433 to $11,069 for PPOs and $11,062 to $11,737 for POS plans.

Premium Costs 2014

Premiums in 2014 may increase 20 to 40 percent. Factors that will drive up health insurance costs. The following ACA provisions become effective Jan. 1, 2014:

◦ Guaranteed Issue - plan exclusions for pre-existing conditions are no longer allowed.

◦ Increased Benefits - ACA requires all non-grandfathered small group employers to provide EHBs.

◦ Minimum Value - Cost-sharing toward services will accumulate to your plan’s out-of-pocket maximum, including flat-dollar copayments for services that are defined as EHB.

◦ Adjusted Community Rating - beginning in 2014, all insurers selling personal or small group products must use the Adjusted Community Rating (ACR). With ACR, insurers calculate the Community Rating and can adjust your cost based only on: family size, geographic location, use of tobacco, age.

Company Pass-Through of Fees - Insurance carriers will start progressively incorporating the following fees into fully insured plan premiums beginning Feb. 1, 2013 as renewals or new business cases begin:

◦ Patient-Centered Outcomes Research Institute (PCORI) Fee. PCORI Fee, of $1 per member per year – fully and self-funded plans.

◦ The Insurer Fee – fully insured groups. The impact on premium is approximately 2.3 percent in the first year.

◦ The Transitional Reinsurance Fee will be collected from health insurance providers for years 2014 to 2016. Impact for the first year of the Transitional Reinsurance Fee is about $5 to $6 per member per month.

◦ A Risk Adjustment Fee of about $1 per member per year is assessed on issuers of risk-adjusted plans in the non-grandfathered individual and small group markets, whether in or out of the Exchanges.

Your Company is Grandfathered

Grandfathered Health Plans – ACA Exceptionswww.healthcare.gov/law/features/rights/grandfathered-plans/index.html

Grandfathered Plan: March 23, 2010 and not make any major changes in coverage

Examples of changes in coverage that would cause a plan to lose grandfathering include: • Eliminating benefits to diagnose or treat a particular condition. • Increasing the up-front deductible patients must pay before coverage kicks in by more than the cumulative growth in medical inflation since March 23, 2010 plus 15 percentage points. • Reducing the share of the premium the employer pays by more than five percentage points since March 23, 2010.

Alternatives: Self-Fund; Defined Contribution Arrangement

Your Company Employs Under 50 FTEs

No financial requirements to contribute toward workers’ health care costs

Must be compliant with PPACA if Company does provide insurance coverage

Have most to gain under the ACA◦ Tax credits for employers with 25 or fewer workers, average annual wages of

employees must be less than $50,000, employer pays 50% of premiums.◦ Go to http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-Questions-and-

Answers:-Calculating-the-Credit.◦ Small group health insurance market already has guaranteed issue http://

www.statehealthfacts.org/comparetable.jsp?ind=350&cat=7◦ 2014 – new insurance options through Small Business Health Options Program (SHOP)

exchanges. On March 1, 2013, HHS proposed letting exchanges put the “employee choice” option and premium aggregation functions of SHOP on hold until 2015. This does not delay the whole SHOP exchange. It just means that for 2014, SHOP exchanges can make employers choose one qualified health plan for all of their employees so that they are all covered by the same plan from one insurance company.

Your Company Employs 50 to 100 FTEs Full Impact of ACA for Employers with non-grandfathered fully insured plans. Self

Funded plans are exempt.

Considerations:

◦ Play or Pay? If you play, what are the alternatives?

◦ Group Insurance: too Expensive, cannot meet participation requirements

◦ High Deductible Health Plan + GAP

◦ Self-Fund

◦ Defined Contribution Arrangement

Your Company Employs 101+ FTEs Less than 10% of very large employers will be affected by ACA. The majority will be

transitioning from fully-insured plans to Defined Contribution Arrangement – True HRAs and Self-funded plans.

Remain subject to ACA Penalties for not providing qualified health plans. No access to Exchange/SHOP options until 2017 Group Insurance Will Cost will Continue to Increase due to premium inflation Expense Incurred Mini-Meds Gone 2014

Considerations:

◦ Self-Fund

◦ High Deductible Health Plan + GAP

◦ Defined Contribution Arrangement – True HRA

PLAN DESIGN CONSIDERATIONS

ACA Provisions and FeesMinimum Essential Coverage

Minimum Value - Employer Shared Responsibility Payment - Compliance With Cost-Sharing Limits

Affordable Premiums

Essential Health Benefits

Maximum DeductibleAnnual Maximum Out-of-Pocket

Guaranteed Issue

State Regulations

Health Insurance Tax

Self-Funded Plan DesignCover only ACA Preventive Services

Cover 60% of the AV of the plan*

Not to exceed 9.5% of W-2 income*

Not required

No Max Deductible$6,250 single/$12,500 family

Not Required

Not Subject to State Regulations - ERISA

Not Applicable

Employer premium contributions: Employees of large firms that offer coverage meeting the minimum value standard are not eligible for premium assistance tax credits or cost-sharing subsidies in an exchange unless their share of the employee-only premium in the employer’s lowest-cost plan exceeds 9.5% of family income.

Selecting the Plan Within a True HRA Plan

Example A: Employee earns $35,000 per year as reported on W-2

Penalty Flow Chart Question: Do any employees have to pay more than 9.5% of family income (regulation revised to use W-2 wages) for the employer coverage?

1. In this example: Average Full-Time eligible employee earns $35,000.00 (as reported on W-2). 2. Affordable Insurance for the employee is 9.5% = $3,335.00. 3. $3,335÷12 = $277.00 is the maximum monthly portion of W-2 that the employee should pay for

insurance and not trigger a penalty based on affordability.

What is the minimum monthly insurance premium that the employer must pay and avoid the penalty based on affordability and the employer mandate?

1. The actuarial value of a Bronze Plan based on an employee share of .40% and an employer share of 60%. Taking the $277.00 monthly maximum employee premium share ÷ .40% will equal $692.50 per month.

What is the employer cost sharing/month using a Bronze Plan as the baseline?

Employee Portion Employer Portion Monthly Premium

Bronze: @40% = $277.00 @60% = 415.50 $692.50

Silver: @30% = $ 207.75 @70% = 484.75 $692.50

Gold: @20% = $138.50 @80% = 554.00 $692.50

Platinum: @10% = $ 69.25 @90% = 623.25 $692.50

Putting the Numbers TogetherExample B: Employee earns $12,000 per year as reported on W-2

Penalty Flow Chart Question: Do any employees have to pay more than 9.5% of family income (regulation revised to use W-2 wages) for the employer coverage?

1. In this example: Average Full-Time eligible employee earns $12,000.00 (as reported on W-2). 2. Affordable Insurance for the employee is 9.5% = $1,140.00. 3. $1,140÷12 = $95.00 is the maximum monthly portion of W-2 that the employee should pay for

insurance and not trigger a penalty based on affordability.

What is the minimum monthly insurance premium that the employer must pay and avoid the penalty based on affordability and the employer mandate?

1. The actuarial value of a Bronze Plan based on an employee share of .40% and an employer share of 60%. Taking the $95.00 monthly maximum employee premium share ÷ .40% will equal $237.5 per month.

What is the employer cost sharing/month using a Bronze Plan as the baseline?

Employee Portion Employer Portion Monthly Premium

Bronze: @40% = $95.00 @60% = 142.00 $237.50

Silver: @30% = $71.10 @70% = 165.90 $237.50

Gold: @20% = $47.40 @80% = 189.60 $237.50

Platinum: @10% = $23.70 @90% = 213.30 $237.50

Links and Contact Information

AIC Website: www.AssociationInsurance.usWebinar Handouts: Click HereAIC Individual & Family Health Insurance Exchange: www.associationinsurance.info

Kenneth Lee, Program Manager Email: klee@mynpi.org Phone: 765.352.1776

Bob Brodell, AIC General AgentEmail: bob@imaginehealthsolutions.com Phone: (312) 659-4242

Jerry Van Ness, AIC Master General Agent AWPEmail: jerry@theamericanworker.comPhone: (949) 331-3156